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Review Monthly FED E R A L R ESER V E BA N K OF ATLANTA Atlanta, Georgia, July 31, 1946 Volume X X X I C o n s u m e r C re d it a n d Number 7 P o s tw a r B u y in g of recent years have accustomed people to measuring hold-appliances, jewelry, and men’s clothing stores — a larger economic changes in terms of billions of dollars. At a proportion of total sales on a cash basis during 1945 was time when such economic guideposts as the national income,made in the District’s reporting stores than was made in the the national debt, and Government expenditures are marked nation generally. At all other types of reporting stores ex to the nearest billion, concern over consumers’ credit trans cept women’s specialty the proportion of cash to total sales actions, each of which is reckoned more often than not in more nearly equaled the national average in that year than hundreds of dollars or less, may seem unimportant and even it did in 1941. irrelevant. Insignificant as such transactions may seem in An increase in cash purchases was not the only wartime dividually, in the aggregate they also amount to billions of change in Sixth District buying habits. Charge accounts and dollars. Therefore when a majority of consumers alter their instalment accounts were paid more promptly. A customer use of credit, they exert an important influence on the nation’s who charged his goods on open account at one of die Dis economy. Consumers in the Sixth District made just such a trict’s department stores in 1941 took 65 days, on an average, change during the war years. to pay his bill. When he signed an instalment contract, he The Sixth District was simply following the national pat completed payment, as a general rule, in nine and a half tern. At the end of 1941 American consumers owed an esti months. By 1945 he was paying his charge accounts within 48 mated 9.9 billion dollars. Of that amount almost six billion days and allowing a period of only five months to elapse be dollars lay in instalment credit, with purchases of goods ac tween the time he bought goods on the instalment plan and counting for the greater part of it. The largest single factor in the date he made his final payment. At Sixth District furni this instalment credit was the financing of automobile pur ture stores in 1941 he was paying his instalment accounts chases. By February 1944 consumers had reduced their total about 15 months after making his purchases. On the average debt by more than five billion dollars to its lowest point, 4.9 in 1945 he was making his final payments in six or seven billion dollars. Instalment credit had declined 69 percent, and months. the total amount owed for the purchase of goods at that time With customers making a greater proportion of their pur had fallen to only 19 percent of what it was in 1941. Between chases for cash and paying their bills more promptly, re the dates of the low point, in 1944, and the end of the war, in tailers expanded their sales and, at the same time, reduced August 1945, consumers began to borrow more, although only that part of their assets represented by charge and instalment enough more to increase the total outstanding to 5.6 billion accounts receivable. On an average in 1941 reporting Sixth dollars by the end of the war. District department stores had on their books charge accounts Before the war, buying on credit was more popular with outstanding in an amount approximately three times the consumers in the District than it was with those in the United average monthly amount of charge-account sales. In other States generally. The average Sixth District customer of de words, department stores having charge-account sales averag partment stores bought on credit 58 percent of his purchases ing one million dollars a month in 1941 had an average of in 1941. During the same time the average United States cus three million dollars each month in outstanding charge ac tomer made 52 percent of his department store purchases on counts. Because of quicker collections, charge accounts in credit. Sixth District consumers used instalment contracts 1945 averaged only about twice the monthly average of more than national consumers did. They paid, however, for charge-account sales. For this group of department stores 94 percent of their purchases at the District’s reporting furni charge-account sales actually increased 25 percent from 1941 ture stores in 1941 on an instalment basis, whereas the figure through 1945. A store, therefore, having average chargefor the country as a whole was only 78 percent. There were account sales of one million dollars in 1941 might have in similar differences in other lines of trade. creased its charge-account sales to $1,250,000, in 1945, The District’s department store sales rose in value from an but because of the better collection experience the charge ao estimated 213 million dollars for 1941 to an estimated total counts outstanding would have amounted to only $2,500,000 of 404 million dollars for 1945. In the two periods the pro portions of cash sales and credit sales in Sixth District de instead of $3,750,000. Expanding incomes made possible this combined reduction partment stores were more than reversed, cash sales chang ing from 42 percent in 1941 to 62 percent in 1945. Other in consumer credit and phenomenal increase in cash pur changes are shown in table 1. This increase in cash buying chases. For the Sixth District as a whole income payments to effected a greater conformity of Southern buying practices to individuals increased each year of the period, from an esti the national pattern. In some lines of retail business — house mated 5.3 billion dollars in 1941 to 9.9 billion dollars in E v e n ts 7 0 M o n t h l y R e v ie w 1944. Though 1945 estimates are not yet available, indications are that there was a considerable increase then also. PRICE INCREASES ACCOUNT FOR PART OF THE INCREASES IN SIXTH DISTRICT DEPARTMENT STORE SALES 19 39 1940 1941 1942 1943 1944 1945 1946 Since the department store sales index measures in dollar terms changes in the daily average sales, its level is influenced by changing prices. In this chart the index for each month has been expressed in terms of 1935-39 purchasing power by using the Department of Commerce Index of retail prices for all commodities. The index was 145.6 percent of the 1935-39 level in May of this year. INCREASED SALE O F CONSUM ERS DURABLE G O O D S HAS BEEN REFLECTED IN CONSUMER LOANS AT SIXTH DISTRICT BANKS Because consumer durable goods are to a large extent purchased on credit, increased sales of these items generally mean increases in con sumer loans. Most of the expansion in such loans at Sixth District mem ber banks has taken place since V-J Day. o f th e F e d e ra l R e s e rv e B a n k o f A t la n ta f o r J u l y 1946 TABLE 1 SALES OF SIXTH DISTRICT REPORTING STORES AS PERCENT OF TOTAL SALES Instalment Cash Charge Account Type of Store 1941 1945 1941 1945 1941 1945 Department............ 3 10 42 35 48 62 Men's Clothing...... 3 1 35 28 71 62 Women's Specialty.. 1 33 4 9 50 94 Furniture............ 79 6 2 19 0 Household Appliance 84 42 8 14 44 8 46 16 28 26 <23 SI 7 20 51 42 54 Automobile Dealers.. 35 •10 ii 44 46 Auto Tire and Accessory.......... 24 4 •17 52 44 59 Source: Retail Credit Surveys The inauguration of consumer-credit control through Regu lation W by the Board of Governors of the Federal Reserve System also did much to reduce the amount of consumer credit outstanding. The purpose of this regulation, adopted in the latter part of 1941, was to reduce inflationary pressures by limiting the demand for goods in the face of wartime shortages. At first the regulation required in most cases the down payment of one third the purchase price of an article bought on the instalment plan and full payment within a period of 12 months. A provision that charge accounts should be paid within a period of 60 days at most was added later. This regulation is being continued, though certain relaxations were made in October 1945 with regard to home-repair and home-improvement credits and consumer loans not made for the purchase of durable goods. A still further reason for the decline in consumer borrowing during the war period may have been the appeals to patriotism that called for limiting expenditures and devoting increases in income to the pur chase of war bonds. Consumers ordinarily borrow most during periods of ex panding income and least during periods of declining income. The optimism engendered during a period of rising income encourages them to take on additional commitments. During a period of declining income, on the other hand, the average consumer is pessimistic about the future and decides to keep his debts as low as possible until better times. The unem ployed obviously are not in a position to assume further financial obligations, and dealers and lenders are hesitant cer tainly in granting them credit. But the employed are also limited in their actions, by the uncertainties of the future. During such periods they try to pay off old loans rather than incur new ones. In accounting for the rise of consumer credit during periods of expanding income, a change in the kind of consumer goods purchased during such periods is of greater importance than an alteration in attitude. The buying of automobiles, re frigerators, stoves, furniture, and other consumer durable goods of relatively high unit values and long lives is cus tomarily bunched in years of high income. Because of their high unit value, these goods are customarily bought on the instalment plan. The reason that this type of consumer credit declined dur ing war years is obvious. Most consumer durable goods were unavailable. Even though many persons wanted to buy new automobiles and household appliances, they had to do with out them and thus failed to use the credit that buying these goods would have involved. Much of the increase in income M o n t h l y R e v ie w o f the F e d e ra l R e s e rve B a n k o f A tla n ta f o r J u l y 1946 that was spent for goods, therefore, went into the purchase of nondurable goods instead. Since some of the forces that normally lead to increased consumer borrowing are now free to operate, the coming months will indicate whether or not most of these wartime changes have become relatively permanent. Incomes have con tinued high since V-J Day. The Department of Commerce’s index of income payments for May 1946 was only 2 percent below that for the record month of February 1945. There are some indications that consumers are now spend ing a greater part of their incomes than they spent during the war. In the Sixth District during June of this year United States Savings Bonds, one of the most common forms of war time savings, had sales amounting to 18.7 million dollars ma turity value. This sum, however, represents a decline of 74 percent from sales in July 1945 of 73.3 million dollars. Savings-bond redemptions, on the other hand, have increased, amounting to a maturity value of 42.2 million dollars in June of this year against 34.5 million dollars in July 1945. Although savings are declining, sales of consumer durable goods are increasing. According to the Department of Com merce, the sales of durable-goods stores in May 1946 amounted to 1.6 billion dollars, compared with 900 million dollars in May 1945. Sales in the automotive group of stores were more than double those of May 1945, although they were still 35 percent below the prewar peak. Because of the pressure generated by high incomes and accumulated wartime needs, for a time at least these sales will continue to expand as fast as production can supply the goods. Can these additional purchases be financed out of wartime savings? Evidence shows that persons in the Sixth District, as well as in the United States as a whole, accumulated un precedented savings in the form of bank deposits, war bonds, and other liquid assets during the war. Their use of these assets to purchase durable consumer goods, however, may be limited. Personal demand deposits, other than those of farmers, in all banks of the Sixth District amounted to 1,900 million dol lars in January 1946, compared with 901 million dollars in July 1943. Time deposits of individuals, partnerships, and corporations in Sixth District member banks rose from 413 million dollars to 935 million dollars from December 1941 to December 1945. There is no estimate of the total amount of war bonds now owned by individuals in the District. Accord ing to the Treasury Department, however, Series E, F, and G bonds of a total maturity value of 3,640 million dollars were sold in the Sixth District states from the time they were first issued until May 1946. In Alabama the total amounted to 616 million dollars, in Florida 678 million, in Georgia 672 mil lion, in Louisiana 635 million, in Mississippi 372 million, and in Tennessee 667 million. Many of these bonds, of course, have been redeemed. Redeeming the war bonds, now held, immediately to buy consumer durable goods would be unfortunate for the in* dividual holders and would certainly cripple attempts to re duce current inflationary pressures. Savings bonds are rightly considered as comparatively long-term investments. Many persons regard their holdings as a provision for meeting major financial needs in the future and will not use them to ward paying current expenses. They also realize it is only as savings bonds reach maturity that the full rate of interest will be earned. Ownership of savings bonds and bank deposits, further 7 1 more, may not be so widely distributed as some people have thought. Though incomes increased considerably in the six states of the District during the war period, the region is still a low-income section. The per capita income for 1944 in each of the states was markedly below the national average. Per capita income payments to the civilian population in Alar bama wrere 55 percent of the national per capita income, in Florida 82 percent, in Georgia 60 percent, in Louisiana 66 percent, in Mississippi 42 percent, and in Tennessee 65 per cent. Because incomes were relatively low before the war, expansion during the war probably did not result in any sub stantial increase in savings for many consumers in the Sixth District. Among groups in the lower brackets the increase in income tended to go for the purchase of nondurable items, such as food and clothing that these groups had never before been able to buy. It is a generally accepted principle of con sumption that only when a family reaches an income level higher than that yet attained by the average family in the District is there any considerable amount of savings. In 193536 it was not until the family’s income reached $2,500 that 10 percent of the income was saved, according to one survey. Even without exhaustive study it could easily be concluded that the increases in liquid assets in the Sixth District are owned chiefly by the groups with relatively higher incomes rather than by those with low incomes, who ordinarily pur chase goods on the instalment plan. ^The survey prepared for the Board of Governors of the Federal Reserve System by the Bureau of Agricultural Eco nomics confirms this conclusion on a national basis. This study estimated that, in 1945, 10 percent of the spending units in the United States owned 60 percent of the total liquid assets. In fact, it indicates that 24 percent of the spending units in the United States had no liquid assets at all. Average liquid assets owned by spending units, according to this sur vey, amounted to $1,748. Of this amount $640 was made up of savings bonds, $552 of savings accounts, and $345 of check ing accounts. Because of the concentration of these liquid assets in the hands of a limited number of spending units, at least 50 percent had total liquid assets on the date of the survey ranging from less than $500 down to zero. There are, to be sure, many persons who managed to save even though their incomes were comparatively low. Even among the group with incomes less than $1 ,000, 49 percent of the spending units in 1945 saved something, according to the survey of liquid assets. At the other end of the scale, how ever, 94 percent of those units with incomes above $5,000 re ported some degree of savings. Because their larger incomes gave them the opportunity to save more when they did save and because more of them saved, persons in these spending units accounted for 40 percent of the savings of 1945 and 36 percent of all liquid assets at the beginning of 1946. Even though some persons in the lowest income group were able to save, this group spent more during 1945 than it received. Consumers often wish to keep their cash and checking ac counts as a provision against sudden emergencies and are re luctant to spend them for goods having a high unit value. Consequently, they frequently purchase such items as auto mobiles and household appliances on the instalment plan even though they have sufficient cash to pay for them. If con sumers maintain the attitude they expressed during the survey, 84 percent of them will not spend their liquid assets for auto- 7 2 M o n t h l y R e v ie w SIXTH DISTRICT DEPARTMENT STORE SALES CONTINUE TO SHOW HIGH INCREASES IOO ioo P ERCEN T CHANGE ABOVE PREVIOUS YEAR o f th e F e d e ra l R e s e rv e B a n k o f A tla n ta f o r J u l y 1946 mobiles and 63 percent will not buy other consumer durable goods with these assets. All these factors point to the usage of instalment credit for financing increased purchases of consumer durable goods during the postwar period. A substantial rise in prices would widen the use of such credit. In addition, even though con sumer buying may level off, charge-account credit will ex pand when many retailers return to the prewar practice of employing such credit as a competitive device. The Importance of Continued Control Department store sales throughout the nation have been high in recent months and in some cases have exceeded the Sixth District gains. The data for July are preliminary, being based upon reports made for the first two weeks by a limited number of stores. INCREASES WERE MOST PRONOUNCED IN S A LE S OF WAR-SCARCE ITEMS F IR S T FIV E MONTHS OF 19 4 6 COMPARED WITH FIR S T FIV E MONTHS OF 1 9 4 5 RADIOS HOUSEHOLD APPLIANCES SPORTING GOODS a CAMERAS MEN'S SHOES SILVERWARE HOUSEWARES LUGGAGE FURNITURE, BED S, ETC. PHONOGRAPHS a RECORDS MEN'S FURNISHINGS MEN'S CLOTHING WOMEN'S SHOES JEW ELR Y WOMEN'S CLOTHING WOMEN'S HOSIERY P IE C E GOODS PERCENT INCREASE Reconversion since V-J Day has made available limited supplies of some goods that were not obtainable during the war. Sales of these goods this year even in limited amounts, therefore, register very high per centage increases. Gains in the sales of other types of goods probably reflect the return of servicemen to civilian life. Whatever the final pattern of postwar consumer borrowing may be, the combination of high incomes, relaxed restraints on spending, and larger quantities of formerly scarce goods has expanded consumer credit since V-J Day, although such credit has not yet reached its prewar level. Total consumer credit in the United States was estimated to be 7.5 billion dol lars in May 1946, an increase of 1.9 billion dollars after August 1945. Sixth District retailers reporting to this bank state that the value of their instalment and charge accounts outstanding has increased since the end of the war. Increased sales explain part of the increase, but a slightly smaller proportion of total sales at department stores is being made for cash, and bills are being paid less promptly. The collection ratio, that is, the percent of accounts outstanding at the beginning of the month that were collected during the month, at department stores was 50 in May 1946 compared with 52 in August 1945. TABLE 2 CONSUMER CREDIT OUTSTANDING SIXTH DISTRICT REPORTING FIRMS Percent Change No. of June 1946From Firms Reporting June 1945 Aug. 1945 DEPARTMENT STORES : Charge Accounts................... + 42 + 44 44 Instalment Accounts............... 4- 28 26 + 26 JEWELRY STORES : Charge Accounts.................... + 48 b 35 8 Instalment Accounts................. 14 - 18 + 22 FURNITURES STORES:.............. - 27 96 + 28 HOUSEHOLD APPLIANCE STORES - 28 10 4- 39 COMMERCIAL BANKS............... 34 K110 4- 99 STATE CREDIT UNIONS............. 22 - 28 4- 25 -102 INDUSTRIAL BANKING COS. 10 4- 68 INDUSTRIAL LOAN COMPANIES.. 18 h 28 4- 25 SMALL LOAN COMPANIES......... 48 - 57 4- 53 The effect of increased sales of automobiles is clearly shown in the trend of consumer credit at the member banks reporting their consumer-credit operations. As shown in the chart on page 70, these Sixth District banks reported in June an increase in their total consumer loans of 99 percent after August 1945. Credit granted for the purchase of automobiles explains 67 percent of the total increase. Expanding retail sales of durable goods rather than more liberal terms and slower collections appear to be the prin cipal reason for the recent growth in consumer credit. Easier terms would not increase the production and supply of con sumer durable goods at this time, for that depends upon the rapidity of reconversion. They would only increase the un desirable pressures on price by adding to the already ex cessive amount of purchasing power. It appears that if the current inflationary trend is to be re tarded, the continued use of an instrument as important as consumer-credit control is essential. Once the initial pressure of postwar demand has begun to moderate and the inflationary tide to recede, then there will be a situation in which an ex pansion of consumer credit free from current restrictions may prove highly desirable in sustaining consumer demand. Charles T. T aylor M o n t h l y R e v ie w o f th e F e d e ra l R e s e rv e B a n k o f A tla n ta f o r J u l y 1946 S ix t h D i s t r i c t S t a t i s t i c s B a n k A n n o u n ce m e n ts D uring July three banks in the Sixth Federal Reserve Dis trict began remitting at par for checks drawn upon them. All three are in Florida, that part of the District served by the Jacksonville branch of this bank. The first of them to begin remitting at par, on July 1 , was the Springs State Bank at Sulphur Springs, a suburb of Tampa. The June 1946 supplement to the Federal Reserve Par List shows Sulphur Springs as a par point. The officers of this newly organized nonmember bank are W. D. Lowry, president; J. L. Young, Jr., vice president; and Hamilton Hunt, cashier. Its capital structure consists of $60,000 in paid-in capital stock, $100,000 in paid-in surplus, and $5,000 in paid-in undivided profits. The bank will do a general banking business. It will serve the northern section of the city of Tampa and the rural communities in the Sul phur Springs area. The Venice-Nokomis Bank at Venice began remitting at par on July 2 . This bank is officered by Robert S. Baynard, president, James T. Blalock, vice president, J. J. Williams, Jr., vice president, A. L. Blalock, cashier, and Bina M. Moore, assistant cashier. It has capital of $25,000, surplus and un divided profits of $17,000, and deposits of $1,076,000. Venice was founded and developed as a farming center by the Brotherhood of Locomotive Engineers during the Florida land boom. The services of John M. Nolen, a prominent city planner, were secured in laying out the 2 ,000-acre townsite in wide boulevards, spacious parks, and residential and in dustrial zones. Though it became almost a ghost town after the collapse of the land boom, in recent years the village has increased in population to more than 500. The last of the three banks added to the Par List in July is the Allapattah State Bank at Miami, which began remitting at par on July 15. This is another newly organized nonmem ber bank, chartered on March 18, 1946. Its officers are O. G. Lindsey, president; E. N. Belcher, vice president; George W. Langford, vice president; and L. E. Fenn, executive vice president and cashier. The bank’s capital stock amounts to $100,000, its paid-in surplus to $25,000, and its paid-in un divided profits to $12,500. R e c o n n a is s a n c e Sixth District Statistics lor June 1946 compared with June 1945 PERCENT DECREASE ^ PERCENT INCREASE Departxnent Department i i i l l i l l i i : Gasoline Ta411i|||j|M Cotton C o liiliption Bank fljwto Member Member Banl||j||vestments Demand DapjlHMdJusted 40 SO 20 10 0 10 20 7 3 30 40 CONDITION OF 20 MEMBER BANKS IN SELECTED CITIES (In Thousands oi Dollars) Percent Change July 17 June 19 July 18 July17,.l1946,from Item 1946 1946 1945 June 19 July 18 1946 1945 Loans and investments— Total...................... 88,930 2,144,785 1,997,722 — 3 ■ + * 5 Loans—total............... 2,0 Commercial, industrial, 503,714 504,761 358,379 — 0 + 41 andagricultural loans 253,172 244,564 181,058 + 4 + 40 Loans to brokers and dealers in securities. 11,528 13,668 12,452 — 16 — 7 Other loans for pur_ chasing and carrying securities............. 1,14,168 1.16,711.1 66,715 — 2 + 17 Real estate loans...... 33,185 30,752 24,1198 + 8 + 37 Loans to banks......... 3,446 3,57,1 2,369 — 4 +, 45 Other loans.............. 88,,215 95,495 71,587 — 8 + 23 Investments—total........ 1,585,216 1,640,024 1,639,^43 — 3 — 3 U. S. direct obligations. 1,423,142 1,477,724 1,500,850 — 4 ___ 5 Obligations guaranteed by U. S................ 1,661 1,652 577 .4* 1 + 188 Other securities........ 160,413 (160,648 137,916 — 0 + 16 Reserve with F. R. Bank... 378,121 362,737 345,405 + 4 + 9 Cash in vault................. 29,662 30,413 28,704 — 2 + 3 Balances with domestic 150,107 139,/194 157,309 + 8 — 5 Demand deposits adjusted. 1,375,5,17 1,377,620 1,227,417 — 0 + 12 Time deposits................. 450,599 445,915 380,551 4" 1 + 18 U. S. Gov't deposits........ 215,203 250,453 304,970 — ,14 — 29 Deposits of domestic banks. 478,5)14 478,245 512,900 H- 0 — 7 Borrowings................... 3,500 3,000 + 17 Place DEBITS TO INDIVIDUAL BANK ACCOUNTS (In Thousands of Dollars) Percent Change No. ol May Banks June June June 1946 Irom Report 1946 1946 1945 May June ing 1946 1945 ALABAMA Anniston........ 3 19,434 17,967 20,332 Birmingham.... 6 224,942 232,949 233,328 Dothan,.......... 2 8,560 7,80.2 8,255 Gadsden........ 3 13,022 13,334 11,288 4 98,222 99,520 126,713 Montgomery... 3 54,142 39,606 51,498 FLORIDA Jacksonville.... 3 204,09(2 208,626 194,132 Miami........... 7 173,105 187,208 153,431 Greater Miami*. 11 247,730 274,|177 210,399 Orlando......... 2 48,610 3,3,723 46,685 Pensacola...... 3 27,3,17 29,895 28,205 St. Petersburg. . 3 44,501 32,371 4 2 ,7 2 2 Tampa.......... 3 97,55,1 82,255 93,397 GEORGIA Albany......... 2 9,871 11,290 10,991 Atlanta.......... 4 592,540 595,321 546,769 Augusta......... 3 43,165 39,370 43J151 Brunswick..... 2 13,162 8,291 7,865 Columbus...... 4 43,500 40.150 44,620 Elberton........ ,1** ,97.2 2 2,946 2,861 Gainesville*. . .. 3 11,151 12,615 *★ Griffin*......... 8,149 2 7,793 Macon.......... 46,411 3 46,175 43,303 Newnan......... 6,,283 2 6,839 6** ,230 Rome*.......... 16,498 3 16,698 Savannah...... 74,063 82,853 4 82,298 Valdosta....... 9,618 2 10,138 7,774 LOUISIANA Baton Rouge. .. 60,959 54,406 3 46,237 20,667 20,716 Lake Charles. . . 3 19,087 523,703 507,946 489,545 New Orleans... 7 MISSISSIPPI Hattiesburg. . . . 13,493 14,488 2 12,617 Jackson......... 80,093 77,035 4 64,963 Meridian....... 23,137 22,884 3 18,432 20,678 Vicksburg...... .28,769 2 17,341 TENNESSEE 110,960 106,253 104,867 Chattanooga... 4 91,821 93,925 134,774 Knoxville...... 4 228,366 224,518 250,386 Nashville....... 6 SIXTH DISTRICT 32 Cities........ 108 3,017,656 3,032,848 2,913,092 UNITED STATES 86,663,000 85,898,000 98,024,000 334 Cities...... *Not included in Sixth District total **Not available + — — — — — 8 —4 3 — 4 5 — 9 2 + 15 1 — 22 5 + 30 —, 2 —. 8 —. 10 —4 — 9 — 4 — 4 + 5 + 13 ,+ 18 ,+ 38 - 3 >+. 32 + 14 — 3 —. 0 — 0 — 5 .+ 3 3 + 13 4 —. 1 9 + 1 + 12 < + 5 +U + 8 .+ 10 — 40 + 11 +★ 4*5 * * + 7 + * 10 ★ + 1 + 30 -, 11 + 18 - 0 .+ 8 + 3 + 7 - 7 >+ 7 + 23 + 4 ■ + 1 + 26 + 0 + 20 + 4 .+ 6 2 — 32 •+ 2 — 9 — 1 + 4 + 1 — 12 7 4 M T h e o n t h l y R e v ie w D is tric t o f th e F e d e ra l R e s e rv e B a n k o f A t la n t a f o r J u l y 1946 B u s in e s s ow quickly prices would rise, how high they would go, and how long the rise would continue have been prin cipal topics of interest to both Sixth District businessmen and their customers. In those fields where prices were controlled by the OPA there has been a feeling of suspense pending the action of Congress on the revival of Federal price regulation. As yet reports of sales at Sixth District department stores have given no indications that a buyers’ strike was begun. Neither do they show any signs of a buying wave in anticipa tion of rising prices. Preliminary figures indicate that depart ment store sales in July have been well above the level of the previous year. The gain of 25 percent during the first two weeks of July over sales in the corresponding period of 1945 at weekly reporting department stores is lower than the in crease in sales made during the four weeks ended June 28. The seasonally adjusted index of daily average sales in June at 365 percent of the 1935-39 daily average, compared with 319 in May, was, however, the highest on record. H Trade Though over-all conclusions regarding retail-price changes resulting from the removal of OPA will have to wait for the release of official price indexes, certain changes are already apparent. The weekly index of the Bureau of Labor Statistics showing wholesale prices of commodities on the primary mar kets, however, has risen considerably. In the first week after the OPA closed, June 29 to July 6, it rose 4 percent. By July 13 the increase amounted to 7 percent and by July 20 the increase was 10 percent. Immediate price changes probably provide no proof to support predictions of how high prices will go as controls are lifted or of whether they will level off in the near future. Nor do they necessarily indicate that prices had started on an in flationary spiral before the OPA revival bill was signed by the president. Wholesale prices on the primary markets are more immediately sensitive to change or expected changes than other prices are. The influence of these changes upon prices of goods sold at retail becomes apparent only after rises in wholesale prices have filtered through the market. Day-to-day price increases, however, do not have to be spectacular to add up to a considerable rise in a limite4 period of time. After the end of World War 1 the cost-ofliving index of the National Industrial Conference Board rose on an average of only 1.5 percent a month; yet in the period between November 1918 and the date of the decline in June 1920 the total rise was about 29 percent. Though wholesale prices rose 23 percent from November 1918 through May 1920, the average monthly rise was only a little greater than one percent. Some retail commodities are quicker than others to respond to wholesale-price changes. They include the dairy products and meats that were formerly subject to Government subsidies. Prices of dairy products have gone up in many parts of the District. In the Chattanooga area, for example, milk pro ducers announced an increase of 75 cents a 100 pounds, about 17 percent increase for each pound of butter fat. This rise was reflected in an increase of between two and three cents a quart for delivered milk. Prices for milk are reported to be from two to five cents higher than before in other areas of the District, and butter, according to various reports, is selling S itu a tio n for amounts ranging from 76 cents to $1 a pound. Advances of more than 100 percent in meat prices have also been reported. Some of the price increases are merely those that are passed on by the distributor because of his increased costs. Others are those that are imposed before an increase in costs, in anticipation that prices will rise. The latter increases are the more explosive elements in a rising price spiral and are the ones that contribute to an eventual drastic price decline. The announced policy of many retail merchants throughout the Sixth District to maintain their prices at old levels so far as possible and to confine increases to their actual cost in creases possibly did much, where it was carried out, to pre vent the worst type of price increases. The merchants’ ability to carry out this policy would have depended to a great ex tent, however, upon the size of their inventories. The index of department store stocks in the Sixth District indicates that, despite record sales, the inventories have been growing each month since the first of the year. In January the seasonally adjusted index stood at 184, in May at 239, and in June at 256. Because of higher sales, however, the sales-stock ratio for department stores was lower at the end of each of the first four months of 1946 than it was on the corresponding dates in 1945. At the end of January the stores had stocks on hand amounting to only 1.8 times their sales for the month. From February to April the ratio was 1.7 each month. At the end of May stocks had increased to a level of 2.5 times the sales for that month. This was higher than the ratio of 2.1 in May 1945. Since the ratio for June was 2.3, there may be a reversal of the previous months’ trend. If deliveries of all outstanding orders were received, inventories would again approach the 1935-39 sales-stock monthly average of 2.7. Outstanding orders are reported to be approxi mately three times the monthly average sales. On the wholesale level increases between three and four dollars a ton in the price of pig iron were announced at Birmingham early in the month. The operators stated that these increases, however, had been authorized by the OPA. One textile firm in the Birmingham area announced that it would continue to operate under OPA ceilings until Congress disposed of the question, but some of the other mills in creased their prices. Cotton textiles afford a striking illustra tion of the way in which commodity-price increases are re flected, first, in increases of manufacturers’ prices and, even tually, in increases of retail prices. According to the presi dent of one of the South’s largest textile firms, the increase in the cotton price must be absorbed by an increase in the price of cotton textiles. Cotton-cloth prices at the time of the OPA’s termination, he stated, were based on a cotton price of 26.4 cents a pound. The price had risen to 33.34 on July 25. One of the greatest opportunities for speculative price in creases lies in the present housing shortage. Various real estate boards in the District cities, however, stated that they would attempt to hold rent increases to a minimum. In at least three states of the District, state control of rents was instituted or requested. The governor of Alabama set up rent controls under the Emergency War Powers Act of 1943, ancj the Louisiana legislature passed a bill establishing them in that state. A Miami group requested the passage of an ordi o n t h l y R e v ie w o f the F e d e ra l R e s e rve B a n k o f A tla n ta f o r J u l y 1946 nance by the city commission that would freeze rents for 90 days. S ix t h D i s t r i c t S t a t is t ic s DISTRICT......... BatonRouge... Birmingham-Chattanooga... Jackson......... Jacksonville-Knoxville....... Macon.......... Miami............ Montgomery... Nashville........ NewOrleans. . Tampa.......... DEPARTMENT STORE SALES* Adjusted** Unadjusted May June June May June 1946 1946 1946 1945 1946 277 306 365 319 313 394 292 341 347 352 333 332 295 1388 309 260 324 289 299 305 258 364 348 326 316 239 3,18 296 300 288 335 440 389 3.48 359 317 319 372 305 335 300 287 ‘ 244 336 303 30,1 283 268 393 345 268 332 293 287 30£ 291 364 389 390 433 214 271 274 276 303 414 437 429 322 301 DISTRICT......... Atlanta.......... Birmingham-Montgomery... Nashville........ New Orleans... DEPARTMENT STORE STOCKS Adjusted* * Unadjusted May June June June May June 1946 1946 1945 1946 1946 1945 200 255 239 232 203 252 394 356 347 361 3;18 430 168 196 155 m 146 209 343 266 257 3il3 234 270 386 414 368 343 373 320 127 .185 <156 •198 151 119 Finance Meanwhile the deposits and currency in circulation in the Sixth District remained at their previous high levels. On July 17 demand deposits at reporting member banks adjusted were 12 percent higher than they were a year ago, although there was no net change from the figure on June 19 of this year. Almost no change occurred between the middle of June and the middle of July in the net outstanding circulation of this bank’s Federal Reserve notes, which was 1,426 million dol lars at the latter time. Loans and investments, upon which the expansion of cur rency and deposits is based, remained at a relatively high level. Total loans and investments of reporting member banks were 5 percent higher on July 17 than they were one year previously but 3 percent lower than they were on June 19. Reflecting the recent redemptions of Government securities, a decline in reporting member banks’ Government securities of 4 percent during the four weeks ended July 17 brought them to a level 5 percent below that on the corresponding date last year. Loans were up 41 percent. One of the principal factors accounting for the higher level of loans at reporting member banks this year is the 114 mil lion dollars in security loans outstanding on July 17. A good part of these loans were incurred by individuals for the pur chase of long-term United States bonds during the Victory Loan Drive. At the time of the drive the Treasury asked all banks to reject applications for loans being made for speculative pur chases of Government securities. Although it was recognized that loans might be properly made to those purchasers of securities for investment who would want to anticipate income by borrowing temporarily from banks, it was understood that loans of this character would have maturities not exceeding six months. The inflationary potential in an indefinite continuation of these loans was brought to the attention of member banks in the Sixth District at the end of June. Member banks were re quested to make every effort to decrease this type of loan and to avoid making new loans for the purpose of purchasing and carrying Government securities. Borrowing from banks for such purposes, it was added, creates additions to the country’s money supply to the same extent as direct purchase of se curities by the banks. In view of the existence of large amounts of liquid assets and the limited supply of goods in relation to those assets, such increases in the money supply add dangerous pressures to the price level. C. T. T. Employment According to reports, employment in the District as a whole has continued the moderate gains indicated in last month's Review. July data for all major labor-market areas are not currently available, but for those surveyed such data showed moderate percentage gains in the total number employed. The trends for individual industries followed no uniform pattern, in some cases varying widely, among the different areas, with in the same industry. There was a continuation of unfilled job openings at opposite ends of the pay-scale, such as for skilled craftsmen in the building trades and textile-machine oper ators at one end and for common labor in the construction and the pulpwrood industries at the other. 7 5 June 1945 333 254 254 233 246 222 297 285 219 205 232 262 il93 281 TOTAL............. Alabama........ Georgia......... Tennessee..... COTTON CONSUMPTION* May June June 1946 1946 1945 161 163 451 160 168 173 161 161 148 130 133 .130 COAL PRODUCTION* June Way June 1946 >1946 1945 174 52 /163 185 62 177 .133 30 SIX STATES , Alabama........ Florida.......... Georgia......... Louisiana...... Mississippi..... Tennessee..... MANUFACTURING EMPLOYMENT*** May Apr, May 1946 1945 1946 126r 140 126 137 139r 169 114 116r 130 131 128 128r 135 133r 146 141 Hlr 128 108r 127 109 GASOLINE TAX COLLECTIONS June May June 1946 1946 . 1945 155 152 111 166 161 116 149 100 151 151 146 106 147 142 107 158 159 122 163 158 123 CONSUMERS* PRICE INDEX May Apr. May 1946 1946 1945 ALL ITEMS.. 135 134 132 147 146 145 Clothing... 151 151 141 Rent........ 1,15 114 115 Fuel, elec., and ice.. 111 111 110 Home fur nishings. 152 149 142 Misc....... 132 132 130 Purchasing power of dollar-- .74 .75 .76 ANNUAL RATE OF TURNOVER OF DEMAND DEPOSITS June May June 1946 1946 1945 Unadjusted.. 16.1 15.9 16.7 Adjusted**... 16.6 16.2 17.2 Index**...... 64.1 62.8 66.7 CO M ELECTRIC POWER PRODUCTION* May Apr. May 1946 1946 1945 SIX STATES. 246 251 279 Hydro generated. . 295 301 277 Fuel generated. . 182 185 282 CRUDE PETROLEUMPRODUCTION INCOASTAL LOUISIANA AND MISSISSIPPI* June May June 1946 1946 1945 Unadjusted.. 213 211 208 Adjusted**... 215 214 209 *Daily average basis **Adjusted for seasonal variation ***1939 monthly average=100; other indexes, 1935-39==100 r=Revised INSTALMENT CASH LOANS Number Percent Change of May 1946 to June 1946 Lender Lenders Reporting Volume Outstandings Federal credit unions............... 34 + 18 +. 6 _ 4 State credit unions.................. 22 + 9 Industrial-banking companies..... — 2 10 + 5 Industrial-loan companies......... 18 — 2 + o Small-loan companies.............. — 1l 48 + 0 Commercial banks . . . 34 4- 5 7 6 M o n t h l y R e v ie w o f th e F e d e ra l R e s e rve B a n k o f A t la n ta f o r J u l y 1946 At the same time, unemployment was increasing over much of the District though declining slightly in some centers. This seeming paradox means that the labor supply is still increas ing. Chief among the factors causing it are the continued re luctance of former servicemen to accept, before their veterans’ benefits are exhausted, many of the jobs available at commonlabor rates, the unwillingness or inability of displaced war workers to return to prewar locations and jobs, and the ad dition of school and college students to the labor force for the summer months. These factors, together with the legal limi tations on the period in which consecutive payments can be made under the unemployment compensation laws, account for the decline in such payments from state funds at a time when the number of job applicants is increasing. Seasonal influences, following the summer solstice, con tinued to predominate in farm wTork, with a lull occurring after the usual rise during spring planting. Evidence that the level of agricultural employment in Mississippi at the peak of planting was some ten percent below the prewar level may augur well for the success of efforts to achieve a better bal ance between agriculture and industry in this part of the South. The food-processing, fertilizer, and cottonseed-products industries also had seasonal declines in employment during June. Principally because of unrelieved shortages of materials and supplies, employment in construction showed only moderate gains. A scarcity of skilled workers, especially brickmasons, carpenters, and plasterers, further hindered fullscale expansion in every area for which reports are available. The bright prospects for the industry cannot be realized until these shortages are met and official restrictions are removed. A reluctance of job seekers to accept common-labor jobs at current rates of pay, however, must be overcome for a balanced growth. Lumber and other construction-materials industries increased their employment in all sections except in the Knoxville,Tennessee, area. Employment in mining and related durable-goods indus tries, such as machinery and iron and steel, has recovered from the low point reached during the spring strikes. The Birmingham area benefited most from this recovery. Plants in the Atlanta and Mobile areas also participated in the up turn, but those in the Knoxville and Nashville areas lagged because of local labor and reconversion difficulties. On the other hand, employment in the Government and in the trade and service industries remained static or increased only slightly. The necessity for cutbacks in some Federal agencies, the uncertainty over OPA prospects, and seasonal influences account for the spotty tendencies. In the textile and garment industries employment was in creasing slowly after some early spring layoffs. The Knoxville area not only was lagging behind other areas in this recovery but had fallen below its own prewar levels, a situation ascribed by local mill owners to labor difficulties. A shortage of trained machine operators was reported both for Knoxville and for Jackson, Mississippi. In connection with the current unionization drive in these two industries in the South, both CIO and A. F. of L. unions have announced plans for increased wage demands to meet increased living costs, although recent figures released by the United States Bureau of Labor Sta tistics indicate that the hourly average wage rate for cottonmill workers in the Southeast now approximates the rate for the nation as a whole. C. H . D. S ix t h D i s t r i c t S t a t i s t i c s RETAIL FURNITURE STORE OPERATIONS Number Percent Change of June 1946from Item Stores Reporting May 1946 June 1945 97 — 4 + 52 89 — 5 + 78 Instalment and other credit sales. 89 — 5 + 47 Accounts receivable, end of month 96 + 27 + 3 Collections during month.......... 96 — 2 + 34 Inventories, end of month......... 76 + 26 + 8 RETAIL JEWELRY STORE OPERATIONS Number Percent Change ol June 1946 irom Item Stores Reporting May 1946 June 1945 Total sales............................ — 14 26 4- 18 24 — 11 rf 21 Credit sales........................... 24 — 18 + 18 Accounts receivable, end of month 26 — 2 + 27 Collections during month.......... 26 + 25 + 3 Place DEPARTMENT STORE SALES AND STOCKS INVENTORIES SALES Percent Change Percent Change No. oi June 1946 irom No. oi June 30;1946, irom Stores Stores Report, May June 1945 Report May 31, June 30, ing ing 1946 1946 1945 ALABAMA Birmingham__ — 10 4 5 + 2,1 4- 14 4- 35 Mobile.......... 5 — 7 + 23 Montgomery... 3 4- 16 + ’34 — 12 '3 -h 19 FLORIDA Jacksonville.... + 2 6 4 3 + 4 + 22 + o Miami............ 3 4 - 13 + 26 4- 8 + 20 Orlando......... — 1.1 3 4- 35 Tampa.......... 5 —• 15 4- 28 *3 i4" 5 + “ 3 GEORGIA Atlanta.......... 5 6 - 10 4- 29 4- 9 + 24 Augusta....... 3 + 32 4 — 10 4- 14 4* 15 Columbus...... 3 - .18 + 8 — 6 + 33. *4 + 4 + '36 4 LOUISIANA — 7 4- 26 Baton Rouge.. 4 4 4 - 17 + 5 7 4- 36 4 New Orleans.. 5 4- 19 4- 56 MISSISSIPPI — 9 4- 28 4 Jackson......... 4 4- 6 + 13 TENNESSEE 3 — 8 4- 33 Bristol.......... — 0 — 6 3 3 — 1 Chattanooga... 4 4- 36 4- 17 + 60 — 3 Knoxville........ 4 4- 14 — 8 4* 43 +'3 5 Nashville........ 6 +‘21 22 14 4- 19 4* 22 ,18 OTHER CITIES* — 9 4- 28 10 + 26 73 94 DISTRICT *When fewer thart 3 stores report in a given city, the isales or stocks are grouped together under "c>ther citie:s." WHOLESALE SALES AND INVENTORIES*—JUNE 1946 SALES INVENTORIES Percent Change No. oi Percent Change N o. o i Items Firms June 1946 irom Firms June 1946 irom Report May June Report May June ing ing 1946 1945 1946 1945 7 Automotive supplies. 10 — 10 + 65 + 26 + J Shoes and other 3 — 13 + 20 footwear............. ‘5 11 — 13 4" 9 Drugs and sundries. + 4 + 16 5 10 — 17 + 20 + 73 Dry goods............. + io — 8 +119 4 Electrical goods..... Fresh fruits and 7 + 10 — 16 vegetables ......... Confectionery......... 6 — 4 + 51 Groceries—full-line 16 — 2 wholesalers......... 33 — 13 + 9 + 34 Groceries—specialty6 — 11 line wholesalers... 9 — 18 + I + 13 3 — 10 3 — 25 — 36 Beer..................... + 9 5 General hardware... + 64 + 6 9 + 15 + 4 Industrial supplies... 3 — 14 + 9 Lumber and building materials............. 3 4- 28 + 38 Tobacco and its 4 — 12 products............. 9 — 6 + 18 + 54 __ 14 + 24 18 — 4 + 14 Miscellaneous......... 16 69 142 — 10 + 17 + 1 + 29 *Based on U. S. Department of Commerce figures.
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