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Mo n t h l y FEDERAL RESERVE Re v i e w BANK OF A T L A N T A A tlan ta, G eorgia, January 3 1 , 1 9 5 0 V o lu m e X X X V N um ber 1 Indian Summer IHE t e n d e n c y to look backw ard over a year that has ended as a new on e com es up on the calen d ar is d eep ly in grain ed in the tim e-con sciou s p e o p le o f our w o rld . T h is ret rosp ective m ood is p a rticu la rly stron g at the b eg in n in g o f 1950, fo r the new date m arks the end o f o n e o f th e m ost ev en tfu l and aw esom e h a lf-cen tu ries in a ll h isto ry and ushers us into on e filled b y a m en acin g clo u d o f q u estion m arks. A lth o u g h it w ou ld b e tem p tin g on th is o cca sio n to let our survey range over the w h o le fifty-year p eriod , lim ita tio n s o f sp ace confine it o f n ecessity to the m ore m odest tim e-span o f a year. T here are som e w ho qu estion the v a lu e o f an annual stock-taking at the b eg in n in g o f a new year on the ground that the d iv isio n o f tim e in to sep arate years is p u rely co n ven tion al. T im e itse lf, it is said, is an in d iv isib le flo w and tak in g stock o f past exp erien ce sh o u ld be a co n tin u ou s p ro cess and not m erely an annual event. T h is, o f course, is true. T om orrow ’s econ om ic h isto ry is a lw a y s the p roduct o f the d ecisio n s that are taken to d ay in the lig h t o f y esterd ay’s e x perience. P ast and present com b in e c o n tin u o u sly to shape the future w ith out a break. N everth eless, as lo n g as the co n ven tion o f the calen dar p ersists, there sh o u ld be no o b je c tion to takin g advantage o f it to do at lea st on ce a year what ought to be d on e every day o f the year— to take account o f w hat has h appened to us in the past. T L ast year in this p lace, w hen th e year 1948 w as under re view , attention w as first directed to the in flation ary exu b er an ce that had characterized m ost o f the year. A s 1948 drew to a close, how ever, it w as said, a c h ill w ind, lik e the first h arb in ger o f w inter, sw ept across the econ om y. T he m ercury in m an y b u siness therm om eters b egan to fa ll. N ow , w ith the record o f 1949 before us, w e know just how c h ill w as that w in d ; w e can see how low the therm om eters r e a lly did fa ll. H o w C h ill t h e W in d O ne o f the ch ief therm om eters registerin g the tem perature o f eco n o m ic activity is w hat econ om ists know as the “gross n a tio n a l p rod u ct.” T h is is the v a lu e, at m arket p rices, o f a ll th e final good s and services produced in the country. It rises or fa lls , o b v io u sly , w ith changes in the p h y sica l ou t pu t o f good s and services and w ith changes in p rices. It is u su a lly spok en o f in term s o f an annual rate— at any p artic u la r tim e th e gross n ation al product is b ein g p roduced at a rate o f so m any b illio n d o lla rs a year. H ow , then, did th is therm om eter b ehave in 1 9 4 9 ? The peak o f th e p o s tw a r b o o m cam e in th e f o u r t h q u a rte r o f 1948 in w h ich the gross n ation al product w as runnin g at the rate o f 2 7 0 .3 b illio n d o lla rs a year. T h e d eclin e that then set in carried it dow n to a rate o f 2 5 6 .3 b illio n d o lla rs in the third quarter o f 1 9 4 9 — a d eclin e o f 1 4 .0 b illio n d o l lars a year. T h is d eclin e in gross n a tio n a l p roduct resu lted in part from a d eclin e in p rices and in part from a reduction in the p h y sica l ou tp u t o f good s and services. O ne o f the best in d icators o f p h y sica l ou tp u t is th e F ed eral R eserve in d ex o f in d u strial p rod u ction . T he average le v el o f th is in d ex fo r the fou rth quarter o f 1948 w as 1 9 4 ; in the third quarter o f 1949 its average le v e l w as 168— a d eclin e o f 1 4 percent. In the sam e p eriod the a ll-co m m o d ity in d ex o f w h o lesa le p rices fe ll from 162 .9 in the fo u rth quarter o f 1 948 to 1 53.3 in the third quarter o f 194 9 — a d eclin e o f o n ly 6 p ercen t; and the in d ex o f consum ers p rices fe ll from 1 7 2 .4 to 1 6 9 .0 , a d eclin e o f o n ly 2 percent. T he d eclin e in the gross n a tio n al product w as th erefore in large part the resu lt o f a sh rin k in g volu m e o f g ood s and services, e sp e c ia lly in m an u factu rin g, m in in g, and railroad transportation. In other lin es p rod u ction con tinued at h ig h lev els. A nother therm om eter o f co n sid era b le interest to m ost p e o p le is the one la b eled “ total p erson al in co m e.” In the p eriod under con sid eration , n a m ely from the fou rth quarter o f 1948 to the third o f 1949, total p erson al in com e f e ll from an an n u al rate o f 2 1 6 .6 b illio n d o lla rs to 2 1 0 .6 b illio n — a d eclin e o f 6 b illio n d o lla rs. T h e v ariou s grou p s o f in com e receivers did not, o f course, fe e l th is dow nw ard m ovem ent e q u a lly . W age and salary receivers, fo r ex a m p le, suffered a d eclin e o f 2 .9 b il lio n d o lla rs a y ea r; the in com e o f farm p rop rietors d eclin ed by 4 .7 b illio n a year, the greatest d eclin e fo r any grou p ; nonfarm p rop rietors and rent receivers fou n d their incom e dow n b y a h a lf b illio n a year. R eceivers o f d ividend s and interest, how ever, w ere in a som ew hat better p o sitio n in the third quarter o f 1 9 4 9 than in the fourth quarter o f 1948, better by about 4 0 0 m illio n d o lla rs a year. T ransfer p a y m ents rose by 1.7 b illio n d o lla rs, la r g e ly b ecau se o f unem p lo y m en t com p en sation benefits. C orporate profits b efore taxes fe ll b y 5.6 b illio n d o lla rs and, after taxes, by 3 .4 b illio n . W hat in com e receivers as a w h o le have le ft out o f total p erson al in com e after p a y in g their taxes is know n as “ d is p o sa b le in co m e.” T h is is the am ount that is a v a ila b le fo r p erson al con su m p tion and savin gs. In the p eriod w e are co n sid erin g, d isp o sa b le in com e d eclin ed 4 .3 b illio n d o lla rs a 2 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 J a n u a ry 1950 y ea r; con su m p tion exp en d itu res d eclin ed 2 .4 b illio n ; and p erson al sa v in g s d eclin ed b y about 2 b illio n . T h e brunt o f the d eclin e in con su m p tion ex p en d itu res w as borne b y the n on d u rab le com m od ities fo r w h ich ex p en ditures f e ll b y 6 .8 b illio n d o lla r s a year. R etail p rices o f th ese com m od ities w ere a lso low er. E xp en d itu res fo r d u rab le go od s, on the other hand, rose b y 2 .9 b illio n d o lla r s a year and th e am ount sp en t fo r services b y 1 .4 b illio n . A third therm om eter o f co n sid era b le im p ortan ce in ap p ra isin g the tem perature o f th e b u sin ess clim a te is th e on e know n as “gross p rivate d om estic in vestm en t.” T h is in clu d es the am ounts sp en t on new co n stru ction and fo r th e purch ase o f p rod u cers’ d u rab le eq u ip m en t a s w e ll as ch an ges in b u si n ess in ven tories. From the fou rth quarter o f 1 9 4 8 to th e third o f 194 9 , total gross p rivate d om estic in vestm en t d eclin ed fro m an an n ual rate o f 4 8 b illio n d o lla r s to 35 b illio n — a d eclin e o f 13 b illio n d o lla rs a year. Over a h a lf b illio n o f th is con sisted in a d eclin e in exp en d itu res fo r n ew p rivate con stru ction and 1.1 b illio n represented the d eclin e in p u rch ases o f p rod u cers’ d u rab le equipm ent. T h e greatest d eclin e occurred in b u sin ess in v en tories. In the fou rth quarter o f 1 9 4 8 these w ere g row in g at the rate o f 9 b illio n d o lla r s a year, but in th e th ird quar ter o f 1949 th ey w ere no lo n g er g ro w in g . On th e contrary, they w ere sh rin k in g at the rate o f 2 .4 b illio n d o lla r s a year. W h ile m ost o f the b u sin ess therm om eters w ere fa llin g du rin g the first three quarters o f 194 9 , there w as on e that w as risin g — govern m ent exp en d itu res. In th e third quarter o f 1 9 49 the F ed eral G overnm ent w as b u y in g g o o d s and services at an annual rate 2.1 b illio n d o lla r s greater than in the fo u rth quarter o f 1948, and state and lo c a l governm ents had in creased their b u y in g rate b y 1.2 b illio n d o lla r s a year. F or a ll governm ent u n its com b in ed , th e rate o f ex p en d itu res had risen b y 3.3 b illio n d o lla r s a year. T h is in crea se in the a n n u al rate o f governm ent exp en d itu res w as la rg e en o u g h to cau se w orry to th ose w ho view w ith alarm the g ro w in g r o le that governm en t is p la y in g in b u sin ess affairs. It w as not la rge en ou gh , how ever, to su stain the h o p es o f th o se w ho p in their exp ectation s o f p ro sp erity on governm ent sp en d in g, fo r the in crease in governm ent exp en d itu res (3 .3 b illio n d o lla r s) fe ll far sh ort o f offsettin g th e 13 b illio n d eclin e in the rate o f p rivate in vestm ent and th e 2 .4 b illio n d eclin e in the rate o f exp en d itu re fo r consum ers’ g o o d s and services. I f p ro s p erity w as to b e m ain tain ed its best ch an ce la y in the sen si b le con duct o f the n a tio n ’s b u sin ess affairs b y th e cou n try’s p rivate b u sin essm en . A lth o u g h th e d eclin es in th e b u sin ess therm om eters u n der the first w in try b la st seem im p ressiv e w h en stated in term s o f d o lla r ch an ges in an n u al rates, th ey w o u ld seem m uch less fo rm id a b le i f stated in term s o f percen tage ch anges. T h is is true sim p ly b ecau se the d eclin es occurred from record h ig h le v e ls. T h ey represented, in d eed , an a p p roach to a m ore n orm al and w o rk a b le le v el o f eco n o m ic a ctivity rather than a departure from n orm al on the dow n sid e. T h ey brought no w id esp read h ard sh ip to an y cla ss d esp ite an in crease in u n em p lo y m en t. T here w as, o f course, a general tig h ten in g up o f th e econ om y, C redit w as a little harder to g et; u n em p loym en t rose a p p r ec ia b ly ; jo b s w ere a little harder to find and better q u a lifica tio n s had to be o ffered ; w age in creases w ere few er and sm a ller and had m ore and m ore to b e earned b y in crea sed p ro d u ctiv ity . Lowq u a lity m erch an d ise co u ld n ot b e so e a s ily w orked off on the b u y in g p u b lic at fa n c y p r ic e s; p rofits, too, had to b e earned b y greater m an a g eria l efficien cy, b y better co st co n trol, by im p rovem en t in the q u a lity o f m erch an d ise, and b y a revival o f th e alm o st-lo st art o f se llin g in the fa c e o f co m p etition . In gen era l, th is con traction o f th e eco n o m y from its p rev io u s state o f ov er-ex p a n sio n w as h ea lth y . It w as accom p an ied b y a fe e lin g o f w ell-b e in g and w as free o f any in d i cation o f p a n ic. I f th e first th ree quarters o f 1 9 4 8, as w e rem arked la st year, con stitu ted th e g lo o m ie st p erio d o f p ro sp erity in our h isto ry , w e can sa y w ith th e sam e m easure o f truth that th e first th ree quarters o f 1 9 4 9 con stitu ted the gayest o f our recessio n s. T h e first c h ill w in d , o f cou rse, is n o t w in ter its e lf but o n ly p orten d s the w in ter y et to com e. B en eath th e fe e lin g o f im m ed iate w e ll-b e in g d u rin g th e 1 9 4 9 recession there lurked an u n ea sy fe e lin g that it to o m ig h t be m erely a p o r tent o f m ore difficult d ays in th e n o t to o d istan t fu ture. T he recession , as fa r as it had g o n e b y late sum m er, had indeed been r e la tiv ely p a in less. W o u ld it co n tin u e to be p a in less if the b u sin ess therm om eters con tin u ed to f a ll? I n d ia n S u m m e r B efo re an answ er w as fo rth co m in g , h ow ever, a g lo w o f w arm th q u ite su d d en ly and p a r a d o x ic a lly su ffu sed the eco n o m y d esp ite th e fa ct that m an y th erm om eters continu ed to fa ll. F ig u res fo r th e fo u rth quarter o f th e year are n ot d efin itive at th is w ritin g . T h ey s till em b o d y estim ates to som e exten t but n ev erth eless p ro v id e a rea so n a b le m easure o f the tem perature o f b u sin ess. T h e gross n a tio n a l p rod u ct, w h ich h ad lo st 14 b illio n d o lla r s in its a n n u al rate d u rin g th e recessio n , lo st another 8 0 0 m illio n d o lla r s in th e fo u rth quarter o f th e year. T otal p erso n a l in com e, w h ich had lo st 6 b illio n d o lla r s a year, d eclin ed furth er b y 6 0 0 m illio n d o lla r s. S a la ries, w ages, and other la b o r in co m e in creased , in d eed , b y 1 0 0 m illio n d ollars, but the in co m e o f farm p ro p rieto rs f e ll b y another 30 0 m illio n d o lla r s a year a lth o u g h w ith o u t c a u sin g m uch con cern. It w as p o in ted ou t that in th e 1 9 2 0 ’s w e had d iscovered that w e can en jo y a b o o m in g eco n o m y ev en w ith a depressed agricu ltu re, and a g ricu ltu re to d a y is fa r fro m depressed. D isp o sa b le in co m e (to ta l p erso n a l in co m e a fter ta x e s) also lo st another 8 0 0 m illio n d o lla r s in its an n u a l rate on top o f the d eclin e o f 4 .3 b illio n d u rin g the recessio n . In th e fo u rth quarter o f 1 9 4 9 the p u b lic w as b u yin g con su m p tion g o o d s at a lo w er rate than in th e third quar ter, low er b y 5 0 0 m illio n d o lla r s a y ea r. T h e sam e trends that had been presen t in the ea rlier p art o f th e year, how ever, p ersisted in the la st quarter— a fu rth er in crease in the rate o f p u rch ase o f d u ra b le g o o d s; a fu rth er d eclin e in the rate o f p u rch ase o f n o n d u ra b le g o o d s; and a slig h t in crease in the rate at w h ich services w ere b o u g h t. T h is r ela tiv e ly h ig h rate o f consum er exp en d itu res w as su p p o rted n o t o n ly b y som e w hat h ig h er in co m es, b ut a lso b y a fu rth er d eclin e o f 20 0 m illio n d o lla r s in the rate o f p erso n a l sa v in g s. A n oth er sig n ifica n t th erm om eter w h ich fa ile d to rise and w h ich rem ain ed at th e th ird quarter le v e l w as gross private d om estic in vestm en t. N ew p riv a te con stru ction , in d eed , in creased, e sp e c ia lly resid en tia l b u ild in g , b ut in vestm en t in n on farm p ro d u cers’ d u rab le eq u ip m en t f e ll b y 1.9 b illio n 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 Ja n u a ry 1950 d o lla rs a year. T here w as a lso a further m odest contraction in b usin ess inven tories, th ou gh at a slo w er rate. G overnm ent exp en d itu res (F ed eral, state, and lo c a l) fo r g o o d s and serv ices continued to rise th rou gh ou t the fo u rth quarter b y 4 0 0 m illio n d o lla rs a year. A lth o u g h the in d ex o f in d u strial prod uction rose by about 4 percent and there w as a further slig h t d eclin e in w h o lesa le p rices, consum er p rices rem ained v ir tu a lly unchanged. L ook in g backw ard at w hat occurred in the fou rth quarter and n otin g som e o f the causes fo r it that can n ow b e d is cerned, on e is rem inded m ore o f the d ecep tive w arm th o f Indian sum m er days than o f sum m er at the fu ll. D esp ite the w arm th there is a tenderness and fr a g ility in the air that b e speaks im perm anence. Im provem ent in som e lin e s w as to be exp ected b ecause o f season al fa cto rs; there w as also som e b u yin g in an ticip ation o f str ik e s; new con stru ction , e sp e c ia lly resid en tial b u ild in g, continued w ith u n exp ected v ig o r; the m arket fo r au tom ob iles and other d u rab le go o d s h eld up su r p r isin g ly w ell but at the cost o f a reduced rate o f savin gs, the draw ing on p ast savin gs, and the creation o f an u n p re cedented v olu m e o f consum er credit o u tstan d in g; in ven tory b u yin g im proved to com pensate fo r o v er-liq u id a tio n in the ea rly part o f the y ear; F ederal farm su p p ort p rogram s, a l th ou gh they h ave not prevented d eclin es in farm p rices, have n everth eless prevented a lm ost u n m an ageab le farm sur p lu ses from m aking their fu ll im p act on the e co n o m y ; and the F ed eral R eserve System has adopted p o lic ie s that m ake it easier fo r banks to sa tisfy w hatever b u sin ess dem and fo r loan s m igh t d evelop . T hese are som e o f the th in g s that have con spired to nourish the fe e lin g that the b ottom had been reached and that b u sin ess w as once m ore headed upw ard. N or does the ou tloo k fo r the im m ed iate fu tu re rest on any m ore substantial factors. T h ose w ho lo o k fo r continued g ood b u siness throu ghou t the first h a lf, and p erh ap s fo r the w h o le o f 1950, base their exp ectation s la r g e ly on the b e h avior o f the construction industry, on a co n tin u in g b oom in the au tom ob ile and d u rab le go o d s m arkets, and on govern m ent sp ending. T here is one other factor that also b olsters h o p e— the N a tio n a l L ife Insurance refu n d s to veterans. T hese are expected to b u oy up consum er sp en d in g to som e in d e term inate degree. Just how veterans w ill u se th ese fu n d s is n ot know n. A survey o f tw o sm all grou p s o f veterans in A tlan ta, how ever, m ay g iv e som e rough id ea o f their in ten tion s. In on e group, 7 percent had alread y borrow ed in an ticip a tio n o f the re fu n d . In th is group 25 percent said that th ey w o u ld use their refu n d s to p ay o ff d eb ts; 38 percent said th ey w o u ld save them ; 14 percent said th ey w o u ld use th e m on ey fo r new h ou sin g. O nly 12 percent in d icated that the m on ey w o u ld be used to purchase consum er good s. In the other group, 4 percent had alread y borrow ed ; 16 percent w o u ld u se the p roceed s to pay o ff debts; 51 p ercent intended to save th em ; 10 percent w ou ld use the refunds fo r new h o u sin g . O n ly 22 p ercent said th ey w ou ld use the m on ey fo r consum er good s. I f these rep lies are at a ll ty p ica l o f veterans in g en eral, the insurance refu nds m ay not m ake as large a r ip p le on the stream o f sp en d in g as m any have su p p osed. T h e G r a s s h o p p e r a n d t h e S q u ir r e l A lth ou gh som e im provem ent in b u sin ess sentim ent has cer ta in ly taken p la ce since last sum m er, the facts o f the situ ation sca rcely seem s to w arrant the b ou n d less op tim ism that has 3 accom p an ied it. O ptim ism is a p lea sa n t state o f m ind, but over-optim ism can som etim es be dangerous. T he grassh op p er w ho h o p s b lith e ly from b lad e to b lad e in the m ello w su n lig h t o f In d ian sum m er, w ith com p lete and op tim istic confidence in h is future, is ill-p rep ared to m eet the rig o rs o f the first freeze. It w o u ld be unfortunate, indeed, if the variou s im portant econ om ic grou p s in the n ation w ere to em ulate the grassh op p er in the b e lie f that a ll dow nw ard adjustm ents in the econ om y h ave now been com p leted and that w e are on the th resh old o f another 1948. It w ou ld be unfortunate, fo r exam p le, if lab or w ere to m ake dem ands u p on industry that w ou ld prevent m an age m ent from con tin u in g to reduce costs and p rices. T o do so m igh t resu lt in h igh er d o lla r in com es but o n ly at the cost o f d e clin in g real in com e. It w ou ld be unfortunate, too, if businessm en w ere to rela x their efforts to cut costs and to expand their m arkets b y a gradual reduction in p rices and w ere now to take advantage o f every m om entary sp ecu lative situ ation to raise p rices. T h e latter course co u ld e a sily resu lt in sh rin k in g m arkets and drastic and in v o lu n tary pricesla sh in g later on. E q u a lly un fortu n ate w o u ld be governm ent p o lic ie s and program s that p ile deficit u p on deficit in the h o p e that a m ira cu lo u sly exp a n d in g econ om y w ill forever absorb them , or that substitute fo r the h ea lth y vig o r o f private enterprise the en ervatin g program s o f p o litic a l largesse. F in a lly , it w ou ld be u n fortunate if consum ers w ere g e n era lly to squ an der their savin gs and burden their unknow n fu ture incom es w ith a m ountain o f debt fo r the sake o f acq u iring present goods, a m ou n tain w h ose p in n a cle now to p s the 18 b illio n d o lla r m ark. Such ten d en cies betray the g rassh op p er’s lack o f re sp o n sib ility tow ard the future. If sufficiently strong, they cou ld p rove u ltim a tely d isastrous b y recreating and accentu atin g the kind o f d istortion s and im b alan ces w ithin the eco n om y that the 1949 recession w as g ra d u a lly but h a p p ily cor recting. Instead o f the grassh op p er, it w ere better to em ulate the sq u irrel, w ho u tilize s the resp ite o f Indian sum m er to m ake snug h is nest a g ain st the com in g co ld and to gather and store the nuts on w h ich h e w ill liv e a ll w inter. H e p ractices the the an cien t virtu es o f industry, th rift, self-relia n ce, and fo r e sigh t— virtues that sca rcely rank h igh est on to d ay’s h it p ar ade. But because h e p ractices them , the sp rin g w ill find the squirrel a liv e, sleek and w e ll fed , and ready to m eet w hat ever p rob lem s m ay fa ce h im in the com in g year. T he grass h opper, on the other hand, w ho fa ils to p ractice these virtues that are so im p ortan t to self-su rv iv a l w ill be but a m em ory in the sp rin g. T om orrow ’s econ om ic h isto ry is b ein g m ade b y tod ay’s d ecisio n s w ith respect to past and present ex p erience. T o m isinterpret that exp erience, and to m istake on e’s h op es fo r reality, is to la y up trou b le fo r the future. U nder present circum stances, therefore, it w ou ld be w e ll to m aintain a h ealth y sk ep ticism tow ard the fu tu re u n til optim ism can find a m ore secure fou n d a tio n in fact. It w ou ld be w ell, too, if the lesson s w e were b eg in n in g to learn in the 1949 recession w ith respect to the m ore efficient, vigorou s, and adventurous m anagem ent o f econ om ic affairs w ere not too e a sily fo r g o t ten in the go ld en days o f Indian sum m er. E a r le L. R a u b er 4 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 Ja n u a ry 1950 Sixth District Banking in 1949 a t i o n a l fiscal, m onetary, and eco n o m ic d evelop m en ts w ere the p rin cip a l factors reflected in ch an ges in D istrict m em ber bank statem ents in 1949. T h e im p act o f th ese d ev el opm ents on banks in lo ca l areas varied, how ever, in accord ance w ith the econ om ic structure o f each. A d eclin e in p rivate credit d u rin g the first seven m onths w as the ch ief deflationary fo rce in 1 9 4 9 . D eflation ary p res sures in 1948 cam e from F ed eral debt retirem ent and from an in crease in reserve requirem ents. B y w ay o f contrast, little retirem ent o f p u b lic ly h eld debt occurred in 1 9 4 9 ; and in stead o f the T reasu ry’s cash in com e ex ceed in g cash ou tgo by 8 b illio n d o lla rs, as w as the case in 194 8 , there w as an excess o f o n ly a little over 2 b illio n d o lla rs. T o ta l gross p u b lic debt d eclin ed 4 b illio n d o lla rs in 1 9 4 8 ; it rose 4 b illio n in 1949* M oreover, the slack en in g o f b u sin ess activ ity in 1 9 4 9 w as m et b y a ch an ge in F ed eral R eserve p o lic y w h ich eased credit restriction s. T h ere w as a ch an ge in op en m arket p o lic y and reserve requirem ents w ere low ered three different tim es. N rectly, to keep up the le v e l o f m em ber bank lo a n s. A t no tim e during the year did th ey sh ow as m uch relu cta n ce to borrow as b u sin essm en did. T h ey borrow ed over 4 5 0 m illio n d o lla r s in th e fo rm o f in stalm en t lo a n s fro m S ix th D istrict com m ercia l banks in 1949. T h ey rep aid a la rg e part o f th eir in d eb ted n ess, but at the end o f the year the banks still h eld ab ou t 75 m illio n d o lla rs m ore consum er in stalm en t p ap er than th ey had at the end o f 1948. A p p ro x im a tely h a lf o f the in crea se resu lted fro m a grow th in lo a n s fo r a u to m o b ile p u rch ases. T otal d ep osits and currency th rou gh ou t the U n ited States d eclin ed du rin g the first h a lf o f the year, la r g e ly b ecau se o f a d eclin e in b u sin ess borrow in g, but have rem ained fa ir ly sta b le sin ce that tim e. In gen eral, D istrict trends resem bled th ese n a tion al trends. B u s in e s s m e n B o r r o w L e ss T he alm ost uninterrupted m onth-to-m onth in crease in total lo a n s during 1948 ended in D ecem b er o f that year. A t a ll m em ber banks throughou t the country, lo a n s m oved d ow n ward durin g the first seven m onths o f 1 949. B y the end o f Ju ly, they had dropped alm ost 2 b illio n d o lla rs and w ere b e low the lev el o f a year earlier. A s a grou p , S ix th D istrict m em ber banks reported a p a r a lle l trend in lo a n s. H ow ever, in no m onth in 1949 did the total fa ll b elo w that o f the cor r esp on d in g m onth in 1948. L oans at the banks o u tsid e the lea d in g cities o f the D istrict h eld up better than lo a n s at the large city banks, p o ss ib ly b ecau se a sm a ller p rop ortion o f them w ere bu sin ess loan s. R educed b u sin ess b orrow in g caused m ost o f the d eclin e in total lo a n s ou tstanding. A t a ll D istrict m em ber banks, fo r e x am ple, total lo a n s at the end o f June w ere greater than on the corresp on d in g date o f the p reviou s year, but com m ercial and in d u strial lo a n s w ere dow n su b sta n tia lly . M oreover, the d eclin e in bu sin ess b orrow in g w as concentrated in those areas w here in d u strial activity w as w an in g. T he reduced dem ands b y b u sin essm en fo r lo a n s d u rin g the first part o f 1949 stem m ed p a rtly fro m a d ecisio n to liq u id ate in ven tories fo llo w in g the slu m p in consum er b u y in g w h ich b egan in late 1948. In ven tory liq u id a tio n s w ere greater, h ow ever, than the d eclin es in consum er dem and ju stified . D u rin g the latter part o f 1949 a restock in g p rocess and a pick u p in a ctivity in m an y in d u stries w ere reflected in a brisk dem and fo r loan s. T h is dem and, togeth er w ith the p articip a tio n o f m any D istrict banks in C om m odity Credit C orporation cotton loans, raised total loan s at m em ber banks b y the end o f the year to a p o in t h igh er than any p re v io u sly reported. C on su m ers B orrow M ore C onsum ers, as a group , con tin u ed to b u y in 194 9 d esp ite d e clin es in incom e, thereby h e lp in g , both d irectly and in d i 1945 1946 1947 1948 1949 In stalm en t len d in g h as b ecom e so im p ortan t to com m ercial banks that at m id year th is ty p e o f lo a n exceed ed S ixth D is trict m em ber bank lo a n s on real estate, a g ricu ltu ral loans, and every other ty p e o f lo a n ex cep t b u sin ess lo a n s. In sta l m ent lo a n s w ere about a third as great as the latter. M o r e G o v e r n m e n t S e c u r it ie s For the first tim e sin ce 1 9 4 5 , m em ber b anks en ded the year w ith greater h o ld in g s o f G overnm ent o b lig a tio n s than at the end o f the p reced in g year. T o a la rg e extent, the in crease in h o ld in g s represented an attem pt b y th e banks to offset the de c lin in g dem and fo r lo a n s and to m a in ta in ea rn in g assets. T he in crease o f 189 m illio n d o lla r s in m em ber bank h o ld in g s o f G overnm ent secu rities betw een the end o f 1 9 4 8 and the end o f A u gu st 1949 , w h en th ey reached th eir p eak at D istrict m em ber banks, w as about d o u b le th e am ount o f the d ecline in lo a n s d u rin g the sam e p erio d . T he greater part o f the in crease in D istrict m em ber bank h o ld in g s o f G overnm ent secu rities took p la c e at the reserve city banks, but lo a n s d eclin ed m ore at th ese banks than at the country banks— th ose ou tsid e reserve cities. M ost o f the in crease occurred in J u ly and A u g u st w hen the banks utilized reserves freed b y the lo w e r in g o f reserve requirem ents. Since then, G overnm ent secu rity h o ld in g s h ave d eclin ed slig h tly , as the dem and fo r lo a n s in creased . N et ad d itio n s to G overnm ent secu rity h o ld in g s w ere m ade b y in crea sin g h o ld in g s o f secu rities m atu rin g in less than a year. S tartin g the year w ith a p p ro x im a tely one-third o f their 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 Ja n u a ry 1950 G overnm ent security h o ld in g s in that m aturity group, both reserve city and country banks had over h a lf o f their secur ities in that extrem ely liq u id p o sitio n by the end o f 1949. D e c lin in g I n t e r e s t R a t e s B usiness loan s w ere m ade at slig h tly h igh er rates o f interest by the lead in g banks in A tlan ta and N ew O rleans during m ost o f 1949. B y the third quarter, how ever, the average rate fo r a ll sizes o f loan s had increased less than 0.2 o f one p ercen t a ge p oin t from that charged at the end o f D ecem ber. P erh ap s because the dem and fo r lo a n s d eclin ed at a low er rate in the D istrict than elsew h ere, the average rate did not d eclin e from June to Septem ber as it did th rou gh ou t the cou n try. B etw een Septem ber and D ecem ber, how ever, the average rate at the D istrict banks d eclin ed slig h tly . T he rates on b u si ness lo a n s at the banks in the larger cities— m any o f w hich w ere large lo an s— are, o f course, m ore sen sitiv e than those in the sm aller centers. T h e I m m e d ia t e F u tu r e D u rin g 1950, banking d evelop m en ts in the D istrict w ill p ro b a b ly continu e to be governed la rg e ly by n ation al d e v elo p m ents. B ecause such a large part o f the m on ey su p p ly now B a n k revolves around T reasury exp en d itu re, b orrow in g, and debt repaym ent, the im m ed iate p rosp ects in these fields w ill be one o f the m ajor factors g overn in g p rosp ects fo r banks. T h e first part o f each p reced in g postw ar year has been a p eriod o f con tractin g d ep osits as tax co llectio n s exceeded e x penditures. S uch a situ ation seem s less lik e ly to develop in 1950. H eavy T reasury exp en d itu res are in p rosp ect fo r the first h a lf o f the year. A T reasury deficit fo r the last h a lf o f 1950, w hich seem s p rob ab le at this tim e, w ill elim in ate the p o ssib ility o f a d eflationary force through debt retirem ent. If the T reasury finances a part o f the deficit b y bank b or row ing, an in crease in the m on ey su p p ly m ay result. T he p rosp ects can be changed, o f course, b y co n g ression al action on taxes and a p p rop riation s. T hese con sid eration s p o in t to no general d eclin e in d e p osits fo r the b an k in g system as a w h o le if there is a con tinued dem and fo r private credit. M any in d iv id u a l bankers in the D istrict, how ever, w ill fa ce the n ecessity o f ad ju stin g to d e clin in g d ep osits. Som e o f them have had to do so already. By and large, th ese p rob lem s w ill be centered at banks in the sm a ller com m unities and esp e c ia lly in those w here incom e is not derived from d iversified sources. C harles T . T aylor A n n o u n c e m e n ts On December 27 two banks were welcomed into the Federal Reserve System. One of these was the Alabama City Bank of Gadsden, Gadsden, Alabama, with a capital stock amounting to $100,000, surplus and undivided profits to $116,000, and deposits to $3,082,000. The officers are James B. Little, Presi dent; W . E. Hockensmith, Vice President; Mrs. Henrietta Killian, Cashier; and H . Ray Cox, Assistant Cashier. The other new member is the Washington Loan and Bank ing Company, Washington, Georgia. This bank has capital stock of $100,000, deposits of $2,715,000, and surplus and undivided profits of $183,000. Its officers are W. L. Johnson, Chairman of the Board; F. W. Thomas, President; Dr. T. B. Walton and R . R. Johnson, Vice Presidents; and H. P. Shank, Cashier. Eight additions have been made to the Par List during the month o f January. Five nonmember banks began remitting at par on January 1. They are as follows: Citizens and Southern Bank of LaGrange, LaGrange, Geor gia, with capital of $200,000, surplus and undivided profits of $325,000, and deposits of $12,177,000. The officers are Olin F. Fulmer, Jr., President; Harry R. Spikes, Executive Vice President; W . F. Holle, Jr., Cashier; and R. W. Smith, Assistant Vice President. Citizens and Southern Bank of Dublin, Dublin, Georgia. This bank has a capital of $150,000, surplus of $150,000, and deposits of $4,700,000. Its officers are Mills B. Lane, Jr., Chairman of the Board; Charles V. Smith, President■ Win ; field S. Simmons, Vice President; T. J. Jernigan, Cashier; Henry L. Cox and Julius A. Lynn, Assistant Cashiers; and Lamar C. Hogan, Manager, Farm Development Department. Citizens and Southern Bank of Thomaston, Thomaston, Georgia. The capital of this bank amounts to $150,000, sur plus to $150,000, and deposits to $6,128,000. The officers are James R. Atwater, Chairman of the Board; C. B. Jenkins, Jr., President; J. P. Culpepper, Jr., Cashier; and B. M. Branch, Assistant Cashier. 5 LaGrange Banking Company, LaGrange, Georgia. The cap ital stock of the bank amounts to $50,000, surplus and undi vided profits to $144,000, and deposits to $2,516,000. The of ficers are A. E. Mallory, President; C. W . Curry, Executive Vice President and Cashier; W. B. King, Vice President; and Neil Glass and Paul Gray, Assistant Cashiers. The Bank of Commerce, Woodbury, Tennessee. This bank has a capital of $50,000, surplus and undivided profits of $33,000, and deposits of $1,460,000. The officers are / . F. Adams, President; J. H. Cummings, Vice President; and 5 . B. Hawkins, Cashier. On January 15, The Citizens Bank and Trust Company, Wartburg, Tennessee, a nonmember bank in Nashville Branch territory, began remitting at par. This bank has a capital of $40,000, surplus and undivided profits of $63,000, and de posits o f $1,161,000. The bank’s officers are Glen Brasel, President; George H. Buxton, Sr., Vice President; W . P. Lovelace, Cashier; and J. B. Powell, Assistant Cashier. Also going on the Par List on January 15 was the Okee chobee County Bank, Okeechobee, Florida. The capital of this bank amounts to $50,000, surplus and undivided profits to $68,000, and deposits to $922,000. The officers are C . H. McNulty, President; N. Ray Carroll, Vice President; S. H. McDougald, Vice President; and Warren E. McNulty, Cash ier. Vice President Carroll became a Director of the Jackson ville Branch of the Federal Reserve Bank of Atlanta on January 1. Another addition to the Par List was Hastings Exchange Bank, located at St. Augustine, Florida, in Jacksonville Branch territory. This is a new organization opening on Jan uary 17 with a capital of $50,000, paid-in surplus of $10,000, and undivided profits of $5,000. The officers of the bank are E. B. Bowles, President; W. H. Freeman, Vice President; S. H. Marsh, Vice President and Cashier; and R. E. Tutten , Assistant Cashier. 6 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 Ja n u a ry 1950 Industry and Employment in 1949 year ju st past, con stru ction activ ity th rou gh ou t the S ixth D istrict w as greater than in an y ea rlier year and electric p ow er prod u ction b y the D istrict u tility p la n ts re corded another an n u al increase. C otton tex tile m ill op era tion s, how ever, averaged low er than in 194 8 and co a l p ro d uction w as at a su b sta n tia lly low er le v e l b ecau se o f w ork sto p p ages and the shortened w ork w eek. S teel m ill a ctivity w as also reduced by the co a l strike in the sp rin g and b y the c o a l and steel strikes in the fa ll. E m p loym en t in m an u factu r in g in dustries averaged m ore than 7 p ercent less than in 1 9 4 8 . I N th e C o n s tr u c tio n R esid en tial con struction as w ell as b u ild in g activ ity as a w h ole rose to a record lev el in 1 9 4 9 . A cco rd in g to F. W . D od ge C orporation statistics, the total v a lu e o f construction contracts aw arded in the D istrict w as 1 ,1 3 8 m illio n d o lla rs, an increase o f 11 percent over the 194 8 total, and resid en tia l con struction am ounted to 4 9 0 m illio n d o lla rs, an in crease o f 13 percent. R esid en tial contracts accounted fo r 4 3 p ercen t o f the 1949 to ta l; in 1948 the p ercen tage had b een 4 2 . SIXTH DISTRICT CO N STRUCTIO N MILLIONS OF DOLLARS MILLIONS OF DOLLARS E ach D istrict state excep t F lo rid a shared in th e g a in in contract aw ards, but F lo rid a s till led the other states in both total and resid en tial constru ction . F ig u res p u b lish ed b y the Bureau o f L abor S tatistics in d ica te that in the first ten m onths o f last year 6 1 ,3 2 5 h ou sek eep in g units w ere authorized by perm it or contract in the six states, a ga in o f 18 p ercen t over that p eriod in 1948. T h e largest g a in s occurred in M ississip p i and A lab am a, 51 and 4 8 percent, resp ec tiv e ly ; in G eorgia the increase w as 16 p ercen t and in F lo rid a , L ou isian a, and T ennessee, 9 p ercen t each. A n in crease o f 8 .6 p ercen t w as re ported for the cou ntry as a w h o le. C onstruction costs, accord in g to the in d ex o f the A m erican A p p ra isa l C om pany, aver aged about the sam e in 1 9 4 9 as in the p reced in g tw elve m onths. T e x tile s On the b asis o f the d a ily average rate o f cotton co n su m p tion , tex tile m ills in the D istrict operated last year at a lev e l about 13 percent b elo w the average fo r 1 948. T he d eclin e in cotton con sum ption w h ich began in 194 8 continued, a lm o st u n in ter rupted, throu gh J u ly 1949, b u t,w a s fo llo w e d b y a sharp in crease in the latter part o f the year. T he average con su m p tio n in the A ugu st-D ecem b er p erio d w as 17 percen t greater than in the January-July p erio d and 2 .4 p ercen t greater than in that part o f 194 8 . In ven tories o f te x tile p rod u cts at a ll le v e ls had been se v e rely reduced and at m idsum m er there w as a rather sudden resu m p tion o f b u y in g w h ich resu lted n o t o n ly in increased p rod u ction , but in risin g p rices as w e ll. M ill m argin s— the spread betw een the cost o f a p ou n d o f raw cotton and the p rice o f the fin ish ed prod u ct— had d eclin ed fro m 6 4 .7 cents in D ecem ber 1 9 4 7 to 3 3 .9 8 cents in D ecem b er 1 9 4 8 and to 2 7 .7 5 cents in June 1949, but betw een Ju n e and O ctober there w as a rise to 3 6 .0 8 cents. N ev erth eless, fo r the first ten m onths o f 194 9 , m ill m argin s w ere ab ou t 3 4 percent low er than the 1 9 4 8 average. E m p lo y m e n t M an u factu rin g em p lo y m en t in creased slig h tly in N ovem ber, fo llo w in g a drop in O ctober w h ich w as caused p r in c ip a lly b y the w ork sto p p a g e in steel and related in d u stries. A la bam a, F lo rid a , L ou isian a, and M ississip p i reported gain s but T en n essee suffered a d eclin e w h ich w as b ecau se o f another strike. In the first elev en m onths, em p lo y m en t in m an u factu rin g in d u stries averaged 7 .4 p ercen t low er than in 1 9 4 8 . D ecreases larger than the D istrict average occurred in M ississip p i, A la bam a, and T en n essee, w h ereas in L ou isia n a , F lo rid a , and G eorgia the d eclin es w ere sm a ller than the D istrict average. T he in d ex o f m a n u fa ctu rin g em p lo y m en t d eclin ed each m onth fro m N ovem b er 194 8 th rou gh J u ly 1 9 4 9 . It recovered som ew hat in A u gu st and Septem ber, but th e rise w as in ter rupted in O ctober b y a steel strike. E m p lo y m en t in the te x tile in d u stries averaged 1 1.2 p er cent less in 1 9 4 9 than in 1 9 4 8 . T e x tile em p lo y m en t had de c lin ed about 2 0 percen t fro m M arch 1 9 4 8 th rou gh J u ly 1949, a d ecrease h a v in g taken p la c e each m on th ex cep t on e. There w as a recovery o f m ore than 8 percent, h ow ever, betw een J u ly and N ovem b er. In the lum ber and w ood p rod u cts group, SIXTH DISTRICT M A N U FA CTU R IN G EMPLOYMENT 1 9 4 9 COMPARED WITH 1 9 4 8 | i i i i i i l l I |i i i i CHEMICALS 1 1 FOOD AND KINDRED PRODUCTS E APPAREL PAPER AND PULP MANUFACTURING-ALL TYPES LUMBER AND FINISHED PRODUCTS TEXTILES PRIMARY METALS TRANSPORTATION EQUIPMENT -- 1 1 1 1 -- -- L_ 1 -1 5 -1 0 -5 PERCENT CHANGE J 1 1 1 1 1 1 1 1 — 0 +2 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 Ja n u a ry 1950 em p loym en t averaged 8.3 percent less in 1 9 4 9 than in 1948, but in the fo o d and kindred prod u cts in d u stries, the 194 9 av erage w as dow n o n ly one percent fo r the year. In the trans portation eq uipm en t group, w h ich in clu d es sh ip b u ild in g and repair establish m ents and au to m ob ile a ssem b ly p lan ts, em p loym en t averaged about 16 percent le ss than in 194 8 , c h ie fly because o f continu ed d eclin es at the sh ip yard s o f the D is trict. T here w as also a d eclin e o f 15 p ercen t in fab ricated m etal products, and one o f 11.6 percent in p rim ary m etals indu stries. O n ly in the ch em ical group, w h ich in clu d es fe r tilizer m anufacture, w as the 194 9 average h ig h er than that fo r 1948, and the increase in that group w as o n ly one-third o f one percent. C o a l, S t e e l , P e t r o l e u m , a n d E lectr ic P o w e r C oal m in in g op eration s in A lab am a and T en n essee in 1949 averaged 35 percent low er than in 1 9 4 8 . T h e m in es w ere id le d u rin g the last h a lf o f M arch, the third w eek in June, the first w eek in Ju ly, and fo r a lm o st tw o m onths in the fa ll. Output w as further reduced b y the three-day w ork w eek dur in g the last h a lf o f the year. SIXTH DISTRICT PRODUCTION INDEXES 7 S ix t h D is t r ic t S t a t is t ic s INSTALMENT CASH LOANS Volume No. of Lenders Percent Change Lender Dec. 1949, from Report Nov. Dec. ing 1949 1948 Federal credit unions........ + 12 39 + 4 State credit unions............. + 41 22 + 7 Industrial banking com panies .............................. + 6 — 1 10 Industrial loan companies. . 14 + 32 + 21 Small loan companies........ 36 + 47 + 16 Commercial banks............. + 24 33 + 1 Outstandings Percent Change Dec. 1949, from Dec. Nov. 1948 1949 + 37 + 2 + 35 + 3 — 1 + 1 + 4 + 1 + 2 + io + 6 4- 38 RETiAIL JEW ELRY STORE OPERATIONS Percent Change Number of December 1949, from Item Stores Reporting Nov. 1949 Dec. 1948 38 — 10 + 186 Cash sales................................................ 37 + 210 — 21 Credit sales.............................................. — 5 37 + 178 Accounts receivable, end of month.......... 37 + 34 + 50 __ 7 Collections during month......................... 37 + 8 WHOLESALE SALES AND INVENTORIES* INVENTORIES SALES No. of Percent Change No. of Percent Change Item Firms Dec. 1949., from Firms Dec. 31, 1949, from Report Nov. Dec. Report Nov. 30, Dec. 31, ing ing 1949 1949 1948 1948 Automotive supplies. 3 — 16 - 48 Electrical group....... Full lines............... 3 + 14 + 9 — 15 Wiring supplies.... 3 — 13 — ii 3 40 _ 35 _ — 3 Appliances............ 8 — 5 7 — 24 __ 8 General hardware. . . 7 12 — 9 — 5 + 4 __ 34 Industrial supplies. . . 3 4 3 + 10 + o Jewelry..................... 3 6 + 58 — 5 — 13 + 60 Plumbing and heat _ _ 2 ing supplies.......... — 8 3 4 — 19 + 9 _ 12 _ Confectionery.......... 3 + 5 Drugs and sundries.. 4 11 'o — 7 + 11 + *0 13 17 — 32 — 12 + 2 — 4 ___ 6 _ 8 Full, lines............... — 9 34 — 9 26 Specialty lines...... 10 — 20 — 10 4 — 2 — 5 Shoes and other __ 31 footwear................ 3 — 51 _ _ 2 _ \2 _ Tobacco products. .. . 13 — 1 10 — '5 Miscellaneous.......... 14 10 — 6 — 5 + 10 + 4 __ 9 148 6 93 1 — 8 *Based on U. S. Department of Commerce figures. D u rin g m ost o f the year D istrict steel m ills operated ab ove rated capacity. A ctivity w as reduced som ew hat in M arch and A p r il because o f the w ork sto p p a g e in co a l m in es and the m ills w ere closed in O ctober and ea rly N ovem b er b y both the co a l and the steel strikes. In the coastal areas o f L ou isian a and M ississip p i, p rod u c tion o f crude petroleu m averaged about the sam e in 194 9 as in 1948, alth ou gh third-quarter output w as w ell b elo w that p eriod a year earlier. P rod u ction in 1948 had averaged about 14 p ercent greater than in 194 7 . E lectric pow er produ ction at the D istrict p u b lic u tility p lan ts averaged 7.9 percent greater in 1 9 4 9 than in 1 948. T he in crease took p la ce at the h y d ro-electric p lan ts, w here about 2 8 percent m ore current was generated than in 1 9 4 8 . A t th ose p lan ts u sin g fu els, 1949 output w as 7 .5 p ercent sm a ller than in the p reced in g year. On the average, hydro-generated pow er accou nted fo r 52 percent o f total p rod u ction la st year, w hereas in 1948 the percen tage w as less than 4 4 . D . E. M oncrief DEPARTMENT STORE SALES AND INVENTORIES SALES INVENTORIES No. of Percent Change No. of Percent Change Place Dec. 1949, from Stores Dec. 31, 1949, from Stores Report Nov. Dec. Report Nov. 30 Dec. 31 ing ing 1948 1949 1949 1948 ALABAMA __ 15 Birmingham........... 4 + 44 — 18 3 — 4 __ 2 5 + 63 __ 8 Montgomery.......... 3 + 74 — 40 3 — '7 FLORIDA __ Jacksonville........... 4 — 19 + 30 3 + 6 6 __ 1 Miami.................... 4 — 8 4 3 + 73 + 2 __ 5 Orlando................ 3 + 55 Tampa.................... 5 — 2 — 17 0 + 65 3 + GEORGIA „ 4 6 + 50 5 — 34 5 + Augusta................ 4 3 — 28 + 60 3 + + 11 Columbus............. 3 + 65 + 6 Macon.................... 1 6 + 61 — 29 4 + — *5 4 0 + 70 Savannah............... 6 + 6 6 + 1 — 26 4 — ‘5 LOUISIANA Baton Rouge.......... 4 4 + 57 — 8 0 — 28 + New Orleans........ 6 + 42 4 3 — 18 — 5 + MISSISSIPPI Jackson.................. 4 + 52 4 — 25 6 — 2 + Meridian............... 3 5 + 57 TENNESSEE Bristol.................... 3 3 1 — 29 — 12 + 71 + Chattanooga........ 4 9 3 — 35 — 13 + 67 + Knoxville............... 4 + 67 + 0 Nashville............... 6 + 58 2 — '9 5 — 24 + 22 + 69 OTHER CITIES* 1 22 — 11 — 13 + DISTRICT.................. 113 76 — 22 + 57 — 4 + 1 *When fewer than three stores report in a given city, the sales or stocks are grouped together under "other cities." 8 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 Ja n u a ry 1950 A Year o f Changes in Consumer Spending e s p it e a low er in com e in 194 9 , total consum er sp en d in g in the S ixth D istrict w as very little less than in 1948. R ather than reduce their p u rch asin g, consum ers n ot o n ly w ent further in to debt, but they a lso used m ore o f their a c cum ulated liq u id assets and sp en t a greater p rop ortion o f their in com e. F in a l estim ates w ill p ro b a b ly show 194 9 p er so n al incom e paym ents in the six states a p p ro x im a tely 3 p er cent less than in 1948. T h e d o lla r v o lu m e o f total retail trade, how ever, p ro b a b ly d eclin ed less than on e percent and consum er exp en d itu res fo r rents and other services p ro b a b ly increased. In 1949, w hen it look ed as th ou gh th e consum er had stopp ed b u yin g because p rices w ere too h igh , p rices w ere cut— d ra stica lly in som e cases. W hen it seem ed that he w as ru nning out o f m oney, easier credit term s w ere extended. D u rin g the first part o f the year, m erchants an ticip ated that h e w ou ld con tin u e to spend le ss and th ey reduced their in ven tories and cut their forw ard com m itm ents. F in a lly , w hen it w as discovered that a ll the consum er w anted w as a se le c tio n o f the righ t good s at the righ t p rices and the credit w ith w h ich to buy th ese good s, the p ro cess o f in ven tory red u ction w as reversed. C onsum ers w ere thus la rg e ly r e sp o n sib le fo r the p ick u p in p roduction in late 1 949. D p la c e D istrict a u to m o b ile d ea lers’ sa le s ab ou t 1 6 percent ab ove th ose fo r 194 8 . C onsum ers sp en t 4 p ercen t m ore at fo o d stores and o n ly on e p ercen t le ss at drug stores. A lso , th ey m ost lik e ly k ep t up th eir p u rch ases at m an y retail es tab lish m en ts fo r w h ich rep orts are n ot a v a ila b le . Further m ore, in the sam e c ities w here a u to m o b ile sa les w ere soarin g, sa les o f m an y other ty p es o f g o o d s d eclin ed sh a rp ly. SIXTH DISTRICT SALES C H A N G E S (Percent Change, 1948-49) W H O LESA LE TY O W O E L R PE F H L SA E * DR S AND SUNDRIES UG : ALES S i i l l i 1 TOBACCO PRODUCTS GROCERY 1 I JEW ELRY APPLIANCE E HARDW ARE Era SHOE PLU BIN A D M G N H A G SUPPLIES E TIN DRY GOODS _ _ INDUSTRIAL SUPPLIES M C IN Y A H ER A D EQ IPM T N U EN WIRING SUPPLIES AUTOM OTIVE SUPPLIES __ J__t_i__1 C h a n g e d S a le s T ren d s A lth ou gh the total am ount consum ers spent did n ot change m uch from the am ount th ey sp en t in the p reced in g year, there w ere m arked changes in the ty p e o f sp en d in g. T here w ere p eriod s o f both d eclin in g and in crea sin g sales. T he sales trend w hich b egan to ch an ge in the last quarter o f 1948 continu ed w e ll into 1949. D u rin g the first quarter, sa les at D istrict departm ent stores, fo r ex a m p le, w ere 7 p er cent less in d o lla r v olu m e than th ey w ere d u rin g the corres p o n d in g p eriod in 1948 and the D istrict sh o w in g w o u ld h ave been m uch w orse had it not been fo r the go o d sa les e x p e ri ence in L ou isian a and M ississip p i. H o u seh o ld a p p lia n ce d ealers reported d eclin es o f from 2 0 to 30 p ercent fro m a year earlier. D istrict fu rn itu re store sa les w ere dow n alm ost 2 0 percent. A u to m o b ile d ealers a lo n e reported greater sa les in 1949 than in 1948. T he three-m onth sa les p erform an ce fo r the D istrict w as ju st about the sam e as that fo r the nation , if the exp erien ce o f departm ent stores is representative. A good E aster b u sin ess a t D istrict d e p a r t m e n t s t o r e s b rought their sa les fo r the first six m onths to a lev el o n ly 3 percent b elow that o f the first h a lf o f 1948. T h rou gh ou t the country, departm ent store sa les w ere dow n 5 percent. H o u se h o ld a p p lia n ce and furn itu re stores, how ever, con tin u ed to report sub stantial sa les d eclin es. C onditions w ere m uch the sam e in the third qu arter; fo r the n in e m onths departm ent store sales w ere dow n 4 p ercent from that p eriod in 1 948. T h e final quarter b rough t tw o strik in g ch an ges. D ep a rt m ent stores sa les w ere rather d isa p p o in tin g in O ctober and N ovem ber, but in D ecem b er th ey alm ost set a record, w h ich b rought the year’s total up to o n ly 2 percent b elo w that o f 1 948. T he other d evelop m en t w as the p ick u p , w h ich b egan in O ctober, in sa les at a p p lia n c e and fu rn itu re stores. N ot o n ly w as this an im portant facto r in ra isin g sa les fo r the year at those stores, but it a lso h elp ed keep departm ent store sa les up. I f th e year had n ot been such a good on e fo r au to m o b ile sales, total consum er exp en d itu res at retail stores m igh t have been con sid erab ly low er than th ey w ere. E stim ates fo r 194 9 S o u r c e : E s tim a te s b a s e d o n m ent o f C o m m er ce d a ta . F ed eral R eserv e B an k o f A t la n t a and U . S. D e p a r t M oreover, in several cities departm ent stores had p oorer sa les ex p erien ce than that sh ow n b y the D istrict average. T he y ea r’s sa les w ere dow n as m uch as 10 p ercen t at stores in M o b ile and M on tgom ery, A la b a m a ; M acon and R om e, G eor g ia ; M eridian , M ississip p i; and in the B risto l-K in g sp ort area o f T en n essee. S a le s d eclin ed b etw een 5 and 10 percent at the stores in B irm in gh am , A la b a m a ; J a ck so n v ille, F lo r id a ; A t lan ta and C olum bus, G eo rg ia ; and in C hattanooga, K n ox v ille , and N a sh v ille , T en n essee. B etter records in other c ities offset th ese d eclin es. T h e Or lan d o, F lo rid a , stores reported sa le s ab ou t the sam e as in 1 948. A sim ila r co n d itio n w as rep orted b y th e stores in B aton R ouge, L ou isian a, and Jackson, M ississip p i. In both Savan nah, G eorgia, and N ew O rleans, L o u isia n a , sa les w ere up one percent. In T am pa and M iam i, F lo r id a , th ey d eclin ed o n ly 3 and on e p ercent, resp ectiv ely . D e c lin e s in C o n s u m e r P r ic e s One resu lt o f the d e clin in g dem an d s fo r certain ty p es o f con sum er good s, p a rticu la rly d u rin g the first part o f the year, w as a cut in retail p rices. S h o p p ers w ho e n jo y lo o k in g for b argain s had a g ood tim e in 1 9 4 9 . S p e c ia l p rom otion s and clearan ce sa les offered them ch an ces to r e a lly save m oney. In ad d ition , the p r e v a ilin g p rices g ave con su m ers m ore for their m on ey than in 194 8 . A cco rd in g to B ureau o f L abor S ta tistics data fo r six large c ities in the D istrict, the in d ex es o f reta il fo o d p rices during 1 9 4 9 averaged 5 p ercen t low er than in 1 9 4 8 . A p p a rel prices averaged 3 percen t low er and p rices o f hom e fu rn ish in gs, 2 percent. A verages fo r the year, how ever, ob scu re the d eclin in g trend. A t the end o f N ovem b er, fo r ex a m p le, consum ers fou n d p rices o f clo th in g and h o u se fu rn ish in g s 7 and 6 per cent low er, resp ectiv ely , than in N ovem b er 194 8 . T h e p rices o f som e other th in g s in creased , how ever. T he 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 Ja n u a ry 1950 p rices o f fu el, electricity, and refrig era tio n averaged one p er cent h igh er in 1949 and prices o f m iscella n eo u s item s w ere a lso up. R ents advanced during the latter part o f the year. A s a result o f these con flictin g p rice trends, the D istrict co n sum ers’ price index for a ll item s averaged o n ly 2 percent less fo r the entire year than it did fo r 1948. T he D istrict trend o f consum er p rices w as sim ila r to the n a tion al trend. CO N SUM ERS PRICE INDEX SIXTH DISTRICT PERCEN T 1935*39= 100 PERCEN T 9 fo r u n d elivered m erchandise averaged 28 percent low er in 194 9 than in 1948. In the ea rly fa ll, som e m erchants b egan to fe e l a little m ore encou raged about the sa les o u tlo o k and tried to b u ild up their stocks. B ecause m anufacturers o f consum er goods, how ever, had cu rtailed op eration s rather than b u ild up their ow n in ventories, som e retailers had difficulty in r ep len ish in g their stocks. T he low er lev e l o f in ven tories during the la st m onths o f 1949, th erefore, m ay h ave resulted p a rtly from the in a b ility o f m erchants to rep lace m erchandise so ld rather than p essim ism about the future. G r o w th in I n s t a lm e n t S e ll in g C u ts in in v e n t o r ie s The d o lla r volu m e o f consum er purchases in m any field s fe ll off m ore than can be exp la in ed b y fa llin g p rices. M any m er chants interpreted this as a sig n a l to reduce in ven tories. A s a result, cuts in consum er dem and w ere translated into m uch greater cuts in dem and from producers. A t D istrict dep art m ent stores, inven tories fo r the year averaged about 7 percent less than in 1948, d esp ite the m oderate d eclin e o f o n ly 3 p er cent in sales. T he d ollar d eclin e in v a lu e o f m erchandise re ceived w as over tw ice as great as the d o lla r d eclin e in the v alu e o f sales. E ither because m erchants w ere less w illin g to m ake forw ard com m itm ents or because there w as less d elay in d eliveries, orders outstan d in g at the end o f each m onth GRO W TH IN INSTALMENT CREDIT SIXTH DISTRICT (Percent Change, 1948-49) S a le s b y T y p e I n s t a lm e n t A c c o u n t s O u t s t a n d i n g END OF Y EA R H- IO + 2 0 + 3 0 + 4 0 1 1 1 1 1 I 1 T Y P E OF R E T A IL E R ^ 1 H O U SEH O LD A P P L IA N C E D EPA R TM EN T m m m m m JE W E LR Y F U R N IT U R E m m C O M M E R C IA L BANK in s t a l m e n t S A L E C R E D IT O TH ER A U T O M O BILE During 1949, cash and charge account sales were below 1948 sales, but during the latter part of the year instalment selling expanded. As a re sult, the instalment accounts receivable of the stores doing most of the instalment selling were higher at the end of 1949 than at the end of 1948 and commercial bank consumer loans also rose. In stalm en t s e llin g is cu stom arily associated w ith sa les o f consum er du rab le good s, such as furniture and h ou seh old a p p lian ces. The slu m p in the sa les o f these good s du ring the first part o f 1949 m eant that in stalm en t credit at stores s e ll in g these good s exp an d ed rela tiv e ly little. M oreover, charge account sa les at the departm ent stores slu m p ed . In fact, charge account credit fa ile d to exp an d even later in the year. A fter June, w hen in stalm en t credit con trols w ere rem oved co m p letely , there w as a rapid exp an sion in the sa le o f con sum er du rab le g ood s financed in large part by instalm en t contracts. N ear the end o f the year, in stalm en t contracts at the D istrict departm ent stores w ere 36 percent greater than on the corresp on d in g date in 1948. A t fu rn itu re stores they were up 12 p ercen t; at h o u seh o ld a p p lia n ce stores, 41 per cent; and at jew elry stores, 13 percent. T h e b ig g est factor in the grow th o f consum er credit has been the exp an sion o f in stalm ent credit to finance the purchase o f au tom ob iles. S o m e Q u e s t io n s A b o u t 1 9 5 0 Som e o f the question s that are now b ein g asked about the future trend o f consum er b u yin g in the D istrict differ con sid erab ly from those asked last year. A t the b eg in n in g o f 1949, one qu estion w as w hether the d eclin in g sa les o f con sum er durab le go o d s (ex cep t a u to m o b iles) w o u ld continue. N ow , the q u estion is how lo n g the p ickup in sa les w ill con tinue. Last year, sp ecu la tio n s occurred about how far in v en tory liq u id a tio n w ou ld g o ; now , d iscu ssion centers on w hether the increased p rod u ction in recent m onths, in resp on se to continued consum er dem and, has again filled up the in ventory p ip e lin es. T h is year an a ly sts are w on d erin g how m uch lon ger easier credit term s w ill be a stim u lu s to consum er b u yin g. Last year th ey w ere w o n d erin g w hy in stalm en t credit w as not grow in g m ore ra p id ly than it w as. But other q uestions have a far m ore fa m ilia r ring. W ill the dem and fo r a u tom ob iles be satiated in 1 9 5 0 ? If so, w ill con sum ers sh ift their b u y in g to other typ es o f good s or w ill they save m ore o f their in co m es? T hese questions have been asked before, but the answ ers h ave lo st no im portance as determ i nants not o n ly o f the future course o f retail trade but o f the general econ om ic ou tlook . O f course, fu n d am en tal to any a n a ly sis o f the fu tu re is the qu estion o f how h ig h in com es w ill be in 1950. B y and large, m erchants in the D istrict have decided that the answ ers to these and other questions w arrant their p la n nin g fo r sa les d uring the first h a lf o f 1950 at lev e ls eq ual to or exceed in g th ose o f the first h a lf o f 1949. E con om ic d ev el opm ents during the six-m onth period w ill h elp them d ecide how to fa c e the rem ainder o f the year. M any o f them fe e l, how ever, that sh ifts in consum er sp en d in g o f as great a m ag nitude as, or p erh ap s greater than, those occu rring in 1949 can be expected in 1950. C harles T . T aylor 1 0 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 J a n u a ry 1950 Agriculture: 1949 In Review ew fa r m e r s in the S ix th D istrict w ill rem em ber 194 9 w ith p leasure. L ast year m arked the tu rn in g p o in t from h ig h war and postw ar dem ands fo r farm products. Instead o f en d in g the year w ith m ore m on ey in their p ock ets than a year ea rlier as had becom e cu stom ary in the past seven years, m any farm ers fo u n d that th ey had seriou s fin an cial p rob lem s. B ecause their in com es w ere reduced, som e o f their debts re m ained u n p aid and m ost farm ers fa ced the n ecessity o f reorgan izin g their farm p rogram s becau se o f acreage restric tio n s on m ajor crops. In the tran sition from a p erio d o f relative fin an cial secu rity to on e characterized b y seriou s concern fo r the fu ture and fro m u n lim ited to circum scribed op p ortu n ity lies the story o f a g ricu ltu re fo r 1949. T he ou tlook fo r agricu ltu re at the b eg in n in g o f the year w as ex cellen t. N on farm activity, as m easured by em p loym en t, p a y ro lls,* a n d con struction , w as h ig h and w as exp ected to con tin u e so. T here w ere no b u rdensom e su rp lu ses o f farm com m od ities. Farm ers knew that the p eanut acreage a llotm en t w ou ld b e b elow that fo r 1 9 4 8 , but the stin g w as taken out o f th is by the u nrestricted op p o rtu n ity to grow cotton, to w hich the acreage diverted from p ean u ts co u ld be e a sily sh ifted . On the w h ole, farm ers w ere n ot p a rticu la rly concerned about the prices o f their m ain p rod u cts. L ivestock p rices w ere s till fa r ab ove su p p ort le v e ls and the p rices o f cotton, p e a nuts, and tob acco w ere o n ly slig h tly ab ove su p p ort le v e ls and, therefore, cou ld not d eclin e grea tly . M oreover, op tim ism in the D istrict states w as b o lstered by the k n ow led ge that farm ers had ju st com p leted their m ost su ccessfu l year from the stan d p oin t o f gross in com e. Cash re ceip ts from farm m arketings in 1 9 4 8 w ere 5 .4 percent larger than in 1947. A lso , on January 1, 1949, D istrict farm ers h eld 3.3 m illio n b ales o f 1948 crop cotton that had neith er been p laced in the lo a n nor so ld . F ew farm ers, th erefore, en ter tained m uch doubt that 1 9 4 9 w o u ld b e another go o d year. F P la n t i n g T im e M ost farm ers m ade their p la n s as th ou gh no m ajor read ju st m ents w ere n ecessary. Som e p erh ap s realized that th e current v o lu m e o f farm p roducts co u ld not be m arketed in d efin itely at h ig h prices, but riot m an y b eliev ed it: stro n g ly en ou gh to b egin m ak in g adju stm en ts on th eir farm s. T he S tea g a ll am endm ent, w h ich guaranteed h ig h p rice su p p ort d u rin g the w ar, p rovid ed, in d eed , su p p orts fo r tw o years after the offic ia l end o f h o stilities. O sten sib ly, th is p ro v isio n w as to giv e farm ers p rice p rotection d u rin g the p eriod o f ad justm ent to norm al dom estic and fo re ig n requirem ents. T h e tw o-year p e riod ended on D ecem ber 31, 1 9 4 8 , w ith the dem and fo r farm products co n tin u in g alm ost at w artim e lev e ls. O f course, m uch o f the dem and w as occasio n ed b y exp orts o f farm p roducts to E u rope under th e M arsh all P la n and other p rogram s. But o n ly in a v ery restricted sen se w as the exp ort dem and o f 194 7 and 19 4 8 n orm al. T h e D epartm ent o f A g ricu ltu re m ade no p u b lic lon g-tim e estim ate o f n orm al requirem ents and farm ers, th erefore, co n tinued to p la n t record acreages o f the crops on w h ich th ey sh ou ld have been m ak in g adjustm ents dow nw ard. G en erally, farm ers assum ed that 194 9 w o u ld be the last year w hen they co u ld grow cotton w ithou t acreage or m arketing lim ita tio n s. C onsequently, th ey fe lt it w o u ld be w e ll to take utm ost ad vantage o f this op p ortu n ity . Digitized W hen p la n tin g tim e cam e farm ers in the D istrict states in for FRASER creased cotton acreage to 8 m illio n acres, an in crease o f 10.5 percent, from the 7 .3 m illio n acres p la n ted in 1 9 4 8. O n this acreage, 2 0 6 ,0 0 0 ton s m ore fertilize r w ere u sed than in the p reced in g year. T hat 19.4-p ercen t in crease in fertilizer rep resented an a d d itio n a l in vestm en t o f 1 2 .6 m illio n d ollars. T ob acco acreage w as in creased 5 .2 p ercen t as the resu lt o f the a llo ca tio n o f m ore acres to grow ers. P ean u t acreage w as dow n ab ou t 3 9 0 ,0 0 0 acres, or 2 6 percen t, b ecau se o f quotas. T h e 1 9 49 crop w as d estin ed to b ecom e the m ost exp en sive crop on record. Farm ers in ten sified th eir efforts b y u sin g m ore seed, fertilizer, lab or, and m ach in ery. M oreover, som e item s en terin g in to p rod u ction , lik e m ach in ery, g a so lin e, and fertilizer, cost m ore per u n it than th ey had in th e sp rin g o f 1948. Farm in com e in the D istrict states d u rin g the first quar ter o f 1 949, how ever, w as 2 0 .5 percen t h ig h er than in the first quarter o f 1948. F or th is reason, the added costs did not dam p en fa rm ers’ h o p es, w h ich rested on ex p ecta tio n s o f h igh y ie ld s, h ig h p rices, and h ig h in co m es. M id s e a s o n P r o s p e c ts E a rly sum m er b rou gh t h ea v y rain s. B efo re field s dried suffic ie n tly to p erm it ch o p p in g and w eed in g , th e rain s a g ain de scended. G rasses and w eed s th rived , h o p e le s sly crow d in g out the cotton crop in som e areas. T he w id esp read op tim ism o f e a rly sp rin g ga v e w a y to deep con cern and as th o u gh grass and w eed s w ere n ot en ou gh , the b o ll w eev il struck su d d en ly and hard. A s fast as p o iso n w as a p p lie d the rain s w ashed it off and in som e sectio n s th e su p p ly o f p o iso n w as q u ick ly exh au sted . In a fe w areas con cern gave w ay to d esperation. On A u gu st 8 the first cotton estim ate w as m ade and the fu ll im p act o f w eather and in sects co u ld then be m easured in term s o f y ie ld s. T en n essee wras the o n ly D istrict state w here it w as estim ated that y ie ld s w o u ld exceed 3 0 0 p o u n ds o f lin t cotton an acre. T h e estim ate sh ow ed a d eclin e o f 33 percent fro m 1 9 4 8 y ie ld s fo r G eorgia; 3 4 fo r F lo r id a ; 25 fo r L o u isi a n a ; 17 fo r M ississip p i; 8 fo r T en n essee; and 2 6 fo r A labam a. D istrict cotton farm ers had g a m b led on th e w eather, as farm ers a lw ay s do, and th ey had lo st. A farm er fro m W ayn es boro, G eorgia, ex p ressed the sen tim en t o f m an y w h en he said, “S ix thousand d o lla rs throw n to the w ee v ils, th e w orm s, and the w eather! W here do I go fro m h e r e ? ” N o t a ll farm ers, o f course, w ere as ser io u sly affected as the on e from W ayn esb oro. M an y m ade e x c e lle n t y ie ld s and as the year w ore on, estim ates w ere raised slig h tly . On th e w h ole, how ever, farm p ro d u ctio n in 1 9 4 9 w as d isa p p o in tin g . T he N ovem b er 1 crop estim ate fo r A la b a m a , fo r ex a m p le, in d i cated a decrease fro m 1 9 4 8 le v e ls in p ro d u ctio n fo r every crop on the estim ate. C a sh R e c e ip t s F ro m M a r k e t i n g s A s a resu lt o f low er y ie ld s and lo w er p rices, p a rticu la rly for un su p p orted com m od ities, th e estim ated farm in com e for 19 4 9 in the D istrict states w as 2 .4 b illio n d o lla r s— a d eclin e o f about 10 p ercen t fro m 1 9 4 8 . T h e estim ate in d icates a 20p ercen t in crease in F lo rid a , but the other states w ere expected to show d ecreases. M ississip p i, w ith an estim ated decrease o f 2 0 to 2 5 percent, w as h ard est h it. F or the m ost part 1 9 4 9 w as a fa v o r a b le year fo r the liv e stock p rod u cer. T h e rain s that m ade grass grow in cultivated field s a lso cau sed p astu res and g razin g crop s to grow lu x u ria n tly . Corn y ield s, on a p er acre b a sis, w ere con sid erab ly 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 Ja n u a ry 1950 h igh er than 1948 y ie ld s in three states and o n ly slig h tly low er in the other three. L ivestock incom e, how ever, d oes n ot fluctuate as w id ely as crop incom e. C hanges in the num ber o f liv esto ck on farm s o ccur slo w ly . In the D istrict states in 1 9 4 9 the num ber in creased slig h tly . L ivestock p rices, how ever, d eclin ed , la r g e ly b ecause o f low er h og p rices in the latter part o f the year. In com e from livestock in 1949 is th erefore estim ated to have been slig h tly under that fo r 1948. T he in crease in the n um bers m arketed w as not large en ou gh to offset low er p rices. F a rm L e g is la t io n T he com p lete story o f D istrict a gricu ltu re in v o lv e s m ore than w hat took p la ce on farm s. Indeed, m uch that h a p p en ed on farm s w as the resu lt o f p o litic a l action on the n a tio n a l le v e l. T he continued h ig h lev e l o f b u sin ess a ctiv ity and the h ig h p erson al d isp osab le in com e en ab led m ost o f the n a tio n ’s farm p roducts to find buyers at p rices above p arity. T otal b u y in g p ow er, how ever, w as sustained b y m any G overnm ent or G ov ernm ent-sponsored p rogram s; by u n em p lo y m en t insurance, and by an in crease in G overnm ent o u tla y s, p a rticu la rly in c on n ectio n w ith fo reig n assistan ce and d efen se. In a d d ition to sh arin g in the benefits o f these gen eral eco n om ic program s, farm ers had som e o f their own, the m ost im p ortan t o f w hich w as the price-supp ort program . A t the clo se o f 1949, the farm p o litic a l situ ation , centering around p rice sup ports, w as far fro m settled . E a rly in the year Secretary B rannan subm itted the D ep artm en t o f A g r i cu ltu re’s farm p lan , p o p u la r ly know n as the B rannan p la n . H is p la n w as to raise the su p p ort p rices fo r m eat an im als and d airy products rela tiv e to the su p p orts fo r cotton and grain s. T h e n o v elty o f th e p la n , how ever, la y in its m ethod o f su p p ortin g th ese p erish a b le or sem i-p erish a b le products. Instead o f c a llin g fo r the su p p ort o f p rices, th e p la n w o u ld a llo w p rices to seek their m arket le v e l and th e G overnm ent w ou ld m ake up the d ifferen ce by direct su b sid y betw een w hat the farm er received and w hat h e sh o u ld have received, ac cord in g to a new p arity fo rm u la . In theory, i f not in practice, the consum er w ou ld get low er fo o d p rices and th e farm er’s in com e w ou ld be m aintained. A ll the n ation al farm organ ization s excep t the Farm ers U n io n im m ed iately o p p o sed the p la n . T h e farm er, th ey in sisted , w anted the p rices o f h is p roducts su p p orted in the m arket and did not lik e the idea o f a d irect su b sid y. A lth o u g h farm ers o p p osed the p la n , certain non farm grou p s, p articu la r ly lab or un ion s, thou gh t that it m ade sense. Sen ator A nderson o f N ew M exico, form er Secretary o f A g ricu ltu re, then subm itted h is farm b ill. T h e A n d erson b ill w as sim ila r to the A ik en b ill, subm itted in 194 8 , in a d vocat in g flex ib le p rice supports. T he essen tia l d ifferen ces betw een them w ere the in clu sio n o f hired farm lab or in the cost in d ex in th e A nderson b ill w h ich w as not con tain ed in the A iken b ill and the fix in g o f the m inim um su p p ort le v el at 75 p er cent, instead o f at 6 0 p ercen t as p rovid ed in the A ik en b ill. G eorgia’s R epresentative P ace, veteran farm leg isla to r, subm itted a b ill w hich w o u ld have giv en 1 0 0 p ercen t p rice su p p ort on stap le, storab le com m od ities. C ongressm an P ace w anted the B rannan id ea a p p lied o n ly to potatoes, eggs, and shorn w o o l. T he P ace b ill fa iled . R epresentative G ore from T en n essee introduced an am end m ent to the A nd erson b ill to raise the su p p ort le v e l on b asic com m od ities to 90 percent. The H ou se passed th is am ended b ill, but the Sen ate w ou ld not accep t the ch an ge. A C on fer en ce C om m ittee drew up a com p rom ise b ill w h ich w as passed 1 1 S ix t h D is t r ic t In d e x e s DEPARTMENT STORE SALES* Unadjusted Adjusted* Nov. Nov. Dec. Dec. Dec. Place Dec. 14 99 Atlanta........ Baton Rouge. Birmingham.. Chattanooga. Jackson........ Jacksonville.. Knoxville.... Macon.......... Miami.......... Montgomery. Nashville.... New Orleans. Tampa.......... 14 98 14 99 14 99 14 98 382 443 449 335 398 416 414 393 342 370 359 438 370 498 D IS T R IC T ....... 14 99 367 407 420 332 339 371 361r 344 320 344 308 401 355 430 378 423 449 395 364 393 416 392 337 386 390 429 360 497 642 700 728 539 641 633 692 640 615 669 611 731 592 817 425r 484 483 399 400 434 433r 399 397 403 366 482 434r 516 635 668 727 636 586 597 695 638 607 699 662 716 575 816 DEPARTMENT STORE STOCKS Unadjusted Adjusted* Nov. Dec. Nov. Dec. Dec. Dec. Place 14 99 14 99 14 98 14 99 14 99 14 98 352 424 282 351 496 322 DISTRICT........ Atlanta........ Birmingham.. Montgomery. Nashville__ New Orleans. 352 449 258 421 498 323 368 441 293 376 547 338 306 352 240 281 441 290 395 530 292 467 582 352 320 366 249 300 486 304 GASOLINE TAX COLLECTIONS*** Adjusted** Unadjusted Nov. Dec. Dec. Nov. Dec. Dec. Place 14 99 14 99 14 98 14 99 14 99 14 98 224 217 202 234 238 220 237 SIX STATES. Alabama... Florida.... Georgia... Louisiana.. Mississippi Tennessee. 214 212 192 223 238 167 231 194 192 186 180 220 184 204 228 221 200 233 240 225 256 220 218 186 231 250 183 248 198 196 185 179 223 188 220 COTTON CONSUMPTION* Dec. Nov. Dec. Place 14 99 14 99 14 98 TOTAL.......... Alabama... Georgia... Mississippi. Tennessee. 143 155 141 153 164 155 94 101 "128 140 127 92 99 86 117 Nov. 14 99 14 99 SIX STATES.. Alabama... Florida. ... Georgia... Louisiana.. Mississippi Tennessee. 138 133 129 138 142 142 141 137r 128 123 139 138r 139 146 Oct. Nov. DISTRICT.... 14 98 Residential. Other........ 151 Alabama... 156 Florida...... 142 Georgia__ 146 Louisiana.. 153 Mississippi. 148 156 Tennessee. CONSUMERS PRICE INDEX Item Dec. 14 99 Nov. 14 99 14 99 SIX STATES.. Hydrogenerated Fuelgenerated 14 99 363 361 348 330 322 261 406 412 461 14 98 CONSTRUCTION CONTRACTS Nov. Oct. Nov. Place MANUFACTURING EMPLOYMENT*** Place ELECTRIC POWER PRODUCTION* Nov. Oct. Nov. Dec. 14 98 ALL ITEMS... 171 175 172 Food.......... 198 210 203 Clothing... 192 204 192 Fuel, elec., and refrig 138 138 138 Home fur nishings . 184 196 182 153 155 Misc.......... 155 Purchasing power of .57 dollar.... .58 .58 *Daily average basis **Adjusted for seasonal variation ***1939 monthly average=100; Other indexes, 1935-39=100 14 99 14 99 14 98 614 676 580 964 415 633 866 531 444 660 873 557 620 672 528 628 203 934 337 386 314 175 543 196 280 248 339 ANNUAL RATE OF TURNOVER OF DEMAND DEPOSITS Dec. Nov. Dec. 14 99 14 99 14 98 Unadjusted.. 21.7 21.2 21.5 Adjusted**... 19.2 20.0 19.0 Index**........ 77.7 81.3 77.1 CRUDE PETROLEUM PRODUCTION IN COASTAL LOUISIANA AND MISSISSIPPI* Dec. Nov. Dec. 14 99 Unadjusted.. Adjusted**.. r R e v is e d 14 99 14 98 316 327 313 308 312 323 1 2 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 Ja n u a ry 1950 Six th D i s t r i c t S t a t i s t i c s CONDITION OF 2 M BER BANKS IN LEADING CITIES 8 EM (In Thousands ol Dollars) Percent Change 8 90 Jan. 1 Dec. 2 Jan. 1 Jan. 1 , 1 5 / irom 8 9 1 Item 15 90 14 99 14 9 9 Dec. 2 Jan. 1 9 1 14 99 14 99 Loans and investments— Total............... 2,449,518 2,433,354 2,295,051 Loads'—Net........ 883,767 890,660 854,098 Loans.—Gross... 895,681 901,795 862,923 Commercial, industrial, and agricultural loans.. 533,586 545,748 542,633 Loans to brokers and dealers in securities---7,607 9,575 4,571 Other loans for pur chasing and carrying securities 33,525 51,349 33,920 Real estate loans............. 79,067 71,176 • 65,641 Loans to banks................. 4,519 4,405 4,059 Other loans... 237,491 237,317 194,210 Investments'—total............. 1.565.751 1,542,694 1,440,953 Bills, certificates, and notes............ 565,228 529,003 408,048 U. S. bonds... 798,743 805,577 849,757 Other securities............. 201,780 208,114 183,148 . Reserve with F. !R Bank__ 420,196 402,680 505,037 Cash in vault... 40.657 45,667 41,546 Balances) with domestic banks............. 187,145 188,314 194,042 Demand deposits adjusted. 1,757,752 1,770,992 1,766,079 Tim© deposits. .. 532,666 529,944 530,748 U. S. Gov t deposits.......... 46,803 42,786 28,073 Deposits of domestic banks 571,599 530,804 535,708 Borrowings....... 1,000 500 Place 1 1 1 — 2 — 21 + — — + 7 + 3 + 4 — + 2 6 6 — 1 + 11 + 9 + o + 1 — 35 + 20 — 3 + 22 + 9 + 7 — 1 — 3 + 4 — 11 + 39 — 6 + 10 — 17 — 2 — 1 — 1 + 1 + 9 + 8 + 100 — 4 — 0 + 0 + 67 + 7 DEBITS TO INDIVIDUAL BANK ACCOUNTS (In Thousands oi Dollars) Percent Change N ol o. Dec. 1 4 , irom 99 Banks Dec. N ov. Dec. Report 1 4 99 14 99 14 98 Dec. N ov. ing 14 99 14 98 ALABAMA Anniston........ Birmingham... Dothan............ Gadsden........ Mobile............ Montgomery.. 6 2 FLORIDA Jacksonville... Miami............. Greater Miami* Orlando.......... Pensacola....... St. Petersburg. Tampa............ 7 13 3 3 3 3 3 5 3 4 6 22,654 378,294 14,011 21,660 138,187 81,985 21,215 310,036 14,483 18,249 116,648 78,970 25,243 374,127 14,939 20,784 153,012 83,584 + 7 + 22 — 3 + 19 + 18 + 4 — 10 + 1 — 6 + 4 — 10 — 2 310,501 273,178 367,338 65,156 44,102 65,918 156,649 272,904 240,454 335,860 53,416 35,807 56,993 129,204 293,726 281,618 397,807 57,007 37,960 59,527 137,687 + + + + + + + + — — + + 4+ 26,798 928,862 60,630 9,968 61,309 4,357 14,167 13,631 67,491 8,903 24,707 96,667 12,572 25,683 830,559 54,618 8,132 53,655 24,163 976,034 61,099 10,273 59,706 4,344 14,995 12,195 66,396 9,726 24,073 + 4 + 12 + 11 + 23 + 14 + 4 + 0 + 14 + 17 — 6 + 9 1 0 0 + 19 0 ,0 1 13,406 + 2 + 11 — 5 — 1 — 3 + 3 + o — 6 + 12 + 2 — 8 + 3 — 3 — 6 14 14 14 22 23 16 2 1 6 3 4 14 16 11 14 GEORGIA Albany............ Atlanta............ Augusta.......... Brunswick....... Columbus....... Elberton........ Gainesville*... Griffin*.......... Macon............ Newnan.......... Rome*............ Savannah....... Valdosta........ 2 4 2 3 2 3 2 LOUISIANA Alexandria*... Baton Rouge.. Lake Charles.. New Orleans.. 3 3 3 35,856 110,233 40,718 773,920 31,452 102,925 35,001 700,556 34,071 + 14 112,652 + 7 38,910 + 16 774,399 + io + 5 — 2 + 5 — 0 3 3 2 18,052 140,561 26,429 26,836 16,446 136,776 25,386 27,155 17,419 + 10 133,789 + 3 27,371 + 4 30,498 - 1 + 4 + 5 — 3 — 12 3 4 159,946 133,106 357,891 136,456 102,154 320,280 160,335 + 17 148,442: + 30 326,554 + 12 — — 4,637,544 4,089,400 MISSISSIPPI Hattiesburg... Jackson.......... Meridian........ Vicksburg....... TENNESSEE Chattanooga----Knoxville........ Nashville........ 3 4 3 3 4 2 8 2 6 SIXTH DISTRICT 32 Cities.......... 114 UNITED STATES 333 Cities........ 40 ,2 1 14,164 11,970 57,854 9,519 22,643 81,384 12,281 0 10 + 10 + 13 + 0 118,197,000 99,941,000 122,277,000' + 18 — 3 * Not included in Sixth District total. 4,634,731 and ig know n as T h e A g ricu ltu ra l A ct o f 1 9 4 9 . T h e P resident sig n ed the b ill, but the con troversy over su p p o rts continu ed. T h e A ct p ro v id es fo r su p p o rt o f b a sic co m m o d ities at 9 0 p er cent o f p a rity th rou gh ou t 1 9 5 0 . In 1 951 th eir p rices are sch ed u led to be su p p orted at fro m 8 0 to 9 0 p ercen t and fo r the n ext tw o years at fro m 7 5 to 9 0 p ercen t o f p a rity. T he A ct a lso req u ires that the cost o f fa rm la b o r b e in clu d ed in th e p a rity fo rm u la . A s 1 9 4 9 drew to a clo se, farm ers and farm gro u p s w ere seek in g w ays to m o d ify th is law . In a ll p r o b a b ility it w ill last no lo n g er than its p red ecessor, the A ik en -H o p e la w . Q uestion s on w h ich d ecisio n s w ere p o stp o n ed and sid estep p ed b y the p resen t law are certain to com e up a g a in in 1 950. N a tio n a l farm p rogram s h ave p r o fo u n d ly affected farm ers in the D istrict states. In D ecem b er 1 9 4 7 , p ean u t grow ers voted to con tin u e p rice su p p orts on p ean u ts even th ou gh th is w o u ld m ean a red u ction in acreage in ca se th e Secretary p ro cla im ed quotas to be in effect. T h e S ecretary m ad e no such p ro cla m a tio n in 1 9 4 8 , b ut h e d id set q u otas fo r 1 9 4 9 . In Septem ber 1 9 4 9 th e p eca n grow ers voted fo r a m arket in g agreem ent fo r p ecan s and in a referen d u m on D ecem ber 15, 1 949, cotton fa rm ers voted to accep t q u otas on p rod uc tio n in return fo r p rice su p p ort. It is o f m ore than p assin g interest that D istrict farm ers h a v e e lec ted to lim it p roduction o f tob acco, pean u ts, and cotton in return fo r p rice su pports. T h eir action s are ev id en ce that th ey w ant the G overnm ent’s h elp even th ou gh th is m ean s a certain d eg ree o f regim en tation . T h e effects o f restrictive p rogram s are m an y, but bankers are p a rticu la rly interested in th eir effect on farm lan d v alu es. B ases or q u otas are a llo ca te d to in d iv id u a l fa rm s and these qu otas m ay b ecom e as v a lu a b le as th e lan d itse lf. T h is is a l ready true on som e tob acco farm s. T h e p u rch ase o f a farm w ith a b ase in v o lv es the b u y in g o f a rig h t to p rod u ce and se ll a p a rticu la r com m od ity. A n d that rig h t d ep en d s p recariou sly on p o litic a l action . Sum m ary A lth o u g h the w eather can be b lam ed in part fo r th e d eclin e in farm in com e, crop restriction s and lo w er p rices also had their effect. B oth th e im p o sito n o f q u otas fo r su p p orted com m o d ities and the lo w er p rices, p a r ticu la rly fo r u n supported com m od ities, are ev id en ce that th e h ig h p ostw ar dem and for farm p rod u cts is ta p erin g off. H ig h fa rm in co m e d ep en d s in e v ita b ly u p on a h ig h le v e l o f b u sin ess a ctiv ity and consum er in com e. In the D istrict states fo r e ig n dem and fo r farm p rod ucts, e sp e c ia lly fo r cotton and to b a cco , a lso h a s a very im portant influ en ce on farm in com e. T h e p rosp ects fo r a high le v e l o f d om estic dem and th rou gh 1 9 5 0 are go o d , but those o f m a in ta in in g fo re ig n dem and are fa r fro m b righ t. Just as 1 9 4 9 w as a year o f d ecisio n on p rice-su p p ort p ro gram s, 1 9 5 0 w ill b e a year o f ad ju stm en t. F arm ers in the D istrict states w ill be req u ired to red u ce th eir cotton acreage b y 1 ,1 3 0 ,0 0 0 acres and th eir p ean u t a creage b y 3 1 9 ,5 4 9 acres. T he q u estion o f w hat to grow on th ese 1 ,4 5 0 ,0 0 0 acres to be retired fro m h ig h -in co m e crop s ra ises a serio u s problem . T hat th is red u ction w ill m ean a lo w er in co m e is obvious. Farm ers w ill h ave to w ork ou t th eir ad ju stm en ts to su it their p articu lar farm s and sk ills and th ey w ill n eed a d d ition al c a p ita l to m ake them . But so m e w ill be in a le ss credit-w orthy p o sitio n b ecau se o f th eir 1 9 4 9 ex p erien c es. I f b u sin ess a ctiv ity co n tin u es at or near presen t lev els, as is now b ein g pred icted , 1 9 5 0 w ill be a g o o d year fo r farm ers. But t h e postw ar b oom is over. J o h n L . L il e s
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