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Consumer Credit Quality— A Search for an Answer The postwar growth in the level of outstanding consumer credit has been spectacular. Aided by a stimulative monetary credit policy, most sectors of the economy have shared in the growth. Consumers added to their present consumption at the expense of future income; merchants and retailers increased their sales; lenders received interest income from extending credit; and other segments felt the impact through the growth in aggregate demand. This continuing uptrend in the use of consumer credit is reflected in a current level of outstanding debt in excess of $90 billion. Not only has the level of debt grown, but the ratio of consumer credit to disposable personal income has advanced, indicating that consumer credit has become increasingly more pervasive. Has this growth in private indebtedness been so rapid as to warrant grave concern and worry? Whether or not the current level of out standing debt has become excessive depends upon the prospects of its repayment. If the growth in debt has been offset by an increase in the ability and desire to repay, there may be little need for worry. However, many persons fear that more and more marginal borrowers have been coaxed into borrowing, leading to the greater possibility of defaults. This idea is often given as an indication of the deterioration of credit “quality.” While it is difficult, if not impossible, to define credit quality exactly, at least two meanings are commonly associated with its current usage. One focuses on the likelihood of an individual loan, or a portfolio of loans, being repaid. Another meaning, which uses aggregate figures, cen ters around the likely effect of a change in the overall performance of the economy on the number of loan foreclosures and repossessions. A sharp increase in foreclosures and repossessions would be direct evidence of a deterioration in credit quality, of course. Attempts to gauge such an occurrence in advance of its actual happening have led to the wide spread use of aggregate measures to assess the strain of private debt on the economy. One measure, the ratio of instalment repayments to dis posable personal income, has increased, along with the growth in the level of outstanding credit. Today, about 14.5 cents out of each dollar of the consumer’s take-home pay is committed to repaying instalment debt, compared with 10 cents a decade ago and only 4 cents immediately following World War II. Measuring credit quality by aggregate figures has serious limitations. Attitudes toward borrowing have changed. The proportion of the popu lation making purchases on credit has grown. In addition, an average increase of 6 percent per year in per capita income over the past 20 years has caused a shift in consumer spending patterns. Today’s con sumer, differing in many respects from his counterpart of 20 years ago, buys a larger proportion of items with credit. Growth in the ratio of repayments to personal income may not signal a lowering of quality, but merely an increase in the proportion of credit-type purchases. In the final analysis, the quality of credit is determined by the bor rower’s repayment of an obligation in accordance with the original con- tract. Perhaps the rise in consumer credit has been ac companied by an increase in the creditworthiness of bor rowers. If so, the quality of credit measured in the aggre gate may not be the same as that derived from adding the qualities of individual loans. The most realistic approach to solving the dilemma of credit quality is based on the disaggregation of data. This method employs either a detailed analysis of individual loans, which are then added together for a measure of the quality of total outstanding credit, or an analysis based on average values or the distribution of certain characteris tics for entire portfolios of loans. The ability of presentday computers to handle large amounts of detailed infor mation makes both of these approaches feasible. But what specific characteristics of borrowers are most important in judging loan quality? A great deal can be learned from the individual lender whose portfolio quality depends largely upon his judgment of those borrowers who will most likely repay. In practice, he knows that some risks must be taken in order to compete for loan business. But after deciding the level of risk, he must then deter mine on what basis loans will be accepted or rejected. Bankers have generally scored each loan application by a number of borrower characteristics. But even the most experienced banker is not sure of the individual merits of these characteristics. To test the reliability of these “rules of thumb,” and also, to take a closer look at the quality of consumer credit, the Federal Reserve System is con ducting a special study. The objective is to determine if the loan portfolio outstanding at any particular time is stronger or weaker than that which existed at some earlier date. Once the measurement technique is developed, the System hopes to be able to measure changes in the quality of loan portfolios from year to year. To accomplish this task, a questionnaire was designed to get borrower and loan characteristics for individual consumer loans at banks. This questionnaire was first de veloped and tested in 24 banks across the United States to work out problems in design and data processing and to provide data for preliminary analysis. Following the pilot phase of the study, consumer loans in an entire metropoli tan area are being sampled. With these data, changes in quality that take place in that area can be identified. It will also be possible to compare various areas for regional differences in credit quality and to develop a national index, or measure of consumer credit conditions. Mobile, Alabama, was the first metropolitan area selected for this study. However, banks in Cleveland, Ohio, have since started supplying data to the Federal Reserve System, and other banks will soon be participating in the study. Personnel in the Consumer Loan Department of each Mobile bank participating in the survey are completing four types of questionnaires. One obtains data on indi vidual borrower and loan characteristics for about onetenth of all new loans made during each working day. A similar questionnaire samples loans as they are repaid. In formation is acquired for loans when the borrower de faulted. Questionnaires are also completed for part of the rejected loans. As the questionnaires are received at this Bank for analysis, the information is transferred to punched cards and fed into our computer. A large quantity of data is http://fraser.stlouisfed.org/ • 86 • Federal Reserve Bank of St. Louis processed, showing the average and percentage break downs for a number of different classifications of bor rower and loan characteristics. Thus far, over 5,000 individual questionnaires have been received from Mobile banks. For purposes of this report, all personal loans, repair and modernization, and other consumer goods loans have been grouped into a single category— nonautomobile loans. However, the same information is also available for automobile loans. Mobile, Alabama One of the reasons Mobile was selected as the first area to be studied is that its population of 412,000 contains a good cross section of American consumers. Engaging in industry, shipping, farming, and tourism, Mobile has been similar to the nation in the growth of retail trade and consumer indebtedness. The large increase in Mobile’s credit is the result of a rapid growth in personal income and spending on more credit-type purchases. Personal in comes have increased approximately 7 percent per year. Similarly, per capita incomes, probably a better indicator of the economic well-being of Mobile residents, have moved steadily upward. Meanwhile, retail spending has advanced at about the same rate. Although some important differences exist between Mobile and the U.S., the composition of Mobile’s com mercial bank consumer credit resembles that of the nation. Automobile loans, the largest single component of in stalment credit outstanding, account for about one-half of the total in both Mobile and the nation. Since mid-1962, these loans have contributed only about one-third of the growth in Mobile’s consumer debt, while accounting for two-thirds of the nation’s. However, personal loans have advanced more rapidly in Mobile than in the nation. The growth rates in other consumer goods and repair and mod ernization loans have been about the same in Mobile and the U.S. Since mid-1962, instalment debt at Mobile banks has grown by nearly 40 percent, or about 10 percent an nually. During the same period, the national figure was about 18 percent per year, on average. The 1,683 nonautomobile loans in our study revealed that the typical borrower from the commercial banks in Mobile was 41 years old, had lived in the area slightly Consumer Instalment Debt Held by Commercial Banks M obile, Alabam a June 1962— July 1966 M illions of D o llars 1962 M illions of Dollars 1963 1964 1965 1966 MONTHLY R E V IE W over ten years, and had been with his firm for about the same time. His household income averaged a little over $6,500. Not all of the borrowers were indebted before they made their new loans, but those that were, owed $96 per month, on average. Their new debt to the bank aver aged $596, to be repaid in 15 months at the rate of $39 a month. The characteristics of the borrowers that defaulted were significantly different from those of all borrowers. On average, they were younger, had lived in the area a shorter time, had been on the job fewer years, and received some what lower incomes. The amounts of their new loans were higher, as well as their monthly payments. This general picture is useful in evaluating the differ ences between borrowers who defaulted and those who repaid their indebtedness, but some significant changes may be hidden in the averages. For example, while the average borrower that defaulted was one year younger than those who repaid their loans, borrowers between 20 and 30 years old had the highest default ratio. Similarly, nearly 70 percent of all borrowers that defaulted had lived in Mobile for five years or less, even though these short-term residents accounted for only 50 percent of the loans. Borrowers who worked for the same firm for five years or less also had a considerably worse repayment record than those who had been employed longer. These yardsticks of the quality of individual loans ap pear to measure the maturity and attitude of the borrower, as well as the stability of his income and whether he will still be in the area when the final payments come due. It is not clear, however, how these variables are interrelated or what is the relative importance of each in determining the quality of loans. The variables are obviously good proxy measures for the borrower’s maturity and attitude toward repayment. Nevertheless, income and indebtedness of the borrower are significant in that they measure the borrower’s ability to repay. The table shows that average incomes for bor rowers that defaulted were much less than for other borrowers. As expected, a more detailed review of writtenoff loans revealed that borrowers with low incomes (less than $2,000) had relatively poor repayment records. However, further analyses showed that borrowers with household incomes of $10,000 or more also had rela tively poor repayment records. Sixty-nine percent of all borrowers with high household incomes had more than one source of income, primarily a working spouse. Con versely, borrowers with household incomes of less than $10,000 had two or more sources of income in only 15 percent of the cases. Combining the two average level in comes may add to the family’s ability and desire to incur debt, but the additional income may not always be fully available for retiring debt. Thus, the income variable alone is perhaps not sufficient information on which to base credit quality. While the borrower’s household income measures his potential repayment ability, monthly instalment indebted ness both before and after the loan measure his approxi mate net ability to retire his debts. Borrowers not in debted before negotiating loans had better repayment records. Meanwhile, borrowers with preloan indebtedness of $60 to $100 had the highest default ratio. This level Digitized N O V E Mfor B E FRASER R 1966 of indebtedness did not seem too great, but adding a new debt apparently overburdened many borrowers. Characteristics of Nonauto Consumer Loans at Mobile, Alabama, Area Banks1 July 1965— June 1966 Average Values Borrower and Loan Characteristics D efaults Loans Repaid Difference2 4 0 .0 4 1 .0 - 1 .0 7 .2 1 0 .4 - 3 .2 8 .6 1 0 .5 - 1 .9 H o u s e h o ld I n c o m e ( Y e a r ly ) $ 6 ,2 1 2 $ 6 ,5 1 1 A g e o f B o rro w e r Y e a rs R e s id in g Y e a r s w it h in A rea F ir m M o n t h ly P r e lo a n D e b t (I n d e b te d B o r r o w e r s O n ly 3 ) $ 7 7 -$ 2 9 9 $96 - $19 $685 $596 + $89 N u m b e r o f M o n t h ly P a y m e n ts 1 4 .3 1 5 .2 - 0 .9 A m o u n t o f M o n t h ly P a y m e n ts $54 $39 + $15 A m o u n t of Lo a n JData based on simple averages, difference between defaults and loans repaid. “Includes reported monthly payments for auto, rent, mortgage, and other debts before bank loan was made. These characteristics are normally used by bankers considering loan applications. Perhaps equally important in assessing the possibility that a loan will be repaid are the characteristics of the loan itself. Is the repayment period so long that future events place the loan in jeopardy? Is the loan too large or too small in relation to the borrower’s income or previous debt? Answers to these and other questions may give further insight into the quality of loans. The table shows that the average borrower who de faulted borrowed more money and tried to repay it with less, but larger, monthly payments. One might conclude that borrowers with larger, short-term loans have the worst repayment record. This is partly true in that relatively more loans defaulted when they totaled $1,500 or more and were to be repaid with 12 monthly payments of $90 or more. Loan contracts placing greater pressures on bor rowers’ present incomes appear to reduce loan quality. However, borrowers with small loans requiring a few small monthly payments also had relatively poor repay ment records. Many had very low incomes and were faced with the problem of becoming overburdened. Measuring Future Credit Quality The comparisons of borrower characteristics suggest that they are significant measures of the repayment potential of prospective borrowers. However, bank data may be utilized to measure many other aspects of credit quality. For example, a consideration of the importance of age, relative to income, may be desirable. What exactly do age, years residence, or other variables measure? Ap parently, the ultimate quality of a bank’s or a nation’s loan portfolio depends, in part, upon the borrower’s at titude toward indebtedness and repayment. Do these variables provide proxy measures of attitudes or should other characteristics be reviewed? Is it possible to quantify a borrower’s attitude toward indebtedness? Just as attitude is important in evaluating credit quality, so is the borrower’s ability to repay. Bankers have a gen • 87 • eral idea of the repayment capacity of their borrowers, but are they always fully aware of their current outstand ing indebtedness? Should they evaluate net, rather than gross, income of the borrower? How does the number of dependents affect a borrower’s repayment potential? So far, this study has raised many questions, but it has clarified enough issues to guarantee that, as these and other data are studied, many more questions will become answerable for the first time. As information is collected during periods of changes in the rate of economic growth, it will become more possible to adequately measure and quantify changes in credit quality in local areas. Then, the quality of the national consumer loan portfolio can be better measured by totaling the regional changes. R o b e r t E. S w e e n e y a n d J o e W. M c L e a r y What Happened to State and Local Government Borrowing? Late last year state and local governments in the South east found it increasingly expensive to borrow. As the consumer may have found it necessary to go into debt to purchase a car, governmental units may have had to bor row to finance the building of a road. What effects have the rising costs of borrowing had on state and local governments in the Sixth District states of Alabama, Florida, Georgia, Louisiana, Mississippi and Tennessee? State and local governments, like most any individual or company, must pay a price for using someone else’s money. That price is measured by the net interest cost (N IC ), at an annual rate. In order to analyze this cost movement in the District states, this Bank computed weighted average NIC (weighted by dollar volume) on new issues, by rating. The price state and local governments must pay is a function of credit quality, which is measured by ratings of one or more national rating organizations. As with other debt securities, a large number of tax-exempts are rated from Aaa to C. Table I shows the weighted average NIC, by rating, for the 1964-66 period and so far as pos sible for available data. This period was selected because it represents approximately equal portions of time before and after the recent rapid climb of NIC’s. By third quarter 1965, NIC’s had begun their rapid climb. Preliminary data for the third quarter of this year indicate that they were still advancing at an increasing rate, but had started some firming in October. A comTable I: Weighted Average Net Interest Cost of New Issues for State and Local Governments Sixth D istrict S ta te s (In P ercent) A aa Aa A Baa Ba 3 .3 6 3 .0 7 3 .3 2 3 .6 5 4 .0 1 II — 3 .0 8 3 .3 3 3 .6 4 3 .9 3 III — 3 .2 7 3 .4 8 3 .7 5 4 .0 8 Quarters 1964 I 1964 1964 1964 IV 1965 I — 3 .2 7 3 .3 9 3 .5 3 — 3 .2 9 3 .2 3 3 .2 7 3 .5 1 3 .9 3 1965 II 3 .2 2 3 .2 2 3 .3 7 3 .6 3 — 1965 III 3 .2 2 3 .2 8 3 .4 9 3 .6 5 4 .0 0 1965 IV — 3 .6 4 3 .6 7 3 .8 4 3 .8 7 1966 I — 3 .6 8 3 .8 4 4 .1 1 — 1966 II — 3 .8 3 3 .9 4 4 .1 5 — Source: Computed from information in The W eekly B ond Buyer and M oody’s Bond Survey. . 88 * parison of the weighted average NIC for first quarter 1964 and second quarter 1966 shows that Aa rated issues have increased .76 percentage points; A issues, .62 points; and Baa, .50 points. The lower rated Baa’s gained less, on average, because they tend to be smaller issues, have more interest for local investors, and are somewhat insulated from movements in the national markets. Another factor contributing to the smaller gain in Baa’s net interest cost is the continuing long-term trend resulting from an in crease in investors’ confidence in lower-rated issues. What effects have these rising costs had on state and local governments? Assume that an “average” state or local government had a rating of A in first quarter 1964 and second quarter 1966 and that in both periods it issued a $5 million, 20-year bond. Over the life of the two bonds the second would have cost $620,000 more. Some analysts believe that when NIC’s rise normally, there is little, if any, downward movement in the volume of offerings. Even if this is generally true, we are now in an “abnormal” market. Some state and local governments, having reached their legal interest rate ceilings, have cur tailed their issuance of debt. Other state and local gov ernments are faced with a problem similar to that of the consumer who late last year realized that he needed a new roof but postponed his purchase in hopes that the cost would go down. Now the roof is leaking and he must buy a new one even though the cost is higher. Like the consumer, most state and local governments have acted in terms of postponements, not cancellations. The amount of new securities offered by state and local governments in the District states has increased in every postwar year. In 1965, volume reached over $2 billion. However, the first half of 1966 was approximately onequarter billion dollars below the same period for 1965 and the same as the second half of 1965. This decline was associated mainly with the relatively low level of issues in first quarter 1966, which may have resulted from the postponement of some issues by state and local gov ernment debt managers because they felt that NIC’s were too high and would soon drop. Cancellations and bid re jections also contributed to the decline. Quarterly totals for District states are listed in Table II. This year the distribution of the volume of new issues has been rather exceptional to the normal seasonal pattern. Normally, the first quarter is the highest; the third quarter, the lowest; the second quarter, somewhat above average; M O N T H L Y R E V IE W Table II: Tax-Exempt Sales of New Issues Sixth D istrict S ta tes (In Millions of Dollars) I 1965 602 III 1965 489 I 1966 350 II 1965 534 IV 1965 391 II 1966 530 H a lf- Y e a r T o t a ls 880 880 1 ,1 3 6 and the fourth quarter, moderately below. First quarter 1966 was low and the second quarter substantially higher. Preliminary data indicate that the third quarter will reach approximately the same level as the second quarter. In such a complex market it is difficult to establish the one reason for a contraseasonal pattern, but two main considerations stand out: timing and urgency. Like the man needing a new roof, state and local governments in the District states appear to have postponed their borrow ing in the first quarter only to return to a more costly market. But in spite of higher costs, state and local gov ernments continue to offer a large volume of securities. Eliminating the effects of seasonal influences by taking an average over the past ten quarters reveals that Florida is the leader in state and local governments as a percent of the District states’ volume (see Table III). During second quarter 1966 almost 30 percent of the volume was attributed to Alabama. One issue, by the Camden In dustrial Development Board, accounted for 45 percent of Alabama’s volume. The percent of volume for any quarter is greatly influenced by singularly large issues or a group of issues. The averages give the best representation, although Florida has been declining in importance on a quarter-to-quarter basis. Table III: Percent of Total for New Issues of Tax-Exempts Sixth D istrict S ta tes On the basis of purpose of issue, the large decrease in volume between the first half of 1965 and the first half of 1966 can be explained primarily by the reduction in funds applied to school buildings and improvements and housing notes. These decreases, from $264 million to $156 million for school buildings and improvements and from $225 million to $109 million for housing notes, were par tially offset by a substantial increase in streets, roads, and bridges— from $69 million to $124 million. Chart I shows the average distribution of tax-exempt issues for state and local governments in District states, by purpose, over the past ten quarters. Who is finding these costs higher? The large jump in the District states’ volume between the first and second quarters in this year was mainly associated with increases in the volume of issues made by local public agencies and special authorities. Local public agencies, which are usu ally concerned with urban renewal, went from $26 million to $106 million. A large increase in the cost of borrowing was also noticed when classification was on the basis of purpose for urban renewal. Special agencies increased their volume of issues from $80 million to $161 million, mainly in the industrial bond category. In terms of percent composition, as an average over the past ten quarters, the rankings in Table IV were found. Data for the first halves of 1965 and 1966 reveal in creasing volume, in spite of higher cost, for local public agencies and special authorities and decreases in volume for all other categories. Housing authorities and cities show the largest decrease in absolute terms. With respect to percent composition, local public agencies and special authorities in second quarter 1966 were 11 percentage Chart I: Distribution by Purpose of Tax-Exempt Issues for State and Local Governments First Quarter 1964— S eco n d Quarter 1966 Sixth D istrict S ta tes (In Percent) First Quarter 1964— Secon d Quarter 1966 .......I F lo r id a 2 3 .0 (2 ) L o u is ia n a 1 4 .8 (5 ) A la b a m a 2 1 .2 (1 ) Tennessee 1 4 .2 (3 ) G e o r g ia 2 0 .1 (4 ) M is s is s ip p i 6 .7 (6 ) N ote: Figures in parentheses indicate ranking on basis of percent of volume for second quarter 1966. Just as changing costs of bank borrowing would not move the consumer who needed a new roof to buy a car he did not need, state and local governments do not change the purpose for which their money is to be put to use because NIC’s have risen. When classified by purpose, the sharp increase between first and second quarter 1966 shows up in the urban renewal and industrial bond categories. Urban renewal advanced from 8 to 20 percent of the six-state total and industrial bonds from 1 to 18 percent, or from $26 million to $106 million and from $5 million to $90 million, respectively. The largest single issue in second quarter 1966 was $70 million issued by the Camden Board for industrial development. This was the largest issue to come out of the District since March 1964, when the Jacksonville Expressway Authority made an issue for over $135 million. The large increase in urban renewal was associated with a number of large issues of Tennessee cities. N O V E M B E R 1966 H o u s in g N o te s S c h o o l B u ild in g s a n d Im p r o v e m e n t s — 1 .—r ... I1 I 1 1 1 , || M W 1 1 1 ™~““““ ■■■id rrm rrB ivH 20 18 1 Stre e ts. R o a d s , an d B r id g e s IllaV U rb a n Renew al In d u st ria l Bonds W a te r, S e w e r , a n d D r a in a g e S y s t e m s 8 1?«c3 1*! 7 Pk H o u s in g Bonds mam M is c e lla n e o u s WW R e fu n d in g 11 7 5 5 i 1 6 ' ' ' i m 1 4 i i \c »■ ' ' ' i ife ■ ' ' ' sb P erce n t A lthough w ide flu ctu ation s are found on a quarter-to-quarter b a sis, h ou sin g n o tes have been th e overall lead er for th e periods im m ed iately before and after th e rapid rise in NIC’s. Note: All other (7) components add to 15 percent. Source: The W eekly Bond Buyer; classifications by this Bank. . 89 ‘ Table IV: Distribution of Issuing Body for Tax-Exempts Sixth D istrict S ta tes Debits to Demand Deposit Accounts In s u r e d C o m m e r c ia l B a n k s in t h e S ix t h D is t r ic t (In Thousands of Dollars) First Quarter 1364— S eco n d Quarter 1966 (In P ercent o f D ollar V olu m e) H o u s in g A u t h o r it ie s 26 C o u n t ie s 13 C it ie s 20 S ch o o l B o a rd s 10 S p e c ia l A u t h o r it ie s 19 L o c a l P u b lic A g e n c ie s 9 S ta te s 3 points above their average over the past ten quarters. In contrast, housing authorities were 14 percentage points below their averages and cities were 7. Just as a retailer sells the goods of manufacturers, an underwriter sells the bonds of state and local governments. The underwriter, usually through a competitive bidding process, buys the bonds of a municipality and then sells them, hopefully at a profit. Over the past ten quarters, on the basis of the location of the underwriter, those syndi cates composed entirely or predominantly of Southern firms accounted for 17 percent of the underwriting. The average size of the issue these firms handled was $812,000, while it was $2,999,000 for entirely non-Southern under writers. Over time the trend seems to be toward Southern underwriters handling progressively larger issues. Rising costs have stimulated some unusual approaches to marketing municipals, although none of these methods have been reported in the District states. When Tulsa reached its interest rate ceiling, the city’s banks agreed to buy the bonds just below the ceiling if the city would re deposit the funds with banks in the syndicate. In Pitts burgh a conditional bid was made on bonds which had also reached their interest rate ceiling. The bid was made to purchase an option for two weeks in hopes that market conditions might improve in that time. Although rising costs do not seem to have a causeeffect relationship with distributions on the basis of pur pose or issuing body, they may make their impression on dollar volume of new issues. Third quarter preliminary data for the District states and a fourth quarter “guessti mate” indicate that this may be the first year since World War II that has not shown an increase over the preceding year for dollar volume of new issues. At this writing, the tax-exempt market appears to be firming; if this continues, volume may increase as postponed issues are returned to market. However, because of the planning that is neces sary to market tax-exempt bonds, the impact of this firm ing on dollar volume of new issues may not be revealed until early 1967 or later. C. W i l l i a m S c h l e i c h e r , J r . Bank Announcements h e A m e r i c a n B a n k , Geneva, Alabama, a nonmember bank, began to remit at par on October 10 for checks drawn on it when received from the Federal Reserve Bank. On October 12, T h e C o m m e r c i a l B a n k o f G a i n e s v i l l e , Gainesville, Florida, opened as a nonmember bank and began to remit at par. Officers include William C. Ruffin, Jr., President; Guy R. Dudley, Executive Vice President; and Jerry C. Evans, Cashier. Capital is $350,000, and surplus and other capital funds, $175,000. T . 90 • Sept. 1956 STANDARD METROPOLITAN STATISTICAL AREASf Birmingham . . . 1,378,015 Gadsden .................. 63,948 Huntsville . . . . 173,069 414,214 Montgomery . . . 290,027 Tuscaloosa . . . . 83,410 Ft. LauderdaleHollywood . . . 506,878 Jacksonville . . . 1,312,153 M ia m i...................... 1,837,476 O r la n d o .................. 409,286 202,148 Pensacola . . . . T am paSt. Petersburg . 1,065,280 369,941 W. Palm Beach . . Albany .................. 97,885 Atlanta .................. 4,154,755 A u g u s t a .................. 256,727 213,891 Columbus . . . . Macon ...................... 221,295 Savannah . . . . 244,909 Baton Rouge . . . 544,005 Lafayette . . . . 115,352 138,931 Lake Charles . . . 2,235,687 New Orleans . . . Jackson .................. 598,270 Chattanooga . . . 552,719 Knoxville . . . . 432,965 Nashville . . . . 1,439,524 OTHER CENTERS 64,676 A n n is to n .................. Dothan .................. 61,655 .................. 42,822 Selma Bartow .................. 39,012 Bradenton . . . . 59,225 199,979 Brevard County . . Daytona Beach . . 77,279 Ft. Myers— N. Ft. Myers . . 63,856 Gainesville . . . . 83,411 Monroe County . . 29,198 Lakeland . . . . 107,190 O c a l a ....................... 51,897 St. Augustine . . 19,298 St. Petersburg . . 254,078 Sarasota . . . . 90,287 Tallahassee . . . 113,960 Tampa .................. 610,697 Winter Haven . . 52,507 80,661 Athens .................. Brunswick . . . . 38,791 Dalton .................. 81,550 Eloerton . . . . 15,838 Gainesville . . . 68,543 G r iff in ....................... 31,674 LaGrange . . . . 24,028 Newnan .................. 22,118 R o m e ....................... 72,076 50,254 V a ld o s t a .................. Abbeville . . . . 13,216 Alexandria . . . . 116,582 Bunkie .................. 6,169 Hammond . . . . 36,258 New Iberia . . . . 34,986 Plaquemine . . . 10,832 Thibodaux . . . . 21,106 Biloxi-Gulfport . . 92,963 Hattiesburg . . . 53,362 Laurel .................. 34,516 M e r id ia n .................. 62,141 N a t c h e z .................. 33,451 Pascagoula— Moss Point . . 51,506 Vicksburg . . . . 40,545 Yazoo City . . . . 25,739 B r is t o l....................... 71,419 Johnson City . . . 66,247 Kingsport . . . . 142,606 SIXTH DISTRICT, Total 26,798,068 Alabama! . . . . 3,473,852 F l o r i d a ! .................. 7,699,520 G e o r g ia ! .................. . 6,821,925 3,820,728 Louisiana*! . . . 1,277,916 Mississippi*! . . . 3,704,128 Tennessee”! • • • Aug. 1966 Percent Change Year-to-Date 9 months Sept. 1966 from 1966 Aug. Sept. from Sept. 1966 1965 1965 1965 1,450,377 66,392 183,085 460,313 343,526 90,965 1,293,340 56,215 158,867 385,414 264,063 77,825 -5 -4 -5 -1 0 -1 6 -8 +7 + 14 +9 +7 + 10 +7 + 13 + 10 +5 +9 +11 + 14 519,006 1,410,076 1,945,954 421,265 205,356 422,710 1,200,579 1,593,090 377,297 182,473 -2 -7 -6 -3 -2 +20 +9 + 15 +8 + 11 + 16 + 15 + 14 +9 +7 1,131,475 378,288 90,235 4,459,831 273,444 210,825 238,071 263,409 563,860 120,975 138,945 2,304,313 646,670 568,730 458,217 1,382,445 972,024 301,529 91,113 3,918,309 200,012 193,921 196,333 222,115 432,052 100,174 108,986 1,987,879 507,352 505,876 390,883 1,228,337 -6 -2 +8 -7 -6 +1 -7 -7 -4 -5 -0 -3 -7 -3 -6 +4 + 10 +23 +7 +6 +28 + 10 + 13 + 10 +26 + 15 +27 + 12 + 18 +9 + 11 + 17 + 10 +21 +8 + 12 +23 +7 + 11 + 11 +21 + 16 +18 + 16 + 16 + 14 +9 + 13 64,499 56,913 41,776 35,976 57,044 209,867 86,087 55,276 58,829 39,324 30,089 40,142 181,365 73,393 +0 +8 +3 +8 +4 -5 -1 0 + 17 +5 +9 +30 +48 + 10 +5 + 15 + 11 + 16 + 17 +20 + 10 +9 64,688 78,695 32,722 105,901 52,879 22,355 281,676 91,888 129,881 636,617 54,293 70,996 40,529 79,942 13,661 72,148 32,354 22,600 27,442 74,667 54,771 11,152 124,151 6,128 33,460 35,838 10,769 21,984 105,761 56,419 35,526 70,848 36,449 55,459 74,397 27,147 91,737 45,431 17,493 238,685 82,338 103,589 556,619 49,199 64,664 39,753 88,089 10,966 67,408 29,505 21,417 22,909 65,705 57,757 11,809 105,460 6,274 26,297 31,062 8,698 20,138 81,219 49,442 36,776 56,293 30,142 -1 +6 -1 1 +1 -2 -1 4 -1 0 -2 -1 2 -4 -3 + 14 -4 +2 + 16 -5 -2 +6 -1 9 -3 -8 + 19 -6 +1 +8 -2 +1 -4 -1 2 -5 -3 -1 2 -8 + 15 + 12 +8 + 17 +14 + 10 +6 +9 + 10 + 10 +7 +25 -2 -7 +44 +2 +7 + 12 -3 + 11 -1 3 + 12 + 11 -2 +38 + 13 +25 +5 + 14 +8 -6 + 10 + 11 + 14 + 11 + 16 + 12 + 11 + 15 + 12 + 12 + 12 +8 +7 + 13 +1 -1 + 18 +5 + 14 + 17 +5 + 10 +2 + 14 + 13 +5 + 14 +9 +20 + 11 + 18 + 19 +2 +9 + 15 52,983 43,526 46,892 74,722 74,960 155,054 28,079,638 3,699,330 8,091,308 7,158,613 3,902,286 1,417,183 3,810,918 44,574 34,306 23,030 60,722 61,956 126,120 24,322,630 3,265,567 6,963,361 6,360,313 3,318,834 1,134,794 3,279,761 -3 -7 -4 5 -4 -1 2 -8 -5 -6 -5 -5 -2 -1 0 -3 + 16 + 18 + 12 -'-18 +7 + 13 + 10 +6 + 11 +7 + 15 + 13 +13 + 13 + 18 + 14 + 13 + 11 + 16 + 12 + 10 + 11 +12 + 16 +15 + 12 ♦ In clu d e s only b a n ks in the Sixth D istrict portion of the state. tP a rtia lly estim ated. ^Estim ated. MONTHLY R E V IE W Sixth District Statistics Seasonally Adjusted (A ll d a ta a re in d e x e s , 1 9 5 7 - 5 9 Latest Month (1966) One Month Ago Two Months Ago 240 224 240 223 238 175 163 181 180 159 182 180 168 192 ALABAMA INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) Aug. 7,337 Manufacturing P a y r o lls...........................Sept. 170 Farm Cash R e c e ip t s ............................... Aug. 133 7,304r 173r 157 221 7,197r 172 158 211 198 162 152 164 6,617 163 123 PRODUCTION AND EMPLOYMENT Sept. Sept. Sept. Sept. Sept. 121 120 122 129 48 122r 121 123 128r 79 122 121 123 130 84 118 117 118 121 67 Sept. Sept. 2.1 41.5 2.0 41.4r 2.1 41.7 2.6 41.7 . Sept. . Sept. . Sept. 222 175 164 224 178 173 220 177 176 198 164 155 Insured Unemployment, Avg. Weekly Hrs. in Mfg., (Hrs.) FINANCE AND BANKING Bank D ebits**............................... FLORIDA INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) Aug. 15,834 Manufacturing P a y r o lls...........................Sept. 226 142 Farm Cash R e c e ip t s ............................... Aug. 15,638r 14,929r 14,070 221r 216 198 137 124 120 Latest Month (1966) GEORGIA INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) Aug. 10,160 Manufacturing P a y r o lls...........................Sept. 190 Farm Cash R e c e ip t s ............................... Aug. 110 PRODUCTION AND EMPLOYMENT Nonfarm E m p lo y m e n t...........................Sept. M anufacturing........................................ Sept. N onm anufacturing............................... Sept. C o n s tr u c tio n ....................................Sept. Farm E m ploym ent....................................Sept. Insured Unemployment, (Percent of Cov. E m p .)...................... Sept. Avg. Weekly Hrs. in Mfg., (Hrs.) . . . Sept. One Year Ago 10,141r10,137r 187r 186 135 156 9,236 170 128 130 126 131 118r 66 131 128 132 129 65 125 123 127 138 65 2.1 41.lr 1.4 41.0 41.1 252 196 196 250 198 206 219 174 181 210 8,328r 166r 153 8,044r 165 147 Sept. Sept. Sept. Sept. Sept. 121 111 123 136 62 121 112 123 134 67 121 113 123 137 67 114 105 117 126 69 Sept. Sept. 1.8 42.9 1.9 41.9r 1.9 42.6 2.7 40.2 FINANCE AND BANKING Member Bank L o a n s * ...........................Sept, Sept. Member Bank D e p o s i t s * ...................... .Sept Bank D e b its*/**........................... 226 154 167 225 156 167 221 158 185 200 142 145 3,973r 20lr 177 4,030r 200 180 3,647 183 140 131r 142 127 133 68 127 136 123 128 54 FINANCE AND BANKING Member Bank L o a n s ............................... Sept. Member Bank D e p o sits ........................... Sept. Bank D ebits**.............................................Sept. LOUISIANA INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) Aug. Manufacturing P a y r o lls...........................Sept. Farm Cash R e c e ip t s ............................... Aug. 130 128 131 118 52 One Two Month Months Ago Ago 1.5 42.0 252 190 194 3,246 168 2.1 7,388 143 185 PRODUCTION AND EMPLOYMENT Insured Unemployment, (Percent of Cov. Emp.) . . . Avg. Weekly Hrs. in Mfg., (Hrs.) MISSISSIPPI INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) Aug. 4,031 Manufacturing P a y ro lls...........................Sept. 200 Farm Cash R e c e ip t s ............................... Aug. 162 PRODUCTION AND EMPLOYMENT Insured Unemployment, (Percent of Cov. Emp.) . . . Avg. Weekly Hrs. in Mfg., (Hrs.) Sept. Sept. Sept. Sept. Sept. 132 142 127 130 47 132 142r 127 128 56 Sept. Sept. 1.6 41.2 1.6 41.Or 1.7 41.2 2.1 40.8 290 208 196 283 228 205 284 214 193 223 170 174 8,661 186r 140 8,501r 185 148 FINANCE AND BANKING Member Bank Loans* . . . . Bank Debits*/* TENNESSEE INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) Aug. 8,778 Manufacturing P a y r o lls...........................Sept. 188 156 Farm Cash R e c e ip t s ............................... Aug. 7,750 170 122 PRODUCTION AND EMPLOYMENT PRODUCTION AND EMPLOYMENT Sept. Sept. Sept. Sept. Sept. 143 147 142 110 79 142 147 141r 110 53 142 145 142 112 50 136 137 136 108 88 Sept. Sept. 1.8 42.5 2.0 42.7 r 1.9 42.5 2.2 41.8 . Sept. 244 177 174 245 181 175 241 182 184 216 162 157 Sept. Sept. Sept. Sept. Sept. 135 142 131 154 66 135 143 131 153r 77 134 141 130 155 76 126 131 123 142 66 Sept. Sept. 1.8 41.3 1.7 40.7r 1.9 40.7 2.5 41.9 FINANCE AND BANKING Member Bank Loans* . . . . Member Bank Deposits* . . . Bank D eb its*/** ........................... . . . Sept. 235 170 206 231 174 195 235 173 207 209 161 182 Insured Unemployment, Insured Unemployment, Avg. Weekly Hrs. in Mfg., (Hrs.) I O O , u n le s s in d ic a t e d o th e r w is e .) One Year Ago SIXTH DISTRICT INCOME AND SPENDING Personal Income, (Mil. $, Annual Rate) Aug. 54,386 54,045r 52,838r 48,708 189 Manufacturing P a y r o lls...........................Sept. 187r 186 170 Farm Cash R e c e ip t s ............................... Aug. 147 149 151 131 C r o p s ......................................................Aug. 114 126 134 134 L iv esto ck ................................................. Aug. 158 157 160 130 instalment Credit at Banks, *(Mil. $) 252 292 New L o a n s .............................................Sept. 241 282r 237 R e p a y m e n ts ......................................... Sept. 265 270 265 PRODUCTION AND EMPLOYMENT 125 131 131 Nonfarm E m p lo y m e n t............................ Sept. 131 125 132 Manufacturing ....................................Sept. 132 132 152 162 161 Apparel .............................................Sept. 160 120 126 C h e m i c a l s ........................................ Sept. 127 127 132 145 145 145 Fabricated M e t a ls ........................... Sept. 108 F o o d ......................................................Sept. I ll 110 111 Lbr., Wood Prod., Furn. & Fix. . . Sept. 106 103 105 105 109 P a p e r ................................................. Sept. 114 115 115 117 117 110 Primary M e t a l s ................................Sept. 117 101 104 104 Textiles .............................................Sept. 105 158 168 Transportation Equipment . . . Sept. 170 170 131 131 N onm anufacturing............................... Sept. 131 125 Construction .................................... Sept. 124 122 127 123 Farm E m ploym ent....................................Sept. 58 66 69 67 Insured Unemployment, 2.4 1.8 2.0 (Percent of Cov. E m p .)...................... Sept. 1.8 41.4 41.5 41.3r Avg. Weekly Hrs. in Mfg., (Hrs.) . . . Sept. 41.6 139 164 139 165 Construction C o n t r a c t s * ...................... Sept. 140 151 137 R e s id e n tia l.............................................Sept. 124 137 141 All O th e r ................................................. Sept. 199 175 132 137 139 Electric Power Production**.................. July 144 117 114 112 Cotton C onsum ption**........................... Sept. 116 204 Petrol. Prod, in Coastal La. and Miss.** Sept. 207 158 205 FINANCE AND BANKING Member Bank Loans* All B a n k s ................................................. Sept. Leading C i t i e s ....................................Oct. Member Bank Deposits* All B a n k s ................................................. Sept. Leading C i t i e s ....................................Oct. Bank D eb its* /* * ........................................ Sept. = FINANCE AND BANKING Avg. Weekly Hrs. in Mfg., (Hrs.) *For Sixth District area only. Other totals for entire six states. **Daily average basis. r-Revised. Sources: Personal income estimated by this Bank; nonfarm, mfg. and nonmfg. 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 Corp.; 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. http://fraser.stlouisfed.org/ N O V E M B E R 1 9 66 Federal Reserve Bank of St. Louis . 91 . It was “the best of tim es and the worst of tim es” as autumn hustled toward its close. Job gains in Septem ber, following the end of several labor dis putes, offset the loss of an unusually large number of workers returning to school. Personal incomes continued to rise, while durable goods sales slackened. High levels of total construction contracts failed to lighten the growing concern over sharp declines in residential activity. Bankers and nonbank financial interm ediaries chafed under the impact of reduced savings flows and the difficult adjustm ents evoked by m easures to curb inflation. The outlook for record farm cash incomes in 1966 was accom panied by growing distress over rising prices, particularly by the housewife. \s \s Employers extended the workweek and attem pted to hire more workers to replace those returning to school and entering the armed forces. Job gains increased in Florida and Georgia, where labor disputes were settled, but declined elsewhere. After advancing from its spring lows, insured unemploy ment was reduced in September. v* ]S Rising prices nibbled the incomes of the “average” District consumer and his national counterpart. New consumer loan extensions at commercial banks remained weak, reflecting less demand for durable goods. A broader index, the seasonally adjusted volume of outstanding instalment credit at banks, actually declined in September after several months of modest gain. Construction provided the most vivid example of “the best of tim es and the worst of tim es.” Current construction jobs recovered very well from the slumps induced mainly by strikes and associated dislocations. Leading indi cators of future residential construction activity, such as housing starts, permits, and residential construction contracts, pointed to further declines. Although declining irregularly since April, nonresidential contract volume reached the highest level ever achieved for the first nine months of any year. Reduced rates of growth in savings flows to banks and savings and loan associations, together with sharp declines in mortgage commitments from virtually all lenders, indi cated continued weakness in housing production. u* Commercial banks’ rate of expanding demand and other deposits sup ported the pattern of general slowing over the past three months. Reduced rates of growth in the national money supply, a slackening of the volume of net regional capital imports, and a changing pattern of disposition of consumer savings have all contributed to the slowdown in bank credit. Thus, while loan activity was not especially vigorous during October, it may have reflected a shortage of lendable funds rather than a lack of loan demand. Investments in U. S. Government and “other” securities declined slightly further. District farm ers will probably have record cash incomes this year, as high livestock incomes more than offset reduced crop sales. Rain has in terfered with harvesting in some areas, but most crop yields look good. De creased acreages underlie smaller cotton and corn crops; orange production is expected to be 40 percent above last year. Prices of livestock and poultry products, though somewhat lower in recent weeks, remain relatively high, and cattle prices are strong. N o t e : D a t a o n w h ic h s t a te m e n t s a r e b a s e d h a v e b e e n a d ju s t e d w h e n e v e r p o s s i b l e to e lim in a te s e a s o n a l in flu e n c e s.
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