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MONTHLY Buome^Kei/ieuJ IN THI S - FEDERAL RESERVE BANK of CLEVELAND----- ISSUE Another Look at Northeast O hio.....................2 Business Borrowers at Fourth District Banks. . 7 Around the Fourth District.............................. 14 f c d y , Notes on Federal Reserve Publications. . . . 15 t $ 5 % • cSl e v e |.a“n d y Jo u n g 1 ] Ak r o n • •^ nsfield • c An to n focal in Another Look at Northeast Ohio A l t h o u g h Ohio’s industrial strength is by no means limited to the Northeastern sector of the state, that area has a well-known concentration of manufacturing industry, especially in the durable goods lines. It is not surprising therefore, that Northeast Ohio has had its full share of the impact of the 1957-58 recession in business. jTJL The 22-county area of Northeast Ohio de picted on the cover chart includes about onefourth of the land area of the state, but accounts for more than two-fifths of the state’s population and about half of its man ufacturing industry. A cluster of six Stand ard Metropolitan Areas, which together in clude eight counties, gives the section its dis tinct industrial character. A look at Table 1, which presents some basic economic facts for Northeast Ohio against a background of similar information for Ohio, for the Fourth Federal Reserve District, and for the United States, helps to reveal the pattern. Industrial Structure of the Area The machinery group of industries (in cluding both electrical and nonelectrical classifications) is the most important source of employment and income in Northeast Ohio. With over 147 thousand employees in the area, it accounts for as much as 22 percent of total manufacturing employment.(1) Of nearly equal importance in terms of em ployment is the primary metals group of in dustries, including steel, which provides jobs ( ! ) As reported in “ Directory of Ohio Manufacturers, 1957” , based on 1956 average or representative annual employment. 2 for almost 134 thousand workers, or onefifth of the total manufacturing employment in the area. Steel mills of the Youngstown and Cleve land steel districts (which include plants in Canton, Lorain, Mansfield, and Massillon, but exclude those in Pennsylvania) account for 15.3 percent of the nation’s steel ingot capacity. (See Table 2.) That figure is ex ceeded only by the Chicago and Pittsburgh steel districts, with 19.2 percent and 17.4 percent, respectively. The Philadelphia steel district follows the Northeast Ohio area with 14.2 percent of the nation’s ingot capacity. Fabricated metal products and transporta tion equipment stand nearly equal in impor tance, and together they employ one-fourth of the area’s manufacturing workers. Among the nondurable goods industries, rubber manufacturing is the most important in the Northeast Ohio area, providing employ ment to nearly 65 thousand workers, or about 10 percent of manufacturing employment. Average manufacturing employment for the 22 counties is 179 per 1000 population as against 152 for Ohio and 101 for the United States. (Based on 1956 data.) Impact of the Current Recession It is a well-established general principle that activity in durable goods industries tends to fluctuate more widely than activity in the nondurables, both on the upswings and the downswings. The reasons are traceable mainly to the greater postponability of demand which characterizes the durable-goods field. In the case of the 1957-58 recession, as well as in the Table 1 BASIC ECONOMIC FACTS 22 Counties of Northeast Ohio NE Ohio 22 Counties POPULATION 1. Population, Jan. 1, 1956............................... 2. Population, per sq. mile, Jan. 1, 1956........ . .thous. M ANUFACTURING 3. Monthly payrolls, all insured employment (1956— 1st Q .)............................................ mil. dol. 4. Manufacturing employment per 1,000 population (1956— 1st Q .) ........................ 5. Value added by manufacture, 1954............ mil. dol. 6. Value added per manufacturing employee, 1954.............................................................. . . . .dol. FINANCE 7. Demand deposits, per capita, Dec. 31, 1955 ........dol. 8. Savings accounts (Commercial banks and savings and loan associations) per capita, Dec. 31, 1955...................... . .. .dol. 3,930 384 468.4 Ohio Total 9,040 220 926.7 Fourth District Total 14,306 194 1,333.2 U. S. Total 165,879 56 12,933.0 179 5,156 152 10,154 134 14,181 101 116,001 7,969 7,994 7,971 7,189 696 590 604 657 913 771 661 641 AG R ICU LTU R E 9. Farm income, per acre, 1954....................... 10. Farm income, per farm, 1954...................... . .. .dol. . .. .dol. 44.12 4,146 42.20 4,765 36.23 3,625 21.27 5,126 TRADE 11. Retail sales, per capita, 1954....................... . . . .dol. 1,085 1,099 1,010 1,053 12. 13. 14. 15. 16. 17. 18. Growth Growth Growth Growth Growth Growth Growth SOME G R O W T H TRENDS in population, 1950-56.................... in manufacturing employment, 1947-54. . . . in value added by manufacture, 1947-54. . . in demand deposits, 1950-55.......... in savings accounts, 1950-55.......... in farm income, 1949-54................. in retail sales, 1948-54..................... +14% + 4% +55% +32% +42% +16% +29% +14% + 6% +60% +26% +46% +20% +31% +10% + 2% +34% +22% +43% +13% +25% +10% +13% +56% +20% +55% +12% +30% Note: All except items 1, 3, and 5, are expressed in relative terms so that direct comparability with the larger areas is possible. Sources: Same as listed in March 1957 issue of Monthly Business Review, article entitled “ Cleveland and Eastern Lake Erie” , pp., 12-13. 3 preceding boom, this familiar principle was in evidence with perhaps even greater force than usual. Thus, the decline in industrial activity be tween August 1957 and April 1958 brought production in the nation’s manufacturing in dustries down nearly 13 percent. However, output in the primary metals industries, which in Northeast Ohio represent one-fifth in terms of manufacturing employment, de clined during the same period by almost 37 percent. Production of machinery, both nonelectri cal and electrical, between August of last year and April of this year was down 19 per cent and 23 percent, respectively, on a na tional basis. Production of transportation equipment declined 18 percent and fabricated metals declined 16 percent. (See Table 3.) Table 2 STEEL INGOT CAPACITY as of January 1, 1958 Steel District Youngstown Cleveland (2) Totad— NE Ohio Fourth District United States Net Tons Percent of U. S. Capacity 9 .8 % 5.5 13,806,000 7,760,000 21,566,000 56,726,710 140,742,570 15.3 40.3 100.0 (1) Includes Canton and Mansfield, but no plants in Pennsylvania. (2) Includes Lorain. Source: American Iron and Steel Institute— Iron Age. Output of rubber and rubber products was down 21 percent. The rubber industry of Table 3 INDUSTRIAL PATTERN OF NORTHEAST OHIO RELATED TO CHANGES IN U. S. INDEX OF PRODUCTION Manufacturing Employment in Northeast Ohio INDUSTRY All Manufacturing Industries.................. Machinery.............................................. (Nonelectrical)................................... (Electrical)......................................... Primary Metals...................................... Fabricated Metal Products.................. Transportation Equipment.................. Rubber Products................................... Food and Beverages.............................. Chemicals and Allied Products........... All Other Manufacturing Industries. . Percent of Area’s Total Manufacturing Employment 100.0% 21.8 (14.9) ( 6.9) 19.9 13.0 12.2 9.6 4.2 2.9 16.4 Area’s Percent of Ohio Total for Named Industry 50.6% 44.4 (43.0) (47.8) 71.5 61.9 47.7 86.3 37.9 43.3 36.2 Percent Change in the Index of Industrial Production, U.S. August 1957-April 1958 — 12.9% — 19.8 (-1 8 .5 ) (— 22.8) — 36.8 — 15.7 — 18.1 — 20.6 + 0.9 — 4.3 — 8.0 Sources: Directory of Ohio Manufacturers, 1957, Ohio Department of Industrial Relations, Division of Labor Statistics, Columbus; Board of Governors of the Federal Reesrve System, Washington, D.G. 4 Northeast Ohio accounts for nearly 10 per cent of manufacturing employment in the area, and for more than one-fourth of the nation’s total employment in the rubber in dustry. M A N U FA C T U R IN G EM P LO YM EN T April 7958, c om pa re d with y e a r ago Percent Decrease *30 -2 0 -10 (areas) Considering the fact that these five indus try groups account for about 77 percent of total manufacturing employment in North east Ohio, it is evident that the impact of the recession upon the area has been relatively greater than upon the nation in general, or even upon the remainder of Ohio. Some Measures of Differential Impact Certain measures of local business activity confirm a differential impact of the recession upon the area, as against the remainder of Ohio. Manufacturing employment in April in four metropolitan areas of Northeast Ohio, as shown by an accompanying chart, was 17 per cent below a year ago. Employment in four other metropolitan areas of Ohio, where com parative data are readily available, was down 13 percent over the same interval. Akron Cleveland Canton Youngstown AVERAGE OF 4 NAMED AREAS M O TH ER OHIO AREAS * Source of data: Ohio Labor Market Information, Bureau of Unemployment Compensation, Columbus, Ohio. * Includes reports on Cincinnati, Columbus, Dayton, and Toledo. S A LE S TA X C O L L E C T IO N S Ja n uary 1 through M ay 17, 1958, com pa re d with y e a r ago Ptretnt Decreese -30 -20 -10 O ' (counties) Ashland As shown by another chart, sales tax collec tions by the Office of the Treasurer of the State of Ohio for the period January 1 through May 17 were down from a year ago in all 22 counties of Northeast Ohio. The de clines ranged from 9 percent in Ashland County to 26 percent in Trumbull County. The total year-to-year decline for the area amounted to nearly 17 percent, whereas, the decline in the remaining 66 Ohio counties was less than 15 percent. Department store sales in four metropoli tan areas of Northeast Ohio for the first four months of 1958 were 7 percent smaller than during the corresponding period a year earlier, whereas the decline was less than 5 percent for the other four metropolitan areas of Ohio which report department store sales. Bank debits, which are charges made to de mand deposits as owners of these accounts write checks against them, are often looked upon as barometers of local business activity. AVERAGE OF 22 NAMED COUNTIES ALL OTHER OHIO COUNTIES Source of data: Office of the Treasurer of the State of Ohio, Columbus, Ohio. 5 Bank debits in the eight Northeast Ohio cities for the January-May period were 11 percent below a year ago; in the other eleven Ohio cities which report, debits were less than 3 percent below a year ago. DEPARTM EN T ST O R E S A L E S J anuary-April 1958, com p a re d with y e a r age Percent Decrease -20 .. -10 (areas) Declines in measures of local business activity have been especially marked in the Youngstown and Canton areas, where a single industry—steel—is the major source of in come and where the factory layoffs have affected a large proportion of the labor force.(2) A Note on the Diversification Question The industrial strength of Northeast Ohio, as has been re-emphasized here, lies pre dominantly in the manufacturing of durable goods. Although there is considerable diver sity within the hard-goods lines, there is less of a balance between the manufacturing of durable goods and of nondurable goods than occurs in other parts of the country, including some other sections of Ohio. The price paid for the very real strength accruing from the manufacture of durables is a relative vulnera bility to cyclical recession. It is noteworthy that the food group of manufacturing industries during the recent downturn has remained practically recession proof. Total employment in the food industry in Northeast Ohio is only 4 percent of the area’s manufacturing employment, as against 7 percent for the remaining part of Ohio. (2) During May and June, there were strong indications of at least a leveling off of the business decline, and even some signs of business recovery. The improved tone of the news applied to Northeast Ohio as well as the nation generally. (See, for example, “ Around the Fourth District” , page 14 of this issue.) Such recent developments, however, do not fall within the span of time under review in this article. 6 0 AVERAGE OF 4 NAMED AREAS OTHER OHIO AREAS * Source of data: Federal Reserve * Includes reports on Cincinnati, Columbus, Portsmouth and Springfield. BAN K DEBITS Ja n uary -M ay 7958, c om pa re d with y e a r ago Percent Decrease -20 -10 0 I-----1-----1-----1-----1 (cities) AVERAGE OF 8 NAMED CITIES OTHER OHIO C I T I E S * Source of data: Federal Reserve * Includes reports o n : Cincinnati, Columbus, Dayton, Toledo, Hamilton, Lima, Middletown, Portsmouth, Springfield, Steu benville, Zanesville. Business Borrowers at Fourth District Banks i s t h e s e c o n d of a series of articles Most banks in the Fourth District will lend to new businesses. In fact, many are active in analyzing the results for the Fourth Dis trict of the 1955 and 1957 Business Loanpromoting the establishment of new firms in their communities, but they recognize that Surveys conducted by the Federal Reserve such loans are likely to involve more risk than System. The first article dealt with changes loans to established concerns. Products or in business loans from 1955 to 1957, by type services of the new firm may not be proven. and size of borrower, and by size of bank.(1) Here, the characteristics of business bor The firm itself has not demonstrated an ability to compete and has no established rowers are analyzed in terms of the volume of lending going to recently established busi record of borrowing and repayment habits on which the bank can judge credit-worthiness. nesses, the corporate status of borrowers, and the location of the business borrowers. h is T Table 1 Loans to New Business On the 1957 Survey date, member banks of the Fourth District had approximately 6,500 loans totaling nearly $100 million out standing to new businesses, that is, businesses formed within 24 months before the Survey date. These loans accounted for 7 percent of the number and 4 percent of the amount of all outstanding member bank loans to busi ness. Banks with deposits under $10 million had the largest percentage of loans to new firms in relation to total loans outstanding, with 11 percent by number and 8 percent by amount going to new businesses. As the size of bank increased, the relative importance of loans to new enterprises decreased. ( l ) See “ Results of the 1957 Business Loan Survey, General Summary, Fourth District,” MONTHLY BUSINESS RE V IE W , June. 1958. Additional tables classifying the rela tive size of borrowers within type-of-borrowers and size-ofbank groups, are now available upon request. LOANS TO NEW BUSINESSES* AS A PERCENT OF TOTAL BUSINESS LOANS OUTSTANDING, BY SIZE OF BANK OCTOBER 16, 1957 Fourth District Member Banks Size of Bank (Total Deposits in millions of dollars) Percent of loans to New Businesses* Amount Number Outstanding All Banks................... 7-4% 3.5% Over $100................. 4.8 2.4 $104100.................... 7.6 7.0 Under $10................. 11.2 8.3 * Businesses formed within 24 months before October 16, 1957. 7 In the loans outstanding as of the Survey date, awareness by banks of the greater ele ment of risk in extending credit to new busi ness was evident in the higher collateral that had been required of such borrowers. Accord ing to the accompanying chart, 80 percent of the loans to new firms were secured, while for established firms, the comparable percentage was 47. New business borrowed to a greater extent on term loans than established businesses, which perhaps explains in part the higher proportion of secured loans. However, the S E C U R IT Y f o r loans is usually demanded of new businesses, in sharp c on trast to the secu rit y re quirements of established businesses. PERCENT OF DOLLAR VOLUME, 1957 0________ 25 50 75 100 1 NEW BUSINESSES UNSECUREC ESTABLISHED BUSINESSES SECURED UNSECURED SECURED M A TU RITIES of loans are som ewhat longer fo r new greater reliance on term loans does not ex plain the slightly higher interest rates charged new firms; the average interest rates charged on short-term loans were higher for new firms than for established ones. Corporate Status of Borrower The share of total business loans received by corporations increased between 1955 and 1957. In 1957, corporations received 80 per cent of the dollar volume of business loans outstanding and 31 percent of the number of loans, compared with 71 percent of the dollar volume and 27 percent of the number in 1955. (See Table 2.) Unincorporated businesses showed an absolute decline in both dollar vol ume and number of loans between 1955 and 1957. This reflects, in part, the fact that most unincorporated businesses are small businesses. Effective interest rates on loans to unin corporated businesses were slightly higher than rates on loans to corporations. In 1957, one third of the volume of loans outstanding to unincorporated businesses had interest rates of 6 percent and over, whereas those rates applied to less than one tenth of the loans to corporations, another indication of the relatively smaller size of unincorporated businesses. businesses than fo r established businesses. 0 NEW BUSINESSES PERCENT OF DOLLAR VOLUME, 1957 25 50 75 SHORT TERM ESTABLISHED BUSINESSES T a b le 2 100 PERCENTAGE DISTRIBUTION OF BUSINESS LOANS OUTSTANDING, BY CORPORATE STATUS, 1955 & 1957 Fourth District Member Banks LONG T ER M LONG TERM SHORT TERM Corporate Status 1955 1957 Percent Change 1955 to 1957 IN T E R ES T RA TES a re slightly higher fo r new busi Amount Outstanding n esses than f o r established businesses. Corporate......... Noncorporate. . T ota l................. 0 r NEW BUSINESSES PERCENT OF DOLLAR VOLUME, 1957 25 50 75 100 i--------------------------------- '---------------- 1 ■' ESTABLISHED BUSINESSES 8 UNDER 6 % ■ ' -V- r" ~UNDER 6% 5% AND OVER S%* 71.4% 28.6 100.0% 80.4% 19.6 100.0% + 6 1 .6 % — 2.0 + 4 3 .4 % 27.4% 72.6 100.0% 30.9% 69.1 100.0% + 16.6% — 1.4 + 3.5% Num ber of Loans Corporate......... Noncorporate. . T ota l................. BU SIN ESS LO A N S A T FOURTH D IST R IC T MEM BER BANKS O U TSID E O F L O C A L B AN KIN G A R E A * PERCEN T OF TOTAL AMOUNT OUTSTANDING 20 30 40 50 ---- 1---- 1— PERCENT OF TOTAL NUMBER OF LOANS 10 20 PITTSBURGH BANKS CLEVELAND BANKS COLUMBUS BANKS CINCINNATI BANKS AKRON BANKS TOLEDO BANKS DAYTON BANKS BORROWERS O UTSID E 4th D IS TR IC T BORROWERS IN 4th D IS T R IC T (outside local area) SMALLER CENTERS * Based on data collected in Business Loan Survey of October 5, 1955. Location of Borrower The ability to shift funds readily from one part of the country to another is one of the important functions of the nation’s banking system. Banks located in New York and Chicago have long been recognized as an im portant source of funds for business through out the nation. To a lesser extent, banks in other large cities have been known to provide loan facilities to distant borrowers. In neither case, however, has there been a statistical basis for appraising the inter-regional flow of funds generated by business demands in ex cess of the volume of credit available at local banks. The 1955 Survey provided for the first time a body of quantitative data on the vol ume of bank lending to nonlocal borrowers. (Processing difficulties delayed the avail ability of these data until recently and led to the omission of similar data from the cover age of the 1957 Survey.) Although less than 3 percent of the num ber of business loans outstanding at Fourth District member banks as of October 5, 1955, were obligations of borrowers outside the Dis trict, this represented more than 25 percent of the dollar volume. More than 90 percent of the number of loans and 70 percent of the dollar volume of credit extended went to strictly local business, that is, firms located in the same city, metropolitan area(2), or county as the lending bank. The remainder were loans to nonlocal borrowers within the Fourth District. As shown on the accompanying chart, the extent of nonlocal lending varied widely among the Fourth District’s major cities. Nearly seven tenths of the dollar volume of business loans outstanding at the time of the 1955 Survey at Pittsburgh banks had been ex tended to borrowers outside of the Pittsburgh metropolitan area, principally to borrowers outside the District. Pittsburgh banks partici pated widely in the national market, with (2) As defined by the Bureau of Census. (text continued on page 13) 9 Table 3 BUSINESS LOANS AT FOURTH DISTRICT MEMBER BANKS BY LOCATION OF BANK AND LOCATION OF BORROWER To Business Borrowers located in: FOURTH FEDERAL RESERVE DISTRICT Business Loans Outstanding at Member Banks In: Akron Cincinnati Cleveland Columbus Dayton Pittsburgh Toledo Smaller Centers Total OTHER FR DISTRICTS TOTAL UNITED STATES (2) AMOUNT OUTSTANDING (thousands of dollars) Akron Cincinnati Cleveland Columbus Dayton Pittsburgh Toledo Smaller Centers $21,238 259 12,953 Fourth District ------- $ -----169,752 927 ---- $ 374 1,678 187,266 ------- ---- $ ----2,679 13,347 32,183 $ -----7,593 ---- 39,986 202,074 ------- $ 892 1,400 ------- $ ---26 3,687 630 ------- 647 160 1,753 2,834 1,950 122 943 11,748 507 1,006 9,140 ---- ------- 1,595 508 1,047 49,017 347 $37,010 $176,527 $202,579 $58,945 $48,087 $205,412 $53,707 ---- $ 6,424 $ 28,036 22,816 205,695 52,281 271,861 13,542 46,355 522 43,342 71,149 296,708 52,583 2,777 436,171(S) 443,370 $ 7,305 77,078 63,071 8,634 2,393 345,050 6,592 17,693 $ $1,387,949 $527,816 $1,915,765 896 4,754 9,095 1,341 2,003 6,926 2,857 54,753 17 381 272 30 8 679 123 890 913 5,135 9,367 1,372 2,011 7,604 2,981 55,643 82,623 2,400 85,024 $605,682 35,341 282,769 334,933 54,990 45,735 641,758 59,175 461,063 NUMBER OF LOANS 839 15 168 ___ Akron Cincinnati Cleveland Columbus Dayton Pittsburgh Toledo Smaller Centers ------13 1 48 6 1 5 72 Fourth District 1,084 4,393 4,308 1 ---- 2 17 7,869 ------20 8 54 7,970 ___ ---- ---- ---- 6,163 ---- ------- 140 74 70 2,580 37 55 321 954 157 48 720 263 54,258(S) 1,415 2,081 6,241 2,663 56,775 58 26 61 1,178 ------- ---- 1,949 9 1 7 ---------- 5 35 6 ------- Note: Details may not add to totals due to rounding. (1) Based on data collected in the Survey of Business Loans of October 5, 1955. (2) Excludes 12 loans to borrowers outside the United States amounting to $4,889,000. <8) Of these loans, $408,799,000 of the dollar volume and 50,265 of the number were made to borrowers in the same county as that of the bank. Table 4a BUSINESS LOANS BY MEMBER BANKS THROUGHOUT THE U. S. TO BORROWERS IN THE CLEVELAND F. R. DISTRICT <*> To Business Borrowers located in Business Loans Outstanding at Member Banks in: Akron Cincinnati Cleveland Columbus Dayton Pittsburgh Toledo Smaller Centers Total, District $1,387,949 313,431 19,736 1,781 76,152 13,529 4,933 36,568 9,224 AMOUNT OUTSTANDING (thousands of dollars) Federal Reserve Districts: Cleveland New York Philadelphia Richmond Chicago St. Louis Dallas San Francisco 4 other Districts Total, All Districts $37,010 27,513 2,710 76 9,500 2,947 832 ---- $176,527 24,762 ------- $202,579 60,454 2,317 ---- 11,088 3,925 28,012 370 ---- ---- 504 1,065 3,921 1,109 1,003 $81,092 $221,289 $295,845 $58,945 15,356 3,746 946 3,900 551 ------- $53,707 9,878 5 ------- $205,412 73,670 4,418 13 684 557 3,668 5,956 1,369 22,670 2 $605,682 91,158 6,540 746 18,846 5,179 366 5,768 2,289 $60,679 $295,746 $88,500 $736,576 $1,863,307 2,663 12 10 3 5 56,775 278 245 110 220 304 4 13 147 82,623 587 349 134 349 355 26 44 272 2,708 58,097 84,741 $48,087 10,640 ------1,885 ---67 136 $83,580 ---2,237 ------- NUMBER OF LOANS Federal Reserve Districts: Cleveland New York Philadelphia Richmond Chicago St. Louis Dallas San Francisco 4 other Districts Total, All Districts 1,084 25 11 6 19 14 5 ---- 4,393 39 ------- 7,970 99 48 ---15 12 ---- ---- 55 6 24 15 68 6 26 1,189 4,542 8,211 1,415 30 26 4 13 13 ---- 1 ------- 6,241 73 9 14 12 6 4 7 1 2,126 6,367 ------- 1,501 2,081 31 ------13 Note: Details may not add to totals due to rounding. (1) Based on data collected in the Survey of Business Loans of October 5, 1955. 1 ---- 14 ------- Table 4b BUSINESS LOANS BY MEMBER BANKS IN THE CLEVELAND F. R. DISTRICT TO BUSINESS BORROWERS THROUGHOUT THE UNITED STATES Obtained Loans from Banks in : Akron Located in: T? 1 1 T J T~\• 1 • 1 reacrai Ax.cscrvc JL/ist/riCLS* Cleveland New York Philadelphia Richmond Chicago St. Louis Dallas San Francisco 4 Other Districts Total, All Districts Cincinnati Cleveland Columbus Dayton Pittsburgh Toledo Smaller Centers Total, District AMOUNT OUTSTANDING (thousands of dollars) $28,036 3,408 ----------3,630 ----------267 ------ $205,695 19,156 3,303 4,359 21,950 9,094 945 8,068 10,203 $271,861 11,482 2,228 5,022 29,977 7,508 1,114 1,393 4,347 $46,355 3,124 3,149 157 ----2,204 -------------- $43,342 1,312 ----1,050 ------------------31 $296,708 66,883 18,917 31,135 79,808 17,796 32,577 61,484 36,450 $52,583 427 267 ----3,223 ---------------2,675 $443,370 5,769 1,738 1,302 6,298 293 442 482 1,373 $1,387,949 111,561 29,602 43,025 144,886 36,895 35,078 71,694 55,079 35,341 282,769 334,933 54,990 45,735 641,758 59,175 461,063 1,915,765 6,926 117 141 84 123 23 26 32 133 2,857 2 1 -----115 ---------------5 54,753 203 125 56 232 30 23 41 178 82,623 410 285 179 771 159 56 114 424 7,604 2,981 55,643 85,024 NUMBER OF LOANS x cQcrsi ivcscrvc uistnci/s • Cleveland New York Philadelphia Richmond Chicago St. Louis Dallas San Francisco 4 Other Districts Total, All Districts 896 8 ----------8 ----------1 ------ 4,754 42 11 14 149 43 6 39 77 9,095 25 1 18 144 57 1 1 25 1,341 12 6 6 -----6 --------- ---- -----6 913 5,135 9,367 1,372 2,011 2,003 1 -----1 -------— Note: Details may not add to totals due to rounding (1) Based on data collected in the Survey of Business Loans of October 5, 1955. (continued from page 9) business loans extended to borrowers in each of the other eleven Federal Reserve Districts. Nearly two fifths of the credit extended to borrowers outside the Fourth District went to firms located in the New York and Chicago Districts, reflecting both the tendency of tightening monetary policy to affect money market centers earlier than others and the ability of the banking system to spread the ef fects of such tightening throughout the nation. More than two fifths of the business loans outstanding at banks in Cleveland, Columbus, Cincinnati, and Akron were granted to non local borrowers. In each case, however, roughly half of the nonlocal lending was directed into nearby centers of the Fourth (Cleveland) Federal Reserve District. Busi ness lending at banks in these cities appears, therefore, to be more regional in nature than national. Although banks in smaller centers in the Fourth District extended business credit to firms located in each of the other eleven Dis tricts, in some cases even to firms located outside the United States, the bulk of their loans were obligations of local borrowers. Business firms in the Cleveland District also borrowed from banks located outside the District. Table 4a indicates the extent of the major interdistrict flows. Business in the Cleveland District borrowed $475 million from banks located outside the District. As a result, about 90 percent of the credit extended by Fourth District banks to borrowers located elsewhere was indirectly returned. The net outflow from the Fourth District amounted to about $57 million. The bulk of the interdistrict borrowing by Fourth District business was from banks in New York. The dollar flow from the New York District was nearly three times the return flow. Other money centers, such as Chicago, Dallas, and San Francisco, were “ net borrow ers” from the Cleveland District. Activity between Cleveland and other Federal Reserve Districts was probably conducted within lim ited geographic areas in Districts contiguous to the Cleveland District. When the number of loans to nonlocal bor rowers is compared with the dollar volume, the large average size of loans indicates the limited access of small business to nonlocal sources of credit. The nature of the credit risk in lending to business firms that are not nationally known precludes “ long-distance” borrowing in many cases. Despite the pre dominance of large loans in the data collected, a sufficient number of small loans was re ported to warrant the assumption that the small business is not entirely restricted to local banks for funds. For example, loans by banks in the Cleveland District to borrowers in Arizona averaged a little more than $5,000 on the Survey date. 13 Ana-und the. fyousUU jbi& ttU ct— Departm ent Sto re Sales in M ay, 1958 % change from Feb.* Metropolitan Areas % change from yr. ago 9 — 13 Wheeling-Steubenville............ Youngstown............................. Erie........................................... Akron...................................... Columbus................................. Pittsburgh................................ Springfield................................ Cleveland................................. Cincinnati................................ Canton...................................... — 5 — — 8 F ourth D + 5 — 3 i s t r ic t T otal. + 18 + 14 + 10 + 8 + 6 + 6 + + . . . 5 3 -0- — — — 5 4 -0-09 — 2 4 * Seasonally Adjusted # # # # Charge account sales at Fourth District department stores accounted for an even half of all sales in May, while cash sales were about one-third of the total, and instalment sales accounted for 16.4% of the total. For cash sales, this repre sented a moderate pickup from the previous month, when the ratio of cash sales to total sales had been the lowest in the many years’ records of the Fourth District. * * * * During the first six months of 1958, savings deposits of individuals at report ing banks of the Fourth District increased by $104 million. That was nearly twice the increase scored in the same period in 1957. # # # # Production of electric power by utilities in Northeastern Ohio so far this year has been about 6% under the comparable figure for last year. # * # * In the two weeks preceding Independence Day, continued claims for un employment compensation in the Cleveland area dropped 12,000 to a four-month low of 41,783. Settlement of the building-trades dispute was one factor in the improvement. # * * * Total loans and investments at weekly reporting banks of the Fourth Dis trict increased by 4.2% during the first half of 1958. That was substantially larger than the 1.8% increase during the corresponding six-month interval of the previous year. ( The above items are based on various series of District or local data, which are assem bled by this bank and distributed upon request in the form of mimeographed releases.) 14 NOTES ON FEDERAL RESERVE PUBLICATIONS Among the articles recently published in monthly business reviews of other Federal Reserve banks are: “ The Capital Markets since October” , Federal Reserve Bank of New York, June 1958. “ Inflation, Economic Growth, and the Tax Bite” , Federal Reserve Bank of Kansas City, June 1958. “ The Interstate Highway System” , Federal Re serve Bank of San Francisco, June 1958. “ Development Credit Corporations” (second of a series), Federal Reserve Bank of Boston, June 1958. (Copies may be obtained by writing to the Federal Reserve Bank named in each case.) # # # Recent statements on Federal Reserve policy in clude : “ Monetary Policy in a Recession.” Remarks of ALFRED HAYES, President, Federal Reserve Bank of New York before the 55th Annual Convention of the New Jersey Bankers Association, Atlantic City, May 22, 1958. ‘ ‘ Review of Monetary Policy Actions. ’ ’ Address by M. S. SZYMCZAK, Member, Board of Governors of the Federal Reserve System, before the Grocery Wheels of Washington, D. C., Bethesda, Maryland, June 10, 1958. (Copies of these addresses are available at the Board of Governors of the Federal Reserve System, Washington 25, D. C.) 15
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