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a r c h m In this issue: M a tu rity o f N e g o tia b le C D 's at D istrict B an k s L o u isia n a S h a r e s in D istrict B a n k in g N o tes: D istrict B u s in e s s C o n d itio n s E c o n o m ic R ecovery B u sin e ss Loans M a t u r it y of N e g o t ia b le a t D is t r ic t C D 's Ban ks b y A r n o ld A . D ill The negotiable certificate of deposit (CD) has become an increasingly important source of funds to District banks. At 23 large District banks, the volume outstanding in denominations of $100,000 or more doubled from $850 million at the end of 1970 to $1,743 million at the end of 1972. During the same period, CD's rose from 7.3 to 12 percent of total liabilities at these banks. C D volume at other District banks has also been rising rapidly and is estimated to total over $1 billion. One little-publicized aspect of this expansion is C D maturity distribution. Yet maturity decisions can have important effects on a bank's interest expenses and liquidity. These decisions affect interest expenses because C D rates are volatile and vary with maturity. In the past two and one-half years, these rates, in concert with other money market rates, have changed direction four times and have shifted by as much as one percent in a single month. Therefore, depending on the timing of C D issues and redemptions, interest expenses— and their effect on earnings— can change greatly. Banks which manage to group certificate issues when rates are down will have lower interest expenses than banks that do not. In the past two years, CD's maturing in 30 to 59 days have yielded as much as I V 2 percent below those maturing in one year. Given such differences, the pattern and level of a bank's interest expenses will be affected by the maturity of certificates it issues. C D maturity also affects a bank's liquidity. Maturing certificates must be either refinanced by new issues or increases in other liabilities or else offset by asset sales or loan reductions. The shorter the average maturity of a bank's outstanding CD's, the greater near-term refinancing problem it confronts. Also, the shorter the average maturity, the more often CD's will turn over and the more interest expenses will reflect the volatility of rates. It must be disconcerting to some District bankers that at times over 20 percent of their total liabilities has been interest-sensitive, short-maturity CD's. At the same time, some of those bankers have relied heavily on overnight borrowing in the Fed funds market. Calculation and Behavior of C D Maturity The average maturity statistic is calculated from monthly data submitted by 23 large District banks. Each bank reports the dollar volume of CD 's maturing in Monthly Review, Vol. LVIII, No. 3. Free subscription and additional copies available upon request to the Research Department, Federal Reserve Bank of Atlanta, Atlanta, Georgia 30303. MARCH 1973, MONTHLY REVIEW W HAT IS A NEGOTIABLE CERTIFICATE O F DEPOSIT? A negotiable CD is a marketable receipt for funds deposited in a bank for a specific time and rate of interest. Most are issued in denominations of $100,000 or more and in maturities of six months or less. An active secondary market enables the selling of certificates prior to maturity. Most CD's are purchased by sophisticated investors such as corporations, state and local governments, financial institutions, and wealthy individuals. To attract such investors, banks must offer CD rates competitive with those on other money market instruments such as Treasury bills and commercial paper. each of the next 12 months; these data are totaled for the District maturity distribution (Chart I). Average maturity is then calculated on a weighted average basis. (See Appendix I for details and sample calculation.) Average C D maturity has ranged from a high of 5.0 months in August 1965 to a low of 2.7 months in December 1969 (Chart II). At some banks, it has ranged from over six months to less than one month. Average CD maturity has also shown sizable month-to-month fluctuations. C D maturity trended downward from 1965 to 1969. Then, after rebounding in early 1970, maturity declined and in 1971 and 1972 fluctuated around a relatively low 3.2 average. Average maturity also seems to follow a seasonal pattern. Except for 1972, maturity has declined in the last three months of each year. This pattern occurs because a large amount of District CD's are issued to mature in December. In fact, as high as 20 percent of certificates outstanding at the end of November have been scheduled to mature around mid-December. Businessmen apparently have a large need for cash at that time to make tax and dividend and other payments. However, banks have usually been successful in reissuing CD's in mid-December and dollar volume normally has not declined substantially. Rate Ceilings Have Big Impact Under Regulation Q , the Board of Governors sets maximum interest rates banks can pay on various maturity CD's. Whenever rates on competCHART II Average CD maturity: volatile and affected by Reg. Q ceilings. Mnnth, CHART I CD maturity distribution changes substantially over time. Percent of CD's maturing N ote: S h a d e d a re a s d e n o te p e rio d s w h en R eg. Q in te re s t ra te c e ilin g s w e re b in d in g on o n e or m o re CD m a tu rity c a te g o rie s . 23 la rg e D istric t b a n k s ing money market instruments have eclipsed CD rate ceilings, banks have been severely constrained from bidding for certificates, and volume and maturity have declined. Rate ceilings first affected CD maturity during the credit "crunch" in the latter half of 1966. Money market rates began to move above ceilings about midyear, precipitating a sharp CD runoff. During this period, average maturity declined from four to three months. A decline in money market rates in early 1967 again allowed banks breathing room under ceilings. A large volume of moderately long CD's were issued and average maturity increased. By Novem ber 1967, however, rising money market rates were again restricting banks from competing for CD's maturing in over 90 days. As a result, average maturity of new issues was very low in late 1967 and early 1968. On April 18, 1968, the Board of Governors raised ceilings on maturities of 60 or more days, FEDERAL RESERVE BANK OF ATLANTA 35 allowing banks to compete for longer CD 's. The maturity of new issues then rose sharply. As 1968 drew to a close, however, competitive money market rates once again were rising above rate ceilings on all maturities. As ceilings remained in effect throughout 1969, C D volume plunged and average maturity fell to a record low of 2.7 months.1 The Board of Governors again raised ceilings on January 21,1970, enabling banks to compete for CD 's maturing in 270 days or more. As a result, sales picked up and the average maturity of new issues rose to an all-time high early in the year. However, two developments in early 1970 abruptly reversed this striking maturity rise. First, interest rates on competitive money market instruments turned up after mid-April and began to eclipse rate ceilings on longer-maturity CD 's. Because of this, C D sales declined after April and average maturity leveled off. Then, on June 27, 1970, the Board of Governors suspended rate ceilings on certificates maturing in 30 to 89 days. Sales picked up sharply in July and August, but this time banks were selling mainly short CD 's and, therefore, average maturity dropped from 4.6 months in June to 3.5 in October. Ceilings did not constrain banks in 1971 or 1972 and, as a consequence, fluctuations in maturity diminished. In early 1973, however, C D rates were rising, and for some maturities approached prevailing ceilings. As ceilings once again 0 become effective on some maturities, average maturity should be greatly influenced. The Importance of M a tu rity Considerations W hen ceilings were binding, there was little that banks could do to influence C D maturity. During such times, most banks stood ready to issue, at ceiling rates, all the CD 's of any maturity that they could. However, even when free of ceilings, only a few large District banks have made maturity an important consideration in liability management. These banks typically estimate the volume of funds they will need to raise in the money market over some future period. Then they adopt a strategy regarding liability mix and maturity, aimed at mini mizing the cost of obtaining these funds subject to some liquidity constraint. In conjunction with this, these banks develop a plan to maximize returns on their investment trading accounts and portfolios. The optimum liability strategy depends to a large extent on the outlook for Fed funds and C D interest 1CD m aturity during 1969 is biased upw ard by CD's issued by large Tennessee banks. Beginning in April of that year, these banks w ere allow ed to pay m ore than 4-percent interest on CD's. W hen Tennessee banks adjusted th eir rates from 4 percent to the Federal Reserve rate ceilings (ranging from 5’/« p ercen t on 30-59 day m aturities to 6V< percent on one year o r longer m aturities), they attracted an inflow o f CD's at the same tim e o th er District banks w ere rapidly losing them . The average maturity o f outstand ing CD's rose at Tennessee banks in 1969, contrary to behavior elsew here in th e D istrict. 36 CHART III Rates on long CD’s exceed those on short CD’s, but spread and level can change quickly. M id -Jan u a ry 1973 6.0 .45% spread I - 5.6 -5 .0 30 GO 90 120 days days days days N ote: 180 days 270 days F ig u re s r e p r e s e n t a p p ro x im a te r a te s a t N ew York C ity b a n k s. 1 year p re v a ilin g o ffe rin g rates and the prevailing maturity structure of C D rates. Generally, if a bank foresees a rise in these rates, it will try to issue long maturities to lock in prevailing rates. For the same reason, a bank may increase its desired C D volume and cut purchases of overnight Fed funds. Conversely, when a bank expects rates to fall, it will avoid issuing long maturities and may also let C D 's run off and increase Fed funds purchases. A bank must also weigh its interest rate fore cast against the current maturity structure of C D rates. Banks usually have to offer an interestrate premium to induce investors to extend matur ity, and this premium is large when rates are expected to rise. This was true in March 1972, for example, when rates were about iV e percent higher on one-year C D 's than on those maturing in 30 to 59 days (Chart III). In this case, a cost-minimizing bank would issue a one-year C D only if it thought short-term rates would be rising substantially during the next year. Several bankers interviewed did not feel that the 1V8 percent premium prevailing in March 1972 was justified. In other words, they thought interest costs over the coming year would be minimized by issuing a succession of short C D 's rather than one long one. This partly explains the low average ma turity figures in the first half of 1972. As the year progressed, the premium on long C D 's shrank and more bankers probably felt that the cost of lengthening maturity was justified. This may explain the rise in maturity in the latter half of 1972. The Puzzle of Interbank Differences C D maturity behavior differs widely among banks. For instance, among the 12 largest C D issuers in the District, the average of maturity in 1971 ranged M A R C H 1973, M O N T H L Y R E V IE W from 4.0 months to 2.2 months. Maturity has trended up at some banks and down at others and varied in volatility. One might suspect that banks with conservative management philosophies would have longer CD maturity than more aggressive banks. And it is true that, among the 12 largest C D issuers, one conservative bank has consistently had the longest average maturity. Aside from this, however, maturity behavior seems to bear little relationship to management philosophy. Also, over time, there has been no significant correlation between average maturity and bank size, C D volume, ratio of CD's to total deposits, or portion of CD 's issued to state and local governments. M aturity W ill Be Increasingly Im portant Most large banks interviewed expect the negotiable certificate of deposit to become an even more important source of funds. They forecast growing credit demands that will provide a profitable outlet for C D funds. As a result, competition for CD 's will likely increase and more banks will begin to issue them. As the liquid funds of state and local gov ernments, businesses, and individuals grow, the potential supply of CD funds should also rise rapidly. In addition, District banks have been improving access to national money markets by issuing CD's to investment bankers in New York who, in turn, distribute them to investors. CD's issued by District banks could become even more attractive as the secondary market in these instru ments develops, increasing their liquidity. As the C D grows in importance as a source of funds, so will CD interest costs grow in importance in total bank expenses. As this happens, bankers will devote greater attention to CD management and better appreciate the earnings and liquidity implications of maturity. Several banks in the District are already in the process of increasing the sophistication of their liability management, including CD policies. As District bankers delve into the economics of liability management, they can be expected to ask several questions about CD maturity: 1. What is the minimum CD maturity one can prudently have? 2. What maturity strategy will minimize the average interest cost of CD funds over a given period? 3. How much would be added to interest costs over a given period if C D maturity is extended? Because maturity affects bank costs and liquidity, the answer to the first question is important. Especially when rate premiums on long maturity CD's are larger than bankers think justified, they will be tempted to keep maturity very short to cut interest expenses. Conversely, they may worry FEDERAL RESERVE BANK OF ATLANTA about becoming too dependent on short CD's. The question of minimum maturity can be an swered only after analyzing a bank's overall liquidity and objectives. C D maturity should be considered only along with the following factors: maturity of other liabilities; total reliance on interest-sensitive funds; the quality, liquidity, and maturity of assets; and the ability of the bank to raise funds in the money markets. Regarding this last point, most money managers at large District banks have grown increasingly confident of their ability to place CD 's and other money market liabilities at their discre tion. Also, they say that once they have incurred the development cost of establishing their CD-issuing and Fed-funds borrowing capabilities, operating costs are little affected by changes in the maturity or composition of money market borrowing. However, bankers are apt to become uneasy (and so might bank regulators) if a further C D expansion should significantly reduce the average maturity of bank liabilities, especially if there is not a compensating fall in the average maturity of bank assets. The more asset maturity exceeds liability maturity, the greater the potential for interest costs to deviate from interest income. A bank with short liability and long asset maturity experiences more rapid increases in interest expenses than interest income when rates rise. At the same time, the capital value of a bank's investments would likely decline and customer loan demands would inten sify. Because of these risks, it might be assumed that bankers would try to maintain a reasonable balance between asset and liability maturity, perhaps by increasing the average level of C D maturity from the low levels of 1971 and 1972. However, as bankers continue to grow more con fident of their ability to issue CD's at will, they will be tempted to keep maturity short if they think this will significantly reduce costs. Turning to the second question, development of a cost-minimizing C D strategy requires a projection of the interest rates needed to attract various ma turity CD's over a given planning period. Given such a projection, it would be relatively easy to simulate various maturity strategies and determine the minimum cost strategy (see Appendix II), though, of course, this strategy would have to be revised each time interest rate projections were updated. O nce a projection of C D rates has been made and the interest-cost-minimizing strategy deter mined, the question of the least expensive way of extending maturity could be calculated with relative ease (see Appendix II). An array of average interest costs and associated C D maturity could be developed to illustrate the cost of extending maturity and for use in arriving at an optimal combination of interest cost and maturity. Getting answers to the above questions should prove well worth the c o st.i 37 APPENDIX I Calculation of Average Maturity of Outstanding Negotiable CD's On the last Wednesday of each month, 23 large District banks report to the Federal Reserve Bank of Atlanta the dollar volume of outstanding negotiable CD's in denominations of $100,000 or more that mature in the remaining days of the survey month and in each of the next 12 months or more. These data are then aggregated for District totals published along with an average maturity statistic in this Bank's release entitled "Maturity Distribution of Outstanding Negotiable Certificates of Deposit." These data are forwarded to the Board of Governors where they are combined with data from other Districts and published in the Federal Reserve statistical release G.9. Average maturity is calculated on a weighted average basis. All CD's are assumed to mature in the middle of the month. Those maturing in the survey month are assumed to mature in the middle of the period between the survey date and the end of the calendar month in which the survey is taken. The weights are the percent of outstanding CD's maturing in each month or fraction thereof; starting date for calculations is the survey date. A downward bias in calculated average maturity develops because all CD's maturing in more than 12 months after the survey date are lumped together. These are assumed to mature in the middle of the twelfth full month after the survey date, regardless of their actual, but unknown, maturity. In some cases, this formula can seriously understate maturity at individual banks. For example, one District bank recently issued a $10-million negotiable CD to mature in 10 years. Such a CD is treated as maturing in 12.5 months under the current formula. Sample Calculation Sixth District, December 27, 1972 Maturity Distribution Period of Maturity 1972 1973 1974 Remainder of December January February March April May June July August September October November December January or later Total M il. $ Maturity Multiplier* (B) Percent (A) 66.1 559.3 222.8 219.5 108.4 86.0 120.5 77.9 46.0 55.1 44.2 42.8 33.9 3.8 32.2 12.8 12.6 6.2 4.9 6.9 4.5 2.6 3.2 2.5 2.5 1.9 60.1 3.4 1,742.6 100.0 4/31 X 1/2 4/31 + 1/2 (4/31 + 1/2) (4/31 + 3/2) (4/31 + 5/2) (4/31 + 7/2) (4/31 + 9/2) (4/31 + 11/2) (4/31 + 13/2) (4/31 + 15/2) (4/31 + 17/2) (4/31 + 19/2) (4/31 + 21/2) (4/31 + 23/2) (A) X (B) / 100 + 1 1 1 1 1 1 1 1 1 1 1 .0025 .2025 .2085 .3313 .2250 .2268 .3884 .2983 .1984 .2761 .2407 .2657 .2210 + 1 .4494 + + + + + + + + + + 3.5346 = average maturity ♦Formulas for maturity multipliers: = remaining days of December December = midpoint of the remainder of December days in December X Va January = midpoint of January = portion of December remaining + v2 February = midpoint of February = midpoint of January + 1 March = midpoint of March = midpoint of February + 1 etc. 38 MARCH 1973, MONTHLY REVIEW APPENDIX II Maturity Strategy to Minimize the Interest Cost of a Given Volume of CD's A projection of the interest rates needed to attract various maturity CD's to a bank is necessary to develop the cost-minimizing maturity strategy. Whether or not the strategy would actually minimize costs depends on the accuracy of the rate forecast. The strategy would have to be revised each time the interest rate projection was updated. Given the hypothetical projection in Table 1 fora future year, various maturity strategies can be tried and average monthly interest cost calculated. In this case, interest costs would be minimized by issuing a series of three 30-day maturity CD's beginning January 1, a 180-day CD on April 1 and, again, a series of three 30-day CD's beginning October 1. This would produce a monthly average interest cost of 4.25 percent. If a series of twelve 30-day maturity CD's had been issued instead, the average cost would have been about 4.75 percent. A series of four 90-day CD's would have produced an average cost of about 5.15 percent. If T a b le either successive 180-day CD's or one 360-day CD had been issued, average cost would have been 5.65 percent. The cost of lengthening maturity can be derived by modifying the cost-minimizing strategy. For example, if a 270-day maturity CD were issued April 1 (alternative strategy #1) instead of a 180-day CD (the costminimizing strategy), the average of maturity for the year would be increased from approximately 2.25 to 4 months. Surprisingly, this would increase the average interest cost by only about .01 percent. However, the intrayear pattern of interest costs would differ with each strategy. If two successive one-month CD's were followed by a ten-month CD issued on March 1 (alternative strategy #2), the maturity average would rise to 4.8 months and the average interest cost to 4.35 percent. Continuing this process, it would be possible to develop a table showing combinations of maturity and interest-rate averages associated with various maturity strategies. (See Table 2). 1 T a b le H y p o th e tic a l P r o je c tio n o f I n te r e s t R a te s N e e d e d to M a tu rity a n d I n te r e s t C o st A t t r a c t V a r io u s M a t u r i t y C D ’s f o r a F u t u r e Y e a r* T ra d e -o ffs fo r a F u tu r e Y ear CD’s m a tu rin g in 30-89 days J a n u a ry 1 F e b ru a ry 1 M arch 1 April 1 M ay 1 June 1 J u ly 1 A u g u st 1 S e p te m b e r 1 O c to b e r 1 N o v e m b er 1 D ecem ber 1 90-179 days 5 .50 4.25 3 .9 0 3.65 4 .4 0 4.75 5.25 5.50 5.0 0 5 .5 0 4.75 4.5 0 5.65 4.50 4 .00 3.75 4 .6 0 5.00 5 .50 5.75 5.15 5.65 5.00 4.75 180-359 days 1 year a n d ov er 5.65 4.65 4.25 4.15 4.25 5.40 5.65 5.90 5.50 5.75 5.10 4 .9 0 5.65 4.65 4.25 4.50 5.13 5.50 6.00 6.0 0 5.75 5.75 5.15 5.15 2 M atu rity A verage M onthly A verage CD R ate C o st-m in im iz in g s tra te g y 2.25 4.25 A lte rn a tiv e s tra te g y # 1 4.00 4.26 A lte rn a tiv e s tra te g y # 2 4.80 4.35 e tc . e tc . *This w a s a p p ro x im a te ly th e c o u rs e of CD r a te s in 1971. NOW A V A IL A B L E In te r n a tio n a l F in a n c e and T rade: A S ou th eastern P ersp ectiv e A collection o f articles w hich covers several institutional aspects o f the w orld m onetary system , describes the grow th o f international trade and bank ing in the Sixth District and exam ines so m e aspects o f financing eco n o m ic d e v e lo p m e n t in less d e v e lo p e d nations. N o w available w ith these limits: single copies to individuals; five copies to banking and educational institu tions . Research D epartm ent , Federal Reserve Bank o f Atlanta , Georgia 30303. FEDERAL RESERVE BANK OF ATLANTA 39 L o u is ia n a E c o n o m ic S h a re s in R e c o v e ry b y J o s e p h E. R o s s m a n , Jr. In late fall of 1971 when we last reviewed Louisiana's economy, the aftereffects of the 1970 recession were still very much in evidence. The state's nonfarm employment was still below prerecession levels and the unemployment rate was nudging 7 percent. The economic recovery under way in both the nation and Louisiana was clearly weaker than previous ones. However, 1971's uncertain rally gathered strength in 1972, and today the nation is in the midst of a strong expansion approaching boom proportions in some sectors. Louisiana's indicators show that it, too, has shared in this econom ic strengthening, although some sectors still remain depressed. The Bayou State's nonfarm employment, an important gauge of economic health, has registered considerable growth since late 1971. In fact, since the end of 1970 when recovery is generally acknowledged to have begun, its growth in nonfarm employment has been as strong as the nation's. This growth represents nearly 50,000 jobs— 22,000 in 1971 and 27,000 in 1972. Growth in nonmanufacturing employment was responsible for all of the 1971 and 1972 nonfarm employment increases. Manufacturing employment, with a declining durable goods work force and a virtually constant nondurable goods work force, still remains below 1969 levels. Two categories— trade and state and local government— account for most job gains in nonmanufacturing. Only temporarily slowed by the recession, each category has trended strongly upward since it ended. However, growth in nonmanufacturing was not limited to just these categories. Except for transportation and utilities, all experienced sufficient growth to bring 1972 employment above 1969's. Construction employment, which had steadily declined since mid-1960, also made strong gains during 1971 and the first half of 1972. However, labor management conflict once again took its toll, as strikes involving 5,000 Lake Charles construction workers during July and August 1972 reduced job gains. Except for the Lake Charles and Lafayette areas, construction employment showed growth in 1972 in all major areas. Comparisons of fourth-quarter 1971 and 1972 figures show increases ranging from 1.1 percent in the New Orleans area to 12.4 percent in the Alexandria area. Sluggish construction employment in Lake Charles can be partially traced to curtailed expansion of local oil refineries and completion of most oil refinery projects started over the past two years. Despite significant job gains in the past two years, unemployment still stays high across Louisiana. In January 1973, 6.8 percent of the civilian labor force remained unemployed (seasonally adjusted). This continued high un employment rate can be attributed in part to a rapidly growing labor supply. The Bayou State's labor force increased by 12,000 between 1968 and 1970 and by Note: This is one of a series of articles in which economic developments in each of the Sixth District states are discussed. MARCH 1973, MONTHLY REVIEW Louisiana nonfarm employment rebounded; unemployment remained fairly high. Thousands cent and nonbuilding construction value gains of 54 percent were balanced by a 21-percent decline in the value of nonresidential building contracts. This apparent weakness in nonresidential building largely reflects the impact of the New Orleans Superdome on 1971 contract figures. During 1972, contracts for nonresidential building grew dollarwise throughout the state except for New Orleans. Percent U n e m p lo y m e n t ^ ^ — 7.0 .. 1969 1. 5.0 1 1970 1971 Government and trade accounted for most of the post-recession job growth . . . 1972 Thousands G o v e rn m e n t nearly 45,000 between 1970 and 1972. A growing number of teen-agers seeking jobs, reductions in the Armed Forces, and normal population growth all contributed to this expansion. In addition, more adult women either landed jobs or were actively seeking them. Labor Department statistics, which classify 150 major employment centers according to em ployment conditions, further discourage the thought that all is well in Louisiana. Until October 1972, Baton Rouge, and until February 1973, New Orleans, were listed as "D category" areas (substantial unemployment of 6.0 to 8.9 percent) while Shreve port throughout 1972 was classified as a " C cate gory" area (moderate unemployment of 3.0 to 5.9 percent). In addition, many smaller labor centers were classified as "substantial" or "persistent" unemployment areas, of which the largest were Alexandria and Lake Charles. Each of the major Louisiana labor markets ex periencing "substantial" unemployment during 1972 showed a general weakness in manufacturing and in a nonmanufacturing category consisting of the self-employed, unpaid family workers, and domes tics. New Orleans' manufacturing job weakness was centered in shipbuilding and repair, which declined by 1,600 workers during 1972; that of Baton Rouge and Lake Charles was centered in chemical and petroleum production. Some Bright Spots Construction played an important role in improving Louisiana's economy in 1971 and 1972. The value of total construction in 1971 increased 25 percent. Figures through November indicate that 1972 should be still another year of substantial construction, with a 21-percent contracts increase over 1971. Residential construction gains in value of 30 per FEDERAL RESERVE BANK OF ATLANTA — 225 Other sectors also registered gains S e rv ic e s I — 165 I But some still remain below 1969 employment levels. T ra n s, a n d U tilities 1970 1971 90 — 80 A* D u rab le Mfg. 1969 — — 80 — 70 1972 41 Consumers Step Up Spending as Incomes G row Higher employment and income levels, longer workweeks, and improved unemployment rates appear to have encouraged the Louisiana consumer to step up his spending. Automobile sales were a particularly important part of 1971's increases and remain high today even though Phase I freezes on automobile prices have long been relaxed. In addition, retail sales of general merchandise, build ing materials, and furniture all grew substantially in 1971, and continued to quicken during 1972. Retail merchandise sales during the Christmas holi days were especially strong. Capital investment for new plant and equipment totaled $669 million in 1971, a 10-percent increase over 1970 levels and the second highest figure in the state's history, according to the Louisiana Department of Comm erce and Industry. A $115million expansion in the Continental Can Company papermaking plant in Hodge, Louisiana, was the largest single project. Petroleum refining and petrochemical firms accounted for three-fifths of total investments. Capital investments reached a record $1.89 billion in 1972, exceeding the previous record set in 1967 by $1.1 billion. Growth included $1.23 billion in nuclear power facilities and $664 million in conventional manufacturing facilities. Perhaps even more important than the dollar amounts of these investments are the estimated 22,000 cons truction jobs and 7,696 permanent jobs accompany ing these projects. One of the state's most important industries— oil— has faced many of the same problems faced by the nation's oil industry during the last two years. Lingering aftereffects of the 1970 recession kept industrial demand for oil down during early 1971. Mild winters in 1970 and 1971 lessened oil demand still further. As pollution control became a greater factor in management's decision to expand existing plants or build new ones, more investment dollars went into pollution control equipment. This produced construction employment but did not increase the number of permanent jobs. A continuing embargo on the sale of offshore oil leases during 1971 and through September 1972 had a detrimental impact not only on the state's oil industry but on its entire economy, particularly in southern Louisiana. Curtailment of the erection and operation of drilling platforms has an impact that spreads beyond the workers directly involved into retail and service industries. The embargo was lifted in September. Resulting offshore-lease sales, which totaled $590 million in late September and $1.67 billion in December, are already stimulating the industry. Billions of dollars of oil and gas reserves are believed to lie in the newly leased offshore lands. 42 E C O N O M IC SPREA D S U n em p . R ate F o u rth Q u a rte r IM P R O V E M E N T A CRO SS STA TE _______ N o n fa rm Em p._______ F o u rth P e rc e n t Q u a rte r C h an g e 1971 1972 A lexandria 8.5 7.8 36 125 1971 1972 37 725 + 4 .4 B aton R ouge 5.9 4.5 108 117 114 767 + 6 .2 L a fa y e tte 3.5 3.5 37 325 38 3 0 0 + 2 .6 Lake C h arle s 9.1 8.0 42 058 42 433 + 0 .9 + 2 .3 M onroe 5.8 5.6 39 100 40 000 New O rle a n s 6.0 5.5 377 267 387 267 + 2 .7 S h re v e p o rt 5.4 4.6 94 658 99 725 + 5 .4 Ironically, Louisiana, which sits on about onefourth of U. S. natural gas reserves, has been one of the hardest hit in the current nationwide gas short age. Interstate pipelines, which transport out of the state nearly 70 percent of Louisiana's natural gas production, have been sharply cutting supplies to Louisiana's industrial customers and utilities this winter (1972). A year-old Federal Power Commission ruling that gives residential and institutional heating needs priority over industrial needs has provided the rationale for the cutbacks. These cutbacks have forced many industrial customers to limit produc tion because manufacturers counted on an abun dance of natural gas and did not equip their plants to burn alternative fuels such as coal or oil. Petrochemical plants, too, have already been affected because natural gas is used both as a power source and as a raw material in production. One Lake Charles petrochemical company laid off 3,500 workers for a week in January 1973 and another, also located in Lake Charles, planned to shut down for three weeks in February 1973. The Louisiana Chemical Association has estimated that adding fuel-converting facilities would cost industries nearly $2 billion. A continued shortage, requiring firms to consider alternative fuel sources, may eliminate one of industry's big inducements to locate in Louisiana— access to abundant and relatively cheap fuel. Farming: An Im portant Sector of Louisiana Economy Farm commodities reached new highs, with cash receipts in 1971 totaling $748 million, up 6 percent from 1970. Cattle and calves made the largest single contribution to farm income, soybeans were second, and rice was third. When all figures are in, cash receipts for 1972 are expected to top $750 million and may reach $800 million, according to Louisiana's Commissioner of Agriculture, Dave L. Peace. In 1972, state farmers planted the greatest acreage since World W ar II. MARCH 1973, MONTHLY REVIEW Favorable factors supporting increased cash receipts include high rice and soybean prices during 1972. Overall, 1971 was a busy year for the Port of New Orleans. W hile total tonnage handled by the Port was down slightly, the value of tonnage did increase over 1970. The decline in tonnage handled was largely the result of the longshoremen's strike in late 1971. Other factors affecting 1971's tonnage included the imposition of import sur charges and a maritime strike in Japan, one of the Port's principal trade partners. According to the New Orleans Executive Port Director, E. S. Reed, a strike of Japanese ports in the first 100 days of 1972, recession in Europe, and dollar devaluation all worked to produce a slack the first six months of the year. Activity did pick up in the last half, partially as a result of U. S. wheat sales to Russia through the Port of New Orleans. Although often overshadowed by New Orleans, Louisiana's other two ocean ports— Baton Rouge and Lake Charles— are important employment and income sources for their respective areas. Lake Charles suffered the greatest loss from strike activity during 1971, with tonnage down 7 percent from 1970. Baton Rouge was least affected, achieving a 3-percent growth. Preliminary figures through September 1972 show greater tonnage traveling through both Baton Rouge and Lake Charles. Latest figures from Louisiana's Tourist Comm is sion show visitors funneled $650 million into the state's economy during fiscal 1971-1972. Nearly 40 percent of these dollars— $275 million— was spent in New Orleans by an estimated 3.6 million visitors. This represents a greater than 14-percent increase in tourism and convention trade over the previous fiscal year. Prospects of a superport financed by public funds brightened with the release of a U. S. Maritime Commission report designating offshore Louisiana as the most economic site for a deepwater port in the Gulf of Mexico. Concurrently, Loop, Inc., Louisiana's offshore oil port, is seeking to privately finance, build, and operate an offshore oil terminal with tentative completion in 1976. Com posed of ten major oil companies, Loop has an option for 1,450 acres of land in Lafourche Parish FEDERAL RESERVE BANK OF ATLANTA to allow onshore developments for an offshore port. Banks Seek to Satisfy Strengthened Loan Demand Strong deposit inflows, which began in 1970, con tinued throughout 1971. Aided by deposits of funds from the New Orleans Superdome bond sales, time deposit growth was especially strong for member banks in the state's District portion (southern two-thirds). W hile banks had ample funds throughout 1971, loan demand was generally slug gish early in the year and banks added to investment holdings. As 1971 progressed, however, loan de mand strengthened and investment activity declined. Although still healthy, 1972 deposit inflows slowed below 1971's near-record rates. Bank lending, on the other hand, continued to grow with real estate and business loans noticeably stronger. Reflecting this strengthened loan demand, additions to investment portfolios were much smaller than in either 1970 or 1971. Savings and loan associations also experienced strong growth. Louisiana savers added over $340 million to their accounts in 1971, a 17-percent increase over 1970. This increase was an all-time high in both dollar amount and percentage gain. Growth in 1972 evidently was even greater as savings increased $365 million through the first 11 months of 1972. Helping to support the residential boom, savings and loan associations increased outstanding mortgages during 1971 by $290 million, a 14-percent rise. Outstanding mortgages increased by $280 million as of November 1972. Economic Prospects Most economic forecasters look for strong economic growth in the nation for the rest of 1973. This, in turn, should have a favorable impact on Louisiana's economy. Local events, such as renewed offshore oil exploration and drilling, continued construction of nearly $2 billion in new capital investments, and growing port activity should further stimulate the state's economy. Continued employment growth, with a gradual decline in unemployment rates, seems likely for the remainder of 1973.B 43 BANKING STATISTICS B illion $ CREDIT* -3 2 - -2 8 — 30 -2 4 /V -1 8 — 26 -1 4 - 8 Other Securities U.S. Govt. Securities l M J i l i I i i i i I ii J DJ -4 1972 - 14 - 10 - 8 -4 i l i i i l I i I I I i i J D J A 1971 34 J J 1971 1973 D J J 1972 D J A 1973 LATEST MONTH PLOTTED: JANUARY * Figures are for the last W ednesday o f each m onth. ** D aily average figures S I X T H D I S T R I C T B u s in e s s B A N K I N G N O T E S L o a n s A c c e le r a t e BUSINESS LOANS % c h g ., yr. e n d '72 fro m yr. e n d '71 C u m u la tiv e ch g ., fro m e n d of prev . y e a r 3 2 la rg e D istric t b a n k s M illio n $ 4 4 for FRASER Digitized All m e m b e r b a n k s — 600 — 30 MARCH 1973, MONTHLY REVIEW Business loan d em and strengthened substantially this past year. Seeking to satisfy this dem an d , large District banks increased outstanding commercial loans by nearly half a billion dollars during 1972, a 15-percent growth rate. This sharply contrasts with 1971 w h e n business loans rose nearly 5 percent. And o n e must go back to 1966 and 1967 to find greater growth. Unlike much of the nation, w hich did not e x p e rience substantial strengthening in business loan d e mand until the se c o n d half of 1972, the District began to s h o w such signs in D e c e m b e r 1971. Siz able gains w e re recorded at that time, even after allow ing for the usual strong seasonal increases in D ec em b er. Growth con tin u ed evenly through the first three quarters of 1972, each sh ow in g a sea so n ally adjusted annual rate o f 12 percent. Fourthquarter figures sh o w accelerated growth at an an nual rate o f 22 percent. This acceleration has c o n tinued through January and the first half of February o f this year, w h e n loan d em and typically declines. The majority o f large District banks shared in business loan growth during 1972. Those that did not either kept their business loans constant or ex p erie nced only small declines. Twenty-three large banks that report loans by borrowers' type of busi ness s h o w e d increases in all major categories. H o w ever, nearly half o f the dollar gains in business loans at th ese banks w ere in tw o categories— w h o l e sale and retail trade and the service industry. Loans to construction firms also s h o w e d large gains, and, p ercentagew ise, s h o w e d the strongest growth of major categories with a 3 0-percent increase. Strength in business lending was also evid ent in subcategory loans w hich m ore clearly d efin e the borrower's business. O n ly tw o subcategories— "other" n o n d u rable g o o d s and public utilities other than trans portation and com m u n ica tio n — failed to increase. Retail trade loans s h o w e d the greatest percentage and dollar gains. During 1972, increased e c o n o m i c activity in both the Southeast and the nation was an important factor in the strengthening o f business loan d e mand. More con fid en t consum ers helped fuel ex pansion with a faster rate o f sp en din g on such items as h o u seh o ld appliances and furniture. Manufac turers sou gh t funds to increase payrolls and build up inventories in order to expand production. C o n struction firms seeking to satisfy a strong d em an d for residential d w ellings n e e d e d more m o n e y to b e gin n e w projects. Banks w e r e in a relatively g o o d position to m eet business loan d em an d s during 1972. An inflow of time and savings d eposits began in 1970 and c o n tinued throughout 1971 and 1972 as consum ers a dded heavily to passb ook savings a ccounts and FEDERAL RESERVE BANK OF ATLANTA B U SIN ESS LOANS AT 23 LARGE DISTRICT BANKS C h an g e From P rev io u s Y ear (M illion $) 1972 D u rab le G oods Mfg. N o n d u ra b le G oods Mfg. M ining W h o le sa le a n d R etail T rad e T ran sp ., C om m ., & P. U. C o n stru c tio n S e rv ic e s + + + + + + + 54 41 3 110 19 90 110 1971 - 4 -4 2 + 1 -1 0 + 17 -1 4 +23 1970 + 6 +20 - 8 + 9 -1 9 -2 8 + 6 BUSINESS LOANS % chg., yr. end ’72 from yr. end ’71 Large banks, by Federal Reserve District "other" time deposits. Monetary policy, generally expansive during the year, was aim ed at stimulating e c o n o m i c growth. Business loan growth at large District banks was considerably stronger than at large banks in the nation. Indeed, only tw o other Districts— Rich m on d and M inneapolis— ach ieved greater growth during 1972. As in the Sixth District, the nation sh o w ed c o n siderable increases in loans to w h o lesa le and retail trade and to service and construction firms. On the other hand, loans to transportation, com m u n ication , and other public utilities grew more rapidly in the nation than in the District. And whereas all major business loan categories increased in the District, the nation exhibited d eclin es in loans to business firms en g ag ed in the mining of coal, crude p e troleum, and natural gas. JOSEPH E. ROSSMAN, JR. 45 S ix t h D is t r ic t S t a t is t ic s S e a s o n a lly A djusted (All d a t a a r e i n d e x e s , u n l e s s i n d i c a t e d o t h e r w i s e . ) Latest Month Two One Month Months Ago Ago One Year Ago SIXTH DISTRICT Unemployment Rate (Percent of Work Force) . . Avg. Weekly Hrs. in Mfg. (Hrs.) INCOME AND SPENDING . Jan. . Dec. Livestock ................................... Instalment Credit at Banks* (Mil. $) N.A. 144 159 154 155 148 164 164 152 141 125 149 141 126 142 132 481 429 461 370 487 415 388 351 122 113 112 107 110 109 110 120 106 115 112 120 111 124 135 105 125 124 121 123 130 130 102 128 91 121 113 112 105 110 110 111 120 106 114 110 118 110 123 135 106 123 122 120 123 130 130 102 128 87 121 112 111 105 109 110 110 120 107 114 110 118 110 122 134 106 123 121 119 124 129 129 102 128 84 117 108 109 105 106 108 108 116 104 107 105 112 104 114 121 104 120 117 115 120 124 125 103 123 94 4.0 4.0 3.8 4.4 1.9 N.A. 253 333 175 186 83 112 282 235 184 278 275 222 159 304 337 198 189 189 219 283 433 763 435 1.9 41.2 250 331 170 179 77 116 281 234 184 276 272 221 158 303 337 198 188 194 222 279 439 740 440 2.0 41.0 282 325 240 174 80 123 281 234 185 275 275 219 159 298 336 199 188 188 219 274 446 751 438 2.8 40.8 182 222 143 167 90 119 258 222 176 257 269 205 161 267 302 193 181 174 195 250 401 635 398 213 198 207 192 202 189 171 157 185 162 218.8 179 159 208.5 176 155 203.7 156 140 173.5 EMPLOYMENT AND PRODUCTION Nondurable Goods Food................ Textiles . . . Printing and Publishing . Jan. . Jan. . Jan. . Jan. . Jan. . Jan. . Jan. . Jan. . Jan. . Jan. . Jan. . Jan. . Jan. . Jan. . Jan. . Jan. . Jan. State and Local Government. . Jan. Farm Employment............................ . Jan. Unemployment Rate (Percent of Work Force) . . . . Jan. Insured Unemployment (Percent of Cov. E m p .)................ . Jan. Avg. Weekly Hrs. in Mfg. (Hrs.) . . . Jan. . Jan. . Jan. Stone, Clay, and Glass . . Primary M e ta ls................ Fabricated Metals . . . . M achinery........................ Transportation Equipment Nonmanufacturing ................ C onstruction.................... Transportation ................ T r a d e ............................... Electric Power Production** Cotton Consumption** . . . Petroleum Production** . . Food ............................ Textiles ........................ Apparel ........................ Paper ............................ Printing and Publishing Furniture and Fixtures Stone, Clay, and Glass . . Primary M etals................ Fabricated Metals . . . . Nonelectrical Machinery Electrical Machinery . . . Transportation Equipment . . . . July Dec. Feb. Nov. . . . . . Nov. Nov. Nov. Nov. Nov. . . . . . . . . Nov. Nov. Nov. Nov. Nov. Nov. Nov. Nov. FINANCE AND BANKING Loans* All Member B a n k s ....................... Jan. Large B a n k s ................................... Jan. Deposits* All Member B a n k s........................... Jan. Large B a n k s ................................... Jan. Bank Debits*/** ............................... Jan. ALABAMA INCOME Manufacturing Payrolls ....................Jan. Farm Cash R eceip ts........................... Dec. EMPLOYMENT Nonfarm Em ployment........................Jan Manufacturing ............................... Jan Nonmanufacturing........................... Jan C onstruction............................... Jan Farm Employment ........................... Jan 46 Latest Month One Two Month Months Ago Ago One Year Ago . Jan. . Jan. 4.3 41.6 4.4 40.9 4.3 40.9 5.5 41.1 . Jan. . Jan. . Jan. 196 177 192.0 197 174 178.6 194 172 183.3 167 151 169.1 154 177 154 197 136 151 FINANCE AND BANKING Bank Debits** Manufacturing Payrolls ....................Jan. Farm Cash R eceip ts............................Dec. 152 145 EMPLOYMENT Jan. Jan. Jan. Jan. Jan. 130 114 134 144 96 130 114 134 143 95 130 114 133 140 94 124 109 127 128 98 Jan. Jan. 3.4 41.3 3.4 41.2 3.1 41.3 4.0 41.4 Jan. Jan. Jan. 239 210 241.6 233 263 240.0 224 200 237.5 188 177 192.6 Jan. Dec. 149 154 159 130 153 166 140 136 Jan. Jan. Jan. Jan. Jan. 122 109 128 130 93 121 109 126 127 94 121 109 127 128 84 119 107 124 126 93 Jan. Jan. 3.6 39.1 3.7 41.4 3.6 40.6 3.7 41.1 Jan. Jan. Jan. 209 168 234.5 197 163 229.8 197 156 218.4 164 141 182.3 Manufacturing Payrolls ....................Jan. Farm Cash R eceip ts............................Dec. EMPLOYMENT Jan. Jan. Jan. Jan. Jan. Unemployment Rate (Percent of Work Force) Jan. Avg. Weekly Hrs. in Mfg. (Hrs.) Jan. FINANCE AND BANKING Jan. Jan. Jan. 139 148 143 160 138 128 132 109 110 104 111 95 78 108 102 109 90 82 108 101 109 87 80 108 102 109 95 85 6.8 40.4 6.4 43.7 6.0 41.7 6.1 42.4 189 169 201.5 180 160 171.2 176 160 160.8 152 150 140.5 Jan. Dec. 164 187 171 127 166 108 157 135 Jan. Jan. Jan. Jan. Jan. 122 126 120 121 86 119 125 116 114 78 120 124 118 113 81 116 118 115 117 98 Nonmanufacturing Unemployment Rate (Percent of Work Force) . . Avg. Weekly Hrs. in Mfg. (Hrs.) FINANCE AND BANKING Member Bank Deposits Bank Debits** . . . EMPLOYMENT Unemployment Rate (Percent of Work Force) . . Avg. Weekly Hrs. in Mfg. (Hrs.) FINANCE AND BANKING LOUISIANA MISSI SSI PPI 156 155 153 145 152 128 140 135 114 113 115 114 114 114 116 115 118 110 108 111 110 EMPLOYMENT 112 112 112 MARCH 1973, MONTHLY REVIEW One Two Month Months Ago Ago One Year Ago 4.0 38.6 4.4 40.8 4.2 40.7 4.3 40.8 212 180 193.9 206 176 190.9 201 173 192.5 165.5 Latest Month Unemployment Rate (Percent of Work Force) . . Avg. Weekly Hrs. in Mfg. (Hrs.) . Jan. . Jan. FINANCE AND BANKING Member Bank L o a n s* ............... Member Bank Deposits* . . . Bank Debits*/** .................... 174 TENNESSEE . Jan. Dec. N.A. 110 159 126 162 206 Is for entire six states 144 109 **Daily average basis Latest Month One Two Month Months Ago Ago One Year Ago EMPLOYMENT Nonfarm Employment . . . . Manufacturing .................... Nonmanufacturing................ Construction................... Farm Employment.................... Unemployment Rate (Percent of Work Force) . . Avg. Weekly Hrs. in Mfg. (Hrs.) Jan. Jan. Jan. Jan. Jan. 124 116 128 128 97 122 116 126 123 86 121 114 125 123 86 116 112 120 122 94 . . . Jan. . . . Jan. 3.2 N.A. 3.3 40.7 3.2 40.9 3.7 41.1 FINANCE AND BANKING Member Bank Loans* . . . . . . . Jan. Member Bank Deposits* . . . . . . Jan. Bank Debits*/**........................ . . . Jan. 208 179 187.5 201 171 174.9 198 171 171.4 168 152 153.7 tPreliminary data . . . . . . . . . . . . . . . r-Revised N.A. Not available Note: Indexes for bank debits, construction contracts, cotton consumption, employment, farm cash receipts, loans, petro leum production, and payrolls: 1967 = 100. All other indexes: 1957-59=100. Employment and labor force data for Alabama, Georgia, M ississippi, and Tennessee have been adjusted to new bench marks. Sources: Manufacturing production estimated by this Bank; nonfarm, mfg. and non mfg. emp., mfg. payrolls and hours, and unemp., U.S. Dept, of Labor and cooperating state agencies; cotton consumption, U.S. Bureau of Census; construction contracts, F. W. Dodge Div., McGraw-Hill Information Systems Co.; petrol, prod., U.S. Bureau of Mines; industrial use of elec. power, Fed. Power Comm.; farm cash receipts and farm emp., U.S.D.A. Other indexes based on data collected by this Bank. All indexes calculated by this Bank. D e b it s to D e m a n d D e p o s it A c c o u n t s In s u r e d C o m m e r c i a l B a n k s in t h e S ix t h D istr ic t (In T h o u s a n d s o f D o lla rs ) Jan. 1973 Dec. 1972 Percent Change Jan. 1973 From Dec. Jan. Jan. 1972 1972 1972 STANDARD METROPOLITAN STATISTICAL AREAS Birm ingham .................. 3,463,148 Gadsden ....................... 98,715 306,761 H untsville....................... M o b ile ........................... 1,016,862 Montgomery................... 608,096 186,934 Tuscaloosa .................... Jan. 1973 Dec. 1972 P«rc«nt Change Jan. 1973 From Dec. Jan. Jan. 1972 1972 1972 D o th a n .......................... Selma ........................... 149,192 84,362 127,009 79,785 115,929 +17 58,806 + 6 +29 +43 Bradenton .................... Monroe County . . . . O c a la .............................. St. A ugu stin e................ St. Petersburg............... T a m p a ........................... 201,274 79,114 185,380 28,277 1,071,370 1,807,213 151,712 64,959 148,752 30,526 854,651 1,559,183 131,403 54,094 139,565 30,305 738,706 1,464,147 +33 +22 +25 - 7 +25 +16 +53 +46 +33 - 7 +45 +23 A t h e n s ........................... Brunswick .................... D a lt o n ........................... Elberton ....................... Gainesville .................... Griffin ........................... LaG range...................... N ew nan.......................... Rome ........................... Valdosta ....................... 161,541 91,909 174,997 21,315 134,109 69,831 36,869 57,380 142,926 104,046 166,787 84,279 161,183 20,974 115,483 63,945 36,927 57,871 129,306 95,236 126,405 79,203 151,990 16,282 99,881 52,695 32,018 39,388 114,376 88,658 - 3 + 9 + 9 + 2 +16 + 9 - 0 - 1 +11 + 9 +28 +16 +15 +31 +34 +33 +15 +46 +25 +17 A bb ev ille....................... B u n k ie ........................... Hammond...................... New I b e r ia .................... P laqu em ine.................. Thibodaux....................... 17,713 12,474 70,978 68,193 27,772 43,207 17,444 11,671 61,824 59,442 21,839 37,399 16,985 9,006 59,853 54,136 17,746 41,343 + 2 + 7 +15 +15 +27 +16 +4 +39 +19 +26 +56 + 5 Hattiesburg ................... Laurel ........................... Meridian ....................... N atch ez.......................... PascagoulaMoss P o i n t ................ V icksburg...................... Yazoo C i t y .................... 115,590 70,395 120,953 54,735 105,776 67,902 111,539 52,248 97,632 53,772 94,554 49,602 + + + + 9 4 8 5 +18 +31 +28 +10 160,787 78,207 44,756 136,781 68,268 40,410 107,512 +18 54,368 +15 39,117 +11 +50 +44 +14 Bristol .......................... Johnson C i t y ................ K ingsport...................... 136,797 160,079 241,689 128,314 147,933 209,673 112,588 + 7 126,215 + 8 200,071 +15 +22 +27 +21 2,957,432 90,500 284,712 903,794 552,763 169,375 3,009,116 79.288 253,165 825,270 493,637 158,045 + 17 + 9 + 8 + 13 + 10 + 10 + 16 +25 +21 +23 +23 + 18 777,425 388,195 704,472 310,088 600,820 306,556 + 10 +25 +29 +27 2,046,210 355,433 226,061 3,708,643 1,674,233 277,104 214,895 3,275,363 1,649,429 248,456 187,288 2,549,274 +22 + 28 + 5 + 13 +24 +43 +21 +45 459,112 6,784,200 1,456,569 423,123 503,977 840,952 4,049,988 1,357,384 408,358 6,496,434 1,370,059 374,764 431,794 557,437 3,437,938 1,025,086 307,677 5,323,533 1,118,567 367,611 343,011 537,185 3,055,627 904,004 + 12 + 4 + 6 + 13 + 17 +51 + 18 + 32 +49 +27 +30 + 15 +47 +57 +33 + 50 A lb a n y ........................... 199,880 A tla n ta ........................... 13,589,470 473,547 Augusta ........................ 419,374 C olum bus...................... Macon ........................... 499,470 Savannah ...................... 559,786 183,321 12,837,098 406,916 384,386 473,799 578,650 156,462 9,537,008 388,376 350,840 430,868 418,170 + 9 + 6 + 16 + 9 + 5 - 3 +28 +42 + 22 + 20 + 16 +34 238,496 Alexandria .................... Baton R o u g e ................ 1,197,197 L a fa y ette....................... 263,489 235,152 Lake C h a r le s................ New O r le a n s ................ 5,743,787 204,312 1,028,586 250,590 205,172 4,049,729 199,807 1,011,807 205,789 209,808 3,222,736 + 17 + 16 + 5 + 15 + 42 + 19 + 18 +28 + 12 + 78 Biloxi-Gulfport............... Jackson ........................ 217,675 1,268,713 216,117 1,302,266 203,398 1,009,009 + 1 - 3 + 7 +26 District T o t a l.................... 73,395,410 65,574,129 54,684,875r +12 +34 Chattanooga.................. 1,157,708 890,595 K noxville........................ N a sh v ille ...................... 3,266,594 1,054,164 806,185 3,055,542 1,038,272 684,197 2,390,714 + 10 + 10 + 7 + 12 + 30 +37 99,140 88,917 + 8 + 20 Alabama ....................... 8,170,263 7,108,893 6,830,616 +15 F lo r id a ........................... 25,920,693 22,821,149 19,267,132r +14 G eo rg ia.......................... 19,527,210 18,576,063 14,166,723 + 5 Louisiana' ................... 8,954,567 6,889,536 5,899,654 +30 Mississippi' .................. 2,840,518 2,779,873 2,291,201 + 2 T e n n e s se e '.................... 7,982,159 7,398,615 6,229,549 + 8 +20 +35 +38 +52 +24 +28 Bartow-LakelandWinter Haven . . . . Daytona Beach . . . . Ft. LauderdaleHollywood................... Ft. M yers........................ Gainesville ................... J ack sonville................... MelbourneTitusvilleCocoa ....................... Miami ........................... Orlando ....................... P en sa co la ....................... Sarasota ....................... T allahassee.................... Tampa-St. Pete . . . . W. Palm Beach . . . . OTHER CENTERS A n n is to n ........................ 106,977 1District portion only r-Revised Figures for some areas differ slightly from preliminary figures published in "Bank Debits and Deposit Turnover" by Board of Governors of the Federal Reserve System. F E D E R A L R E SE R V E B A N K O F A T L A N T A 47 D is t r ic t B u s in e s s C o n d it io n s Winter weather cooled the region's economy somewhat, but a good performance is indicated. Employ ment gains continued, despite the effects of bad weather. Business borrowing from banks remained strong, but consumer borrowing slowed. Construction activity did not grow. Agricultural prices soared, and farmers enjoyed a record rise in cash receipts. Adverse weather conditions affected the region's labor market in January. The factory workweek and payrolls dropped sharply because of ice storms and fuel shortages. Georgia's, Louisiana's, and Missis sippi's labor markets suffered most from winter's wrath. Despite foul weather, however, construction job gains helped total nonfarm employment rise. Bank lending posted an exceptionally strong ad vance in January, a pattern that continued through late February. At the larger District banks, manu facturers, trade, service, and construction firms are taking down sizable amounts of new credit. During the last week in February, most of these same banks raised their prime lending rate to 6V 4 percent. Effective February 27, the Federal Reserve Bank of Atlanta increased the discount rate to 5V 2 percent in recognition of the recent rise in short-term money market rates. Consumer instalment credit outstanding at com mercial banks increased more slowly in January despite sharp increases in new lending. Repayments also rose considerably in all consumer loan cate gories. Unit sales of domestically produced autos declined somewhat from December's high level but were substantially above January of last year. The value of total construction contract awards was unchanged in January. Residential awards, up strongly in most of 1972, were stable in January after growing more slowly than in previous months. Some decline in the rate of deposit inflows at thrift institutions has become apparent, though mortgage rates have been relatively stable. Nonresidential awards changed little in January after a large D e cember drop. Prices received by District farmers in January were sharply higher than both the month-ago and yearago levels. Nearly all commodity prices were strong. Despite higher prices, soaring feed costs have cur tailed poultry production throughout the District. Freezes, muddy field conditions, and a shortage of natural gas forced farmers to abandon a portion of Louisiana's sugar cane crop. Some progress was made in harvesting the Mississippi and Tennessee soybean crops, but substantial acreages remained in the fields in late February. District farm cash re ceipts reached a record high of $6.6 billion in 1972, compared with $6.0 billion in 1971. Tennessee farm ers enjoyed the largest increase in income. N ote: D ata on w h ic h s ta t e m e n ts a re b a s e d h av e b e e n a d ju s te d w h e n e v e r p o s s ib le to e lim in a te s e a s o n a l in flu e n c e s . 48 MARCH 1973, MONTHLY REVIEW
@FedFRASER