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Bu m ♦ Covering financial, industrial and agricultural conditions ly eview Fourth Federal Reserve District Federal Reserve Bank of Cleveland V o l. 27___________________ Cleveland/ O hio, Feb uary 28, 1945___________________No. 2 Manpower and Production The new flood o f war orders and intensification o f legislative interest in the manpower problem are directed at accomplishing an over-all increase o f about S y 2 percent in war output above 1944 fourth quarter levels. It is apparent, however, that the enlarged procurement program falls upon an indus trial system which has lost the resilience afforded earlier in the war program by adequate reserves o f both manpower and materials. Industry long has been operating at near-capacity levels and has struck a fine balance between raw materials and finished products over the past few years. Attempts to boost output by even a few notches have run into shortages o f raw and semi-processed materials all along the line. So far this year, steel has operated at almost one million tons below capacity, due primarily to weather conditions in a number o f important production centers, which caused curtailed shipments o f both raw materials and finished products. This loss in produc tion, also aggravated by a deficiency o f fuel, has caused further inroads into inventories o f metal manufacturers with little expectation o f replenish ment o f stocks in the immediate future, since they cannot readily be made up under present manpower conditions. Output o f bituminous coal through mid-February totaled approximately ten percent under production during the same period last year. Car shortages due to congestion in ice-clogged northern railroad yards, a steady decline in the number o f miners employed, as well as a gradual increase in their average age, nave all been contributing factors to the decline in produc tion. The last two factors have not been totally offset by increased mechanization o f deep mines or an ex panded output from stripping operations. Total stocks o f coal held by all classes o f consumers declined to slightly over 57 million tons on January 1 o f this year, which represents a 32-day supply. Last year on this date, stocks o f coal held by all consumer groups Digitized for 56 FRASER totaled million tons, or a 30-day supply, a further indication that one o f the chief difficulties in the current coal situation has been uneven distribution. Other industries o f the district are working on un comfortably small inventories o f essential materials. Rubber manufacturers report that they obtain supplies o f carbon black for urgently needed tire production by governmental directives. Shoe manufacturers not only report shortages o f sole leather, but also a de ficiency o f various kinds o f upper stocks and linings. Paper and paperboard manufacturers, faced with increased military requirements for packaging, foresee further curtailment o f civilian supplies this year due to the shortage o f pulp wood and waste paper. Govern mental restrictions in the use o f lead are affecting several important industries o f the district, particularly paint manufacturers and potteries, where the metal is an important ingredient o f various glazes. The lead stockpile, formerly totaling 270,000 tons, has dwindled to 80,000 tons, while military orders for batteries have mounted. Manpower in all areas o f production, raw material as well as finished product, is the primary factor in determining whether new goals will be achieved. United States Employment Service total placements and assists in January for the State o f Ohio showed an increase o f 35 percent over December, which approxi mately paralleled the reported experience o f all the other major industrial centers o f the district. The quit rate in manufacturing employment continues to decline and is responsible for reducing the separation rate to its lowest point in three years. Impossible to measure, but o f great importance, is the effect o f the current pressure and publicity o f the manpower prob lem upon the productivity and morale o f workmen. Many reports from the district indicate considerable stability has been introduced in the male labor force along with greater productivity and lessened absen teeism. Others are less optimistic about the attitude o f labor and point out that, even if labor were willing, the long-maintained pressure o f work has lowered ability to remain steadily on the job and work for long hours at high efficiency. 2 THE MONTHLY BUSINESS REVIEW DISPOSITION OF GOVERNMENT-FINANCED WAR PLANT The urgency and scope o f war requirements have resulted in an unprecedented increase in Governmentowned plant and equipment facilities in the United States. The disposition and utilization o f these facilities are destined to attract the increased attention o f many groups in the coming months and unques tionably pose one o f the most challenging post-war problems. How this task is accomplished — what policies and methods will instrument the Surplus Property Act o f 1944— is o f utmost importance to the economy o f the entire country. will continue operation as peacetime arsenals, will be held as stand-by plants, or will be dismantled. Another third o f public plant is centered in facilities for producing ships, aircraft, engines, and parts. These plants have production potentials far above any possible immediate post-war use, but they present peculiar and expensive conversion problems, if they are to be shifted to channels o f peacetime production. Post-war use o f these facilities constitutes a vital challenge to the ingenuity o f American public and business leadership. Before American entry into war, private industry had expanded its plant facility, in part at Government instigation, to help meet growing war demands. In fact, it was not until 1942 that Government invest ment exceeded total private expenditures for plant and equipment. As could be expected, the larger part o f private expansion was in equipment rather than plant, the ratio running about three to one. O f the approximate $8 billion supplied privately, the great preponderance was in iron and steel, the products of petroleum and coal, metal products, machine tools, machinery and electrical equipment, and a wide variety o f miscellaneous manufacturing facilities. In all likelihood, the large proportion o f this expansion will lend itself to peacetime production, particularly since the greater part o f the investment is in equip ment o f a generally adaptable type. The central problem o f this type o f plant growth is for the com panies which own it to correlate production potentials to post-war markets. The last third o f public plant, involving a little more than $5 billion, represents facilities which may be adapted readily to supplying peacetime wants. Included in this category, and directly competitive with privately-owned plants, are facilities for iron and steel, radio and electrical equipment, food, chemicals, and miscellaneous non-ferrous metals. Also covered are such problem expansion areas as synthetic rubber, aluminum and magnesium, and almost half o f all the machine tool facilities. The investment experience o f World War II differs vastly from the previous war period in the ratio of privately and publicly-financed plant expansion. Pri vate financing in the years 1917-1920 amounted to some $9 billion, while public financing totaled a little over $600 million. Public investment was concentrated in shipbuilding, and it scarcely touched industry in general. During World War II, however, the Govern ment has become dominant in shipping, aircraft, synthetic rubber, and nonferrous metals, and has a large interest in many other industrial fields. The public investment which was required to create the necessary war production facility amounts to approxi mately $16 billion, and will be increased further before the end o f the war. Problems of Plant Disposal The great expansion o f Governmentowned plant raises many questions concerning its disposition that are not involved in the growth o f privately-financed facility. M ost o f these problems develop because private investment necessarily is limited by pros pects o f future returns, while the criterion o f public investment is the winning o f the war, irrespective o f costs. Hence, it is not surprising to find that approximately a third o f all publicly-owned in dustrial facility is concentrated in the production o f ammunition, explosives, shell loading, and guns. These plants are o f such specialized character that they do not readily lend themselves to the pro duction o f civilian goods, and many o f them probably The purposes to which the new plant facility will be put are clouded, at present, in uncertainty and po tential conflict o f interests. The controlling objective o f Congress should be to secure the maximum contri bution to the public welfare through the disposition of plant facility and to cause the minimum dislocation in employment, commerce, and industry. On their part, the basic aim o f Government authorities, em powered with responsibility for plant disposal, should be to obtain the best returns consistent with the interests o f the public and in line with Congressional intent. From present indications, any large-scale destruction or wastage o f surplus plant would be con sidered an evidence o f serious administrative and legislative ineptitude. Under the most optimistic conditions, however, Government plant disposal will raise many questions related to competitive private enterprise and the adjustments which may be necessary to accommodate the expanded facility. These not only will involve such factors as the numerous purchase priority rights, but will include many problems o f broad social and economic significance. For instance, will it add to the present unbalance between large and small business? Will this be the means to concentrate industrial power further in large-scale enterprise and in industrial regions already holding vast production resources? Or will it be used to decentralize industry and to aid small business as compared to large business, either through policy o f sale (some kind o f preferential treatment) or through subsidy operation? How, too, will such problems as full employment, regional balance, and increased public planning be related to disposal policies? Option Considerations First consideration in any discussion o f plant disposal must be given to the lease rights neld by present operators. Practically all plants leased from the Government by private corporations provide an option for purchase by the operator, ex cep t aluminum, magnesium, syn THE MONTHLY BUSINESS REVIEW thetic rubber and components (butadiene and styrene), pipelines, and a miscellaneous group o f plants includ ing the Geneva Steel Works. Sales plans for these facilities have been postponed until accumulated pres sures help to formulate a socially acceptable and, it is hoped, an economically feasible solution. Policies governing the establishment o f sales prices for Government-owned plants are yet to be decided upon and will determine whether many o f these plants are to be acquired by present option holders. In order to aid the formulation o f price policies, Government plants are currently being evaluated by professional appraisers to determine the special cost features at tributable to war as compared to that part o f plant facility which has post-war potential worth1. When peacetime plant evaluations are more accurately known, option agreements will have to be correlated with revised appraisals. Under present agreements, operators, in many instances, would be required to assume considerable property which would have little or no use in peacetime production, since many options may be exercised only for the entire plant and its equipment. The extent to][which options w illjje usedlis difficult to appraise. M ost o f the new war plant facility was built at high cost for both labor and materials, with only wartime requirements in mind. They often con tain such special features as double boiler capacity, dual wiring, special lighting, air-conditioning for special production (not necessarily associated with the comfort or efficiency o f labor), and other high-cost installations. Some o f these features have peacetime value, but not commensurate to their cost. Policies which are not directly concerned with the sale o f property also may be formulated. For instance, there may be a requirement that no plant be abandoned for a minimum period; that operation be maintained at or above a specified level; or that the plant employ a minimum labor force. Then, too, policy may forbid sale to selected large operators or companies which have monopoly or restraint charges pending against them by the Department o f Justice. Some, including present corporate operators, have even asked that a moratorium on plant sale be instituted for a two-year period, during which time a low rental should be charged with the objective o f smoothing reconversion and maintaining employment. Option Rights and Competition Option rights also call to attention the effect o f plant disposition upon competition. It is estimated that 150 large firms hold some form o f option rights on some 75 percent, by value, o f all facility commit ments, and that approximately 100 companies have received about two-thirds, by value, o f all prime con tracts. Thus, these larger enterprises apparently will > T h e Surplus D isposal A c t o f 1944 c o n ta in s c e rta in safeguards w hich m ay tend t o increase th e com p lex ity and r ig id ity o f disposal plans. A m on g these is the clause w hich requires Congress to pass upon sales o f all surplus plants a b o v e £5 m illion. A lth ou gh the U. S. Steel C orp ora tio n does n o t hold an o p tio n t o purchase the G en eva Steel W orks w hich it operates, it has evidenced an interest in its acquisition. T h e ann ou n cem en t o f U. S. Steel in tent t o expan d western in du stry w as accom pan ied b y a statem en t, in order t o allay criticism , th at its purchase w ould result in the dism antling o f o u tm o d e d units so th atfor th eFRASER co m p a n y ’ s basic ste»lm ak in g ca p a c ity w ou ld n o t be increased in Digitized the p »»t-w a r period. 3 have priority, through option, and financial ability, through operations, to buy the best integrated o f these plants2. As a result, they are likely to enhance their position by purchasing the newly-created facilities to the detriment o f small competitors who cannot participate equally in their acquisition. In any event, it would seem certain that, if the sales value o f the Government-owned plant is determined by the degree o f convertibility, wartime operators would have an experience advantage over any other buyers. When the time for the actual sale o f Governmentowned war plant arrives, there may be increased pressure for “ temporary” and even long-term[operation on a rental basis.8 This may result from the desire o f Congress to examine sales policies further, or it might derive from the belief o f business that the only correct criterion o f plant value is peacetime operation. In order to assure a fair operation trial, minimum levels o f operation might be required, although this would appear infeasible in the face o f some o f the possible reconversion difficulties. Further complicating this possibility is the fact that some o f the Government plant is closely allied, on a “ scrambled facility” basis, with privately-owned plant. T o illustrate this problem, blast furnace facilities, which are Government-owned and are integrated with privately-owned oper ational stages, cannot function long unless there is demand for finished steel products. The probable truth is that much o f the Government-owned plant, because o f size or location, or because it represents but one stage in the total production process, cannot be purchased except by present operators. The eventual result may be an extreme buyer’ s market, with current tenants the only possible purchasers. Economic Concentration vs. Regionalism Opposed to the forces o f concentration, however, is the prevalent attitude o f Congress, as well as the activities o f the sponsors o f the cause o f small business who see decentralized plant disposal as a primary means o f continuing the Ameri can competitive economy. Several bills now passed or pending have, as their stated objective, the fostering of new and small enterprise through a planned disposal of Government plant facilities. The Surplus Property Act o f 1944, itself, prescribes the policy o f aid to small business and charges the Smaller War Plants Corpor ation with responsibility for carrying it out. The powers to be used include advice to the Board and disposal agencies on the requirements o f small busi ness; the ability to purchase any surplus property for resale or lease to small business; and the guarantee of loans to small businesses which may wish to buy on credit or time bases. Prominent in this discussion is a “ multiple rental” plan whereby the larger plants would house numerous small enterprises. Despite some studies which purport to show the operating efficiency o f small business as compared with large-scale enterprise, the expansion o f large business is much in evidence. The pressure for war production has tended to increase the relative in fluence o f large business, and, because the great * Few plant sales have y e t been m ade b y a n y disposal a g e n c y o f th e Sur plus D isposal Board, although listings o f surplus plants have been m ade. A ll o f these plants w ere built especially fo r w ar p ro d u ctio n and are n « longer in use or were never used, 4 THE MONTHLY BUSINESS REVIEW majority o f wartime industrial expansion has been concentrated in the northeastern states, the problem o f regional balance is beginning to receive much public attention. This fact not only raises questions of national economic policy, but presents regional poli tical opportunities which may not be dismissed lightly. Even the growing tendency o f “ national” organizations to decentralize the location o f some of their constituent units has not changed the funda mental pattern o f industrial concentration, because policy has remained centralized. Examination o f wartime plant expansion tends to substantiate the reality o f industrial concentration, and it exhibits additional possibilities for the post-war enhancement o f the more mature industrial areas. The established industrial areas have experienced a somewhat greater relative expansion in equipment than in plant facility, as compared to the newer industrial areas, and this augurs well for post-war plant utilization. Thus, the competitive position of these areas may be advanced. It is also widely recognized that shipbuilding, aircraft, aluminum, and other lines difficult to convert to peacetime uses have seen their greatest relative expansion in the less industrially developed regions o f the country. Then, too, the location o f some o f these plants was dictated by security reasons, rather than regard for sources of raw materials or traditional markets. It is becoming increasingly clear, however, that regional considerations may play an important part in the disposition o f Government-owned plant. Many o f these probably are not yet recognized and may result in new disposal policies, as ramifications o f the problem become intelligible. However, if socio economic considerations lead to a continued operation of uneconomic units— aided by purchase price prefer ences, subsidies, etc.— then such operations may be disadvantageous to plants in the older industrial areas which normally have supplied the markets o f the South and West. S ta tu s o f th e F ou rth D istrict The present experience o f plant disposition in the fourth district essentially parallels that o f the country at large. As o f February 1, 1945, only three Government-owned industrial facilities in the district had been declared surplus and none had been sold. This does not mean, however, that many options are not intended to be exercised or that numerous offers to purchase have not been received by disposal agencies. The end o f the European war and the crystallization o f sales policies may result in great activity in this field. The Fourth Federal Reserve District is more than casually interested in the plant disposal program. According to the 1939 Census o f Manufacturers, the area produced 11.9 percent o f the value o f all manu factured products and 12.4 percent o f “ value added by manufacturing” for the entire country. War plant facility expansion, as shown in Table I, nearly kept pace with the pre-war position o f district industry. In the early years o f the war, the district’s relative share o f plant growth was a little larger than at TABLE I Fourth District War Plant Facility Expansion, 1940 - June 1944 (In Millions o f D ollars) 1. 3. Iron and Steel, Basic- S em i-F in ish ed..................... A ircraft, Engines, Parts, A cce sso rie s........................... Ships, C on stru ction and 4. 5. 6. C om b a t V eh icles.................... G uns and A m m u n it io n .. . . Explosives and A m m u n ition 7. 8. 9. N onferrous M e ta ls................ M ach in e T o o l s ........................ M ach in ery and E lectrical E q u ip m e n t........................... C hem icals, in clu d in g Syn th etic, C oa l, and Petroleum 2. 10. 11. P u blic Private D istrict T o ta l U.S. T ota l P ercent in D istrict 341 245.0 586.0 2,099 28.0 412 42.0 454.0 3,721 12.2 51 27 192 12.0 28.0 35.2 63.0 55.0 227.2 2,430 754 2,322 2.6 7.3 9.8 198 92 37 2.0 31.0 39.1 200.0 123.0 76.1 2,511 1,433 317 8.0 8.6 24.0 143 91.9 234.9 895 26.2 F ood and O th e r ..................... 177 16 122.8 105.0 299.8 121.0 3,186 3,837 9.4 3.2 T O T A L .................................. 1,686 754.0 2,440.0 23,505 10.4 present, because both private and public expansion easily could be correlated with established industries, up to the labor force potential. The industrial groups which showed the greatest relative growth in the district were iron and steel, machinery and electrical equipment, machine tools, and aircraft, including engines, parts, and accessories. Since a good share of the latter is represented by facilities operated by former automobile equipment suppliers, it is evident that the largest relative expansion is associated with established pre-war industries. It is a significant fact that approximately 70 percent o f the Governmentowned plant facility in the fourth district is believed to be highly convertible to peacetime production, if awards for ship and aircraft facilities are omitted from consideration. This is, perhaps, the most important differentiating factor favoring the fourth district and may bulk large in determining the disposition of Government plant, as well as the degree o f its ab sorption into district industry. One probable basis for determining the comparative position of fourth district industry to acquire plant facility lies in its major war contract holdings. Active contracts, as o f December 31, 1944, are shown for the fourth district in Table II. TABLE II Fourth District Major War Supply Contracts* Active as o f D ecem ber 31, 1944 Value in Thousands T otal United States.................................... 369,701,605 O h io......................................................... 6,832,001 Pa. (4th d istrict)................................. 1,309,383 K y. (4th district)................................ 98,062 W . Va. (4th district).......................... 50,756 Total Fourth D istrict................................. 8,290,202 Percent in Fourth D istrict....................... 12.1 * I n d u d e s all prim e co n tra cts o f 350,000 or over. The fourth district share o f outstanding contracts, as o f December 31, 1944, amounted to 12.1 percent. This indicates that the area, both in percent of expansion and contracts held, compares favorably with its pre-war industrial position. When one con siders the nature o f fourth district industry, known traditionally as the subcontracting district because it contains so many metal-working companies, its net share o f total war contracts should be considerably in excess o f its share o f prime contract holdings. Unless THE MONTHLY BUSINESS REVIEW unforeseen problems o f war contract settlement reduce the immediate financial ability o f plant operators, the magnitude o f war contracts would seem to measure, in part, the capacity o f district industry to purchase new plant facility. Although there is no such thing as a normal rate o f plant expansion— rather it is sporadic and indetermin able, despite averages which indicate an approximate over-all annual increase o f two percent— there would seem to be little doubt that the war-built usable plant at least matches the growth which would have occurred if the war had not intervened. Some have contended that deterioration o f plant has been progressive for much o f the last decade and has been accelerated by war. Though record war production does not wholly substantiate this, it could mean that the market for the war-built plant would be enhanced and that there may be a general step-up in plant efficiency during the post-war period. Since a good proportion o f usable plant is located in this area, the post-war position of fourth district industry may be improved. In other words, if ease and degree o f convertibility are criteria o f plant value, the fourth district is in an enviable position. There is no mystery about Government-owned plant. It is tangible and can be an important addition to the economy, or its disposal can be so laggard that it may result in a prolonged market overhang. Therefore, many believe that present fears o f business may be greatly reduced by a program o f rapid plant facility disposal. Although the majority of Governmentowned plant and equipment may have to be retained in its present status until the end o f the war, the inter vening period should see considerable facility sale and the formulation o f complete disposal plans. The over-all limits to plant disposal would appear to be the ability o f industry to absorb it and the consent of Government to release it. War plant disposal constitutes a complexity o f problems. Each region, each industry, each plant, will need to be examined as a separate problem and then be related to its national setting. Current ap praisal o f war plant disposal would seem to show that peacetime prospects are particularly promising for the mature industrial areas and for established business firms. However, just as the war has provided a back ground o f experience and opportunity for many able RATES ON NEW COMMERCIAL LOANS PERCENTAGE DISTRIBUTION OF DOLLAR VOLUME 12 RESERVE C ITY B A N K S - FO U R T H D IS T R IC T INTEREST RATES 5 enterprisers, the sale o f plant facility may create a new group o f industrial leaders— those who can work effectively in a new climate o f closer Governmentbusiness cooperation. FINANCIAL Interest Rates on Commercial Loans Changes in interest rates on commercial loans cannot be measured with absolute preci sion. Quality o f risks, the average size o f loans, prospective cost o f servicing loans, and other con tingencies represent indeterminable variables whose effectiveness is not subject to simple evaluation. However, changes in the proportionate volume of loans made within several major rate-groups are in dicative o f changing conditions under which com mercial bank credit is extended. Those proportions are depicted in the adjoining chart. Each of the bars represents 100 percent o f new commercial loans made to customers by a represen tative group o f reserve city banks of the fourth district during the first half o f the months of March, June, September, and December o f each of the past six years. In this tabulation, renewals were considered as new loans. Loans which extended beyond twelve months were excluded. First of several observations is that the proportion o f new loans bearing rates o f five percent or higher has steadily diminished. For a time during 1939, over 25 percent o f new commercial loans (dollar volume) carried rates o f five percent or better. By 1942, less than ten percent of the new loan volume was o f this category. Very few o f these loans exceeded 310,000, and the bulk consisted o f units o f $1>000 to 35,000. Another, but less drastic, contraction occurred in the 4.0 to 4.9 percent group. In 1939, nearly 18 per cent o f the dollar volume o f new commercial loans was written at those rates. In 1944, the proportion had dropped to about eleven percent o f the total. Loans in this gr»up ranged in size from 310,000 to 325,000, with a few exceptions. A third type o f new loan to decrease in proportion ate importance was that whose rates were less than two percent. It is noteworthy that, during both 1940 and 1941, over 40 percent o f new commercial loans were made at such a relatively low rate, and for a considerable period over half the new loans yielded a return o f less than two percent. This class o f loans included the largest commitments; not many were written in amounts o f less than 3100,000. PE R CE N T In 1939, the three above-described groups repre sented nearly 70 percent o f the loan volume. Five years later, these end groups comprised only approxi mately 40 percent o f the total. In a sense, the dispersion of rates narrowed to a noticeable degree, as intermedi ate rates became more prominent. 5 AND OV ER 4 . 0 - 4 .9 3 .0 -3 .9 2.0-2.9 UN DER 2 1939 1940 1941 1942 1943 1944 The 3.0 to 3.9 percent rate classification experienced substantial growth. Loans o f this kind dominated the field during both 1943 and 1944, after several years of comparative unimportance. The average size o f these loans also increased remarkably. In 1939, a typical 6 THE MONTHLY BUSINESS REVIEW loan in this group represented a commitment of $16,000. During the past two years, these new loans averaged in excess o f $100,000 each— as large as the 2.0 to 2.9 percent type. Obviously, considerations other than size were responsible for this one percent differential in rates. In the period 1939-41, virtually every new com mercial loan o f $100,000-and-over carried a rate of less than two percent. During 1943 and 1944, more than half (in dollars) o f such large loans carried rates from 2.0 to 3.9 percent. These changes in the composition o f new business loans placed on the books o f the largest commercial banks should be considered in relation to changes in total loans outstanding. Toward the end o f 1941, commercial loans o f reserve city banks o f this district had increased more than 100 percent in three years. This growth was accompanied by some scaling down in rates on new loans, perhaps because o f improved quality or other considerations such as the contem porary expansion o f excess reserves. Since the close o f 1941, outstanding commercial loans have contracted somewhat, but the proportion o f new loans taken at the lowest rates has diminished noticeably. The ascendancy o f the intermediate loan rate-groups is the most striking feature in the current loan picture. Recent Banking Developments There has been no appreciable change in total deposits o f weekly reporting banks o f this district since the close o f the Sixth War Loan. As in previous inter-drive periods, Government deposits have de clined, but thus far the contraction has been at a somewhat slower rate than in previous intervals, in part because o f relatively heavy internal revenue receipts during January. Adjusted demand deposits have regained about onethird o f their drop during the recent war loan drive. Time and savings deposits have continued their un precedented rate o f growth which has persisted for nearly a year. Loans Some contraction in loans has taken place since the first o f the year, chiefly because of liquidation o f collateral loans. However, advances to customers other than brokers and dealers, covered by collateral in the form o f Government securities, still represent over one-half o f all secured loans outstanding. t Investments Holdings o f Treasury bills are again declining as banks dispose o f these short-term and low-yielding securities, partly through the repurchase option mechanism, but mostly by not replacing maturing bills. Bill holdings now constitute only about 4 percent o f the portfolio o f Government securities o f weekly reporting banks, as against nearly 16 percent two years ago when such holdings were at their peak to date. There has been no marked change in holdings of certificates o f indebtedness and notes. Government investments have virtually vanished, as guaranteed one o f the remaining outstanding issues matured and holders were given the privilege o f exchange for certi ficates o f indebtedness. Reporting banks have acquired substantial quanti ties o f Treasury bonds in recent weeks. Over half the year-to-year increase (21 percent) has been concen trated in the past three months, constituting one o f the sharpest expansions on record for this section of the portfolio. Reserves The above-mentioned purchases o f Treas ury bonds and a resumption in the outflow of currency into circulation have tended to reduce somewhat the volume o f funds available for invest ment, particularly as reserve-free Government deposits were being converted into other deposits requiring reserves. AGRICULTURE Limestone Requirements of Ohio Soils “ Liming the soil,” according to the United States Department o f Agriculture, “ is the very backbone of profitable crop production, soil con servation, and permanent agriculture in the humid regions o f the country.” The importance o f lime has been known and emphasized for several decades, not only by the Department o f Agriculture, but also by the state agricultural experiment stations and the Agricultural Extension Service. Despite this emphasis, the “ lime budget” is still considerably out o f balance in the humid section o f the United States, an area which includes the Fourth Federal Reserve District. The almost universal need for lime within the fourth district sets the stage for widespread joint action between farmers and country bankers. The satisfac tion o f lime deficiencies through use o f bank credit is one o f the best examples o f the interdependence of banking and agriculture, and the results obtained demonstrate clearly the mutual advantage o f the trans action. On the basis o f nearly 20,000 tests o f Ohio soils made annually, the Department o f Agronomy at Ohio State University reports that the rate o f lime usage in the State is much below the amount required to place all crop and pasture lands on a basis for growing good clovers and alfalfa. Although there is a wide range in lime needs over the State, the shale and sandstone soils o f eastern Ohio are uniformly the areas o f greatest need. The soils o f the western part o f the State are largely o f limestone origin, and in some sections, particularly the black soil areas, there is enough lime. However, even on these soils, lime is currently being lost or consumed at rapid rates. The proportion of rotated cropland acres which are in need o f lime in each Ohio county is indicated by the cross-hatching on the accompanying map. The map also shows (circled figures) the tonnage of ground limestone which should be applied to rotated soils requiring lime in each county. It should be noted clearly that these recommendations are averages. The actual amount o f lime which should be applied in any specific case will depend upon a number o f factors including previous treatment, soil type, etc. The only THE MONTHLY BUSINESS REVIEW Indexes of Department Store Sales and Stocks D a ily A v era ge fo r 1 9 3 5 -3 9 = 1 0 0 SALES: A k ron ( 6 ) ..................... C a n ton ( 5 ) ................... C in cin n ati ( 9 ) ............. C levelan d ( 1 0 )............ C olu m bu s ( 5 ) ............. Erie ( 3 ) ......................... P ittsburgh ( 8 ) ............ Springfield ( 3 ) ............ T o le d o ( 6 ) .................... W h eelin g ( 6 ) ............... Y o u n gstow n ( 3 ) . . . . ’ D istrict ( 9 7 ) ................ STOCKS: D istrict ( 5 1 ) ................ W ith o u t Seasonal A d ju stm e n t Jan. D e c. Jan. 1945 1944 1944 A d ju ste d for Seasonal Variation Jan. D ec. Jan. 1945 1944 1944 179 167 155 142 172 151 129 168 146 121 161 145 236 217 189 172 213 194 172 230 197 173 210 186 131 369 395 314 285 370 355 262 408 331 312 335 304 125 162 162 138 129 154 153 118 164 131 108 139 132 140 147 234 227 186 181 210 201 164 229 195 165 207 190 213 211 168 156 190 196 157 225 177 154 180 169 137 158 (1 9 4 5 c o m p a r e d w it h 1 9 4 4 ) Percentage Increase or Decrease SA LE S STOCKS Jan uary January 1945 1945 D E P A R T M E N T S T O R E S (97) A k r o n ............................................................................................. ......+ 1 5 C a n t o n .......................................................................................... ..... + 7 C in c in n a ti.................................................................................... ......+ 1 7 C le v e la n d ............................................................................................+ 1 5 C o lu m b u s............................................................................................+ 1 6 E r ie ............................................ .................................................... ......+ 3 P itts b u rg h .................................................................................... ......+ 1 4 S prin gfield.................................................................................... ......+ 6 T o l e d o ..................................................................................................+ 1 5 W h e e lin g ....................................................................................... ......+ 1 6 Y o u n g s t o w n .......................................................................................+ 2 1 O ther C itie s ................................................................................. ......+ 1 D is tr ic t.......................................................................................... ...... + 1 4 — 6 a — 3 —13 — 5 - 2 — 3 a - 7 — 5 a — 2 — 7 F U R N I T U R E (71) C a n t o n .................................................................................................- 0 C in c in n a ti...........................................................................................+ 1 0 C le v e la n d ..................................................................................... ...... — 4 C o lu m b u s ..................................................................................... ...... — 8 D a y t o n .......................................................................................... ...... — 4 P itts b u rg h .................................................................................... ...... — 4 T o l e d o .................................................................................................. + 1 3 O ther C itie s ................................................................................. ...... — 3 D is tr ic t.......................................................................................... ...... — 2 — 7 + 8 —16 —23 a +17 -2 4 — 12 — 8 C H A IN S T O R E S * W H OLESALE T R A D E ** A u to m o tiv e Supplies ( 7 ) ........................................................ ...... + 2 7 Beer ( 6 ) ......................................................................................... ...... + 1 C loth in g and Furnishings ( 3 ) ..................................................... + 1 6 C o n fection ery ( 3 ) ...................................................................... ...... — 19 D rugs and D ru g Sundries ( 5 ) .............................................. ...... + 6 D ry G ood s ( 3 ) ............................................................................ ...... + . 3 E lectrical G ood s ( 1 1 ) ..................................................................... + 1 5 Fresh Fruits and Vegetables ( 8 ) ......................................... ...... + 1 2 G rocery G rou p ( 4 5 ) ........................................................................ + 1 1 T o ta l H ardw are G rou p ( 1 6 ) ................................................. ...... + 1 0 Industrial Supplies ( 1 0 ) ..................................................... ...... + 4 P lum bing and H eating Supplies ( 6 ) ............................. ...... + 2 4 Jew elry ( 9 ) ..........................................................................................+ 5 L u m b er and Building M aterials ( 3 ) .................................. .......— 4 M a ch in ery, Equip. & Sup. (E x ce p t Elect.) ( 4 ) ............ .......+ 7 M eats and M ea t P rodu cts ( 4 ) ............................................. .......+ 1 1 Paper and its P rodu cts ( 3 ) ...........................................................+ 1 4 T o b a c c o and Its Produ cts ( 1 4 ) ...................................................+ 5 M iscellaneous ( 1 5 ) .................................................................... .......+ 2 D istrict— A ll W holesale T ra d e (1 6 5 )................................ .......+ 9 a a +26 +33 a a — 16 —12 —26 +19 — g +14 +14 a - 5 a +11 —28 a a —- 5 — 6 * Per in divid u al unit operated. ♦♦W holesale data com piled b y U. S. D epartm en t o f C om m erce, Bureau o f th e Census, a N o t available. Figures in parentheses in dica te num ber o f firms reporting sales. (0 0 0 o m itte d ) Fourth D istrict U nless January O therw ise Specified 1945 B a n t D ebits— 24 citie s .................................. 34,837,000 Savings D eposits— end o f m onth: 39 Banks O. and W . Pa............................ 31,180,952 L ife Insurance Sales: 93,161 O hio and Pa................................................... 3 R etail Sales: D ept. Stores— 97 firm s.............................. 3 35,459 W earing A p parel— 16 firm s..................... 3 1,822 Furniture— 71 firm s.................................... 3 1,674 Building C o n tr a c ts — T o t a l ......................... 3 9,874 ” _ ’ — R e s id e n t ia l.......... 3 1,625 C om m ercial Failures— L ia b ilities.............. 3 29 ” — N u m b e r ................. 2 P ro d u ctio n : Steel In got— U. S..................... N et T o n s 7,178 Bitum inous C oal— O., W . Pa., E. K y ................ N et T o n s 18,677 C em ent— O., W . Pa., W . V a......... Bbls. 498a E lectric Power— O ., Pa., K y ................. T h o u s. K .W .H . 3,144a S h o e s ...................................................... Pairs b a D ecem ber b C on fidential January 1944 34,741,000 3 960,398 86,430 31,083 1,595 1,707 14,798 3,523 91 8 7,587 19,651 610a 3,206a b % change from 1944 + 2 +23 + 8 +14 +14 - 2 -3 3 -5 4 -6 8 -7 5 - 5 - 5 -1 8 - 2 - 5 Fourth District Business Indexes Wholesale and Retail Trade D rugs— D istrict ( 5 ) ........................................................................ + 5 G roceries— D istrict ( 4 ) ........................................................... ...... + 1 5 Fourth District Business Statistics (1 9 3 5 -3 9 = 100) Jan. Jan. 1945 1944 Bank D ebits (24 c it ie s ).......................................... 218 213 C om m ercial Failures (N u m b e r ) .......................... 3 12 (L ia b ilit ie s )....................... 2 6 Sales— Life Insurance (O . and P a .) ................... 110 102 ” — D epartm en t Stores (97 fir m s )............... 145 132 ” — W holesale D rugs (5 fir m s )...................... 213 201 155 150 ” — ” D r y G o o d s (3 fir m s )............ ” — ” G roceries (45 fir m s )............. 169 152 ” — ” H ardw are (16 fir m s )............ 142 129 ” — ” A ll (69 fir m s ).......................... 169 153 158 150 ” — Chain Drugs (5 fir m s )* ............................ ” — Chain G roceries (4 fir m s )........................ 160 150 B u ilding C on tracts ( T o t a l ) ................................... 40 61 (R e s id e n t ia l) ........................ 21 46 P rodu ction — C oal (O ., W . Pa., E. K y .) .......... 149 157 — C em ent (O ., W . Pa., E. K y .)* * 60 74 — Elec. Pow er (O ., Pa., K y . ) * * . . . 206 210 ” — Petroleum (O ., Pa., K y . ) * * . . . . a 98 ” — S h o e s................................................... 84 88 * Per individ ual unit operated. ♦♦D ecem ber, a N o t available. Jan. Jan. Jan. 1943 1942 1941 173 156 135 34 77 79 22 49 91 84 174 90 133 132 88 175 161 137 144 136 80 136 147 104 145 177 117 146 157 110 149 131 100 152 148 106 85 140 121 61 184 143 138 144 132 126 166 130 187 168 134 97 101 98 84 101 110 \ Debits to Individual Accounts (Thousands o f Dollars) A k r o n ........................................................... B u tle r ........................................................... C a n t o n ......................................................... C in c in n a ti.................................................. C le v e la n d ................................................... C o lu m b u s................................................... C o v in g to n -N e w p o r t............................... D a y t o n ........................................................ E r ie ............................................................... F ra n k lin ...................................................... G reen sb u rg................................................ H a m ilto n .................................................... H o m e ste a d ................................................. L e x in g to n ................................................... L im a ............................................................. L o ra in .......................................................... M a n sfield ................................................... M id d le to w n ............................................... Oil C i t y ....................................................... P ittsb u rg h .................................................. P o rtsm o u th ................................................ S h a ro n ......................................................... Sprin gfield.................................................. S teu b en ville............................................... T o le d o ......................................................... W a rre n ........................................................ W h e e lin g .................................................... Y o u n g s to w n .............................................. Z a n esv ille................................................... T o t a l........................................................ J an u ary 1945 195,316 20,470 83,651 658,451 1,386,041 305,963 26,634 148,195 52,310 5,694 11,657 21,732 4,745 85,735 31,170 9,410 20,359 19,515 17,406 1,346,732 12,124 15,747 31,928 15,266 236,046 23,817 41,921 82,382 12,919 4,923,336 Jan u ary 1944 179,160 17,946 74,986 632,227 1,275,149 306,956 25,548 155,127 64,128 6,241 12,315 19,342 4,852 79,639 26,094 9,428 19,868 20,806 14,536 1,373,950 11,308 16,785 33,435 13,058 267,823 22,173 45,118 85,798 13,057 4,826,853 % change from 1944 + 9.0 + 1 4 .1 + 1 1 .6 + 4.1 + 8.7 — 0.3 + 4.3 - 4.5 -1 8 .4 — 8.8 — 5.3 + 1 2 .4 — 2.2 + 7.7 + 1 9 .5 — 0.2 + 2.5 — 6 2 + 1 9 .7 - 2.0 + 7.2 — 6.2 — 4.5 + 1 6 .9 -1 1 .9 + 7.4 — 7.1 — 4.0 - 1.1 + 2.0 7 THE MONTHLY BUSINESS REVIEW way to take all o f these consideration is to make every field in question. applications should be at by the map. influencing conditions into lime requirement tests for Lacking such tests, the least as great as indicated Although the lime budget in Ohio is still unbalanced, there has been considerable improvement in the use o f lime by farmers in recent years. Much o f the im provement has undoubtedly resulted from (1) wide spread educational efforts on the part o f the institu tions named above, (2) special inducements by the Agricultural Adjustment Administration, and (3) im proved services o f lime manufacturers and dealers. The following table shows a doubling o f applied lime stone tonnage during the five war years and an exceptionally large rise in recent years over the low applications during the depression. The highest annual application before 1930 was 310,000 tons. Use of Agricultural Liming Materials Ohio 1930......... ......... 233,000 1932......... ......... 103,000 1934......... ......... 158,000 1936......... ......... 319,000 1938____ ......... 318,000 tons tons tons tons tons 1940. . . . . . 814,000 1941.. . . . .1,145,000 1942. . . . . . 1,420,000 1943.. . . . .1,521,000 1944.. . . . . 1,600,000 tons tons tons tons tons' ♦Prelim inary. Ohio agronomists have estimated that an initial application o f between 30 and 35 million tons o f lime stone would be required to prepare a ll o f the State’ s rotated and pasture soils for growing satisfactory crops o f clover and alfalfa. In addition to this base requirement, an annual application o f 1,500,000 to CROPLAND NEEDING LIMESTONE AND RECOMMENDED APPLICATION RATE IZ Z Z Z ] IWTTI 61 Souroot Department of Agronomy, Ohio State UniT«r«lty. ** 2,000,000 tons would be necessary to replace the lime lost annually on rotated and pasture lands through leaching, erosion, and crop removal. Taking both of these needs into consideration, the Department of Agronomy has suggested an annual application o f 4,500,000 tons o f liming materials in Ohio in the immediate post-war period. This recommended tonnage takes into consideration the fact that lime should not be applied to all soils needing it, for some soils are o f low productivity for reasons other than their acidity, and lime applications would be largely Wasted. TRAD E R etail Sales at fourth district department stores during January were 14 percent greater than they were in the same month o f 1944 and the largest for any similar month on record. However, the decrease in sales from the previous month was slightly more than usual, and the seasonally adjusted index declined four points to 186 percent o f the 1935-39 average. Departments selling dresses, furs, men’ s and boys’ wear, and furniture experienced sizable yearto-year gains in their business. Merchants continued to report increases in their sales this month, and during the two weeks ended February 17, dollar volume was up 26 percent from the corresponding period o f 1944. Whether the substantial gains that stores have been experiencing in their dollar sales during the past year will carry over into the next several months depends largely upon their ability to obtain merchandise. In recent months, stocks usually have been the limiting factor to sales. In all probability, the dollar volume o f sales during the war years would have been greater, if retailers had been able to secure adequate quantities and types o f merchandise to fulfill consumer demand. Following the record-high holiday business o f last year, inventories were reduced to the lowest level since July 1941. During January, stores received slightly more merchandise than they sold, and their dollar stocks at month-end were down seven per cent from January 31,1944, and were at approximately the same level as they were on the corresponding date two and three years ago. Stocks o f women’ s readyto-wear and accessories at the end o f last month were down 2 percent from the same date last year, men’ s and boys’ clothing 8 percent, and housefurnishings 13 percent. In an effort to build up their inventories, fourth district department stores during January made a large volume o f commitments for new merchandise, and orders outstanding at retail on January 31 were the largest on record. The present expansion started during November and December, which is unusual for those months, when the volume o f orders generally is reduced as stores receive delivery o f holiday merchandise which had been ordered during the summer and early fall. The sharpest increase in orders occurred during January, as shown on the accompanying chart, and at month-end the volume outstanding was up 52 percent from the same date last year and 128 percent from two years ago. Com pared with the previous all-time high o f mid-1943, 8 THE MONTHLY BUSINESS REVIEW there was a gain o f 19 percent. Whereas in the early war months unfilled orders were slightly less than half the volume o f stocks on hand, the present scramble for merchandise has become so widespread that orders are 66 percent in excess o f stocks. In any discussion o f dollar stocks and orders, the fact that changes in the physical volume o f goods on hand are not accurately reflected in the changes in dollar value must be taken into consideration. Although dollar stocks at the end o f last month were almost as large as they were on the same date o f the previous three years, stores actually had considerably less merchandise to offer for sale. This difference resulted largely from the general upgrading o f mer chandise that has taken place over the war period. Many manufacturers have chosen to use their limited supplies o f raw materials and manpower for the pro duction o f luxury items at high prices rather than the lower-priced lines. In an attempt to alleviate this situation, the War Production Board and Office of Price Administration are jointly sponsoring a program intended to increase production o f many popularpriced items. W PB has made up lists o f woolen, rayon, and cotton garments for which manufacturers will receive priorities on fabrics. OPA’ s part in the pro gram is the establishment o f ceiling prices on these STOCKS AND OUTSTANDING FOURTH DISTRICT ORDERS DEPARTMENT STORES IS O -------- STO CKS — ORD E R S too A / )■jh so 1940 1941 1942 1943 garments. This joint effort is aimed at reducing ‘currently inflated” clothing prices by six or seven percent, not so much by lowering prices on those apparel articles which have been available, but by increasing production o f many less expensive clothing items which have disappeared from store shelves. The Government expects that stores will have a somewhat greater supply o f these items by early summer. O f the total yardage o f textiles available for civilians, W PB has designated that 80 percent o f the woolen and cotton goods and 75 percent o f the rayons must be used for production o f “ essential” items, all o f which are in the low and medium-price ranges. Items covered include women’s dresses, underwear, pajamas, blouses, coats, suits, men’ s shirts, trousers, underwear and many types o f clothing for infants and children, which stores have found especially difficult to pur chase. Worsted cloth is also included in the W PB orders. However, civilians are not likely to get any worsteds until later this year, since present production o f such materials is being devoted entirely to filling military requirements. This, together with Government re strictions on pants-making and the manufacture of overcoats, is expected to be reflected in men’ s clothing inventories, since worsted textiles are the principal materials for men’ s suits and coats. Evidence o f this is found in the fact that stocks o f men’ s suits, coats, and other clothing at fourth district department stores were 10 percent smaller this January 31 than last and down 26 percent from the same date two years ago. Wholesale / Sales at 165 wholesale firms in the fourth district were nine percent greater this January than last. Firms selling automotive supplies, clothing and furnishings, paper products, electrical goods, fresh fruits and vegetables, and groceries ex perienced substantial increases in their business. Sales o f coal, confectionery products, and building materials were smaller than those o f January 1944. Wholesale inventories at the end o f last month were down six percent from January 31 last year.
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