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M o n th ly F E D E R A L R E S E R V R e v ie w E B A N K O F A T A t la n ta , G e o rg ia , Ju n e 3 0, 1942 V o lu m e X X V I I G a s o lin e T a x e s in Of all the necessary restrictions upon civilian habits of life created by war conditions, few have so vitally affected the average individual as the restrictions placed upon automobile transportation. Since the entry of the United States into W orld W ar II, Americans have had to begin to alter a way of life built around the unrestricted use of the automobile. Restrictions now placed upon autom obile transportation seriously affect the tax base from which state governments derived over 40 per cent of their tax revenues in the fiscal year 1940-41. Motor fuel taxation yields more state revenue than any other form of state tax. In 1941 the motor fuel tax yielded 25 per cent of all state taxes in the United States.1 In addition, motor vehicle license taxes constituted 12 per cent of total taxes. To this proportion of 37 per cent m ay be added other levies upon the autom obile and other trades directly and indirectly influenced by motor transportation which brings the estimate of total taxes raised by the motor vehicle industry to 40 per cent of all the state taxes levied. In the states com prising the Sixth Federal Reserve District, motor fuel and license taxation is of greater im portance than in the United States as a whole. Forty-eight per cent of the total taxes collected in 1941 in Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee were m otor fuel and motor vehicle license taxes in contrast with the 37 per cent for the United States as a whole. The tax of seven cents per gallon on gasoline in Florida, Louisiana, and Tennessee is higher than in any other state. The rem aining three states of the Dis trict levy a tax of six cents, which is equalled by only North and South Carolina and exceeded by only Arkansas, which levies a tax of six and a half cents per gallon. The proportion of revenue derived from the gasoline and motor vehicle license taxes in 1941 varied from 62 per cent in Florida to 32 per cent in Louisiana. In all other states of the District, with the exception of Louisiana, the proportion exceeded that of the United States average as can be seen by examining the accompanying chart and T able II. In Louisiana, the severance tax provided a large proportion of the state taxes in 1941. The yield of severance tax is partly dependent upon oil production in that state which in turn may be affected by the consumption of gasoline. Not only are the revenues of state governments drastically affected by declines in gasoline tax collections, but local gov ernments are affected as well. In 1941, 31 per cent of the gasoline taxes col lected in the six D istrict states was shared with local governments. The proportion JI n c o m p u t i n g t h e t o t a l a m o u n t r a i s e d b y t a x a t io n , u n e m p lo y m e n t p a y r o ll ta x e s a r e e x c lu d e d s in c e th e p r o c e e d s a r e n o t u s e d f o r th e o p e r a t io n o f t h e s ta te g o v e r n m e n t s . th e S ix th L A N T A N um ber 6 D is tric t varied from state to state. In Alabama, 49 per cent of receipts went to local governments; in Florida, 42 per cent; in Geor gia, 16 per cent; in Louisiana, 13 per cent; in Mississippi, 44 per cent; and in Tennessee, 28 per cent. W hat may constitute a particularly difficult problem if reve nues from the gasoline tax are sharply reduced is the fact that expenditures financed by the tax in several states are rela tively fixed. In one state the entire proceeds of the tax are pledged for the service of highway bonds. In another state, four cents of the seven-cent tax are pledged to pay m aturity and interest payments on the highway debt. In other states, gasoline taxes have been used to service county bonds. Reve nues from gasoline taxation have also been used in some of the states to aid in financing schools and other general activi ties of the state governments as well as the construction and maintenance of highways which are entirely dependent upon motor taxation. Tax adm inistrators may be able to solve this problem through reductions in expenditures not essential to the war effort and through diversion of increased tax receipts from other sources. Data on gasoline tax collections should be interpreted with caution and should be examined in relation to many other fac tors. A study of the m onthly behavior of collections during the past few years will help in picturing the present situation. W hile there is no “norm al” year that may be taken as a guide in studying present conditions, collections in 1939 may be conveniently used as a starting point. That year was the last prior to the beginning of the rearm am ent p ro g ram ; there was little thought of rubber shortage; there was no shortage of gasoline and consequently no rationing. In order to make a comparison with that year, monthly collections for each state and for the District have been converted into indexes, using the average monthly collections in 1939 as a base. These indexes are presented in Table I. Several significant changes may be observed from the data presented. In the first place, collections during 1940 and 1941 were considerably above the 1939 level. D uring these years the general trend in collections was upward, although conditions varied from state to state. P art of the increase in collections during the two years may be attributed to the increase in motor vehicle registrations. New car registrations were 25 per cent greater in the District in 1940 than in 1939, while during the first 11 months of 1941 they were 44 per cent greater than during the same period in 1939. Changes by states are shown in Table III. New car registrations reflect increas ing economic activity and purchasing 38 M o n t h ly 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 J u n e 1942 power. How much of the increase in tax collections was the result of greater average mileage of m otor vehicles travelled cannot be accurately estimated from the data at hand. A second factor of significance, to be observed from Table I, is the seasonal pattern of collections, which should be taken into account before any attem pt is made to interpret current month-to-month changes. In all states except Florida collections in 1940 and 1941 declined after January, rising again in the spring and continuing at a relatively high level until the end of the year. Florida collections followed an op posite seasonal pattern. Collections in that state were lowest during the summer months, rose after the first of the year, and continued relatively high during the first three months of the year— the tourist season. It has been estimated that in norm al years tourists account for 45 per cent of all autom obile travel in F lorida during the three winter months. P a rt of the month-to-month variation may be accounted for by the varying num ber of days in each month. Collections are made for sales during the preceding month. M arch collections are always low because of the fewer days in February. Some of the month-to-month fluctuations would be removed were the index computed on a daily average basis. W ith the customary seasonal pattern in mind, it is possible to examine the trends since the beginning of 1942. January collections continued the seasonal pattern of the two previous years by rising in the six states. February collections declined in the D istrict as a whole. The same thing had occurred in 1940 and 1941. In Florida, however, collections during February in 1940 and 1941 had increased over the previous month, but in 1942 the results of T able I IN D E X E S O F G A S O L IN E TA X C O L L E C T IO N S (Average Monthly Collections, 1939 = 100) 1940 Jan u ary........... ............... F eb ru ary ......... ................. M arch............. ................. April.................................. M ay................. ................. Ju n e................. ............... July.................................... A u g u st........... ................. Septem ber ............... O cto b er............................ N ovem ber. . . . ................. D ecem ber. . . . ................. Ala. 104 89 89 103 105 Ill I ll 101 121 112 122 115 Fla. 118 126 125 127 112 105 101 97 101 94 106 115 Ga. 108 93 94 104 107 109 111 108 119 112 119 116 La. 108 96 93 104 104 112 103 109 112 109 121 115 Miss. 108 88 68 107 113 112 101 97 116 121 125 106 1941 Jan u ary ........... ............... F eb ru ary ........ ................. M arch............. ................. A pril............... ................. M ay................. ................. Ju n e................. ............... Ju ly ................. ................. A u g u st........... ................. S ep tem b er.. . . ............... O cto b er......... ................. November. .. . ................. December ................. 115 109 103 121 121 132 127 136 143 143 142 134 132 137 134 145 126 122 111 116 116 103 112 116 118 115 108 123 124 150 122 130 136 124 131 125 121 111 104 117 127 124 125 128 136 137 143 109 107 109 105 109 125 132 118 109 144 130 137 120 123 126 107 133 119 137 123 139 158 127 150 120 121 120 112 127 124 133 120 127 136 125 134 120 1942 Jan u ary ........... ............... F eb ru ary ........ ................. M arch............. ................. April............... ................. M ay................. ................. 141 129 113 121 125 133 117 107 118 105 135 120 103 114 100 120 125 126 89 103 135 129 80 105 105 167 138 115 110 125 139 125 109 110 110 Tenn. District 113 111 100 93 95 82 111 114 128 112 111 122 121 108 104 107 124 115 130 112 100 114 125 116 the change in tourist traffic began to be felt. The index de clined 16 points in contrast with a rise of 17 points in Feb ruary of 1941. In M arch, 1942, total collections in the D istrict declined, follow ing the usual seasonal pattern. In A pril, 1942, the Dis trict index rose one point from the norm ally low M arch col lections. In 1941 it had risen 15 points and in 1942,16 points. The D istrict index for May collections rem ained at the A pril level. In A labam a and Tennessee the index for May, 1942, is above the same m onth in 1941. In other states, while collec tions increased except in F lorida and Georgia, the indexes were below the 1941 levels. Any estimate of the future behavior of collections must be based upon m any assumptions, and future conditions may compel the altering of the assum ptions. Gasoline consumption may be divided into two m ajor categories— consumption by private passenger cars and consum ption by trucks and busses. It will be helpful to consider each class separately. At the present time, one of the conditions that accounted for the increased collections during 1940 and 1941 no longer exists. No new cars fo r civilian use are being produced and, consequently, registrations can no longer be expected to con tinue to increase. Assuming there were no scarcity of gasoline, private operation of autom obiles would be lim ited by the availability of tires and by the prevailing attitude tow ard their use. How long present tires will last is, in turn, based upon additional assumptions. One rubber com pany official has esti mated that about one-fourth of all autom obiles will be off the highways by July, 1943, with about five m illion more out of use at the end of that year. A statistician with one of the m ajor oil companies has estimated that within two years one-half of the passenger cars in use at the beginning of this year will be off the road unless new or recapped tires are provided. How ever, according to this estimate, some cars will be able to op erate on their present tires until September, 1946. If 50 per cent of the tires are recapped, autom obile use would be ex tended by one year. These estimates are based on a top speed of 40 miles per hour and a 10 per cent reduction in mileage per car. Another factor may com plicate this picture. According to the Senate Defense Investigation Committee, there appears to be little prospect for civilian tires from the synthetic rubber program within the next three years. In January the OPA esti mated that the average vehicle in use in this country had about 9,000 miles of travel left in its tires. The results of the campaign for scrap rubber may alter the picture somewhat. In the immediate future, however, there appears to be little prospect for civilian tires. Exact figures reflecting changes in the use of passenger autom obiles are not available. However, reports from high way departm ent checking stations are of interest. They indi cate to some extent how road travel has declined. At various checking stations in M ississippi, it is estimated that there was a decrease of 4 to 8 per cent in traffic by early A pril of 1942, as compared with the corresponding week in 1941. Traffic surveys in Tennessee indicate declines from last year with the decreases becoming progressively greater from m onth to month since the beginning of the year. In January the traffic M o n t h ly 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 u n e 1942 Table II PER CENT OF TOTAL STATE TAXES P E R C E N T O F T O T A L S T A T E T A X E S* R A IS E D B Y M O TO R V E H IC L E TA XA TIO N RAISED BY MOTOR VEHICLE TAXATION Sixth District, 1941 Sixth District, 1941 Per Cent IOO 39 United S tates................................ D istrict.......................... ............... A labam a........................ ............... F lorida............................ ............... G eorgia.......................... ............... L ouisiana...................... ............... M ississippi..................... ............. T ennessee..................... ............... 80 60 Gasoline Taxation 25.4 40.4 34.5 47.2 48.4 27.6 39.0 48.9 Motor Vehicle License Taxation 11.6 8.2 6.9 15.2 5.5 4.5 4.2 12.7 All Other 63.0 51.4 58.6 37.6 46.1 67.9 56.8 38.3 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 *Unemployment taxes are excluded from the totals. Table III 40 N EW C A R R E G IS T R A T IO N S 20 Georgia Louisiana Mississippi Tenntssse Per cent of taxes raised by gasoline taxation. A labam a....................................................... F lorida......................................................... G eorgia....................................................... Louisiana..................................................... M ississippi................................................... T ennessee................................................... DISTRICT..................................................... Per Cent Increase 1940 Over 1939 18.5 30.8 27.2 15.6 19.9 33.2 25.1 Per Cent Increase 1941* Over 1939* 43.7 44.0 46.7 40.2 30.3 55.7 44.1 *First 11 months. Per cent of taxes raised by motor vehicle license taxes. □ Per cent of taxes raised by all other forms of taxation. Source: United States Bureau of the Census. count in Alabam a was 7 per cent higher than in the previous year. In February Alabam a traffic was about 2 per cent above the 1941 lev el; but by March, however, it had declined 7 per cent below the 1941 level. The average of six recorders in Louisiana indicated a de cline of 10 per cent in January, 18 p er cent in February, and 20 per cent in M arch from the corresponding months of 1941. M anual traffic classification counts in F lorida indicated that the 1942 tourist travel was only 75 per cent of that in 1941. A pril tourist traffic in Louisiana in 1942 is estimated to have been 31 per cent below the same month in 1941. These sam ples seem to indicate that the decline in total traffic is accel erating. D uring the first months of 1942, however, the decline was not sufficient to affect tax collections m aterially. As a partial offset to this decline in passenger car traffic, traffic by trucks is expected in some quarters to increase sub stantially for a time. The necessity for efficient use of highway transportation in moving war m aterials is recognized. Trucks norm ally consume a greater am ount of gasoline per m ile than passenger cars. A rise in collections from this source may offset to some extent the decline in revenues from sales of gasoline to owners of other types of motor vehicles. Efforts are being made, however, through elim ination of competing schedules, and other means, to reduce mileage and thus reduce the use of gasoline and rubber by trucks and busses. Up to this point, it has been assumed that there will be no difficulty in securing supplies of gasoline. The supply p rob lem along the eastern seaboard, however, has become acute. In four states of the District, gasoline rationing was instituted on May 15. Before the war, m any areas of the D istrict were p artially supplied by tankers either directly or in coopera tion with other forms of transportation. Ocean shipping diffi culties have all but stopped that source of supply and the resulting shortage of gasoline is also a factor in the decline in gasoline tax receipts. General conclusions based upon the behavior of collections since the beginning of 1942 are difficult to make. It appears to be true, however, that as yet the full effects of the expected decline in autom obile use have not been felt. In only a few instances have collections fallen below the average monthly collections of 1939. It may also be concluded that, except in the case of Florida, any trend toward decline has been felt only within the last two months. It is the future behavior rather than the past behavior of tax collections that is w orry ing state officials. A number of persons have furnished data upon which this article is based. Acknowledgement is made to the following, who furnished in formation on gasoline tax collections: A. B. Tucker, Chief, Alabama State Gasoline Tax Division; J. M. Lee, Florida State Comptroller; W. Wayne Walker, Director, Georgia State Motor Fuel Tax Unit; J. F. Boyle, Chief, Louisiana State Petroleum Products Tax Division; J. W. Purvis, Supervising Accountant, Mississippi State Highway De partment; and R. L. Weakley, Director, Tennessee State Gasoline Tax and Oil Inspection Division. Data on motor vehicle registration were received from: W. M. Parker, Division Engineer, Florida State Road Department; R. V. Glenn, Georgia State Director, Division of Highway Planning; I. L. Thomas, Jr., Traffic and Planning Engineer, Louisiana Department of Highways; and L. N. Means, Office Engineer, Tennessee Department of Highways. Data on motor vehicle traffic were received through the courtesy of Roscoe Arant, Atlanta Regional Business Con sultant, United States Department of Commerce, from: W. G. Pruett, Alabama State Highway Director; Thomas A. Johnson, Chairman, Flor ida State Road Department; Harry B. Henderlite, Chief Engineer, Louisiana Department of Highways; I. W. Brown, State Manager, Mississippi Division of Highway Planning; and A. P. Connell, Engineer Director, Division of Research and Statistics, Tennessee State Depart ment of Highways. M o n t h ly 40 S ix th R e v ie w D is tric t o f th e F ederal R eserve B a n k o f A tla n ta fo r J u n e 1942 B u s in e s s While business activity in the Sixth District remains at a high level, governmental wartime controls are exerting an in creasing influence on the direction of that activity. Retail trade as measured by department store and furniture store sales ex hibits a downward trend. This trend is in part the result of governmental restrictions upon consumer credit and in part the result of wartime price controls and limitations upon the production of certain goods for civilian use. Another factor in the decline of retail trade is the continued pressure upon the public to buy War Bonds, thus reducing the amount of spend able funds. Still another factor is the uncertainty about the future. Many consumers have already entered the armed serv ices and others hesitate to buy because they may presently be inducted. Wartime needs have resulted in increased business activity in many other lines. The textile industry in the Sixth District is being increasingly devoted to wartime production, although there are indications that total activity may not expand much beyond present levels. The volume of construction continues at a high level, but such construction is almost entirely de voted to meeting the needs for housing war workers and to the building of war plants and facilities for the armed forces. Agricultural conditions are generally reported to be good, but agricultural labor supply may hamper operations in the fu ture. T e x t i l e s : After establishing new high records in each of the first four months of this year, activity at Sixth District cotton textile mills declined slightly in May. The majority of the mills in the District are primarily en gaged in fulfilling war contracts. In general, Southern textile mills are operating at capacity, and war requirements have compelled them to shift from lighter to heavier fabrics. Heav ier fabrics naturally require more cotton than previously fab ricated lighter products. Manufacturers in five Southeastern states recently have been awarded contracts for $20 million worth of textile goods by the War Department. A g r ic u l tu r e : While most agricultural commodities are ex empted from the General Maximum Price Regulation of the Office of Price Administration, prices of many farm products will no doubt be indirectly affected, since the prices of finished commodities have been fixed. Preliminary indications are that the general index of prices received by farmers was about the same in May as in April. Although prices of fresh vegetables are not included in the price order, the order may have some indirect influence upon the prices of vegetables grown and processed in 1942. Maximum wholesale and retail prices of canned vegetables have been fixed at their highest March levels. Although most farm prices are not expected to increase substantially, the need for maintaining and increasing agri cultural production will probably insure the continuance of government support. Parity payments will not be given on cot ton, rice, and most types of tobacco in 1942 because 1941 re turns including conservation payments are at or above parity levels. Conservation payments will be continued on certain agricultural products. Farmers are becoming increasingly concerned with the la bor supply. While the farm labor supply on April 1, accord ing to the United States Department of Agriculture, was higher C o n d itio n s in all states of the District except Alabama than in the United States as a whole, the supply was considerably below that of a year ago. On April 1 the farm labor supply in the six Dis trict states was 63.7 per cent of normal, compared with 74.3 per cent a year ago. Farm labor demand in the six states was 97.8 per cent of normal, compared with 91.3 per cent in 1941. As a consequence of the labor shortage, farm wage rates aver aged $30.54 per month without board, compared with $24.38 a year ago. While growth of Alabama crops was slow during May, con ditions were generally favorable. With less than normal rain fall over most of the state and cool nights in the early part of the month, grass and weeds made little progress, and the available labor was able to put in full time. The oats crop is not up to expectations because of an early lack of moisture. While this year’s acreage in oats is considerably larger than last year’s, the indicated yield is 19.5 bushels per acre, com pared with 25 bushels in 1941. The estimated peach crop is 1.9 million bushels, compared with last year’s large crop of 2.4 million bushels. General rains during the latter part of May and early June were particularly helpful to Florida crops. Favorable condi tion figures were reported on most general crops, but the con dition of new citrus crops declined 15 points to 73 per cent on June 1. Grapefruit declined nearly as much. The estimate of June production from the 1941 bloom was further reduced by a million bushels in May. Southern Florida is producing the best tomato crop in years, and growers are looking for ward to continued good prices. Watermelon shipments were expected to get under way about June 25. Crops and pastures in Georgia showed improvement during the latter part of May as a result of the breaking of the drought of late April and early May. Reported prospects for most crops on June 1 were better than for the same period in other recent years, although the tobacco crop is later than usual and stands are irregular. Peaches are moving to market in volume and, although the estimated crop is smaller than last year’s, a large crop of good fruit is expected. Peaches are being marketed for the first time under a Federal Marketing agreement. The agreement requires that all fruit shipped in interstate commerce meet specifications as to size and degree of ripeness. Cool weather, rains, and floods in May retarded the prog ress of crops in some areas of Louisiana. While the cotton crop is late and stands vary, insect pests that prey upon the cotton plant are reported as being less numerous than last year. Cotton acreage is larger than previously. Rice sowings which were retarded by April rains made good progress in May. Mississippi crops were in a generally good condition on June 1. A peach crop of 1.2 million bushels is predicted for the year, in contrast with 1.4 million bushels last year. Ac cording to the Mississippi State Agricultural Department, se vere damage may result from the boll weevil unless July and August are hot and dry. It is also feared that the 1941 severe attack upon crops by the Southern striped blister beetle may be repeated this year. The chief crop activity in Mississippi at present is cotton chopping. Although there is a local shortage M o n t h ly 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 u n e 1942 of labor, it is not serious enough to require a large-scale mobilization and transportation of farm workers from one area to another, according to the M ississippi branch of the United States Employment Service. R e c o n n a is s a n c e PER CEN T D E C R EA S E ^ Total reserves of the Federal Reserve Bank of Atlanta reached another new high level on June 10 when they were $627.8 m illion. This represents an increase of $54 m illion since December and a rise of $141 m illion since the middle of June last year. Federal Reserve note circulation of this Bank’s issue also reached another peak on June 10 when it stood at $352.6 m illion, a rise of $88 m illion since December and an increase of $136.8 m illion over the corresponding date last year. Bank lending activities are being increasingly directed to ward the w ar program . According to data received by this bank through a special survey of commercial and industrial loans of 181 member banks in the Sixth D istrict covering the period A pril 16 to May 15, 1942, 42 per cent of the dollar volume of new loans was for defense purposes. The p ro por tion of loans for defense purposes renewed during the period was only 16 p er cent. New loans constituted 57 per cent of the total loans made during the period. Of thirteen industrial groups, the greatest proportion of new loans for defense purposes was made to the metal prod ucts industry, followed by the building and construction in dustry. The dollar volume of loans for defense purposes accounted fo r 96 per cent of new loans and 75 per cent of renewals in the metal products industry. In the construction industry 85 per cent of the new loans was for defense pur poses, while 63 per cent of the renewals was for defense p u r poses. W ar needs accounted for only 2 per cent of the new loans made to sales finance and personal loan companies and for 3 per cent of the renewals. P E R C E N T IN C R E A S E Retail|||H^Ies .................................I!...........mill]..I.. Ill..... Badly needed rains in May im proved Tennessee crop pros pects in the eastern part of the state. The outlook for grain crops is excellent, and the farm labor situation may not prove as serious as has been anticipated. M oney and credit: Demand deposits (adjusted) of weekly reporting member banks in the D istrict reached a new high level on June 17. These banks have also continued to increase their investments in United States Government securities. On June 17 their holdings of United States direct obligations were more than twice as large as they were a year ago and more than $120 m illion larger than at the beginning of this year. Loans have declined somewhat further in May and the first half of June. Deposits of other banks and balances m aintained with correspondent banks increased in early June after declin ing in the latter p art of A pril and in May. Net demand and tim e deposits of all member banks in the D istrict increased further in May and reserve requirements averaged $3.8 m illion higher than in A pril. Actual reserves m aintained by the banks, however, rose only about $1 m illion and estimated excess reserves declined $2.8 millions. 41 W holes^e Sales (6! .. .......................................................... ........[j... ........... . Cotton Consumption (7 lilillU Ill Bank Loans ai|||||||fl|fl^^ 40 30 D— d Dep^liliiil 20 10 0 10 20 30 40 Sixth District statistics ior May 1942 com pared with May 1941. commercial and industrial loans, only 23 per cent of the num ber of loans was connected with war needs, although 31 per cent of the dollar volume was accounted for by such needs. Businesses having estimated assets of $50,000 to $500,000 received the greatest num ber of loans during the period, as well as the greatest dollar volume. The proportion for war purposes, however, was greater for businesses having esti mated assets of $500,000 to $5,000,000. Over 98 per cent of the new loans and renewals m ature in one year or less. Holdings of consumer instalm ent paper on the part of the re porting banks of the D istrict continue to decline. Holdings of such paper on the part of 31 reporting banks declined from $46.4 million as of December 31, 1941, to $36.5 million on May 31, 1942, a decrease of 21 per cent. As might be anticipated under present restrictions on the sale of new auto mobiles, the principal decline occurred in the holdings of Volume of Consumer Instalment Credit Extended by 2 7 Reporting Banks of the Sixth Federal Reserve District in the AAonths of M ay and April, I 9 4 2 Type of Paper May, 1942 A pril, 1942 Per Cent In Thousands of Change 1. Retail instalm ent paper purchased (a) Automotive . . . $ 476 (b) O t h e r ...................... 242 $ 650 383 — 27 — 37 2. Direct retail instalm ent loans (a) Automotive . . . 255 (b) O t h e r ...................... 7 253 16 + 1 — 56 Of the total new loans made for defense purposes, 50 per cent of the dollar volume went to the building and construc tion industry, while 36 per cent of the total renewals in dollar volume went to the building and construction industry. Loans to the textile, apparel, and leather products industry am ount ed to 21 per cent of total defense renewals. 3. R epair and m odernization loans (a) FHA, Title I, Class I 217 (b) Other ...................... 3 204 4 + 6 — 30 4. Personal instalment cash loans ................................. 852 944 — 10 S in c e d efen se lo a n s w e re o f a la r g e r a v e ra g e s iz e th a n o ther 5. T O T A L ............................ $2052 $2454 — 16 42 M o n t h ly 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 u n e 1942 automotive instalm ent paper. H oldings of purchased retail autom obile paper declined by 39 per cent during the period, and holdings of direct retail autom obile instalm ent loans de clined by 37 per cent. M ajor declines also occurred in repair and modernization loans, with FHA T itle I, Class I loans de clining by 17 per cent and other m odernization loans by 59 per cent. Personal instalm ent cash loans, in contrast, decreased by only 4 per cent during the five-month period. As of May 31, 1942, holdings of instalm ent paper p u r chased am ounted to 52 per cent of the to ta l; direct retail in stalm ent loans to 9 per cent; repair and modernization loans to 18 per cent; and, personal instalm ent cash loans to 21 per cent. The volum e of consumer instalm ent loans made by report ing banks during the month of May, 1942, was 16 per cent less than for the month of A pril, 1942. The percentage change in the volume of such loans, classified by types of loan, is given in the preceding tabulation, shown on page 41. Retail tra d e: Sales of reporting Sixth D istrict departm ent stores declined somewhat in May, when there is usually a small increase, but m erchants continued their accumulation of stocks which are now very much larger than they were a year ago, even after taking into consideration the rise in prices. The d o llar volume of sales in May reported by 80 firms was down 6 per cent from A pril and down 2 per cent from May of last year. The index of daily average sales, based on reports from m ore than h alf of the reporting stores, de clined 5 per cent in May 1942 but increased 4 per cent above that of May 1941. A fter adjustm ent for seasonal influences, the May index was 6 per cent lower than for A pril. If it is assumed that prices have risen about 20 per cent in the past year, these figures indicate a considerably sm aller volume of merchandise moving into customers’ hands. D epartm ent stores reporting sales by departm ents experi enced declines in sales in 17 out of 22 departm ents as com pared with sales a year ago. The greatest percentage decline occurred in the sale of furs. Sales of m ajor household ap pliances decreased 40 per cent from sales in the previous year. Substantial increases were reported only for women’s and misses’ coats and suits, infants’ wear, and piece goods. In contrast to the decline in sales, stocks on hand at report ing departm ent stores at the end of May were 5 p er cent larger than a month earlier and the index, after adjustm ent for the usual seasonal change, was up 9 per cent. In com parison with May 1941, stocks are larger by 65 per cent. There is still a very large increase in the actual volume of m erchandise on hand, after allowing for the rise in prices. Retail furniture store activities in the Sixth D istrict for the month of May 1942 were in sharp contrast to activities for earlier periods. Sales of reporting stores showed a decrease of 29 per cent fo r the month of May 1942, as com pared with the same month a year ago, and a decrease of 15 per cent for the month of May 1942, as com pared with the month of A pril 1942. The decrease in sales has been accom panied by a decrease in total receivables. May 1942 receivables were 14 per cent less than M ay 1941 receivables and 4 p er cent less than A pril 1942 receivables. Coincident with these declines have been greater collections. D uring May 1942, collections were 15 per cent greater than fo r M ay 1941 and 6 per cent greater than for A pril 1942. In spite of declining sales, inventory holdings of reporting furniture stores continue to increase. Inventories of May 31, 1942, were 63 per cent greater than for M ay 31, 1941, and 6 per cent greater than for A pril 30, 1942. Inventories of re porting stores on December 31, 1940, were 9 per cent greater than on December 31, 1939, and were 40 per cent greater on December 31, 1941, than on December 31, 1940. A slight gain is reported in the proportion o f cash sales to total sales. Of total sales of reporting furniture stores for May 1941 only 3 per cent was represented by cash sales. In A pril 1942 the percentage of cash sales increased to 5 per cent and in May 1942 to 6 per cent. I n te r p r e ta tio n s o f R e g u la tio n W The Board of Governors of the Federal Reserve System has issued the follow ing interpretations of Regulation W that re late particularly to loan credit for consumer purposes. The interpretations have been grouped under section headings set out in the Regulation itself as revised effective May 6, 1942. Section 2 (i) Single-paym ent Loans: An overdraft result ing from the drawing of a check is an extension of credit, but in the usual case it is not “in the form of a loan” within the m eaning of Section 2 ( i ), and therefore is not subject to Reg ulation W unless used as a means of evasion. A pawn transaction in which the paw nor is not under any personal obligation to repay the paw nbroker is not a loan and is not subject to Regulation W. However, the m ere fact that the transaction is called a pawn does not mean that it is not sub ject to Regulation W since there are many so-called pawn transactions which do in fact involve an obligation to repay. Section 6 (b ) Instalm ent Loans N ot to Purchase Listed Articles: Last p a rt of Section 6 (b ) refers to a loan to retire an obligation held elsewhere whereas Section 7 (c ) (1) refers to the renewal or extension of an obligation held by the reg istrant. Section 7(c) Renew als and Extensions: Reference to “ charge account” in clause (1) of Footnote 5 of Regulation W is a cross-reference to Section 6 (b ) and means a charge account arising in whole or in p art from the sale of a listed article. This means that a single-payment loan made on or after May 6 which the registrant knows was used to retire a charge account arising w holly from the sale of unlisted a r ticles may be renewed or extended under Section 7 (c ) (1) or 7 (c) (2) with a final m aturity not exceeding twelve months from the date of the original loan. Section 8 (b ) Security Loans and Credits: Loans for p u r poses of purchasing or carrying building and loan shares are exempted from Regulation W by the last clause of Section 8 ( b ) . Loans fo r other purposes, however, even though secured by building and loan shares, are not exempted by this section. Board does not regard savings passbooks as “investment securities” for purposes of Section 8 (b ) of Regulation W. The word “carrying” in Section 8 (b ) of Regulation W has the same general m eaning as in Section 3 (b ) of Regulation U. In effect, this confines “ carrying” to the refinancing of indebt edness which was originally incurred for the purpose of p u r chasing stocks, bonds, or other investment securities. The mere fact that the extension of credit is secured by such investment securities is not sufficient. M o n t h ly 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 u n e 1942 C O N D IT IO N O F F E D E R A L R E S E R V E BAN K O F ATLA N TA (In Thousands oi Dollars) Per Cent Change Bills disco u n ted.............................. Industrial ad v an ces........................ U. S. secu rities................................ Total bills an d secu rities........... F. R. note circulation...................... Member bank reserve d e p o s its ... U. S. G ov't d ep o sits....................... Foreign bank d ep o sits................... Other d ep o sits.................................. Total dep o sits.............................. Total reserv es.................................. Industrial advance commitments. June 17 1942 18 967 110,086 111,070 350,584 354,716 579 26,488 3,581 385,364 623,145 668 May 20 1942 954 105,478 106,432 335,232 339,783 14,476 25,998 2,867 383,124 614,736 1,263 June 17, 1942, from June 18 May 20 June 18 1941 1942 1941 8 193 94,885 95,085 216,329 267,967 34,163 42,303 7,555 351,988 481,353 32 + 5 + 4 — 96 + 2 + 25 + 1 + 1 + + + + — — — + + 16 17 62 32 98 37 53 9 29 — 47 C O N D IT IO N O F 20 M EM BER BAN KS IN S E L E C T E D C IT IE S (In Thousands of Dollars) Per Cent Change June 17 1942 Loans and Investments—T o ta l... . 871,648 Loans—Total.................................... 372,838 Commercial, industrial, and agricultural lo an s................... 211,647 O pen market p a p e r................... 5,738 Loans to brokers and dealers in securities............................ 4,193 O ther loans for purchasing 8,307 an d carrying secu rities....... 30,298 Real estate lo an s........................ 1,378 Loans to b an k s.......................... O ther lo a n s.................................. 111,277 Investments—Total....................... 498,810 U. S. direct obligations............. 346,487 O bligations gu aran teed by U. S ........................................... 41,606 Other securities........................ 110,717 Reserve w ith F. R. Bank............... 211,916 18,910 Cash in v a u lt.................................. Balances w ith domestic b an k s... . 249,674 Demand deposits-adjusted......... 635,858 Time d ep o sits................................ 191,537 U. S. G ov't d ep o sits..................... 17,137 Deposits of domestic b an k s....... 432,618 Borrow ings...................................... May 20 1942 874,104 385,625 June 17, 1942, from June 18 May 20 June 18 1941 1941 1942 — 0 722,025 + 21 — 3 — 1 376,731 218,867 6,501 193,475 5,426 — 3 — 12 + + 4,485 6,268 — 7 — 27 8,252 30,914 1,388 115,218 488,479 315,460 11,092 36,350 1,494 122,626 345,294 163,779 + — ■— — + + 1 2 1 3 2 10 — 25 — 17 — 8 — 9 + 44 + 112 61,863 111,156 205,516 18,961 239,584 604,418 190,615 44,963 424,275 65,193 116,322 171,084 15,934 259,124 502,806 191,252 47,245 363,087 — — + —+ + + 33 0 3 0 4 5 0 — 62 + 2 — — + + — + + — + 9 6 36 5 24 19 4 26 o 64 19 DEBITS TO INDIVIDUAL ACCOUNTS (In Thousands of Dollars) per Cent Change May April May May 1942 from ALABAMA 1942 19421941 April 1942 May 1941 Anniston*......................... 12,593 ......... Birm ingham ..................... 157,408 151,372 124,455 + 4 + 26 D othan.............................. 7,063 7,487 4,357 — 6 + 62 G adsden*......................... 7,778 .......... M obile.............................. 114,690 101,689 60,377 + 13 + 90 M ontgom ery................... 34,144 31,053 31,038 + 10 + 10 FLORIDA Jacksonville..................... Miami................................ O rlando*.......................... P ensacola......................... St. P etersburg*............... T am pa.............................. 124,641 59,470 16,167 15,580 12,779 55,678 114,543 66,439 GEORGIA A lbany.............................. A tlanta.............................. A ugusta.......................... Brunsw ick....................... Colum bus........................ E lberton.......................... M acon.............................. N ew nan............................ Savannah......................... V aldosta.......................... 8,674 335,071 33,011 4,895 31,389 1,582 32,202 3,478 45,839 5,220 LOUISIANA Baton R ouge*................. Lake C harles*. . . „......... New O rlean s................... + 9 — 12 48,156 114,215 + 9 67,382 — 10 .......... 12,861 + 10 ......... 40,269 ✓ + 16 7,549 301,080 35,908 4,246 28,661 1,621 29,927 3,403 43,076 5,704 6,753 298,405 27,988 4,080 25,916 1,622 25,556 2,731 42,025 4,608 + + + + + — + + + + 32,359 9,216 291,843 301,886 .......... .......... 282,107 MISSISSIPPI H attiesburg................. Jackson............................. M eridian.......................... V icksburg......................... 10,046 35,773 18,060 11,886 10,484 40,463 17,228 9,338 9,972 34,114 16,573 7,833 TENNESSEE C hattanooga................... Knoxville......................... N ashville.......................... 74,361 41,887 132,296 69,636 42,933 115,645 57,252 38,776 114,114 26 C ities.......................... 1,686,187 1,603,657 UNITED STATES 274 C ities......................... 48,324,000 14,130 + + — + + — + + + — 15 11 8 15 10 2 8 2 6 8 + 21 +38 ... 28 12 18 20 21 2 26 27 9 13 ... — 3 + 3 — — + + + + + + 4 12 5 27 1 5 9 52 + 7 — 2 + 14 + 30 + 8 + 16 1,455,379 + 5 + 16 46,620,000 43,661,000 + 4 + 11 SIX TH D IS T R IC T 43 SIXTH DISTRICT BUSINESS INDICATORS Indexes (1923-1925 Average = 100, except as noted) Adjusted** May Apr. May 1942 1942 1941 RETAIL SALES*** (1935-1939 Av. = 100) DISTRICT (46 F irm s)............................ 144 153 138 A tlanta..................................................... Birmingham........................................... Nashville................................................. New O rleans......................................... RETAIL STOCKS DISTRICT (21 F irm s)............................ 139 A tlanta.....................................................282 Birmingham........................................... 108 Nashville................................................. 116 New O rlean s......................................... 129 128 251 104 114 117 84 161 78 64 74 U nadjusted May Apr. May 1942 1942 1941 142 134 144 141 136 148 147 147 131 150 136 142 140 137 121 142 285 111 118 130 135 264 110 119 122 86 163 80 64 75 WHOLESALE SALES TOTAL..................................................... G roceries................................................. Dry G oods............................................. H ardw are................................................. D rugs....................................................... CONTRACTS AWARDED DISTRICT............................................... Residential............................................. O thers..................................................... A labam a................................................... Florida..................................................... G eorgia................................................... Louisiana................................................. M ississippi............................................. T ennessee............................................... 80 70 67 134 149 92 80 72 156 155 80 68 59 158 112 242 98 338 283 146 87 568 134 352 104 64 131 107 140 125 43 3 219 137 114 152 477 67 68 115 144 129 BUILDING PERMITS 20 CITIES................................................. A tlanta..................................................... Birmingham........................................... Jacksonville........................................... Nashville................................................. New O rleans......................................... 17 6 15 55 3 15 76 18 26 64 5 41 92 26 38 175 25 76 169 174 158 171 177 158 114 109 126 COTTON CONSUMPTION*** THREE STATES...................................... A labam a................................................... G eorgia................................................... T ennessee............................................... 256 305 238 221 273 338 248 241 252 312 225 259 EMPLOYMENT (1932 Av. = 100) SIX STATES........................................... A labam a................................................... F lorida..................................................... G eorgia................................................... Louisiana................................................. M ississippi............................................. T ennessee............................................... 168 205 117 175 176 135 154 167 199 120 174 170 134 154 147 163 105 164 133 117 144 PAYROLLS (1932 Av. = 100) SIX STATES........................................... A labam a................................................... Florida..................................................... G eorgia................................................... Louisiana................................................. M ississippi............................................. T ennessee............................................... 326 550 144 314 306 249 309 320 522 150 307 307 242 306 227 330 109 260 174 171 229 197 187 211 173 136 220 COAL PRODUCTION*** (1935-1939 Av. = 100) TWO STATES........................................ 198 173 A labam a................................................... T ennessee............................................... 132 ELECTRIC POWER PRODUCTION*** (1935-1939 Av. = 100) TOTAL..................................................... By W ater Pow er.................................... By F u el..................................................... Statistics (000 Omitted) May Apr. COMMERCIAL FAILURES 1942 1942 Number (Actual, not thousands) 45 38 Liabilities......................................... $ 688 $ 458 May 1941 46 $ 361 Year to Date 1942 1941 213 215 $2,777 $2,392 R E T A IL T R A D E — M A Y 1942 (C itie s ior w hich no in dexes are com piled) Sales for May com pared with : Apr. 1942 May 1941 Apr. 1942 May 1941 — 3 Baton R ouge.. + 10 M acon............. — 4 + 19 C h a ttan o o g a .. — 4 Miami......... . . . — 18 + 0 — 8 — 6 Jackson........... — 8 M ontgom ery.. — 1 + 3 Jacksonville... . . + 6 Tam pa............. + 0 — 3 + 11 — 4 Knoxville....... . . . — 4 *Not included in totals. “ Adjusted for seasonal variation. ***Indexes of retail sales, electric power and coal production and of cotton consumption are on a daily average basis. 44 M o n t h ly IN D U ST R IA L R e v ie w PRODUCTION T h e F e d e ra l R ese rve m onthly index of p h ysical volum e ol production, adjusted ior seasonal variation, 1935-39 average = 100. Latest fig u res show n are for M ay 1942. DEPARTMENT STORE SA L E S AND STOCKS Fe d e ra l R eserve m onthly in dexes of value of sale s and stocks, adjusted lor seasonal v a ria tion, 1923-25 average ■= 100. Latest figures show n are for M ay 1942. MEMBER BANKS IN 101 LEADINS CITIES W ed nesd ay figures. Com m ercial loan s, w hich in clu d e industrial and agricultural loan s, rep resent prior to M ay 19, 1937, so-called "O th e i lo a n s" a s then reported. Latest figures show n a re lor June 10, 1942. M EMBER BANK RESERV ES AND RELATED ITEMS SSU P*IY M GR E SE R V EF o f th e F ederal R eserve B a n k o f A tla n ta fo r J u n e 1942 FA C T O R SU SIN GR E SE R V -----1 -E ---M E M B R B A N K R E S E R V E B A L A N C E S “■Hi r J O R C JU fTlO N y^ rfcE A SU lYC U R R E N C Y T U F A ftD U R V C A SH A N O E P O S IT S O E PO srrs S^|TV ^"S 1941 1942 Wednesday figures. Latest figures shown are for June 10, 1942. N a tio n a l B u s in e s s S itu a tio n Industrial activity continued to advance in May and the first h alf of June. Commodity prices showed little change after the m iddle of May when the general maximum price regulation went into effect. Retail trade declined further in May but increased some what in the first half of June. Production: Volume of industrial production increased in May and the Board’s seasonally adjusted index advanced to 176 per cent of the 1935-39 average, as com pared with 173 in A pril and 171 during the first quarter of this year. O utput of m anu factured products continued to increase, reflecting chiefly fu rth er growth in produc tion of war m aterials, while m ineral production showed a seasonal rise. The largest increases in May, as in other recent months, were in the m achinery and transportation equipm ent industries which are now making products chiefly for m ili tary purposes. The am ount of copper smelted rose sharply and output of chemicals continued to advance. Activity in the autom obile industry, which since January had been retarded during the conversion of plants for arm am ent production, showed an increase in May. Steel production was m aintained at about 98 per cent of capacity in May and the first half of June. Lum ber production increased seasonally and activity at furniture factories, which usually declines at this time of year, was sustained at a high rate. In industries m anufacturing textiles and food products, output continued large in May. Gasoline production declined further, however, reflecting the effects of transportation difficulties. There was a further marked decrease in paperboard production which, according to trade reports, reflected a slackening in demand. Coal production was sustained at a high rate in M ay and output of crude petroleum increased somewhat, following considerable declines in M arch and A pril. Copper production and iron ore shipments rose sharply to new record levels. Value of construction contract awards increased sharply in May, follow ing a de cline in the previous month, and was close to the record high level reached last August, according to figures of the F. W. Dodge C orporation. Awards for publicly financed work increased in May and, as in other recent months, constituted around three q uar ters of the total. Awards for residential building continued to decline. Distribution: Retail trade declined further in May. D epartm ent store sales were about 7 per cent sm aller than in A pril and sales by m ail-order houses showed a sim ilar decrease. In the first h alf of June departm ent sales increased somewhat. Carloadings of revenue freight increased in May by about the usual seasonal amount. There was a further substantial decline in the num ber of cars loaded with m erchandise in less than carload lots, reflecting the effect of Federal orders raising the m inim um weights for such loadings. Increases were reported in shipments of most other classes of freight, particularly coal, ore, and miscellaneous freight. Com m odity prices: Prices of most commodities both at wholesale and retail showed little change after the general maximum price regulation went into effect around the m iddle of May. Declines occurred in prices of cotton and some other agricultural com modities, and prices of some industrial commodities were reduced to conform with the general order that prices should not exceed the highest levels reached in M arch. Action was taken to exempt most m ilitary products from the general regulation and to allow for special treatm ent of women’s coats and dresses and a few other nonm ilitary items. Bank credit: D uring May and the first h a lf of June, the Federal Reserve Banks p u r chased about $200 m illion of United States Government securities. A dditions to mem ber banks’ reserves from this source, however, were offset by continued withdrawals of currency by the public. Excess reserves fluctuated around $2,700 m illion during the six-week period. Reporting member bank holdings of United States Government securities increased by nearly $1 billion during the period. Two-thirds of the increase came in the week ending May 20 with delivery of new Treasury 2 per cent 1949-51 bonds, and the b a l ance represented m ainly increased bill holdings. Loans declined somewhat in the period. Adjusted demand deposits continued to increase, while U nited States Govern ment deposits were reduced. United States G overnm ent security prices: Prices of taxable United States Government bonds, which declined by about 1/2 point at the tim e of the early M ay financ ing, subsequently regained that loss and during the first h alf of June rem ained steady. (Prepared b y the Board of G o vern ors of the Fe d e ra l R e se rv e System )
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