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MONTHLY OCTOBER 1948 CONTENTS Wholesale Price Trends . . Review of Industrial Activity . . . The Locker Plant Industry . . . District Statistical Tables . . . National Business Conditions . . Keview . . . . . . 1 . . 3 . . 4 . . 7 12-13 . 14 FIN A N C E* IN D U STR Y • A G R ICU LTU R E • TRADE FOURTH Vol. 30—No. 10 FEDERAL RESERVE DISTRICT Federal Reserve Bank of Cleveland , Cleveland 1 Ohio Wholesale Price Trends HE movement of wholesale prices this year has been watched carefully by students of the busi ness cycle as one of the factors upon which to base estimates of future business activity and prosperity. An end to the postwar price spiral would require businessmen to reappraise inventory policies and would remove a potent profit factor that has existed for the past three years. The recent trend of wholesale prices suggests to many observers that the third quarter of 1948 may have marked the crest in the postwar rise, as meas ured by the weekly wholesale price index of the Bureau of Labor Statistics. A new postwar peak, 69.4 percent above the 1926 average was established in the week ended September 18. Prices at this level were about one percent higher than the previous record established in May 1920. Wholesale prices charged by manufacturers and processors usually change less rapidly than do spot market prices in primary markets, but the two levels of prices ordinarily tend to move together in the same direction. In this connection, it should be noted that an index of daily spot market prices compiled by the Bureau of Labor Statistics did not recover fully this summer from the drastic February price break, and on September 15 was 10 percent below the level prevailing in the first month of this year. This indi cator, however, is heavily weighted with agricultural products and does not fully reflect changes in price of some important industrial products. The rate of increase in general wholesale prices, including not only raw materials but a broad range of semi-finished and finished products sold by manu facturers, has slowed down substantially from last year. Whereas wholesale prices as measured by the B. L. S. weekly index advanced more than 18 percent T in 1947, the gain in the first nine months of 1948 has been only 3 percent for the entire period. An accompanying chart shows the course of weekly wholesale prices from January of this year to the latest date available. Average prices for the initial month are used as the base period of 100. After the price break of nearly 3 percent in Feb ruary, the general price level advanced about one point a month to reach the highest level on record in the week ended September 18, or 3 percent above the January average. The nearly flat movement of the wholesale price index conceals the broad changes that have taken place in important groups of commodities. The chart shows the movement of farm products, chemical and allied products, textiles, fuel and lighting materials, building materials, and metals and metal products. Metal The greatest increase in any of the series Products occurred in metals and metal products, which advanced more than 12 percent. Individual prices changes from January to Septem ber include lead up from 15 cents a pound to 19.5 cents; copper from 21.4 cents a pound to 23.4 cents; tin from 94 cents a pound to $1.03; zinc from 11.1 cents a pound to 15.6 cents; hot rolled sheets from 2.8 cents a pound to 3.26 cents; and steel scrap from $39.00 a ton to $41.75. These rapid increases are particularly pertinent since metals enter into an ex tremely wide range of consumer goods and capital equipment, and so exercise a strong influence upon the entire price structure. Metal prices may be called “ administered prices” since the bulk of nearly all ferrous and nonferrous metals are produced by a relatively small group of very large companies. Despite public announcements Monthly Business Review Page 2 of a determination to hold down price increases in the face of demands in excess of available supplies, pro ducers were unable to do so under the impact of substantial wage increases, higher fuel costs, increased freight rates, and the sharp advance in the cost of new capital equipment needed to maintain or expand output. The evidence to date indicates no lessening in demand for metal products, but instead increased requirements for rearmament expenditures, European rehabilitation, and Government stockpiling of raw metals. In addition, the demand for iron and steel for automobiles, construction, and most lines of large consumer appliances continues unabated. Building Another strong element in the wholeMatericrls •’ sale price structure has been the build ing materials group which has advanced 6.6 percent since January or nearly 1 percent a month. Although the lower grades of lumber have been under pressure for the past month there is little other evidence of weakness among building material prices. Some seasonal decline may be expected in the winter months, but as long as construction activity maintains its present pace, there is scant prospect of price softness in these lines. Fuel Fuel and lighting material prices have risen nearly 6 percent since January and reflect the new coal wage contracts, higher freight rates, and the shortage of petroleum products. Within this group of commodities, electricity has remained unchanged and gas has risen slightly. Bituminous coal, however, has risen more than 9 percent in eight months. This W E E K L Y W H O L E S A L E PRICES (Selected Series) January 1948=100 PERCENT PERCENT . . . . price fluctuations this year am ong groups vary from a 12 percent gain in metals and metal products, to a 5 percent decline in farm products. Chemicals also show a net decline for the year to date. Source: Computed by Federal Reserve Bank of Cleveland from Weekly Wholesale Price Index of Bureau of Labor Statistics = 100). (1926 October 1, 1948 rate of increase may not be maintained as coal inven tories are now ample and price concessions are being made on the lower grade and poorly prepared bitumi nous coals. Textile Textile product prices on September 18 Products were only one percent above their January level. While wool tops declined in the spot market from a mid-June high of $2.02 a pound to $1.60 in September, and raw cotton dropped from 38.6 cents a pound in April to 31.2 cents, rayon and other synthetic fibers were advanced in price. Whole sale textile products were also influenced by higher wage rates at mills and in the garment trade as well as by advanced transportation costs. In addition, mills showed little disposition to reduce selling prices and margins, but met price resistance by curtailing the work week or shutting down altogether. The success of this policy remains to be tested in the fall markets. Spot market prices for cotton print cloth, however, have been very weak for some months. From a high of 28.2 cents a yard in January, the price fell to 16.5 cents by mid-September, or a decline of 41 percent. Chemical Products Prices of chemical and allied products have exhibited a downward trend during the past eight months and have lost 4 percent of the January level. This trend is par tially the result of increased supplies coming on the market as heavy postwar capital expenditures for new chemical plants and equipment began to bear fruit Oils and fats, which are included in this group, have dropped about 18 percent since the first of the year and are likely to continue their downward movement as the prospective record-breaking oil-seed crops are harvested. Fertilizer materials, drugs and pharma ceuticals have also been weak . Farm Products Farm product prices have behaved eratically this year. They plummeted nearly 9 percent in February, almost regained their January level by the end of June, and have since dropped about 5 percent. Changes in supply and demand conditions for agricultural com modities are first recorded in the spot primary mar kets and are later reflected in the wholesale prices in the processing stage. The following table shows the changes that have taken place this year among selected agricultural commodities. Present indications are that wholesale farm product prices will continue to decline somewhat further as the expected bumper crops are finally harvested and brought to market. This is not to say, however, that all farm and food products will decline in price since it is apparent that under present conditions of full employment and high personal income continued (Continued on Page 6) October 1, 1948 Monthly Business Review Page 3 Review of Industrial Activity NDUSTRIAL activity in the Fourth Federal Re serve District was maintained about in line with seasonal expectations during the third quarter of the year. Construction Industry Construction activity in this area advanced sharply during July and August after lagging in the first half of the year. Dollar value of residential contracts awarded as reported by the F. W. Dodge Corporation increased 36 percent in these months as compared with the same months a year ago. Total building contracts awarded were up 46 percent. Shortage of building mechanics was reported to be delaying some projects. Coal Bituminous coal production has been exceed ing expectations since the signing of the Spring contract. Although total production for the year through August was still 5 percent below the year-ago total, the margin was steadily being reduced. Output in July and August was 12 percent ahead of the same months of 1947. District bituminous coal mined in these two months was about 13 percent above last year. Metallurgical grades of coal are in better supply. Current reports indicate that sellers of low grade and poorly prepared coals are having difficulty disposing of their product. Due to poor market conditions, some marginal mines have closed altogether or are working reduced shifts. Many mines without long term con tracts are having to sell coal actively for the first time in a number of years. Industrial stocks of bituminous coal on August 1 amply reflected the improved supply situation with a total of 56 million tons. This was the largest August 1 inventory since 1944 and further accumulation un doubtedly has taken place since that time. Steel Despite the substantial upturn in steel ingot production and finished steel shipments achieved in the first eight months of the year, District steel consumers have been unable to obtain sufficient supplys to meet their manufacturing schedules. Production in the United States of steel ingots and steel for casting in August reached 7.4 million tons to establish a new peacetime record for the month and only fractionally below 1943 and 1944. Output through August totaled 57.6 million tons or a gain of about 3 percent over the comparable period in 1947. Shipments of finished steel have kept pace with ingot production and totaled 37.5 million tons through July or a gain of nearly 4 percent from the previous year. The gain in finished steel shipments, if main tained through the fourth quarter, will more than offset the effect of the voluntary steel allocation pro gram and provide a larger amount of steel for the “ free” section of the market than was available last year. The fourth quarter voluntary steel allocation pro gram has been set up to cover the following ten fields: U. S. Atomic Energy Commission, warm air heating equipment for homes, armed forces, oil field tanks and well head equipment, prefabricated steel houses, freight cars and repairs, maintenance for anthracite coal mining, barges for inland waterways, new oil tankers and repair work, and the National Advisory Committee for Aeronautics. These programs will require about 492,000 tons of steel a month as com pared with 344,000 tons consumed monthly in the last quarter of 1947, or an increase of 148,000 tons. Steel shipments in July, however, exceeded the yearago figure by a margin of about 255,000 tons and competent authorities expect this margin to increase to nearly 300,000 tons a month for the remainder of the year. Thus an apparent increase in supply of approximately 150,000 tons a month should be avail able to non-priority industries. Unfortunately, the increase in supply of steel may not be in the forms most desired by consumers since the allocation programs bear most heavily on items already scarce, i.e., plates, sheets and strip, and struc tural shapes. For these three items, it is estimated that allocations will take approximately 32, 6, and 20 percent respectively of production. It is not likely that the supply of steel can be sub stantially enlarged over the near term due to persistent shortages of pig iron, steel scrap, and coke. Some pro duction is also being lost because of inability to recruit sufficient labor. According to Steel, District steel production rates for the week ended September 25 were: Pittsburgh 94 y2 percent, Youngstown 103 percent, Wheeling 93/2 percent, Cincinnati 102 percent, and Cleveland 97 percent. The national steel production rate was 96 percent of theoretical capacity. Glass The glass container industry has been operat ing at a substantially reduced rate this year as compared with 1947, and several high cost plants have suspended operations completely. Unit produc tion for the first seven months of the year was 18 percent below last year and shipments declined 15 percent. Inventories at the end of July were only slightly larger than at the beginning of the year but were 23 percent above July 1947 and 123 percent higher than two years ago. Increased competition from metal and other types of containers is responsi ble for the present situation. Mass vacations dropped July plate glass production 28 percent below June to the lowest level this year, according to the Hughes Statistical Bureau. Produc(Continued on Page 6) Monthly Business Review Page 4 ANNOUNCEMENTS Changes in Reserve Requirements B y A CTIO N of the Board of Governors of the Federal Reserve System on September 8, reserve requirements of member banks have been increased as follows: (a) Beginning September 16, country member banks are required to maintain reserve balances equivalent to IVz percent of time deposits, and 16 percent of net demand deposits. Previously the requirements were 6 percent and 14 percent, re spectively. (b) Beginning September 24, reserve city banks are required to maintain reserve balances equiva lent to 1V% percent of time deposits, and 22 percent of net demand deposits. Prior to this date, require ments were 6 percent and 20 percent, respec Revision of Department Store Sales Indexes R e v i s e d monthly indexes of department store sales for eleven cities in the Fourth District are pub lished for the first time in this issue. The revisions result from a recomputation of seasonal adjustment factors applied to the unadjusted indexes of depart ment store sales in the named cities. A number of wartime changes in the seasonal pat tern of department store sales, as well as some shifts occurring since the war’s end, are reflected in the new series more accurately than in the adjusted indexes previously released. For most cities, the revised indexes, adjusted for seasonal variation, are somewhat higher than the original adjusted figures for the months of January, April, September and December, and somewhat lower for the months of March, July and November. There is no change in the annual levels of the indexes as shown. Likewise, the cor responding indexes, unadjusted for seasonal variation, remain as previously announced. The methods used in revising the seasonal adjust ment factors applicable to sales in the eleven cities October 1, 1948 tively. (With respect to central reserve city banks in New York City and Chicago, the requirements against net demand deposits were increased from 24 percent to 26 percent.) These increases in reserve requirements were insti tuted by virtue of authority contained in Public Law 905 passed by the Congress in special session and signed by the President of the United States on August 16. This Act authorizes further increases of require ments of 2 percent against net demand deposits of all member banks. In addition, there remains under previous legisla tion authority to increase reserve requirements against net demand deposits at central reserve city banks by 2 percent, to a maximum of 30 percent. Increases in reserve requirements made under authority of the recent law, however, are subject to termination on June 30, 1949, which is the statutory expiration date of these particular provisions. are substantially the same as those utilized in the latest revision of seasonal factors applying to the index of department store sales for the Fourth District as a whole. Although the current revision of seasonal factors for the individual cities makes use of postwar data to a somewhat greater extent than was possible in 1946 at the time the seasonal factors for the Fourth District were revised, the new adjustment factors for the individual cities are broadly comparable with the factors for the district which are currently in use. As a consequence of the revision, the seasonally adjusted indexes for the eleven cities, appearing here with, are in much greater conformity with the adjusted indexes of the Fourth District than were the indexes for the individual cities before the present revision. A revised edition of the Handbook of Department Store Statistics of the Fourth Federal Reserve District, which will be published this month, incorporates the revised indexes for the individual cities, as well as indexes of department store sales and stocks for the Fourth District, covering the period January 1924 through July 1948. Copies will be available on request. REVISED INDEXES O F DEPARTMENT STORE SALES Adjusted for Seasonal Variation Eleven Cities, Fourth Federal Reserve District, January 1943—July 1948 AKRON M ay June Feb. 245 195 237 258 269 306 Mar. Apr. 1943 1944 1945 1946 1947 1948 Jan. 219 210 233 254 271 294 199 200 251 272 255 281 201 209 219 256 309 295 195 213 217 278 299 328 199 194 232 301 299 314 202 215 233 270 299 330 1943 1944 1945 225 219 226 249 216 251 211 212 272 215 232 238 CAN TON 213 225 242 220 219 246 218 235 251 July Aug. 204 216 226 304 298 Sept. 209 224 221 289 299 Oct. 216 229 232 268 284 Nov. 213 229 239 276 313 Dec. 197 232 245 288 314 215 233 236 215 244 222 223 239 230 220 239 220 202 238 233 Monthly Business Review October 1, 1948 1946 1947 1948 Jan. 253 322 342 Feb. 272 307 323 M ar’ 302 318 346 Apr. 282 344 379 M ay 309 361 402 1943 1944 1945 1946 1947 1948 179 176 199 229 273 , 304 179 159 204 260 274 298 150 170 212 271 282 304 157 181 192 269 302 315 1943 1944 1945 1946 1947 1948 176 168 185 210 241 276 191 156 187 221 237 262 154 162 195 229 234 248 1943 1944 1945 1946 1947 1948 193 202 223 257 287 321 *i . 198 190 230 277 290 326 1943 1944 1945 1946 1947 1948 . .. . . . 202 . .. . . . 198 . .. . . . 196 . . . 238 . .. . . . 256 . . . . . . 295 1943 1944 1945 1946 1947 1948 . .. ... . .. ... ... ... 1943 1944 1945 1946 1947 1948 ... ... . . . ... . . . ... ...... . . . ... . . . ... 1943 1944 1945 1946 1947 1948 . . . ... . . . .. . . . . ... . . . . .. ... ... ... ... Aug. 345 329 Sept. 324 342 Oct. 312 331 Nov. 314 361 Dec. 325 357 CINCINNATI 159 166 159 188 166 193 191 208 220 272 291 283 322 304 309 339 321 341 162 194 205 309 292 167 193 209 288 308 170 196 224 281 288 167 200 224 279 323 167 195 227 281 312 159 165 171 231 254 275 CLEVELAND 155 159 175 158 171 183 234 243 266 262 284 279 155 172 191 233 258 282 165 176 174 265 247 163 183 185 249 266 169 182 201 241 248 173 187 198 250 284 160 186 199 263 292 160 181 240 294 298 310 174 205 221 283 318 355 CO LU M B U S 170 166 207 183 227 213 290 300 307 322 334 360 178 208 244 302 308 368 184 213 231 340 309 187 219 242 317 329 188 222 248 287 304 188 220 235 306 338 186 222 252 315 330 224 196 224 239 265 298 178 200 241 268 268 296 196 204 210 245 298 343 183 208 207 253 312 336 191 211 214 270 294 347 199 201 204 297 301 199 213 213 261 305 207 214 222 254 289 203 217 215 260 302 180 201 230 273 321 176 145 180 217 246 269 130 149 179 240 245 250 140 162 165 229 255 282 PITTSBURGH 143 143 168 148 177 165 230 261 272 259 295 290 136 164 188 250 257 280 150 167 177 281 262 147 174 185 200 284 153 175 200 218 267 148 176 201 255 255 154 171 198 258 287 222 228 233 250 269 291 245 212 240 271 265 286 201 210 258 289 262 270 201 218 209 255 288 295 SPRINGFIELD 202 210 219 204 217 232 254 272 294 295 302 295 219 227 237 268 282 307 221 227 235 301 295 217 234 236 266 302 225 241 238 271 292 224 248 234 268 305 214 240 245 269 304 167 185 205 214 246 286 180 165 200 229 251 270 148 171 217 244 258 263 169 185 189 236 263 298 TOLEDO 167 163 193 174 191 200 241 260 272 277 300 280 164 195 208 250 273 311 168 192 197 294 278 171 199 198 251 282 177 201 205 256 261 174 201 203 251 285 161 196 212 257 289 1943 1944 1945 1946 1947 1948 140 157 175 205 217 235 148 142 184 226 221 233 121 147 192 261 225 253 127 161 182 225 239 243 W H EELING 134 133 149 168 189 175 232 257 255 240 279 266 132 167 198 246 253 273 140 167 182 270 246 134 167 182 240 261 140 171 187 228 222 137 174 187 234 250 142 177 200 235 259 1943 1944 1945 1946 1947 1948 178 185 215 241 286 318 198 172 226 246 294 320 156 188 232 290 276 297 161 187 205 261 313 358 YO U N G STOW N 167 170 197 180 210 226 274 298 325 307 350 338 175 191 231 283 302 341 174 195 218 320 311 173 210 221 288 325 178 209 232 280 305 181 213 231 282 330 178 210 239 287 326 -T* . . . 157 . . . 157 . . . 172 . . . 207 . . . 247 . . . 259 ■ June 314 344 366 Page 5 ERIE 188 188 211 278 296 336 J u ly 314 325 405 ■'** “ ' *' ”* *' ■■ * —* * Monthly Business Review Page 6 Review of Industrial Activity (Continued, from Page 3) tion in August, however, of 24.5 million square feet was the largest on record. Total production for the year was 5 percent above the record established in 1947. Paint and Varnish Paint and varnish manufacturers in this area report a continued high level of sales and production. While sales de clined seasonally in July from June, they remained above the level of a year ago and the outlook for the balance of the year is considered favorable. Increases in the cost of metals and pigments have more than counterbalanced the downward trend in oil prices. Most raw materials are in adequate supply to meet expected production schedules. Paper Paper and paper board production declined somewhat in July due to vacations but cur rently is running above the 1947 rate. Inventory posi tions at both manufacturing and wholesale levels are higher than a year ago. In view of better supply conditions, box manufacturers and other processors are ordering on a more conservative basis. Paper con sumers likewise are now buying in line with current consumption requirements and are trying to achieve better balances in inventories. In August and early September, producers advanced selling prices on some grades of paper and boxboard. lower, replacement shipments were down 18 percent, exports declined 60 percent, while original equipment shipments were up 8 percent. Employment Latest data available indicate that manufacturing employment in July as compared with June fell 1.3 percent in Ohio, 1.0 percent in Kentucky, 0.9 percent in Pennsylvania, and 1.2 percent in West Virginia. Preliminary reports show that some gain was achieved in August. Part of the decline was due to reduced shipments of pig iron and steel to metal-using industries as a consequence of the July coal strike in captive mines. Metal fabricators, in many cases, laid off forces to rebuild stocks. Protracted strikes among several large companies producing glass items, auto parts, and oil products also caused employment losses. Industrial production in other industries was affected somewhat by the growing practice of closing entire factories to give all but maintenance workers vacations at the same time. Slack demand also resulted in some curtailment in output. As a consequence of either or both of these conditions, lower production was reported for automotive tires, glass containers, plate glass, machine tools, men and women’s shoes, ferrous metal foundries, steel castings and forgings, truck trailers, electrical and general machinery and furniture. Faltering production schedules at automo tive assembly plants adversely affected District parts manufacturers. Machine Tools The machine tool industry has not yet benefited from the European Recovery program and firm orders for export re main at a low level. Total new orders received in August were less than 74 percent of the 1945-1947 average and 10 percent less than the first quarter monthly average. Costs have been adversely affected by the rise in steel prices as well as by the shift from the basing point system. Increased wage and freight charges also have had a substantial impact. Activity in the machine tool industry varies with the type of product manufactured. Most favorable rates of production are in the lines making the heavier machines such as planers, planer type milling machines, hydraulic presses, some of the forging machines, and some of the automatic machines. Order backlogs for the industry in August were equal to about five months’ shipments on the average, and were considered somewhat less than normal. Rubber Shipments of pneumatic casings for passen ger cars in August and September were believed to be running ahead of a year ago. Produc tion, however, was held below last year’s schedule partly because of a desire to reduce factory inven tories from the relatively high level attained last spring. As compared with the first seven months of 1947, total passenger casing production was 11 percent October 1, 1948 Wholesale Price Trends (Continued from Page 2) S P O T P R IM A R Y Commodity M A R K E T PRICES 1948 High Barley, bushel ................. $ 2.78 T allow , pou n d ................ .28 Cottonseed oil, p o u n d ... ........... 41 Lard, pou n d ..................... .29 Corn, bushel ..................... 2.81 W heat, bushel ................ 3.11 C otton, p ou n d ................ .39 Hides, pou n d ................... .33 Butter, p ou n d ................... .89 Hogs, 100 lbs..................... 31.20 36.38 Steers, 100 lbs.................. September 14, % Change 1948 from 1948 high $ 1.37 .14 .26 .20 1.96 2.21 .31 .27 .74 29.25 34.50 -5 0 % -5 0 -3 7 -3 1 -3 0 -2 9 -1 9 -1 8 -1 7 - 6 - 5 Source: Bureau of Labor Statistics. Figures rounded to nearest cent. strength will prevail for meat and dairy products as well as turkey and other poultry. Some months must elapse before herds and flocks can be built up again on the lower priced feeds. On balance, it would appear that the general upward movement of wholesale prices has about exhausted itself, except for the metals, metal prod ucts, and building materials. Even if these continue to rise somewhat, the general decline in agricultural commodities may be enough to introduce a period of stability or even a downward tendency. , October 1 1948 Monthly Business Review Page 7 The Locker Plant Industry HE typical frozen food locker plant operator, like many other entrepreneurs, is confronted with two general choices in regard to future operations. One route is to expand facilities in order to serve more patrons efficiently. By broadening his base of activi ties he may enhance the reputation of his enterprise and increase his gross revenue. The alternative in volves standing still, a course partially dictated by the mounting cost of expansion and the possibility of an eventual decline in effective demand. This second choice is not unattractive to those who believe them selves to be already at a satisfactory income level, and are reluctant to go out on a limb to test their market further. T Deterrants to At many plants all locker space is Expansion rented and the waiting lists are fairly long. Some operators in this category feel rental income could be increased by as much as 50 percent by providing more lockers and accom panied by appropriate and effective promotion. But the large majority of locker operators are small busi nessmen with correspondingly limited capital, and the investment required for the newest type of equipment may run as high as $ 100 per locker, not including any outlay for building. These lockers contain their own refrigerating unit and thus can be operated in a warm room, for the comfort of patrons. The cost of expan sion can be reduced if space is already available in the existing locker room for the installation of the conventional cold-room type of locker. Notwithstanding the deterrent of the high cost of expansion, some operators in this District who have waiting lists might enlarge their locker capacity were it not for the “ signs and portents” that prevail. One of these is the prospect that more locker patrons will switch their frozen food storage to home units. An amazing increase has taken place in the use of home freezers. A trade publication estimates that by 1949 around 1,000,000 freezers will be in use compared with 400,000 at the end of 1947, representing a gain of 150 percent in a single year. Secondly, distribution of frozen foods is becoming broader. The number of stores carrying these items is expected to increase 60-70 percent this year. Frozen food concerns have trimmed annual produc tion, the number of brands has been reduced, pack aging improved, and an ambitious educational cam paign has been inaugurated in conjunction with home freezer promotion. One of the latest apparently suc cessful retail developments combines selling or renting freezers, servicing them, and supplying them regu larly with frozen foods which the housewife has ordered by telephone. The pioneers in this type of marketing have been department stores, together Digitized for a very few locker plant operators. with FRASER Trade magazines have consistently advocated that operators “ roll with the punch” by participating in selling and/or supplying home freezers. But most locker plant operators are reluctant to add such a new and time-consuming function. Instead, the most common and most successful technique of participa tion has been the processing of meat for users of home freezers, in addition to regular locker patrons. Be cause this important development is dealt with in greater detail on page 9, it suffices here to say that it is in the direction of buying and processing of carcasses that probably the most significant advances in locker plant operation will take place. Need for Locker plants still have some novelty Coordination to consumers of this region, and partially because the industry is young, it lacks some of the earmarks of stability com monly exhibited by its larger brothers in the service and retail fields. Advertising, at least in this area, is little used. Turnover in ownership of plants has been fairly high. Merchandising methods have usually been “ hit or miss” . Considerable dependence for suc cess has been placed on the natural attractions of a new service, and the chance for establishing solidly the actual value of lockers has often been neglected. No tie-in was made with recent advertising campaigns for home freezers and frozen foods— the story of how a locker can be successfully and efficiently used in combination with a home freezer went untold. The new industry also suffered from fly-by-night operators whose wartime mishandling of customers left preju dices difficult to overcome. Rapid Growth Presumably, most of these shortcomings can be chalked up to “ growing pains” , but a glance at the accompanying table and chart will will reveal that the burgeoning industry is now of sufficient stature to assume mature ways. FRO ZEN FO O D LO C K E R PLAN TS IN T H E U N IT E D ST A T E S As o f July 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 T ota l Plants 1,269 1,861 2,870 3,623 4,323 4,559 5,282 6,464 8,025 9,529 10,617 Source: U. S. D. A., Extension Service. Yearly Increase 592 1,009 753 700 236 723 1,182 1,561 1,504 1,088 Monthly Business Review Page 8 G R O W T H OF T H E FROZEN FOOD LOCKER P L A N T IN D U ST R Y in the United States, 1938-1948 NUMBER OF PLANTS NUMBER OF PLANTS 8,000 T$PERAT ION J U D r i or eACM YEA ■5 6,000 4J300 — ■ ■ ■ §0 0 0 4,000 , zp0 0 ^ S ' 0 ft 1938 *39 *40 NEV\i p l a n t : S ADDED EACH YE AR *41 >42 *43 '4 4 '4 5 *46 2p00 '4 7 '4 8 . . . . the number of locker plants in operation has in creased greatly over 1938, but the rate of annual increase has tapered off in the past two years. Source: U. S. Department of Agriculture, Extension Service. There were no locker plants in this area only slightly more than a decade ago, yet today there are nearly 700 plants in Ohio, Pennsylvania, Kentucky, and West Virginia, the Fourth District States. The national total increased from 1,300 locker plants in 1938 to well over 10,000 this year. Locker plants had their major beginning in the North Central States of Iowa, Illinois, Minnesota and Wisconsin, which today account for 25 percent of all locker plants. Iowa, first among the states with 841 plants, exhibited the second largest increase in the 1947-1948 period as 140 new establishments were added. Gains in the Fourth District states were more modest, aver aging only about seven percent. However, in this area, the advance during the past ten years has outstripped, percentagewise, the growth in a pioneer state such as Iowa. Iowa, during this period, experienced a gain of 140 percent in the num ber of locker plants, while in Fourth District states, the total of 677 plants is nearly 13 times greater than in 1939, indicating this late-starting area has been catching up. In addition, locker plants in the Fourth District states average 55 percent larger in locker capacity than the Iowa plants. In Ohio, for example, the 330 plants, with an average of 760 lockers per plant represent a state capacity of over 250,000 lock ers, compared with 841 Iowa plants having a capacity of 392,000 lockers. Expansion Nearing End . * difficult to determine just how s further this expansion will pro ceed. The tapering off since the war in the demand for lockers it attributed primarily to reduced interest among city dwellers. If this be true, the Fourth District, with its large urban population, http://fraser.stlouisfed.org/ m u ch Federal Reserve Bank of St. Louis October 1, 1948 may approach its peak number of locker plants within the next year or two. The percentage of the nation’s locker plants located in the four Fourth District states has risen from two percent in 1938 to 6/4 percent at this time. An adjoining map of the District shows the dispersion of the plants. Particularly noticeable is the heavy con centration in the Ohio counties of Franklin, Mont gomery, Hamilton, S t a r k a n d Wood, while Southeastern Ohio and Eastern Kentucky are at the other extreme. Factors in Plant Location It is difficult to find other statistical series which show distinct relation ship to the locations of locker plants. One widely publicized fact is that three out of every four locker patrons are farmers, yet Pike county, Kentucky, with easily the largest farm popu lation in the District, has only one locker plant. West moreland county, Pennsylvania, second largest county in farm population, has but three plants. Another factor commonly associated with locker plant opera tion is the raising of beef cattle and hogs. The rela tionship here is somewhat closer than with farm population but is far from conclusive. A comparison of a list of Ohio’s leading livestock counties with the chart of plant locations reveals that the principal areas of activity (not individual counties) coincide reasonably well. A spot check of operations in the Cleveland terri tory showed that in the past it has been rare for market surveys or an attempt at “ scientific” methods of selection to be employed in determining plant location. Such techniques, however, can not long be avoided if the rate of expansion of the industry is to continue successfully. Heretofore many plants came into being by adding a “ cold room” to an existing grocery store or meat market, or by segregating a portion of a cold storage warehouse. (Now that the locker plant is recognized as a separate institution a reverse type of situation arises when a grocery department or retail meat shop is added to the locker plant.) This more or less haz ardous location of locker plants has resulted in occa sional saturation of an area and, in other cases, in a LOCKER PLANTS Year (J u ly l) 193 8 193 9 1940 194 1 194 2 1943 194 4 194 5 1946 1947 194 8 Source: U .S . ...... 1,269 ...... 1,861 ...... 2,870 ...... 3,623 ...... 4,323 .......4,559 .......5,282 .......6,464 .......8,025 .......9,529 10,617 Ohio 21 32 50 74 146 150 178 223 288 310 330 Penn. W. Va. Ky. 5 20 29 35 42 45 75 145 184 228 242 0 1 1 1 1 1 2 2 8 10 13 0 0 0 4 14 15 32 52 60 86 92 Department of Agriculture, Extension Service. S tates of the Fourth District 26 53 80 114 203 211 287 422 540 634 677 Iowa 305 350 450 475 550 571 580 600 655 702 841 October 1, 1948 Monthly Business Review L O C A T IO N OF LOCKER PLANTS IN T H E F O U R T H D IST R IC T by counties, 1948 (Each dot represents one plant) Page 9 more than 1,000 lockers could probably provide a modest return exclusively from rentals. As a matter of fact, in the average cooperative plant in the North Central area, less than half the plant income is received from rental charges.* In the North Central States, revenue from processing accounts for about 16 percent of total income; rentals, 44 percent; and other sources, 10 percent. The terms “ processing” , and “ other sources” cover quite a range of activity. Interviews with locker oper ators in this region turned up a surprising array of services, from the sale of cellophane bags to processing a side of beef, and ranging in size from a modest 50locker operation to a large combination full-scale supermarket and locker plant. * A typical locker plant in this area caters to three types of patrons: (1) farm dwell ers who produce their own meat, vegetables, and fruits; (2) city dwellers who produce their own vegetables, and perhaps some fruit; and (3) patrons who must purchase all their food. There is a fourth type, but somewhat rare — institutional customers, i. e., hotels, restaurants, hospitals — who use the locker plants’ bulk storage and freezing facilities. Types of Patrons . . . . Fourth District locker plants are clustered most heavily around Dayton, Columbus, Cincinnati, Toledo, and in the Akron-Canton area. Source: U. S. Department of the Interior, Fish and Wildlife Service. notable absence of facilities. An outstanding local example of this latter is the complete dearth of locker plants on Cleveland’s populous East Side, while numerous plants are easily accessible to the West and South Side. Scope of Activities Once a location has been selected, an important choice confronts the operator. Should he attempt to confine himself fairly strictly to locker rentals or should he offer a variety of services? His essential attraction and raison d’etre is the provision for refrigerated frozen food lockers, but it has become increasingly evident that a plant with no more than 500 lockers can not operate on rental income alone. The average locker rental in the Cleveland area is approximately $ 16 per year for the standard 6 cubic foot locker, which in the case of 760 lockers (Ohio Average) produces a maximum gross locker revenue of about $12,000. T o operate a plant of this size a minimum of 2 men is needed, and when other costs are considered, it becomes evident that other sources of revenue must be sought in order to insure profitable operation. It is said, however, that a plant having Typical Processing Facilities The most fundamental of the processes is that of sharp freezing, i. e., bringing food from room temperature quickly to 20° F below zero, or lower, and freez ing throughly after which it can be stored in lockers at 0° F. There are three classes of locker plants and all of them provide for this basic function. The first category, ten p e r c e n t of the plants, offers no process ing services other than sharp freezing. The second type, consisting of 60 percent of the plants, has no facilities for killing the animals; instead, carcasses are purchased from packing plants and the process ing is completed in the locker plant. The remaining 30 percent of plants maintain slaughtering facilities and complete processing equip ment. A few plants also dress poultry, which usually involves investment in a mechanical picker. Thus, the second and third categories, comprising 90 percent of the locker plants, are able to meet the typical needs of patrons. A farmer, for example, is able to bring in a carcass and have it dressed, aged, cut to order, frozen, packaged, labeled and dated, and placed in his locker. City dwellers can expect to be able to buy meat at “ wholesale” prices, e. g. a quarter of beef, and have it likewise completely processed. * Based on a 1946-1947 survey, “ Cooperative Frozen Food Locker Associations” , by the Farm Credit Administration. Miscellaneous Report No. 116, April 1948. Page 10 Monthly Business Review It is fairly difficult to measure accurately the pre cise saving accruing to a patron who buys meat in bulk, but there is general agreement that in the typical purchase of a quarter of beef, savings run about 15 percent. One operator estimated the saving amounted to about $15 at current prices. These processing services are, of course, available to the owner of a home freezer as well as to regular locker patrons. Non-processing Operations Aside from renting lockers, there are numerous non-processing op erations. These normally include selling, from serve-yourself chests, one or more nationally advertised lines of frozen foods. Another “ must” is stocking the various materials used in home preparation of foods for freezing— locker wrapping paper, sealing tape, cartons, syrup preservative, pamphlets on processing and cooking frozen foods, etc. A newer, but apparently rather profitable opera tion is selling cuts of meat already packaged and frozen. The cuts are the product of the operator, enabling him to price them attractively. This has the additional advantage of keeping the meat cutter busy during low points in the fluctuating output of custom-processed meat. Some plants have a limited grocery line consisting almost entirely of staple canned goods and other nonperishable items. Provision is sometimes made for a preparation room, to be used free of charge by locker patrons to prepare batches of fruits and vegetables for freezing. Selling Home Another non-processing function is the Freezers sale of home freezers. Many locker operators in this area handle one or two brands of freezers but their merchandizing is rather perfunctory. They shy away from the prob lems which may accompany promoting a line of freezers, such as servicing and repairing them (at any hour), installation and adjustment, extending credit, leasing arrangements, allocating showroom space, and advertising. Whether to extend themselves in this direction has stirred up lively debate within the trade and in trade magazines, which generally favor the move. Freezers vs. An ideal development has occurred in Lockers many instances where the purchaser of a home freezer retains his locker for bulk storage, particularly of meat, and continues, occasionally in greater volume, his use of the plant’s processing facilities. Additional reasons for retention of the locker are to provide emergency storage in case the home freezer breaks down, and to handle the heavy seasonal loads vegetables, and meats, which exceed home of fruits, October 1, 1948 freezer capacity. Locker plants normally provide “ overflow” storage if the locker itself is unable to handle occasional large lots of meat or other products. Locker operators contend that it is not possible to purchase and operate a home freezer as cheaply as locker space can be rented. Use of a home freezer, they admit, does strike at one serious disadvantage of locker plants— their inconvenience. A housewife may not be impressed by operating cost differentials if several trips a month to the locker plant are elimi nated through purchase of a home unit. If the locker operator also sells home freezers he can hardly argue too effectively against their use, but he does recommmend the small boxes (6 cu. ft. capacity) over the larger sizes, so that retention of the locker, and its advantages, is still desirable. If the new owner of a large home freezer abandons his locker, every effort is made to supply his “ box” in much the same way as his locker was supplied. In this way the loss of revenue is restricted to the locker rental. "Dead" Lockers Locker operators like to have a high turnover in the contents of each rented locker. Lockers rented but empty would appear to constitute, in one sense, an ideal situation for the operator, but this is not the case, because no process ing revenue arises from an unused locker. When a customer regularly uses his locker, continually adding processed meat to it, and in turn withdrawing the contents for consumption, the result is profits to the operator. The patron also benefits from a high turn over because it keeps his food bank fresh. Frozen meat even though kept at 0° temperature, will eventually spoil. Pork, for example, may spoil in 6 months or less. In this territory, the customer who rents a locker and then forgets it is frequently reminded of this disuse by the typical operator. If his exhortations prove futile, the operator usually tries to dissuade the renter from renewing. This seemingly rather negative practice has carried over from the period of wartime meat shortages when waiting lists were long and locker space at a premium. Operators have two rea sons for believing that even today it is good business to create a few vacancies in this manner: (1) it sets up a backlog of locker space to take care of new patrons and in turn reduces one of the causes for purchase of home freezers, viz. nonavailability of locker space; (2) if the replacements are more inter ested in their locker, the ratio of food processed (at the plant) per locker increases. This ratio is one of the best analytical tools for evaluating locker plant operation. The national average for this ratio in 1941 was 360 pounds per locker, in 1945 was 353 pounds, and last year rose above 400.* If through increased * Data from the two FCA studies to which previous references were made. October 1, 1948 Monthly Business Review competition or other factors the number of lockers rented per plant declines, this ratio must, for the average plant, obviously be increased still further to produce profits. One operator in this area reported that his volume of meat processing for owners of home freezers has increased to the point that it exceeds the amount processed for his locker patrons. If this trend becomes general it will raise significantly the average ratio of food processed per locker. Charges and Profits Typical processing charges are four cents per pound for beef, five cents for lamb and veal, and four cents for pork (curing, smoking, lard rendering extra). Sharp freezing of fruits and vegetables is usually done for three cents per pound. These charges, plus revenue from retail sales and locker rentals comprise the income section of the operator’s statement. Principal expense item is labor, which constitutes just about half the operator’s costs. Skilled meat cutters are still in short supply. Elec tricity, for operating the refrigerating equipment, together with other utilities, account for another 10 percent of expenses. Other expenses— licenses, taxes, depreciation, repairs, supplies, interest, etc.— take the remaining 40 percent. A study of cooperative plants* (13 percent of plants are co-ops) showed average net profits (or net “ sav ings” ) in 1947 of 12 percent after taxes. Operators interviewed recently in this area agreed that margins are currently showing a tendency to narrow. Pros and Cons Of Locker Use Operators believe that the basic reasons for patronizing locker plants exist as strongly today as ever. These selling points are: (1) frozen foods are usually more palatable than canned foods, (2) locker plant freezing eliminates the work of home canning, (3) family diet is improved by the possibility of using out-of-season foods, (4) depending on the degree of use and size of family, savings result, (5) it is ordi narily possible to obtain higher grade meat than that available in grocery-meat stores, and the type of cuts can be specified before processing. Some disadvantages of using lockers should also be mentioned: (1) frozen foods in most cases must be used soon after being taken from the locker, so * Op. cit. Page 11 that frequent trips to the locker are required unless a home freezer is available for storage, (2) meat bought by the carcass occasionally may not be as carefully inspected, nor as tender as cuts purchased at retail stores, (3) frequently it is less convenient to go to locker plant for supplies than to patronize the “ corner grocery” , where also a wider variety of meats is obtainable. The The locker plant operators interviewed in Future this area were asked about their plans for expansion. There was agreement on this central point: no expansion in the number of lockers until construction and equipment costs come down. Several of the operators, however, had begun, or were planning, to expand their processing facilities. The industry is so young that it has never encoun tered a nationwide economic setback (the 1937-38 recession occurred just as the industry got underway). Operators hope that the possibility of effecting savings in food costs would attract customers even more strongly in a depression. The permanency of the service functions of locker plants seems fairly well assured. A continuing increase in competition from home freezers might well result in compensating gains in processing business for locker plants. New The main trend in locker plant operation Trends appears to be a movement toward providing more services for the locker patron. Delivery service has appeared recently, eliminating time-con suming trips to the plant. Many plants are experi menting with production of their own frozen foods, especially meat. Possibilities exist for buying fruits by the carload and splitting the shipment among operators in an area, so that frozen fruit can be offered to locker patrons at attractive prices. No conclusive information is available, but there appears to be a growth in the chain operation of locker plants which provides the advantage of cen tralized processing facilities. In the matter of locker equipment, the warm-room type seems sure of gaining favor, although this equip ment is more expensive, and necessitates charging higher rentals, a factor many operators cite as pre venting large-scale adoption. Monthly Business Review Page 12 October 1, 1948 DEPARTMENT STORE TRADE STATISTICS Inventories by Departments—August 31,1948 Sales by Departments— August 1948 Percentage Changes from a Year Ago Percentage Changes from a Year Ago (Fourth District Reporting Stores) (Fourth District Reporting Stores) (Compiled September 28, and released for publication September 29) Coats and Suits (Women’s and Misses’ ) ................................................................. W oolen Dress G oods.................................................................................................. Radios and Phonographs.......................................................................................... M illinery...................................................................................................................... A rtNeedlework.......................................................................................................... (Compiled September 29, and released for publication September 30) + 76 + 37 +34 +33 + 29 Major Household Appliances.................................................................................... +64 Men’s Clothing........................................................................................+44 Domestic Floor Coverings........................................................................................ -f-34 Toys and Games.............................................................. .......................................... +33 Hosiery................................................................................................................. +31 Juniors’ Coats, Suits and Dresses..............................................................................+28 Silks, Velvets and Synthetics.................... ............................................................ ..+28 Blouses, Skirts and Sportswear............................................................................... ..+26 Domestics, Muslins, Sheetings................................................................................ .+25 Furniture and Bedding.............................................................................................. ..+21 Sporting Goods and Games......................................................................... . Furniture and Bedding.............................................................................................. Domestics, Muslins, Sheetings................................................................................ Lamps and Shades..................................................................................................... Inexpensive Dresses (Women’s and M isses')......................................................... +26 +25 +24 +23 +22 Gift Shop..................................................................................................................... Blankets and Comforters.......................................................................................... Major Household Appliances.................................................................................... Dom estic Floor Coverings....................................................................................... Lamps and Shades..................................................................................................... +21 +20 +20 +19 +19 Luggage........................................................................................................................ China and Glassware................................................................................................. Girls’ Wear........................................................................................................... . . . " Cotton Wash G oods.................................................................................................. Records, Sheet Music and Pianos........................................................................... +22 +22 _j_22 -j-18 +17 China and Glassware.................. .............................................................................. Better Dresses (Women’s and Misses’ ) .................................................................. Draperies, Curtains, etc............................................................................................ C andy.......................................................................................................................... Silverware and Clocks............................................................................................... +17 +16 +15 +14 +14 Shoes (Women’s and Children’s ) ............................................................................. Juniors’ Coats, Suits and Dresses............................................................................ Infant’s Wear............................................................................................................... Underwear, Slips and Negligees.............................................................................. Fine Jewelry and W atches........................................................................................ +17 +17 +16 +16 +14 Housewares................................................................................................................. Corsets and Brassieres............................................................................................... Boys’ Wear.................................................................................................................. Silverware and Clocks............................................................................................... Shoes (Men’s and B oys’ ) ........................................................................................... +14 +14 +14 +13 +13 Handbags and Small Leather Goods........................................ ............................ Blankets and Comforters.......................................................................................... Notions........................................................................................................................ Silks, Velvets and Synthetics.................................................................................. Aprons, Housedresses, Uniforms............................................................................. +13 +12 +12 +12 +11 Linens and Towels...................................................................................................... Better Dresses (Women’s and Misses’ ) .................................................................. Furs.............................................................................................................................. Draperies, Curtains, etc............................................................................................ Woolen Dress Goods.................................................................................................. +11 + 9 +9 + 8 + 7 Coats and Suits (Women’s and Misses’ ) ................................................................. Blouses, Skirts and Sportswear............................................................................... Men’s Furnishings and H ats..................................................................................... Neckwear and Scarfs................................................................................................. Art Needlework.......................................................................................................... + + + + + Inexpensive Dresses (Women’s and Misses’ ) ..........................................................+13 Girls’ W ear.................................................................................................................. .+12 Cotton Wash G ood s.................................................................................................. .+11 Records, Sheet Music and Pianos............................................................................+11 Neckwear and Scarfs..................................................................................................+11 Housewares................................................................................................................. N otions........................................................................................................................ Books and Stationery................................................................................................ Sporting Goods and Cameras.................................................................................. Luggage........................................................................................................................ +10 +10 + 9 + 8 + 8 T oys and Gam es.........................................................................................................+ Infants’ W ear................................................................................................................+ Linens and Towels..................................................................................................... .+ H osiery........................................................................................................................ .+ Corsets and Brassieres.............................................................................................. .+ 6 6 5 5 4 Handbags and Small Leather G oods......................................................................+ Gloves (Women's and Children’s ).......................................................................... .+ Laces and Trimmings.................................................................................................+ Handkerchiefs..................... ...................................................................................... .+ Underwear, Slips and Negligees...............................................................................+ 3 3 3 2 1 B oys’ W ear..................... . .......................................................................................... — 1 Shoes (Women’s and Children’s ) ............................................................................ — 1 Costume Jewelry.......................................................................................................— 2 Toilet Articles, Drug Sundries................................................................................ — 3 Shoes (Men’s and B oys’ ) .......................................................................................... — 6 Fine Jewelry and W atches........................................................................................ — 6 Men’s Clothing........................................................................................................... — 7 Men’s Furnishings and H ats.....................................................................................— 11 Furs..................... ..................... .................................................................................. —U Aprons, Housedresses and Uniforms.......................................................................— 14 Sales during August b y Fourth District department stores were higher than the year ago level, as well as higher than during July, for all but a few departments. Contrary to the usual experience of recent months, sales in the main store showed a somewhat larger increase than basement store sales, the gains over last year being 13% and 11% respectively. Largest percentage increase over last year was registered by the women’s and misses’ coats and suits department, where sales were 76% over the 1947 season when the fall pick-up in this merchandise was slow in developing. Other large gains in the women's apparel and accessories group were made in millinery, up 33%, juniors’ coats, suits and dresses, up 28%, and blouses, skirts and sportswear, up 26%. Sales of better dresses were 16% higher than a year ago, while sales of inex pensive dresses were 13% higher, contrary to the relative positions of these two departments which has prevailed recently. Several departments in the women’s wear group showed declines in sales from a year ago. These were women’s and children’ s shoes, down 1%, furs, down 11%, and aprons, housedresses and uniforms, down 14%. The housefurnishings departments as a group were at the highest levels of the year, 19% above the year ago position, with all departments in the group sharing in the gains. Sales of radios and phonographs (including television) were 34% above a year ago, while the furniture and bedding department reached a new all-time high for any month, 21% above a year ago. Sales of major household appliances, up 20% from a year ago, also broke all former monthly records. All men’s and boys’ wear departments, however, showed sales declines from a year ago, with the losses ranging from 1% in the case of b oy’s wear to an 11% drop for men’ s furnishings and hats. Dollar sales of the latter department were only about half as large as in June of this year. Sales of piece goods and household textiles were substantially above last year’s level. Sales of toilet articles and jewelry, however, were down from a year ago, with losses ranging from 2% to 6%. All comparisons refer to dollar volume, without adjustment for price changes. 5 5 5 3 1 Books and Stationery.....................................................................................................0 .. Toilet Articles and Drug Sundries.. , ..................................................................... — 2 Costume Jewelry............................... ........................................................................— 3 Gift Shop.............................................................................................................. — 4 Gloves (Women’s and Children’s ).......................................................................... — 6 . Laces and Trimmings................................................................................................— 7 C andy...........................................................................................................................— 8 Millinery...................................................................................................................... — 8 Radios and Phonographs.......................................................................................... — 8 Handkerchiefs.............................................................................................................—13 The dollar value of inventories of Fourth District department stores rose about 8% during August in line with seasonal expectations. A t the close of the month, stocks were 15% higher than a year ago. The pick-up in stocks from the seasonally low levels of recent months brought them to about the same level as early this spring, although total store stocks are still somewhat below the all-time highs which were reached late last Fall. Stocks in the men’s and boys’ wear departments as a group reached a new high point at the end of August, at an average level 20% above a year ago. Contributing heavily to this result was the rise in stocks of men’ s clothing which topped all previous marks at a point 44% above last year’s level. Inventories of boys’ wear also increased sharply during August, and at month’s end were 14% above a year ago. A substantial increase in the stocks of men’s furnishings occurred during August, although the level at the end of the month was only 5% above a year ago when a considerable pick-up in inventories of this merchandise had already oc curred. Stocks of men’ s and boys’ shoes, which showed little change during the month, stood 13% above the year-ago figure at the end of August. Inventories in the housefurnishings departments at the month’s end averaged 23% higher than a year ago, although stocks of radios and phonographs (including television) were 8% lower than a year ago. In most housefurnishings departments stocks at the end of August were somewhat lower than earlier this year. In the women’s apparel and accessories group, where inventories at the close of last month averaged 12% higher than a year ago, the greatest increase was shown in stocks of hosiery which were up 31% from a year ago to reach a new all-time high. Stocks of infants’ wear also set a new record, 16% above a year ago. Declines from a year ago occurred, however, in stocks of gloves, millinery, and handkerchiefs, where the percentage fall ranged from 6% to 13%. Stocks of toys and games at the end of the month were 33% above the year-ago position. The increase during August was comparable to the increase during Septem ber of last year, and the level of toy stocks at the end of August of this year was about the same as at the end of September a year ago. Inventories of toilet articles and drug sundries were at the lowest point for the month since 1944. All comparisons refer to dollar value of inventory, without adjustment for price changes. Monthly Business Review October 1, 1948 Page 13 FIN A N C IA L AND OTHER BU SIN ESS STA TISTICS Time Deposits— 12 Fourth District Cities Bank Debits*— August 1948 (In thousands of dollars) (Compiled September 9, and released for publication September 11) (Compiled September 8, and released for publication September 9) Average W eekly Change During: C ity and Number Tim e Deposits August Previous Year of Banks________August 25, 1948________1848_________Month_________ Ago Cleveland (4 )............. $ 873,914,000 Pittsburgh (12)......... 405,297,000 Cincinnati (8) ............. 181,540,000 Akron (3).................... 102,054,000 +1i 98,000 5,000 + + + 243,000 24,000 Toledo (4).................. Columbus (3)............. Youngstown (3)......... Dayton (3 )................. 96,722,000 79,589,OOOH 61,740,000 47,866,000 + + + + 25,000 101,000 129,000 13,000 Canton (5).................. Erie (4)....................... Wheeling (6) ............... Lexington (5 )............. 43,227,000 39,032,000 28,947,000 10,551,000 + + + 18,000 8,000 55,000 18,000 T O T A L —12 Cities. $1,970,479,000 +$701,000 -$ 1 ,133,000 5,000 174,000 89,000 — — — _ + + + _ + + 35,000 111,000 40,000 4,000 65,000 15,000 10,000 19,000 - $ 1 ,340,000 +$219,000 + 65,000 — 369,000 — 41,000 + — + — _ + + — 155,000 16,000 42,000 29,000 45,000 164,000 16,000 4,000 +$154,000 H denotes new all-time high. Tim e deposits in 12 Fourth District cities increased slightly during August, offsetting in part the shrinkage which occurred in July. The increase during August averaged $701,000 per week as against a gain of only $154,000 per week during the same period last year. The increases were larger than in recent months in Akron, Cincinnati, Dayton, and Youngstown. In Wheeling, tim e deposits increased for the third successive month, and stand only nominally below the $29,200,000 established last October 29. In Columbus, tim e deposits m oved upward for the fifth consecutive month and reached $79,589,000 for a new all-time high. Changes in Consumer Instalment Credit August 1948 25 Fourth District Member Banks (C o m p il e d S e p t e m b e r 2 7 , a n d r e le a se d for p u b lic a tio n S e p te m b e r 2 9) Outstanding at End of M o. Compared W ith M o. Ago Y r. Ago + 2% + 1 + 4 + 57% + 22 + 75 + 4 — 3 + 63 + 21 + 5 + 2 +118 + 98 Type of Credit Total consumer instalment credit Personal instalment cash loans Repair and modernization loans Direct retail instalment loans (a) Automobile (b) Other Retail instalment paper purchased (a) Automobile (b) Other New Loans Made Compared W ith M o. Ago Y r. Ago A L L 30 C E N T E R S .................... $6,859,508 10 L A R G E S T C E N T E R S : ...O h io $ 217,756 112,482 Canton.......................... Cincinnati.................... 842,615 Cleveland.................... 1,778,831 Columbus..................... . . . Ohio 548,454 Dayton......................... 215,909 T oled o.......................... 352,841 Youngstown................. 152,320 91,201 . Penna. Pittsburgh.................... . Penna. 1,940,747 3 Months % Change Ended from August 1948 Year Ago +16.5% $21,226,143 +17.6% + 4.4% +16.1 + 11.1 +16.2 +27.3 + 2.6 — 5.1 +16.1 + 12.2 +25.8 $ + 8.1% + 20.1 +15.3 +17.4 +28.2 + 5.7 + 0.1 +16.9 +17.9 +22.9 698,997 353.862H 2,696,551 5,571,041H 1.704.101H 692,575 1,091,088 488.572H 278.906H 5.788.401H T O T A L ................................... $6,253,156 20 O T H E R C E N T E R S : Covington-Newport... . . . , K y . $ 37,700 Lexington...................... ---- K y . 59,965 20,050 Hamilton..................... 40,320 43,978 19,361 Mansfield..................... 41,555 32,843 M iddletow n................. Portsmouth................. 20,923 Springfield................... 44,597 23,357 Steubenville................ 36,779 W arren.......................... 26,480 Zanesville.................... Franklin........................ 6,476 Greensburg................... . Penna. 21,652 Kittanning.................... 11,358 Meadville..................... 12,008 18,798 Oil C ity ........................ Sharon........................... 28,257 Wheeling...................... ,W. Va. 59,895 +16.6% $19,364,094 +13.5% +28.0 + 5.4 +28.5 +10.3 +12.9 +20.9 + 21.6 +10.9 + 8.2 +20.4 +16.2 +11.7 — 15.0 +28.5 +25.9 +14.7 + 6.1 +10.4 +13.8 $ $ 606,352 +15.8% $ 1,862,049 T O T A L ..................... +17.6% 123,063H +17.2% 175,432 +20.9 + 11.8 61,487 119.441H +24.1 137.064H +19.8 58.763H +17.1 +13.8 121,604 +19.5 99,198 +17.3 65,715 +13.8 139,144 + 20.6 73,903 114.586H +16.7 +14.3 82,665 21.376 + 2.4 67.462H +27.5 34.224H +25.2 + 11.0 37,752 +11.7 61,595 + 17.1 85,034 182,541 +13.9 +17.2% * debits to all deposit accounts except interbank balances. H denotes new all-time high for one month or quarter year. During the month of August, debits to all nonbank deposit accounts of banks in 30 cities of the Fourth District were 16H percent greater than in the same month of 1947. In all but two cities August debits were the highest on record for the month. Over the same period in which this I6J percent increase in debits took place, total /2 deposits against which these debits were made increased less than 5 percent. TEN LARGEST CITIES For the second month in succession, the widest gain over last year among the largest cities occurred in Columbus where debits of nearly $550,000,000 were more than 27 percent above a year ago. Pittsburgh reported a year-to-year increase of nearly 26 percent, with debits totaling over $1,940,000,000. In Cleveland the margin over last year was almost identical with that of all ten large cities combined. TWENTY SMALLER CENTERS The year-to-year expansion in debits among the smaller cities amounted to 15.8 percent as against 16.6 percent for the metropolitan areas. After an interval of five months, Hamilton again led the list with debits going over $40,000,000 for a 28.5 percent gain over the August 1947 total. Greensburg debits likewise ran 28.5 percent ahead of a year ago for a new all-time high for the month. Aggregate debits of reporting banks in Lexington were 28 percent in excess of a year ago. + 2% + 8 + 7 + 42% + 16 + 46 + 4 — 3 + 60 + 43 Indexes of Department Store Sales and Stocks — 5 — 10 +130 + 42 Daily Average for 1935-1939 = 100 During the month of August, the volume of new consumer instalment loans made b y 25 Fourth District reporting banks was second largest on record for any one m onth, and 42% greater than a year ago. The amount of direct auto loans made during August was 60% above the 1947 month and the largest for any month since the series has been compiled. A ctivity with respect to repair and modernization loans likewise was far ahead of a year ago with a 46% gain. The year-to-year increase in new personal instalment cash loans was compara tively moderate at 16%, but the aggregate was close to the March 1948 total which represents the all-time high to date. A t the close of August, the amount of consumer instalment loans carried b y the reporting banks had established a new high, 57% above a year ago, and up nearly 150% within two years. Purchased paper accounted for the largest percentage gains over the comparable 1947 figure, but repair and modernization loans, and direct Digitized forlikewise were outstanding in much larger volume than a year ago. auto loans, FRASER % Change from Year Ago August 1948 Adjusted for Seasonal Variation* August August July 1948 1947 1948 Without Seasonal Adjustment August July August 1948 1947 1948 SALES: Akron (6) ..................... ......... Canton (5)................... ........... Cincinnati (8) .............. ......... Cleveland (10)............ ........... Columbus (6) .............. ......... Erie (3 )........................ ......... Pittsburgh (8) ............. ......... Springfield (3)............. ......... Toledo (6) ................... ........... Wheeling (6) ........................... Youngstown (3).......... ........... District (98)........................... 318 380 337 279 368 338 303 303 305 266 343 308 330 405 341 282 368 347 280 307 311 273 341 313 298 329 292 247 309 301 262 295 278 246 311 273 270 335 280 245 313 280 258 251 256 212 298 268 277 341 263 229 295 271 204 249 239 205 266 244 253 289 242 217 262 250 222 245 233 197 271 237 STOCKS: D istrict....................... ........... 254 257 219 275 257 236 * Revised series; see page 4 of this Review. Monthly Business Review Page 14 October 1, 1948 SUMMARY OF NATIONAL BUSINESS CONDITIONS By the Board of Governors of the Federal Reserve System (Released for publication September 28, 1948) Industrial output in August and the early part o f September regained most o f the decline which oc curred in July. Departm ent store sales showed about the usual marked seasonal increase. Prices o f some additional industrial products were raised, while prices o f farm products and foods generally declined somewhat from the beginning o f August to the latter part o f September. Industrial Production T h e B oard’s seasonally adjusted index o f industrial production was 190 per cent o f the 1935-39 average in August, as com pared with 186 per cent in July and 192 per cent in June. Most o f the increase in August reflected larger output o f n ondurable goods, but activity in these lines was about 2 per cent below the June rate. Steel produ ction increased in August and was at a rate o f 93 per cent o f capacity. D uring September steel m ill'activ ity has been scheduled at a somewhat higher rate. O utput o f lum ber and o f stone, clay and glass products was somewhat larger in August than in the preceding month. Activity in the autom otive industry, however, decreased in August and in the early part o f September, primarily as a result o f work stoppages at plants o f parts suppliers and shortages o f sheet steel. O utput o f most other durable goods continu ed in August at about the July rate. P roduction in n ondurable goods industries in August recovered most o f the decline shown in July, when plant-wide vacations sharply reduced output o f textiles, leather, paper, and some other products. C otton consum ption rose 11 per cent in August but was at a rate somewhat below the same m onth a year ago. Shoe production showed a marked seasonal gain in August, according to trade estimates. Activity also increased in the paper and printing, chemicals, and rubber products industries. O utput o f manufactured foods, on the other hand, declined in August, reflect ing mainly a further sharp reduction in the volum e o f meat production and a less than seasonal rise in the canning industry. Production o f fuels increased in August and was at a rate 7 per cent above the same period a year ago. O utput at metal mines rem ained at the July rate. In the early part o f September crude petroleum output declined somewhat as a result o f a W est Coast re finery strike. Construction Value o f construction contracts awarded in August, according to reports o f the F. W . D odge C orporation, declined moderately from the high levels o f recent months. T h e num ber o f new nonfarm dw elling units started in August was 83,000 as com pared with 94,000 in July and a peak o f 98,800 in A pril, according to prelim inary estimates o f the Bureau o f Labor Statistics. Value o f construction activity on jobs under way continued to increase during August. Distribution Departm ent store sales during August and the first half o f September showed about the usual marked seasonal expansion and the B oard’s adjusted index the third quarter is likely to be slightly higher for than the level during the second quarter, when the index was 309 per cent o f the 1935-39 average. Loadings o f railroad revenue freight increased in August, largely as a result o f increased loadings o f coal and miscellaneous merchandise. Shipments o f grain decreased somewhat from the high July level, and livestock shipments increased less than norm ally for this season. Commodity Prices T h e general wholesale price in dex declin ed 1 per cent in the latter part o f August but advanced again in the m iddle o f September, reflecting chiefly fluc tuations in meat prices. In the latter part o f Septem ber wholesale prices o f farm products and foods, including meats, were somewhat low er than in the early part o f August, w hile average prices o f indus trial products were higher. T h e consum er’s price index increased further by one-half per cent from mid-July to mid-August, re flecting advances in prices o f all m ajor groups o f items except foods. R etail fo o d prices, follow in g a rise o f 7 per cent from M arch to July, have appar ently shown little change since that time. Bonk Credit Federal Reserve System support purchases o f U nited States G overnm ent bonds sold by insurance com panies and other nonbank investors continued heavy in August and the first half o f September. System sales o f short-term G overnm ent securities both to banks and others were also large, and the total p ortfolio o f G overnm ent securities was little changed. In the first half o f September bank reserves were substantially increased by a decline in Treasury balances at the Reserve Banks, but in the third week o f the m onth these balances were rebuilt by large tax receipts. In the early part o f September the B oard o f Governors announced an increase in reserve require ments o f 2 percentage points on net dem and deposits and U/2 percentage points on time deposits, effective September 16 for mem ber banks outside reserve cities and September 24 for reserve city and central reserve city banks. T h is action increased by 2 b illion dollars the am ount o f reserves that m em ber banks are re quired to hold. Pursuant to legislative authority granted in August, the Board o f G overnors reinstituted the regulation o f consumer instalment credit, effective September 20. Com mercial and industrial loans increased by 700 m illion dollars at banks in leading cities in August and the first half o f September. R eal estate and con sumer loans also expanded further. Bank holdings o f Governm ent securities were little changed, despite the retirement for cash o f about 400 m illion dollars o f bank-owned G overnm ent bonds on September 15. Interest Rates and Security Markets Interest rates showed little further change in the first three weeks o f September, follow in g a rise in short-term m oney market rates in August. C om m on stock prices showed further m oderate weakness, but prices o f high-grade corporate and m unicipal bonds changed only slightly. CLEVELANp TOLEDO AKRON • pA I • IYOUNGSTO> CANTON • P it t s b u r g h OHIO DAYTON • COLUMBUS ★w CINCINNATI f VyHEELING W .V A . S LEXINGTON Fourth Federal ReserveDistrict ■ MAIN OFFICE ★ BRANCH OFFICES
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