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Review

Mo n t h l y

F E D E R A L R E S E R V E B A N K O F ATLANTA
Atlanta, Georgia, February 29, 1952

Volume X X X V II

F a r m

P r i c e

S t a b i l i t y

Since the beginning of World War II, stability has become
a key word in our economic doctrine. Over most of the last
decade, the maintenance of a stable price level has been one
of our major objectives. The concern with the stability of
farm prices stems chiefly from two considerations. Rapid
rises in farm product prices increase the cost of living,
which, in turn, creates pressure on wage rates and makes
inflation more difficult to control. Rapid declines in farm
product prices, on the other hand, create serious hardships
for farmers who are operating at a high cost level.
Despite large-scale efforts on the part of the Government,
the record of achievement toward the goal of farm price
stability has not been impressive. Except for 19 5 1 and
for 1943, 1944, and 1945, .when the entire economy was in
a strait jacket of wartime controls, farm prices have shown
less stability in each year of the last decade than in any of
the three years immediately preceding World War II. Dur­
ing World War II most agricultural planning for the post­
war period was based upon the assumption that demand for
farm products would decline drastically and that the main
postwar problem in agriculture would be to cushion a sharp
decline in farm prices. When price controls were relaxed,
however, farm prices began to rise rapidly and the main
problem during 1946 and 1947 was to slow down the spiral
in the cost of living that stemmed from that rise.
By 1948 the emphasis had shifted from the inflationary
effects of farm price increases to methods of stopping a de­
cline in prices. In 1948, from Ju ly to December, average
prices received by farmers for all commodities fell 10 per­
cent. During the 1948-49 crop year, Government outlays for
the support of farm prices amounted to slightly more than
2.5 billion dollars. In spite of large outlays for price sup­
ports, farm prices continued to decline in 1949. During that
year average prices received by farmers fell another 12
percent.
Many observers believed that the long expected “ postwar
adjustment” in agriculture had come and that farm prices
would stabilize at much lower levels than had prevailed in
the years immediately following the war. This view was
accepted so generally that much attention was devoted to a
revamping of Government price-support programs. In April
1949 the much-discussed “ Brannan Plan” was formally
presented. This proposal to use Government subsidies to
underwrite the demand for farm products is indicative of
the widely held conviction that farm prices were in the proc­
ess of stabilizing at much lower levels.




Number 2

i n

1 9 5 2

By the early part of 1950 the effects of the 1949 “ inven­
tory recession” had about worn off and nearly all indica­
tors of business activity began to move upward. As employ­
ment and personal income payments rose, farm prices also
strengthened and by the time war started in Korea, prices
received by farmers were up 6 percent from the low reached
in December 1949. The war in Korea brought about a very
familiar reaction in farm prices. A ll prices went up, of
course, but prices of farm products went up very rapidly
and by February 19 5 1 they were 27 percent higher than
in June 1950.
Again, as in 1946 and 1947, the main concern about farm
prices was how to keep them from going up rather than
how to cushion a decline. The Brannan Plan and other
proposed revisions of the various price supporting schemes
became dead issues. Farm products were included in the
general price freeze that went into effect in February.
As the nation settled down to a long-range rearmament
program that overshadowed the fighting in Korea, at least
so far as its impact on the economy was concerned, farm
prices began to decline slowly and by September 19 5 1 they
were 7 percent below the record high reached in February.
This slow decline was brought to a halt by a deteriora­
tion in crop prospects during the summer. As harvest
time neared, it became apparent that the output of such
important crops as corn and cotton would be much less than
had been expected earlier. By December 19 5 1, farm prices
had increased 5 percent from the September low.
Current Uncertainty About Farm Prices
For agriculture as a whole, 19 5 1 was a year of unusually
stable prices. Some commodities, such as cotton, showed
violent and erratic price movements, but the general level
of farm prices was more constant than at any time since
1945. A rough approximation of this stability may be had
by comparing the range of monthly price indexes with the
annual average index. This range was less in 19 5 1 than in
any year during the last two decades, with the exception of
1944 and 1945.
In spite of the stability achieved last year, many farmers
are apprehensive about the effect that another year of high
production would have on farm prices. Cotton farmers, for
example, have been pressing for higher support prices in
order to take some of the price risk out of the production
of the 16-million-bale crop that has been called for by the

M o n t h ly

14

R e v ie w

o f th e F ederal R eserve B a n k o f A tla n ta fo r F eb ru a ry 1952

Department of Agriculture. Their main argument has been
that present support levels offer inadequate protection in
view of the high costs that will be incurred in producing
the 1952 crop.
This feeling of uncertainty in the minds of farmers has
already received some official recognition. The President,
in his Economic Report to the Congress, recommended that
the sliding scale provisions of existing price-support legis­
lation be repealed. The reasons for this recommendation, as
set forth in the January report of the Council of Economic
Advisers, are as follows: “ The Secretary of Agriculture has
asked farmers for maximum production of several of the
basic commodities. . . . Y e t under existing legislation, if
farmers succeed in increasing production sufficiently to
build up reserves to safe or desirable levels, they could be
penalized by having their support prices reduced from 90
percent to as low as 75 percent of effective parity. This
possibility may act as a deterrent to maximum production
of basic commodities by raising concern in the minds of
many farmers lest the Government, after enlisting them in
an all-out production drive, might leave them worse off as
a result of their patriotism and hard work.”
V A R IA T IO N S IN IN DEX O F PRICES RECEIVED BY FARMERS
Percent of Annual Average
Year

1932
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951

High Month

109.2
117.1
112.2
104.6
107.0
107.4
106.2
104.2
103.0
115.4
110.8
103.1
103.1
103.4
114.5
109.5
107.4
106.4
111.7
103.6

Low Month

Range

90.8
78.6
85.6
95.4
92.1
86.9
95.9
94.7
95.0
86.2
93.7
94.3
97.4
98.1
90.6
93.1
93.3
93.6
91.8
96.4

18.4
38.5
26.6
9.2
14.9
20.5
10.3
9.5
8.0
29.2
17.1
8.8
5.7
5.3
23.9
16.4
14.1
12.8
19.9
7.2

The reasons for the current uneasiness about farm prices
cannot, of course, be listed completely, but there are at
least three important factors that may be having an effect.
The first is that there is no recent history of price stability
except in 19 5 1. During the postwar period there has either
been the problem of preventing farm price increases from
adding to the inflationary pressures or of cushioning a price
decline to protect farm income. Price stability such as char­
acterized 19 5 1, in other words, is so contrary to the usual
experience that many people do not expect to see it re­
peated in 1952.
A second reason for uncertainty about farm prices in
1952 is that no one can be sure just what brought about the



stability in 19 5 1. Did the direct price controls instituted in
February and the changes in monetary and fiscal policy
during the first part of the year merely bring the rise in
farm prices to a temporary halt? After all, farm prices
usually do move in the same direction as disposable per­
sonal income, and from the first quarter of 19 5 1 to the third
quarter disposable personal income increased from an an­
nual rate of 2 17 billion dollars to 225 billion. The fourth
quarter witnessed a further growth to 228 billion dollars
annually. Farm prices in turn rebounded from their Sep­
tember low and at the year’s end were at about the same
level as at the beginning. Another question is, Did the de­
terioration in crop prospects merely cause a temporary halt
in the decline in farm prices that began in February? Farm
prices have weakened appreciably since the beginning of
1952 and future prices on many commodities are now at
the lowest levels since last September.
Still another possible reason for farmers’ concern about
the stability of prices is the violent price movements that
occurred last year for important commodities. Cotton is the
outstanding example. From an early spring high of about
45 cents, the price of cotton fell to 34 cents in September
and was up to about 43 cents by the end of the year. Part
of the sharp decline, of course, was attributable to the over­
estimation of the 19 5 1 crop in the United States. As late as
October, the supply in 19 51-52 was estimated at 19.2 m il­
lion bales, or about 14 percent larger than the 1950-51
supply. At that time the carry-over was expected to range
from 2.7 to 3.2 million bales, one of the smallest in the last
two decades. In view of the strong export demand and the
small carry-over expected at the end of the season, the price
reaction to the probable 14-percent increase in supply
seemed unusually sharp. The cotton market, in other words,
reacted much more violently to the prospective increase in
supply than seemed justifiable, based on a sober analysis
of prospective changes in the supply and demand factors.
Forecasts of Farm Price Movements
One way to gain some perspective about the forces that may
affect the stability of farm prices in 19 52 is to examine the
facts and assumptions on which some of the current fore­
casts are based. Each fall the Bureau of Agricultural Eco­
nomics makes a forecast on the level of farm prices and
incomes for the coming year. In its outlook statement on
farm prices and income for 1952, the Bureau states that,
“ Prices in 1952 are not expected to average significantly
higher than in 19 5 1, as a whole.” If growing conditions
are normal, the total volume of farm marketings is expected
to be about 5 percent larger than in 19 5 1, which would
result in a 5-percent increase in cash receipts from market­
ings. Essentially, the Bureau is saying that demand for farm
products, as a whole, in 1952 will expand enough to absorb
a 5-percent increase in output at about the same price level
as prevailed in 19 5 1. The assumed 5-percent increase in
production is closely in line with the production goals
already announced.
The defense program, of course, is the central feature in
this forecast. The first assumption is that there will be no
additional war scares or any return to peace, but that the
rate of defense spending will rise as scheduled— from an
annual rate of 44 billion dollars at the end of 19 5 1 to 65
billion at the end of 1952. Because of expected increases in

M o n t h l y R e v ie w

o f th e F ederal R eserve B a n k o f A tla n ta fo r F eb ru a ry 1952

productivity per worker, and an estimated increase of
slightly more than one million in the number of workers
employed, it is assumed that the total value of goods and
services produced, or the gross national product, will rise
about 20 billion dollars.
Even after allowance for higher tax rates, disposable
personal income is assumed to increase 12 to 15 billion
dollars. It is also taken for granted that substantially all
the expected increase in consumer incomes will be spent,
which means, of course, that the rate of saving will be
lower than it was in the last quarter of 19 5 1.
A reduction in business inventories and an expected de­
crease in investment in construction and equipment for non­
defense purposes sufficient to cause a total reduction of 8
to 12 billion dollars in private investment is assumed. Since
the assumed increases and decreases in expenditures add to
slightly more than the expected increase in output, it seems
likely that prices will rise slightly in 1952. This is
the general economic framework within which the farm
price forecasts were developed by the Bureau of Agricul­
tural Economics. To go from these assumptions about do­
mestic demand to a forecast of farm prices requires two
additional steps. Some forecasts of foreign demand must be
made and the effects of changes in both categories of de­
mand on farm prices must be estimated.
Throughout fiscal 1952 the volume of agricultural ex­
ports is expected to be 5 to 10 percent larger than in the
preceding year, with average export prices a little lower.
Foreign demand for farm products, in other words, is ex­
pected to be about the same in 1952 as it was in 19 5 1.
Translating the assumed changes in domestic demand into
a farm price forecast is the really difficult step. If farm
output increases 5 percent, will the assumed changes in
domestic demand hold prices steady, permit them to fall, or
push them to higher levels? How well this question can be
answered depends largely upon the accuracy of our knowl­
edge about the relationships between the supply and demand
factors and the prices of farm products that will prevail
in 1952.
Price-Making Forces
At this point it may be helpful to consider some of the
factors that affect the level of farm prices and some ap­
proaches that are used to determine the relationships be­
tween these factors and prices. For a particular commodity
the main factors are the supply of the commodity itself, the
supply of competing commodities, the amount of the mar­
keting margin, and the amount of disposable income in the
hands of consumers. For agriculture as a whole the strength
of consumer demand, which is usually stated in terms of
disposable income, is by far the most important. Total
agricultural output does not vary greatly from year to year,
but disposable income fluctuates widely. Because of the
relationship between the level of consumer incomes and
farm prices, disposable income of domestic consumers has
proven to be the best over-all indicator of domestic demand
for farm products.
One of the most widely used approaches to the problem
of estimating the relationship between the supply and de­
mand factors and prices is to study past relationships with
the view of establishing some sort of normal relationship.



15

Under this approach the relationships for a 15- or 20-year
period are usually analyzed by statistical methods to derive
a typical relationship. Since most problems of price fore­
casting involve only year-to-year changes, the results of
these analyses are usually expressed as the percentage
change in prices that is likely to accompany a given per­
centage change in the price-making forces. In a recent study
of factors affecting year-to-year changes in farm prices, for
example, the Bureau of Agricultural Economics found that
in the period 1922-41 a one-percent increase in disposable
income was usually accompanied by a 1.23-percent increase
in the farm price of livestock products.
In this connection it may be helpful to remember that
most of our usable information about the relationship be­
tween demand, supply, and price of farm products was
obtained during the two decades immediately preceding
World War II. Statistical analyses of the relationship dur­
ing this period yielded results that were internally con­
sistent and that conformed with conventional theoretical
analyses. Attempts to apply these analyses to the postwar
period have met with little success. It seems reasonable to
conclude that the earlier relationships either are not appro­
priate for the postwar period or that there are so many
disturbing influences that the workings of what might be
called normal supply and demand are obscured.
Perhaps the most striking characteristic of postwar mar­
kets for farm products is that they seem abnormally sensi­
tive to even slight changes in the supply and demand fac­
tors. A change in the supply outlook that would have
caused a mild price reaction in the prewar period, for ex­
ample, now often touches off an extremely violent one.
Another way of stating it is that the buyers and sellers who
make a market for a particular farm product appear to
have very little confidence in the level of prices that they
themselves have set.
Because of the effects of price ceilings and the disloca­
tions in the economy during World War II and the current
rearmament period, another approach to agricultural price
analysis has gained in usage. This approach is based largely
upon intuition and an intimate knowledge of the market
for the particular commodity under consideration.
With either approach there is a problem of selecting a
base period, or base year, on which to project the expected
year-to-year changes. Based on the vast current knowledge
about the relationship between changes in supply and de­
mand factors and changes in prices, most of the current
forecasts of continued stability of farm prices in 1952 seem
reasonable if it is also assumed that 19 5 1 is a good year
on which to base the projection. Stated in another way, Can
the farm price situation in 19 5 1 be regarded as normal or
typical in the sense that it was what could reasonably be
expected with the volume of farm output and the level of
consumer income that prevailed? If the situation in 19 5 1
represents a short-run stabilization of farm prices at an
artificially high level, then the assumed increase in demand
in 1952 would merely serve to cushion a decline in farm
prices rather than hold prices steady. If, on the other hand,
the price stability in 19 5 1 was attributable mainly to the
dampening effect of inflation controls, then any increase
in demand in 1952 would result in continued upward pres­
sure on farm prices.

16

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o f th e F ederal R eserve B a n k o f A tla n ta fo r F e b ru a ry 1952

The Unstated Assumption
Although it is not often stated explicitly, most of the fore­
casts regarding farm prices do seem to assume that the farm
price situation in 19 5 1 was typical of what could have been
expected with the 19 5 1 level of farm output and consumer
income. This may well be the key assumption. If it proves
to be correct, there are sound reasons for expecting con­
tinued stability of farm prices in 1952 at about the current
levels.
During the postwar period, year-to-year increases in the
disposable income of consumers have not always strength­
ened the demand for farm products to the extent that is
expected from 19 5 1 to 1952. From 1949 to 1950, for exam­
ple, disposable personal income increased by nearly 10
percent and farm production fell 1.4 percent, but average
prices received by farmers increased only 2.8 percent. The
10-percent gain in disposable income, in other words, was
accompanied by only a small rise in farm prices even
though farm production declined. Although these compari­
sons between such large aggregates should be interpreted
with caution, they do indicate that the effect on farm prices
of a given increase in consumer income may depend to a
large extent upon the base from which the increase is
measured.
FARM PRICES, P R O D U CTIO N , AN D DISPO SA BLE INCOM E

Year

1945
1946
1947
1948
1949
1950
1951

Prices Received
by Farmers
(1910-14 = 100)

206
234
275
285
249
256
302

Production
for Human Use
(1935-39 = 100)

129
134
129
141
140
138
139

151
159
170
188
186
204
223

B row n R . R

a w l in g s

D is tr ic t S ta tis tic s
(In Thousands of Dollars)
Percent Change
Feb. 27,1952, from
Jan. 30
Feb. 28
1952
1951

Feb. 27
1952

Item
Loans and investments—
To tal.............................. .
Loans— N e t ....................... .
Loans— G r o s s .................. .
Commercial, industrial,
and agricultural loans
Loans to brokers and
dealers in securities . ,
Other loans for pur­
chasing and carrying
securities................. ...
Real estate loans . . . ,
Loans to banks. . . .
Other lo a n s .....................
Investments— Total . . . ,
.
Bills, certificates,
and n o te s................. ,
U. S. bonds..................
Other securities................
Reserve with F. R. Banks . ,
Cash in vault..................... ...
Balances with domestic
b a n k s ........................... ...
Demand deposits adjusted . .
Time deposits.................... ...
U. S. Gov’t deposits . . . ,
Deposits of domestic banks .

Jan. 30
1952

2,753,793
1,074*957
1,094,721

2,730,178
1*072*824
1,092,617

2,558,791
1*142*210
1,158,010

+1
+0
+0

635,480

639,169

696,711

—1

—9

10,132

9,883

13,273

+3

— 24

33,148
87,510
7,829
320,622
1,678,836

33,455
87,777
2,920
319,413
1,657,354

35,038
93,296
4,606
315,086
1,416,581

—1
—0
♦
+0
+1

—5
—6
+70
+2
+ 19

804,031
640,497
234,308
514,221
48,206

795,712
632,994
228T648
518,292
45,949

568,588
632,471
215,522
487,458
42,029

+1
+1
+2
—1
+5

+41
+1
+9
+5
+15

218,233
228,166
2,066,741 2,066,674
534,683
536,315
54,773
78,371
627,045
616,055
25,250
20,500 ,

189,331
1,924,422
512,592
72,573
536,134
22,250

+4
+0
+0
+43
—2
— 19

+15
+7
+5
+8
+ 15
—8

Feb. 28
1951

+8
—6
—5

*More than 100 percent

Disposable
Personal Income
(Billions of Dollars)

Although price supports have not received much atten­
tion in most farm price forecasts for 1952, they are an im­
portant passive factor in the demand for some farm prod­
ucts. Even if they are used extensively in 1952, however,
they could not prevent a general decline in prices. Wheat,
rice, and corn are the only commodities of major import­
ance now selling at near support prices. Cotton prices could
decline drastically before reaching the support level. There
is no effective support program for livestock and livestock
products, which account for about half of farmers’ cash
receipts. If the main concern with farm price policy in 1952
is to prevent declines that would create hardships for many
farmers, the present price-support program will have only
limited effectiveness.
The vigorous application of the present authority for im­
posing price ceilings, on the other hand, probably would
prevent a rapid increase in prices. Apparently the best that
farmers can hope for is a continuation of prices at about
the 19 5 1 levels. Because of an increase in costs, which
seems to be almost a certainty for 1952, only the more
efficient farmers may expect to maintain or increase their
net income. Farmers and country bankers, however, should
not overlook the possibility that the well-advertised pricecost squeeze may be much more severe than is indicated by
current forecasts.



S ix th

C O N D I T I O N O F 2 7 M E M B E R B A N K S I N L E A D IN G CITIES

D E B IT S T O IN D I V I D U A L B A N K A C C O U N T S

(In Thousands of Dollars)

Jan.
1952

Place
ALABAMA
Anniston . . . .
Birmingham . . .

Dec.
1951

Jan.
1951

Percent Change
Jan. 1952 from
Jan.
Dec.
1951
1951

30,352
461,622
20,445
23,993
163,909
99,222
32,779

29,403
463,310
19,497
23,470
172,375
94,347
32,570

29,186
446,343
19,637
25,448
160,421
99,013
35,563

+3
—0
+5
+2
—5
+5
+1

+4
+3
+4
—6
+2
+0
—8

401,988
355,186
572,213
83,927
48,775
94,649
181,953

380,593
338,463
525,721
78,516
47,483
85,218
184,841

397,148
354,070
541,055
80,945
41,500
92,032
184*518

+6
+5
+9
+7
+3
+11
—2

+1
+0
+6
+4
+18
+3
—1

40.001
1,136,241
90,117
13,249
83,518
4,550
26,007
13,231
89,017
15,932
27,398
122,432
14*894

39,048
1,187,215
88,738
13,756
83,232
5,175
22,572
14,607
89,059
14,145
29,412
125,421
15,494

35,131
1,148,783
80,217
12,280
76,784
4,394
22,453
13*773
77,856
14,942
30,064
115,609
14,135

+2
—4
+2
—4
+0
— 12
+ 15
—9
—0
+ 13
—7
—2
—4

+14
—1
+12
+8
+9
+4
+16
—4
+14
+7
—9
+6
+5

47,492
125,311
52*485
933,238

45,281
114,617
49,981
933,001

45,401
131,848
49,728
867*509

+5
+9
+5
+0

+5
—5
+6
+8

.
22,202
213,828
Meridian . . . .
33,605
Vicksburg . . . .
32,384
TENNESSEE
217,807
Chattanooga . . .
Knoxville . . . .
150,544
Nashville . . . .
407,814
SIXTH DISTRICT** . . 5,765,190

20,200
167,253
33,916
37,141

21,450
206,949
35,249
25,793

+10
+28
—1
— 13

+3
+3
—5
+26

195,764
155.294
424,365
5,710,331

212,026
162,191
396,405
5,619,540

+11
—3
—4

—7

M ob ile..................
Montgomery . . .
Tuscaloosa* . . .
FLORIDA
Jacksonville . . .
Greater Miami* . .
Pensacola . . . .
St. Petersburg . .
.
GEORGIA

Brunswick . . . .
Columbus . . . .
Elberton . . . .
Gainesville* . . .
Griffin*.................

Savannah . . . .
Valdosta . . . .
LOUISIANA
Alexandria* . .
Baton Rouge . .
Lake Charles. .
New Orleans . .
MISSISSIPPI
Hattiesburg . .

.
.
.
.

*Not included in Sixth District totals.
**32 Cities.

+1

+3
+3
+3

M o n t h l y R e v ie w

o f th e F ederal R eserve B a n k o f A tla n ta fo r F eb ru a ry 1952

17

District Business Conditions
Money M arket Rates and the District
Business Borrower
Last year’s rise in open-market money rates, as seen in the
growing yields on short-term Government securities and
bonds, has been reflected in the higher rates which District
banks charged business borrowers. The greater impact of
these increased rates has been felt by larger borrowers, who,
of necessity, deal only with large banks. The rate of earn­
ings on loans for most of the smaller banks, therefore, was
little affected by the increase in interest rates.
On the New York money market, new issues of 3-month
Treasury bills were yielding 1.367 percent in December
1950. A year later, yields averaged 1.7 3 1 percent, and for
the last Wednesday in December 19 5 1, the yield was 1.865.
Long-term rates also rose, although less sharply. Govern­
ment taxable bonds having 15 years or more to run to ma­
turity, for example, yielded an average rate of 2.39 percent
during December 1950, and 2.70 in December 19 5 1.
These increases were paralleled by the advance in rates
on business loans. As the year 19 5 1 ended, larger commer­
cial banks throughout the country were charging an ap­
proximate average of 15 percent more for new loans to
businesses than a year earlier. During 19 5 1 the average
rate at banks throughout the United States participating in
the Board’s quarterly interest rate survey rose from 3.02
percent to 3.27. The rise was steepest during the first and
last quarters.
The increase in rates throughout the country was closely
paralleled by greater rates charged on new business loans
made by reporting Atlanta and New Orleans banks. At the
end of 19 5 1, the average rate on new business loans in these
cities was 17 percent greater than a year previously.
A V ER A G E RATES O N N EW BUSIN ESS LO A N S
M ATURIN G IN ONE Y EA R O R LESS
(D ec. 1 9 5 0 — IO O )
PERCENT

PERCENT

DEC.

MAR.

1950

'31

OUN.

SEP.

DEC. DEC.

'51

'51

*51

1950

MAR

JUN.

SEP.

DEC.

’51

'51

!5 I

'31

Those borrowing comparatively small amounts, however,
did not feel to any considerable extent the impact of higher
rates. Interest costs on new loans made in the first half
of December for less than 10,000 dollars were only 3 per­
cent higher than they had been during the corresponding
period of 1950. At Atlanta and New Orleans reporting




banks, on the other hand, borrowers whose individual loans
amounted to 200,000 dollars or more found their interest
costs 20 percent higher. In general, the larger the loan, the
greater the increase in rates. This does not mean that the
larger borrowers paid higher rates than the smaller ones.
There is a tendency for the rate of interest to become smaller
as the amount borrowed becomes larger. Such was the con­
dition existing at the end of both 1950 and 19 5 1.
One reason for this tendency is that if local rates are
too high, the larger firms can secure funds in major money
centers. The lower rates paid by the larger borrowers, in
turn, are relatively sensitive to rates on Government securi­
ties as determined in the major money centers. Bankers
have the alternative of making such large loans at com­
paratively low rates or investing their funds in Government
securities. They expect a certain differential to compensate
for the greater risk involved in making these loans. Conse­
quently, when yields on Government securities go up, they
ordinarily make rates to larger borrowers high enough to
maintain this differential.
Over a long-term period, money market rates may also
exert an effect upon rates to smaller borrowers. But in 19 5 1,
according to a preliminary tabulation of operating ratios
for Sixth District member banks, any increase in rates was
confined to the larger banks. Banks with deposits of over
75 million dollars earned an average of 4 .1 percent on their
loans in 1950 and 4.2 percent in 19 5 1. The average rate of
return on loans for all District member banks combined,
however, was the same in 19 5 1 as it was in 1950— 6 percent.
C .T .T .

Better Balance In Retail Inventories
The decline in Sixth District department store inventories
that began in June 19 5 1 had apparently run its course by
December. Seasonally adjusted stocks in January 1952 were
equal in dollar value to that prevailing at the end of De­
cember. January 1952 inventories, however, dropped 9 per­
cent from the January 19 5 1 index of 146, which had been
exceeded only by the record index of 150 in April of last
year.
Last June District department stores began to cut their
orders in an effort to balance stocks and sales. In January
1952, outstanding orders were down 32 percent from the
high volume of the comparable period of 19 5 1 ; neverthe­
less, they were up 17 percent from the December 19 5 1
level. Receipts of merchandise also fell 6 percent in
January 1952, compared with January 19 5 1, and 2 1 per­
cent from the December 19 5 1 amount. Although receipts
are likely to remain below corresponding figures for last
year in the short-run, increases will probably occur on a
month-to-month basis.
STO CKS D O W N
Inventories for selected durable and non­
durable departments at Sixth District department stores
dropped in January 1952 from the corresponding period
of 19 5 1. January 1952 stocks of pianos, radios, and tele­
vision sets were down 53 percent, and major household
appliances 36 percent from comparable January 19 5 1
amounts. Furniture and bedding and domestic floor-coverings experienced more moderate declines of 17 percent and
16 percent, respectively. In the soft goods lines, women’s

18

M o n t h l y R e v ie w

o f th e F ederal R e se rv e B a n k o f A tla n ta fo r F e b ru a ry 1952

and misses’ apparel held their own with no change.
Women’s and misses’ coats and suits and dresses both de­
creased by a moderate one percent, whereas ready-to-wear
accessories fell 5 percent in January 1952 from the Janu­
ary 19 5 1 dollar value. Men’s clothing stocks, however,
climbed 10 percent in the same period.
A see-sawing trend was evident in total retail inventories
throughout the United States. Latest available data show
December 19 5 1 stocks, seasonally adjusted, tending to
reverse the sharp and steady drop of the preceding six
months. The 19 5 1 low point, occurring in November, was
still approximately .5 billion dollars above the highest mark
attained in 1950. The slight increase in December was at­
tributed chiefly to gains in consumer nondurable lines since
the value of durable goods stocks slipped off from Novem­
ber.
BR EA KIN G PO IN T Preliminary information based on reports
just received from nearly 500 retailers participating in this
Bank’s 19 5 1 Retail Credit Survey indicates that for a ma­
jority of the nine lines of business surveyed, 19 5 1’s em­
barrassing and harassing inventory excursion apparently

S ix th D is tr ic t In d e x e s
D E P A R T M E N T ST O R E

SALES A N D

STO CK S*

1947 - 49 =s 100
A d ju s te d * *
Jan.
1952

P la ce
D IS T R IC T S A L E S . .
A tla n ta 1 .......................
B aton R ouge . . . .
B irm in gham . . . .
C h a tta n o o g a . . . .
Jack son ............................
J a ck so n v ille . . . .
K n o x v i l l e ......................

N a s h v i l l e .......................
N ew O rleans . . . .
D IS T R IC T S T O C K S .

.

.

.
.
.
.
.
.
.
.
,
.
.
.
.
.

.
.

.
.

D e c.
1951

U n adjusted
Jan.
1951

Jan.
1952

D ec.
1951

Jan.
1951

123
136
105
118
120
119
108
121
137
126
113
113
113
146

90
84
68
85
88
79
77
79
85
113
77
94
91
119

203r
183r
162r
193
210
182
198
199
237
206
203
188
193
116

94
98
73
90
90
86
80
89
96
124
77
91
91
132

121r
116r
99r
121
119
117
118
116
128
114
117
115
116
133

118
117
98
I ll
117
110
104
106
122
116
113
117
114
133

1ln order to p erm it p u b lic a tio n o f fig u res fo r th is c ity , a sp e c ia l sam p le h as been co n ­
str u c ted w h ich is n o t con fin ed e x c lu s iv e ly to d ep a rtm en t s to r e s . F igures fo r an y such
n o n -d ep artm en t sto r e s, however, are n o t u sed in com p u tin g th e D is tr ic t In dex.

G A S O L IN E

TAX

1939 =

C O L L E C T IO N S
100

A d ju s te d * *

RETAIL SALES AND

IN VEN TO RIES IN SIXTH DISTRICT

(P e rce n t C h a n g e 1 9 5 1 - 1 9 5 0 )

U n ad ju sted

Jan .
1952

P la ce
.
.
.
.
.
.
.

S IX STA TES
A lab am a ..

L o u is ia n a .
M ississip p i
T en n essee .

COTTON

.
.
.
.
.
.
.

D ec.
1951

Jan .
1951

Jan .
1952

D ec.
1951

Jan .
1951

269
275
261
239
294
289
287

252
249
237
233
296
282
240

246
248
236
253
278
256
222

269
268
272
244
291
272
272

257
254
234
232
299
287
259

246
241
246
258
275
241
211

.
.
.
.
.
.
.

C O N S U M P T IO N *

ELECTRIC P O W E R P R O D U C T I O N *

1 9 3 5 - 3 9 == 1 0 0
Ja n .
1952

P la ce
TOTAL. . .
A lab am a .
G eorgia . .
M ississip p i
T en n essee .

1939 =
D ec.
1951

P la ce

was over. The accompanying chart shows that five of the
reporting categories had lower stocks in December 19 5 1
than in the comparable 1950 period.
Hardware stores led the December 19 5 1 stocks descent
with a 2 1.3 percent tumble from the dollar value on hand
December 3 1, 1950. Jewelry, department store, furniture,
and women’s apparel retail outlets followed, in that order.
Certain lines, however, are still confronted with a knotty
stock situation. Men’s clothing, household appliance, auto­
mobile, and automobile tire and accessory retail outlets
ended the year with inventories up to 40 percent, 1 1 percent,
1 1 percent, and 6 percent, respectively.
Interestingly enough, women’s apparel shops apparently
had resolved their difficulties by December and thus con­
trasted sharply with their male counterparts. District de­
partment stores experienced approximately the same direc­
tional changes in clothing inventories, as did stores spe­
cializing in that type goods. Stocks of women’s and misses’
ready-to-wear accessories and apparel, for example, de-




S IX STA TE S
A lab am a .
F lo r id a . .
G e o r g ia . .
L ou isian a .
M ississip p i
T en n essee .

D e c.
1951

Jan.
1951

151
159
155
105
107

182r
181r
190r
115
143

. 162
. 168
. 165
.
98
. 123

M A N U F A C T U R IN G

.,
.,
.
.,
..
..
,.

156
154
161
160
145
159
155

1 9 3 5 - 3 9 == 1 0 0
D e c.
1951
SIX STA TES
H ydro­
g en erated
F u e l­
gen erated

Nov.
1951

509

479

463r

382

275

343

676

745

620r

C O N S T R U C T IO N

E M PL O Y M E N T

D ec.
1950

C O NTRACTS

1 9 3 5 - 3 9 == 1 0 0

100
Nov.
1951
154
144
156
162
147r
160r
155

D ec.
1950
154r
153
157r
155r
142
159r
158

Ja n .
1952

P la ce
D IS T R IC T .
R e sid en tia l
Other . .
A lab am a .
F lo r id a . .
G e o r g ia . .
L ou isia n a .
M ississip p i
T en n essee.

D ec.
1951

Jan.
1951

686r
981r
544
741
936
713
319
170
777

603
840
489
684
760
700
370
192
504

876
757
934
471
659
491
2 ,4 2 0
89
314

C O N S U M E R S PR IC E I N D E X
1 9 3 5 -3 9 =

Item
ALL IT EM S . .
Food . . . .
C loth in g . ,.
F u el, e le c .,
and refrig.
H om e fu r­
n ish in g s ..
M isc . . ,.
Pu rch asing
power o f
d o lla r . . ,.

100

A N N U A L RATE O F T U R N O V E R O F

Jan.
1952

D ec.
1951

194
234
212

195
234
213

188r
228r
207r

144

143r

207
172

209
173

204r
163

.5 2

.5 1

.5 3

n .a .

♦ D a ily average b a sis
♦ ♦ A d ju ste d for sea so n a l variation
r R evised
n .a . N o t ava ila b le

Jan.
1951

DEM AND

D E P O SI1S

Jan.
1952
U n ad ju sted . .
A d ju s te d * * . .
In d e x * * . . .

D ec.
1951

Jan .
1951

2 5 .2
2 3 .8
9 6 .4

2 4 .6
2 1 .8
8 8 .3

2 5 .4 r
2 4 .0 r
9 7 .1 r

C R U D E PE T R O L E U M P R O D U C T IO N
IN C O A ST A L L O U IS IA N A
A N D M IS S IS S IP P I*
1 9 3 5 -3 9 =

100

Jan.
1952
U n ad ju sted
A d ju s te d * *

D ec.
1951

375
368

366
379

Jan .
1951
360r
367r

M o n t h l y R e v ie w

o f th e F ederal R eserve B a n k o f A tla n ta fo r F eb ru a ry 1952

clined 10 percent and 7 percent, respectively, in December
19 5 1, compared with December 1950 and stocks in the
men’s and boys’ wear departments rose 8 percent. Excessive
clothing and apparel inventories in relation to sales par­
tially account for the wearying slump suffered by the Dis­
trict textile industry last year.
A negative relationship appears between stocks and sales;
retailers enjoying falling inventories garnered sales in­
creases; conversely, large inventory gains were usually
associated with unfavorable sales pictures. The brunt of
consumer sales resistance in 19 5 1 was borne by merchants
handling consumer durables, particularly automobiles and
household appliances. Men’s clothing stores, an exception
to the rule, obviously anticipated a much larger volume of
sales than the moderate 3-percent increase actually sustained.
IN V EN TO R Y TU RN OVER The speed with which merchandise
moved during 19 5 1 sheds additional light on the inventory
problem. Generally, those lines of business ending the year
with higher inventories than a year earlier experienced a
decline in the rate of stock turnover in 19 5 1, compared with
1949, the last year for which comparable data are available.
The turnover at men’s clothing stores decreased moderately
to 3.2 in 19 5 1, compared with 3.3 in 1949. Automobile
dealers witnessed a turnover rate of 10.8 in 1949 and 10.0
in 19 5 1. Household appliance stores, however, encountered
a drop of almost 40 percent in the number of times their
stocks revolved, or from 4.2 to 2.6. Automobile tire and
accessory stores had the fastest turnover, stocks being re­
plenished almost once a month in 1 9 5 1 ; in 1949, the average
was 21/2 months. Hardware and jewelry stores also enjoyed
higher turnover rates in 19 5 1 than in 1949. On the whole,
ratio increases were found in those lines recording the larger
sales advances.
Consumer behavior throughout 19 5 1 baffled merchants
who had generally anticipated a level of spending com­
mensurate with the high level of income, even after the two
now notorious buying bursts. This assumption, together with
shortage fears, helps to explain the abnormally high inven­
tories last year. Sales promotion and order cutting con­
tributed to falling stocks so that at the commencement of
1952, many business groups seemingly had achieved fairly
satisfactory inventory positions.
B. A. W.

Textiles and the Defense Program
Although District textile mill operations are slow com­
pared with the high level of activity immediately following
the outbreak of war in Korea, they are still above most
other postwar levels. The recent decline is largely attrib­
utable to sluggish consumer buying. Another reason for the
reduced operations, however, is the scaling down of inven­
tories, built up involuntarily in the last half of 1950 and
the spring of 19 5 1, when District textile production more
than met consumer and industrial demands. The daily rate
of cotton consumption, the most commonly used measure of
textile activity, averaged 13,500 bales in the last quarter
of 19 5 1, about 13 percent below the average rate reached
in the peak period from August 1950 through June 19 5 1.
The recent tempo does not appear so slow, however,
when set against a base other than the Korean-boom period.
Consumption in the final quarter of 19 5 1, for example, was
nearly 4 percent greater than in the first seven months of
1950, and was 20 percent above the 1949 average. Although




19

1951 RETAIL CREDIT SURVEY
The Federal Reserve System is now conducting its
ninth Annual Retail Credit Survey. Retail outlets of
the following nine lines of business located in the
Sixth Federal Reserve District have been invited to
participate in the 19 5 1 Survey: automobile dealers;
automobile tire and accessories dealers; department,
furniture, hardware, household appliance, jewelry,
men’s clothing, and women’s apparel stores.
The sales, credit, and inventory data reported will
be compiled into two summaries, one for the Sixth
District and the other for the remaining eleven Federal
Reserve Districts and for the nation as a whole. Par­
ticipating stores will receive copies of these summaries
free of charge. Copies will be available around the
latter part of May.
These Surveys provide the only comprehensive body
of data of this kind available anywhere in the nation.
Retailers evidently have been favorably impressed
with these summaries in the past. They have found
the information particularly valuable in comparing the
growth of their respective firms with that of others in
the same line of business as well as with that of retail­
ers in related fields. Not only are the data collected in
this Survey interesting, but also they serve as a tool
for determining operational policies. National data,
moreover, provide the Federal Reserve System with a
basis for the formulation of policies designed to pro­
mote monetary stability.

District textile mills were busier in the first quarters of
1947 and 1948 than in the last quarter of 19 5 1, the average
daily rates of cotton consumption for those years were con­
siderably below that for the final quarter of the year just
ended. Indeed, with the exception of the spree following
the Korean outburst, 1946 was the only postwar year in
which cotton consumption was higher than it was in the
last three months of 19 5 1.
A reasonable proportion of military textile orders have
been filled by District firms, considering the kinds of prod­
ucts the military has ordered and the textile specialization
characteristic of this area. Large military textile orders,
however, have not arisen from the defense program, di­
rected as it is toward both the building up of production
facilities and the procurement of such items as tanks and
aircraft. Although the industrial uses of textile mill prod­
ucts are not to be minimized, military procurement, with
its emphasis on hard goods, has not had a very stimulating
effect on the industry.
District textile mills, of course, are not only interested
in total Government textile orders but also in the propor­
tion of those orders placed in this area. For that reason, it
is interesting to compare the District’s contribution to the
textile portion of the defense effort with its plant produc­
tion capacity.
During the second quarter of 19 5 1, when District m ili­
tary orders were largest, woolens accounted for 60 percent
of total Government orders for woolen and cotton goods.

20

M o n t h l y R e v ie w

o f th e F ederal R e se rv e B a n k o f A tla n ta fo r F e b ru a ry 1952

S ix th D is tric t S ta tis tic s
IN S T A L M E N T C A S H

Lender
Federal credit unions . .
State credit unions. . . .
Industrial banks..................
Industrial loan companies .
Small loan companies. . .
Commercial banks . . . .

No. of
Lenders
Reporting
37
19
10
10
33
33

B a n k

Volume
Percent Change
January 1952 from
Jan.
Dec.
1951
1951
-1
+19
-7
+22
-2
— 16
— 26
+17
— 17
— 13
+20
+1

Outstandings
Percent Change
January 1952 from
Jan.
Dec.
1951
1951
+7
+1
+ 10
+1
—2
+13
—1
+7
+8
+3
—2
—0

RETAIL FURNITURE STORE OPERATIONS

Item
Total s a l e s .......................
.
Cash sales..........................
.
Instalment and other credit sales. . .
Accounts receivable, end of month . .
Collections during month .
.
Inventories, end of month .

Number
of Stores
Reporting
. . 121
. . 106
. .
106
. .
116
. .
116
87

Percent Change
January 1952 from
January 1951
December 1951
— 46
+1
+2
— 41
+2
— 47
—9
—4
—9
+4
— 11
—1

WHOLESALE SALES AND INVENTORIES*
Sales
Percent Change
Jan. 1952 from
Jan.
Dec.
Type of
Wholesaler
1951
1951
— 13
— 13
Automotive supplies . . .
— 28
— 40
Electrical— Full line . . .
— 11
“
Wiring supplies
+11
— 27
— 17
“
Appliances. .
— 22
+19
Hardware..........................
—6
+25
Industrial supplies . . .
— 64
— 32
Jewelry...............................
— 21
—7
Lumber & bldg. materials.
+10
— 22
Plumbing & heating supplies
+ 20
Confectionery..................
+ 10
+6
Drugs and sundries . . .
+31
+23
— 19
Dry goods. . . . . . .
—0
Groceries— Full line . . .
+19
“
Voluntary group
+8
+25
“
Specialty lines
+30
—3
Tobacco products . . . .
+2
+16
—5
Miscellaneous.................. . 14
—3
+10
— 12
Total .................................. . 150
* Based on U. S. Department of Commerce figures.
No of
Firms
Report­
ing
.
6
3
.
4
6
. 11
. 12
4
.
8
.
4
5
.
5
. 17
. 32
.
3
4

No. of
Firms
Report­
ing
5

Inventories
Percent Change
Jan. 31,1952, from
Jan. 31
Dec. 31
1951
1951
+6
+10

*4
5
6
3
3
5
3

+2
—5
—5
+5
—8
+15
—3

+7
—3
+8
+11
+12
+35
+ 26

i2
19

+ii
—2

— 20
—9

3
8
14
90

+4
+5
+1

+49
—5
+15
+4

DEPARTMENT STORE SALES AND INVENTORIES*
Percent Change
Sales
Stocks
Jan. 1952 from
Jan. 31,1952, from
Dec.
Jan.
Dec. 31
Jan. 31
City
1951
1951
1951
1951
ALABAMA..........................
—5
+6
— 13
Birmingham..................
— 11
—6
+5
.,
—1
M o b ile ...........................
.,
Montgomery..................
—5
FLORIDA ..........................
+5
+3
—5
—8
Jacksonville..................
+5
—3
—9
+3
+6
— 12
+0
+ ii
T a m p a ...........................
. — 51
+0
GEORGIA ..........................
—i i
— 10
+5
A t la n ta * * ......................
— 15
— 14
+7
.,
Augusta..........................
+17
Colum bus......................
“ 0
—7
Macon..............................
—9
+4
—3
Rome** . . . . . . .
— 10
##
##
Savannah**.....................
+5
LO U IS IA N A ......................
+6
— 18
Baton Rouge ..................
—7
+5
— 18
+5
— 20
+3
—6
—1
M ISSIS SIP PI.....................
— 13
8
+8
— 16
Jackson ..........................
,.
M e rid ia n **...................
—7
—60
—7
TENNESSEE ......................
—4
—67
B r is t o l* * .......................
— 15
0
+1
##
Bristol-Kingsport-Johnson City**
—68
— 17
— 57
Chattanooga..................
—3
— 59
— 12
K n o xv ille .......................
i.3
— 12
. — 60
—3
Nashville.........................
—0
+1
DISTRICT ...........................
. — 54
—4
+4
—8

+i2

—
2

+
2

—

.
.
.
.
.

—
2

—

—

♦Includes reports from 120 stores throughout the Sixth Federal Reserve District.
**ln order to permit publication of figures for this city, a special sample has been con­
structed which is not confined exclusively to department stores. Figures for any such
non-department stores, however, are not used in computing the District percentage
changes or the District Index.




A n n o u n c em en t

LOANS

On February 14, the Pinellas Central Bank, Largo,
Florida, opened for business and will remit at par for
checks drawn on it when received from the Federal
Reserve Bank. Officers of this bank are: John W .
Bryan, President; J. S. Pecarek, Vice President; T. S.
Madson, Vice President; W. A . McMullen, Jr., Vice
President; DeWitt Turner, Vice President and Cashier.
The banJc opened for business with capital stock of
$112,500 and surplus and undivided profits of
$75,000.
Since District textile mills specialize in cottons and have
only 5 percent of the nation’s woolen and worsted looms,
they have received less of a boost from Government orders
than have mills in those sections where wool is the major
input.
Although the data are incomplete, there are other indica­
tions that the District textile industry has been contributing
to the national defense program to a degree commensurate
with its facilities. In April through June 19 5 1, about 10
percent of the Government orders for textiles and textile
products were received by District firms. This is favorable
when it is considered that in value added by manufacture in
1947, the last year for which figures are available, District
textile and apparel manufacturers accounted for approxi­
mately 10 percent of the total added by these groups in the
United States.
In weighing prospects for a pick-up in District textile
operations, the current level of inventories must be con­
sidered, as well as changes in consumer buying and mili­
tary procurement. Although December inventories of Dis­
trict textile mills were 1 5 percent below the peak reached
in Ju ly 19 5 1, they were still 40 percent higher than the
level existing at the beginning of the Korean War, or the
average for 1947, 1948, or 1949. With inventories remain­
ing relatively large, and with little, if any, increase in mili­
tary textile buying forecast, a substantial upturn in con­
sumer textile purchases seems necessary before a much
higher level of mill operations will be achieved.
c. H . T.
Notice

The Board of Governors o f the Federal Reserve Sys­
tem has just published a pamphlet that will be o f
considerable interest and use to bankers and monetary
analysts. The study, entitled “The Development of
Bank Debits and Clearings and Their Use in Eco­
nomic Analysis,” was prepared by George Garvy of
the Federal Reserve Bank o f New York. It combines
a statistical review of debits and clearings in the
United States with a critical review of their use by
economists and monetary analysts to interpret and
project economic developments. This pamphlet, 175
pages, paper bound, can be obtained from the Board
of Governors at a price o f 25 cents each up to ten
copies, and 15 cents each for ten or more copies in
a single shipment.