The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
MONTHLY 1VJL W IN i n L I & o o m e M K e t / c e u / IN THIS ISSU E FEDERAL RESERVE BANK of CLEVELAND- Industrial Summary.............................. 2 N otes................................................. 7 Department Store Trade During 1 9 5 7 . . . 8 fla K c u v u f, t 9 5 $ "£ D M >S & *?% £S S / 9 > ClCJU ^V'tZkJ^ af*/ & CLWxASnty. Lft&& 4/ / w U tg k S * $£* f$ 8 /? /) 0< TWJ&i> O p I f S j J f o r f / • (/ /■ tvsM$&0nea/ djj/u/nsir the/ yStccmeu ~m%0JO s Ck J/} M jA iK hdj rn ^ x s u / is s / fJ M i£ ^ & rtZu%&• y V /f w lo a j /) v urmpoA&cbt ims wvm unZru i<?&&-tznrtmi \M a j & s im M o n a J y s 0 / & in c U * & & u a J l/ 'T t A s o r m J ^ u r n p t& L S. „ j / / «5&*' ■ a u d u crrv ~ 4 r fn £ G n r i£ , f 'r n e / +& % $ iv > c h c m § c ^ <r % ■ n o cA em a c s ffm u m s w r r iE A j t o c tu u d b ^ ^ u c e s / Industrial Summary— 1957 THE SCOREBOARD 1957 will go down in the record books as a year in which a great business Per boom passed its peak. It was a year of unusual centage vacillation in business confidence. After 1957 1956 Change opening on a note of mild optimism as to the Gross National Product future, the mood changed swiftly to doubt in (billions)..................... $435 $415 + 5% the spring and back to confidence again in Industrial Production the summer, only to end on a note of uncer (1947-49=100) monthly _o_ tainty and pessimism in the final quarter of average....................... 143 143 the year. Personal Income (billions) $343 $327 + 5 The accompanying scoreboard for the year, Employment (millions, _o_ while showing gains in most categories over monthly average)....... 65.2 65.0 record 1956, fails to indicate the deteriora Unemployment, (millions, monthly average)....... 2.9 2.6 + 12 tion that took place in the closing months of Wholesale prices (1947-49 the year.(1) = 100) monthly average 118 114 + 4 The five percent rise in Gross National Consumer Prices (1947-49 Product to $435 billion was due in large part = 100) monthly average 120 116 + 3 to higher prices rather than to a larger vol ume of goods and services. Moreover, when the final figures are computed, they are like than half the gain was illusory because of ly to show for the fourth quarter a moderate higher consumer prices. Personal income in decline from the peak rate of $439 billion, August reached a peak annual rate of $346.8 seasonally adjusted annual rate, which was billion, but by November it had dropped attained in the third quarter. about $1.5 billion or nearly one percent. The Industrial production in 1957 was equal turnabout in the upward trend of income to the previous year’s monthly average index was due chiefly to three factors: reduced fac of 143, but the year-end trends of the two tory employment, a shorter work week, and years were exactly opposite. In 1956, pro the incidence of the Asian flu epidemic. duction was moving up to a record rate in Total employment in the nation averaged December, whereas in 1957, output was fall 65.2 million a month for the year, a shade ing sharply from the summer plateau of above the 1956 average. Here, too, all of the about 144 index points to 139 in November gain was scored in the first seven months of and to a still lower level in the final month. the year, as employment slipped below yearPersonal income established a new record ago levels in August. By November, total during the year, with an estimated total of employment was 400,000 below the same $343 billion, or five percent above 1956. More month in 1956. Nonagricultural employment ( i) The 1957 data appearing in the text, charts, and tables did not fall behind year-earlier levels until of this article have been partly estimated. he year T 2 November. At that time, the decline in em ployment was centered chiefly in agriculture and in manufacturing industries and was of sufficient magnitude to more than offset the increase in employment in trade, services, and government. Unemployment, after holding fairly stable throughout the year, rose in November to 3.2 million, or 4.7 percent of the civilian la bor force. A substantial part of the year-toyear increase in joblessness as shown in the table, however, is due to a change in the definition of unemployment that became ef fective in early 1957. Although wholesale prices averaged four percent higher in 1957 than in the previous year, the upward trend peaked out in Aug ust and prices dipped fractionally in the fol lowing months. Raw material prices declined sharply in 1957 but prices for some fabricated materials and finished goods continued to inch forward. The Consumer Price Index continued to climb during the year. The few interrup tions in the rise were attributable mainly to changes in retail food prices. Services and housing costs continued to impart an upward thrust to the index. For the entire year, the Consumer Price Index averaged three percent higher than in 1956. Manufacturing Employment in the Fourth District Manufacturing employment in the Fourth Federal Reserve District declined steadily during the first half of the year, turned up slightly between July and September, when factory employment usually rises, and slid again in October and November. In the latter month, such employment was 6 percent below the four-year peak reached in October, 1956, and had slipped to the lowest point in twoand-one-half years. Even at the high mark of October, 1956, employment in District manufacturing industry was still below the postwar peak of March, 1953. As the accompanying chart shows, changes in manufacturing employment in the District have followed national developments closely, but the downturn from the 1956 peak has The larger drop la District employment reflects the preponderance of durable-goods industries. INDEX Source of data: Bureau of Labor Statistics; Ohio Bureau of Unemployment Compensation; and Pennsylvania Bureau of Employment Security. been steeper in the District than in the rest of the nation. Also, factory employment in the District in that peak month was further below the 1953 high than was the case for factory employment in the nation. These departures from the national aver age reflect the District’s greater-than-average proportion of durable-goods industries. Both 1953 and 1956 were years of exceptional ac tivity in those heavy industries in which the District specializes. During 1957, conversely, employment declined more in the durable goods industries than in those industries pro ducing nondurables. Certain important industries have been se lected for particular attention in the review which follows. These are industries which are of special significance to the Fourth Fed eral Reserve District. Steel Steel ingot production in 1957 is estimated at about 113 million tons, or two million tons less than the output of the previous year. The trend of production during the year was generally downward, with the rate of 3 1957 STEEL OPERATING RATES Percent Capacity Producing Area Cincinnati Cleveland........................ Pittsburgh....................... Wheeling......................... Youngstown.................... TOTAL U . S ......................... Jan. ’57 Dec. ’57 96 94 100 99 101 68 64 63 58 58 98 67 Monthly averages derived from weekly rates published by S teel Magazine. decline accelerating in the final two months. By December, the steel operating rate had dropped to less than 70 percent of capacity, the lowest rate since mid-1954 except for months of strike interruption. District steel producing centers, as shown in the table, have not been affected uniformly by the slackened demand for steel. In gen eral, those mills producing plate and struc tural steel are operating at higher rates than others. Steel production during the year was heav ily influenced by changes in inventory policy on the part of both steel consumers and the mills themselves. During the first five months, steel consumers added substantially to their stocks, thus continuing the trend that fol lowed the settlement of the 1956 strike. By mid-year, however, nearly every category of steel except heavy plate and structural was in ample supply and delivery was available within normal lead-times. At this point, con sumers began to reduce stocks—particularly of the lighter kinds of steel such as sheet, strip and wire. During the third quarter — and even through October—intense competition on the part of mills for new business led most of them to build up their own stocks of semi finished steel so as to provide fast delivery to customers. Buyers shopped the mills and frequently placed orders on the basis of the shortest delivery promises. The speed-up in delivery, of course, was a further induce ment for consumers to continue to pare in ventory. By November, inventory accumu 4 lation of semifinished steel at the mills came to an end and liquidation began, thus re-en forcing the downward spiral of production. It appeared likely, at year end, that steel inventory liquidation would continue through the first six months of 1958, with the empha sis switching to heavy steel products such as plate and structurals as these have become readily available for the first time in several years. Blast furnace operation for the first 11 months of 1957 averaged more than 93 per cent of capacity in sharp contrast to the 86 percent rate for steelmaking furnaces. Usu ally the rates are very close together. The divergence was due to an increase in the proportion of pig iron used to make steel at the expense of steel scrap. The effect upon the price of steel scrap has been sharp, with scrap prices in early December at less than half the year-earlier level. Stocks of Lake Superior iron ore at the close of the shipping season in early Decem ber were ample. Shipments totaled 84.6 mil lion gross tons, up 7 million from the strikeshortened 1956 season. Foreign ore receipts also rose sharply. STEEL PRODUCTION United States Millions of Tons 125----------------------------------------------------------- Source of data: American Iron and Steel Institute. Autos Although automobile sales and production in 1957 did not equal the high forecasts made early in the year, output was the fourth high est on record. Car production for the year is estimated at about 6,120,000 units, or more than 5 percent above 1956. It was exceeded only in 1955, 1953, and 1950. New car sales by dealers, through the first ten months of the year, were about on a par with the same months of 1956. It was hoped by the industry that the introduction of the new 1958 models in early November would sharply stimulate sales. This expectation was not realized and it is now estimated that retail sales will approximate the 1956 total. As a consequence, new car inventories in the hands of dealers are high. On December 1, inventories were estimated at 700,000 units; they increased further during the month as production continued to outstrip sales. It now appears likely that production of new cars in early 1958 will be affected by these large stocks unless there is a marked improvement in sales. Employment in the automotive industry of the Fourth District averaged somewhat higher than in 1956 as new parts plants were opened, or as older units were expanded, in Twinsburg, Cleveland, Lima, and in the Cin cinnati area. One new car and truck assem bly plant is under construction near Lorain, Ohio, and will begin production this year. Rubber The rubber industry in 1957 enjoyed the second best year of record. New rubber con sumption is estimated to have been about 1,475,000 long tons, only 55,000 tons below 1955, the record year. Synthetic rubber pro duction reached a new high, and the con sumption of synthetic rubber rose to 63 per cent of the total, the largest since the aban donment of war-time controls. Passenger-car tire shipments advanced more than 6 percent from 1956 to an esti mated 90.4 million units in 1957. Original equipment sales were up nearly 7 percent to keep pace with higher auto output, and re- AUTO PRODUCTION in 1957 exceeded the 7956 total by more than 5 percent, but fell fractionally short of the 7953 volume to stand as the fourth largest year on record. M illio n s o f Cars 0 1 2 3 4 5 6 1955 LARGEST PRODUCTION YEAR 1950 SECOND LARGEST 1953 THIRD LARGEST 1957 FOURTH LARGEST 1956 FIFTH LARGEST 7 8 Source of data: W ard’s Automotive Reports. TIRE PRODUCTION Passenger Car Casings, United States Millions of Tires IOO--------------------------------------------------- ! ft S 75 ; 50 3 If ; y. mu W0& ■ • 25 ts i 11111 '5 3 '5 4 wgm mm ffilp lib '55 Mg mWm '5 6 '57 Source of data: Rubber Manufacturers Association Inc. 5 placement tire sales advanced 6 percent to an estimated 56.5 million casings. Replace ment tire sales were the largest in the postKorean War period and undoubtedly reflect ed in large part the aging of the 8 million cars produced in 1955 as well as the record number of cars on the highways. Passenger car tire production for 1957 is estimated at about 93.0 million units; as a consequence, factory inventories at year-end were at record levels, in spite of strong sales during the year. Truck tire shipments last year were dis appointing to the industry. Shipments dropped 4 percent from 1956 to an estimated 13.7 million units. Original equipment sales were down 7 percent to 4.2 million casings as truck production slackened. Replacement sales were a bit lower than in 1956 and to taled 8.8 million. Sales of rubber hose, belting, industrial products, rubber soles, foam rubber and the host of other products turned out by the in dustry, experienced a record year in 1957. The non-tire part of the rubber industry now accounts for more than half of the industry’s dollar volume of sales as compared with only 42 percent in 1939. Machinery Machinery production declined irregularly through 1957 from the all-time peak reached in the fourth quarter of 1956. By November, output was 8.6 percent below the year-earlier month. The drop in nonelectrical machinery production was slightly larger than for elec trical equipment. The slowdown was general and extended to nearly every kind of ma chinery. In part it reflected the leveling and eventual turndown of capital expenditures in the fourth quarter for new plant and equipment as well as slack consumer demand for large home appliances. Curtailed defense spending after mid-year also reduced the de mand for machinery and led to the cancella tion of some existing orders for equipment. Output of heavy electrical apparatus, used chiefly by electrical utilities, was at record rates in the fourth quarter of 1957 and was still advancing. Shipments, however, were 6 M A CH IN E TOOLS Metal Cutting Types, United States Millions of Dollars Source of data: ciation. National Machine Tool Builders Asso in excess of new orders and order backlogs were being slowly reduced. The machine tool industry was particu larly hard hit in 1957. Net new orders, which totaled close to $925 million in both 1955 and 1956, dropped precipitously to an estimated $525 millions in 1957, and the decline became progressively steeper through the year. Net new orders for September, October, and No vember amounted to only $85,000,000, or an annual rate of $340 million. Thus the accom panying chart, which is on an annual basis, does not show the full extent of the recent downturn. Machine tool shipments held up very well through the first half of 1957 and exceeded the year-earlier months as well as the second half of 1956 by ample margins. As backlogs fell, however, the industry was forced to cur tail production in the second half of the year to more nearly approach the rate of incoming orders. The average workweek was reduced and employment cut. Estimated backlog of new orders at the end of Novem ber was only about three months. The feeling is general in the machine tool industry that the decline in new orders has about run its course and that some improve ment will be evident this year. Bituminous Coal Soft coal production in 1957 fell slightly short of equalling 1956’s output of 500 mil lion tons, halting a two-year rise in bitumi nous coal demand that was considered to be the start of a new growth trend for the in dustry. Mines in the Fourth District, which supply about one-third of the nation’s re quirements, experienced their share of the weakening in demand. Domestic consumption in the first ten months of 1957 fell about 3J/2 percent short of the similar 1956 period. Exports, how ever, continued to rise; furthermore, stocks of coal in the hands of consumers were built up moderately during the year, so that pro duction fell only fractionally below the 1956 level. Further weakening in demand oc curred in November and total coal produc tion for the January-November months reg istered a 2 percent drop from the year-ago period. Portland Cement The Portland cement industry found 1957 a rather disappointing year. The completion of part of the industry’s capital expansion program boosted monthly capacity about 10 percent above 1956 levels through the first nine months of the year. However, a dip in demand, coupled with a labor dispute in July, pulled production and mill shipments about 7 percent below comparable 1956 levels during the January-September months. Fourth District mills made a relatively strong showing in 1957, however. The labor dispute affected only a few mills of the Dis trict. With 50 out of the 94 cement plants east of the Mississippi River shut down by the strike in July, demand at District mills was boosted sharply. For the January-Sep tember months, portland cement production in the District was slightly ahead of the com parable year-ago months while the rest of the industry registered an 8 percent yearto-year deficit. An increase in monthly capacity at Fourth District mills between 1956 and 1957, amounting to about 15 percent, is suggested by the Bureau of Mines reports for the first nine months of 1957, putting annual portland cement capacity of the District in September at about 32i/2 million barrels.(2) ( 2) These figures include a new mill at Paulding, Ohio, which was inadvertently omitted in a June article appear ing on this subject in this publication. NOTES Among the articles recently published in the monthly business reviews of other Federal Reserve Banks, the following may be of interest to our readers: “ A Foresight Saga,” Federal Reserve Bank of Philadelphia, December 1957. “ What’s Happening in the Credit Markets?” Federal Reserve Bank of Kan sas City, December 1957. “ Individual Savings — Its Nature and Recent Behavior,” Federal Reserve Bank of Richmond, December 1957. (Copies may be obtained by writing to the Federal Reserve bank named in each case.) Special note: The recent revision of department store indexes, for the nation and for all twelve Federal Reserve districts, is described in detail in an article in the December 1957 issue of the Federal Reserve Bulletin. Reprints are avail able at the Research Department, Federal Reserve Bank of Cleveland. The Re search Department of this bank also has available a tabulation of the revised department store indexes for the major metropolitan areas of the Fourth District. 7 Department Store Trade During 1957 store trade in the Fourth department store sales, despite the fact that the opening of new branch stores last year District during 1957 reflected some ele ments of local weakness as well as the changthroughout the District increased the selling area considerably. It should be recognized ing trends in the economy of the nation. Although consumer demand generally was that population has also grown. Thus, if total sales are measured either on a per capita well maintained and it is estimated (at press basis or per square foot of selling space, de time) that total retail sales in the United partment stores experienced a decline in States exceeded the record high of 1956 by physical quantity even greater than 2 percent. about 5 percent, sales by Fourth District de partment stores in 1957 barely matched the year-ago volume. Changes in Sales Considering the rise in prices during the year, there was a net decline of about 2 per Seasonally adjusted sales by Fourth Dis cent in physical volume of Fourth District trict department stores, as shown by the black line on an accompanying chart, during the first quarter of the year averaged slightly Department store sales In the Fourth District have above the preceding quarter. The showing followed the national pattern fairly closely; weak for the first three months was very favorable ness In the second quarter of 1957 was more pro indeed, insofar as sales during the final quar nounced, however. ter of 1956 were already at such a high level. It was generally believed that the late date of Easter, which fell on the third Sunday in April, would be a favorable factor for spring sales. However, as the sales during the Eas ter season did not come up to expectations, the adjusted sales index for April declined sharply to the lowest level in the past 22 months. Delayed spring weather throughout the District was one of the factors in the dis appointing score of the Easter season. The following two months witnessed some recov ery, but total District department store sales for the second quarter, seasonally adjusted, declined by nearly 3 percent from the first quarter’s mark. Sales during the summer months showed a considerable strength for that season. In August, the seasonally adjusted index of sales reached 139 percent of 1947-49 average Seasonally adjusted data, adjusted to Census benchmark. Smoothed by three-months’ moving average, centered. Last daily sales, or 3 percent higher than the pre entry based on November estimates. D e p a rtm e n t vious all-time high peak reached in Septem ber 1956. Adjusted sales for the entire third quarter averaged about 8 percent larger than those of the second quarter; they were also 2 percent above a year ago. By autumn, sales began to show the effects of uncertainty in the business outlook. An unusual complication was the occurrence of the Asian flu epidemic which is believed to have a significant, although not measurable, retarding effect upon store sales. Sales dur ing October by Fourth District department stores, after adjustment for seasonal varia tion, declined sharply, to the lowest level in the past 28 months. Sales in November showed a slight recovery and incomplete re ports for December indicate that adjusted sales during the month were somewhat above those of November. Thus, adjusted sales in the final quarter of the year were apparently about 7 percent below the third quarter and 3 percent below the final quarter of 1956. Comparing Fourth District department store sales with national sales, it should be noted that the course of District sales, sea sonally adjusted, paralleled fairly closely that of nationwide sales, except during the sec ond quarter when weakness in Fourth Dis trict sales was much more pronounced. (See chart.) The fact that the index of U.S. sales runs consistently at a higher level than the index of Fourth District department store sales simply indicates a difference in the cumula tive rates of growth between the 1947-49 base period and the present. Parts of the South and the far West have shown greater gains than this District, in percentage terms. Inventories In contrast to sales, end-of-month inven tories of Fourth District department stores (shown by the colored line on the chart) were nearly stable for the first eight months of the year, after seasonal adjustment. In September, inventories showed a slight pick up and held at that level for the rest of the year. The index of department store stocks for the Fourth District, including an esti mated December figure, averaged 136 for the Department store sales in this District registered wide fluctuations during the year; stocks were nearly stable. Seasonally adjusted Census benchmark. data. Fourth D istrict. A djusted to year (based on 1947-49 average end-of-month stocks) and month-to-month changes during the year fluctuated within 3 points of the annual average. The lowest levels of end-of-month inven tories, seasonally adjusted, were registered in February and May, at 135, and the highest in September, at 139. Thus there were no clear tendencies toward accumulation or liquidation during the year. The entire net expansion of inventories during 1957 amounted to 3 percent. Possibly about one-half of this margin represents priee advances at the retail level. (The value of inventories is reported at retail prices rather than at cost.) Apparel and Homefurnishings Sales by both major groups of departments have followed the general course of total sales during the year; however, they have dif fered in the extent of fluctuation. Thus, while the range of fluctuation for the ap parel group from the low to the high posi tion for the year amounted to about 14 per cent, the range of fluctuation for homefur9 Safes of homofurnishings by Fourth District depart* ment stores have fluctuated more than sales of apparel. SALES BY SELECTED DEPARTMENTS, 1957 Percent Increase or Decrease from 1956(1> Fourth District Department Stores Department Records, Sheet Music, Pianos, Instru ments, etc....................................... Sporting Goods and Cameras............ Blouses, Skirts, and Sportswear......... Aprons, Housedresses, and Uniforms.. Books and Stationery........................ Candy................................................ Girls’ Wear........................................ China and Glassware......................... Women’s and Misses’ Inexpensive Dresses........................................... Seasonally adjusted data, Fourth District. nishings was from a high of 131 in July down to 104 in October, in terms of seasonally ad justed index numbers. Homefumishings in clude furniture, draperies, china and glass ware, major household appliances, and other purchases which are in many instances postponable and therefore more variable over time than is the case with apparel. An accom panying chart traces the course of sales of apparel and homefumishings by months from 1954 through 1957. During the year, there were relatively few departments with gains over a year ago and only two departments, records, sheet music, pianos, instruments, etc. and sporting goods and cameras which scored large year-to-year increases. These two departments account for less than 2 percent of the total store sales. Departments having a large volume of sales in relation to total store sales shared nearly equally in the annual net decline. Major household appliances, however, showed a sub stantial decline from the previous year, amounting to 11 percent. 10 % Change From 1956 +14 + 7 + 3 + 3 + 3 + 3 + 2 + 1 + 1 Linens................................................ Handbags and Small Leather Goods.. Juniors’ Coats, Suits, and Dresses---- —0— -0 — —0— Toys and Games................................ Men’s Furnishings and Hats............. Women’s and Misses’ Coats and Suits Draperies, Curtains, Upholstery, Awn ings, and Shades............................. Cotton Yard Goods........................... Major Household Appliances............. — 4 — 4 — 5 — 7 — 8 —11 ( i ) Based on figures fo r January through November. Credit Sales Sales on a credit basis expanded further in 1957; the ratio of credit sales to total sales for this District was 66.0 percent as against 65.2 percent in 1956 and 56.1 percent ten years ago. The ratio of instalment sales to total sales, as indicated on the chart, aver aged 17.2 percent, representing a gain some what smaller than in the previous two years. The increase in the share of total sales repre sented by instalment sales took place in spite of the over-all decline in sales of homefurnishings, which are typically the instalmenttraded items. The ratio of Instalment sales to total sales during 19S7 averaged slightly higher than In previous years. DEPARTMENT STORE SALES BY METROPOLITAN AREAS Percentage Change from 1956 to 1957(1) Metropolitan Area Percent Change FOURTH DISTRICT.................. —0— Portsmouth. . . . . . . . Lexington...................................... +13 + 7 + 7 + 3 + 2 + 1 Youngstown................................... Pittsburgh ............................ Canton........................................... Wheeling-Steubenville.................... Erie................................................ Cleveland....................................... Columbus....................................... Alrron ................................ Cincinnati....................................... Springfield .............................. Toledo............................................ —0— — 1 — 3 — 4 — 5 n.a. C1) Figures are for January through November. Metropolitan Areas Sales changes from the preceding year varied among individual areas from a 13 per cent gain in Portsmouth to a 5 percent decline in Springfield. The gains and declines were about evenly distributed among the areas of the District so that total sales for the District came out even with 1956. 11 TOLEDO PA. CLEVELAND » •(YOUNGSTOWN OHIO (PITTSBURGH 'W h e e l i n g • COLUMBUS * CINCINNATI . v; V