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MONTHLY IN FEDERAL RESERVE BANK of CLEVELAND.----- THIS ISSUE Investment Outlays and the National Product.......................... Building Activity in Fourteen Metropolitan Areas (Fourth District). O c to fe n , t 9 5 . . 12 7 Since late '55, neither "consumer investment" nor "business investment" has shown as much fluctuation as in most previous years of the postwar period. The changes which have occurred in the two types of investment have tended to offset each other. i Billions of Dollars "Consumer Investment" — consumption expenditures for durable goods + new residential construction. *Business investment" = new nonresidential construction + producers' durable equipment + change in business inventories. I » « ' 1 ■ ■■I ■» i I ' '48 '49 '50 '51 '52 Ouorttrly dote, stotonolly odjusttd at onnuot rafts . 8 Investment Outlays and the National Product expenditures for new plant and creased payrolls engendered by the program, equipment have ceased to show signifi levels of demand on both the consumer and cant increases. Announcements of plans forthe industrial fronts of the economy are future outlays, as summarized in a number strengthened. Thus, the capital expansion of surveys taken this year, indicate an end of program is generally recognized to have a the rising trend. (Summaries of plans for thrust on the total economy beyond what 1958 were not yet available at press time.) might be suggested by the actual dollars in volved in the program, when expressed as a This important economic development, es fraction of total business activity. pecially during recent months, has appeared to intensify moods of business pessimism In spite of this strategic character of plant which had already been generating from and equipment expenditures, it should not be other sources. assumed that there is a necessary and auto matic connection between the direction taken A mere leveling in plant and equipment by capital expansion and the direction of outlays has not, however, been regarded in change in total business activity. “ Offsets” all quarters as necessarily a “ bearish” omen. as between one major part of the economy Many observers have chosen to put the stress and others are regularly recurring aspects of on the very high level of new capital expendi the business scene. tures which are involved in the forward pro Accordingly, the much-discussed question gram, even though the total may not be rising of whether “ a loss of steam” in the capital any further. Also, much of the difference in expansion program will precipitate a general attitude revolves around the question whether business letdown is appropriately broken a leveling implies that a decline will follow. down into two equally important parts of the While there is a great deal of historical evi central question: first, will the present level dence that such a sequence has often occurred ing in the capital expansion program be fol in the past, it has by no means been uniformly lowed soon by a downward turn in that pro the case. Furthermore, “ sideways” move gram? second, in case the latter should occur, ments have recently appeared to be much will this in itself necessarily spell a business more the order of the day than has usually recession ? been the case in the annals of business-cycle history. The materials which follow are pertinent only to the second phase of the question. They Capital Expansion and Total Activity show some of the elements which need to be taken into account in appraising the effect Amid these mixed reactions, there has been upon the total economy of the slackened rate a general agreement that the current indus of rise that has already taken place in the trial expansion program of American busi capital expansion program; that, in turn, has ness is highly strategic for the general busi a bearing on the possible future effects of a ness outlook. Through the channel of in decline in the capital expansion program, if u s in e s s B 2 a decline should occur.(1) Basically, it is a question of “ what are the offsets?”—in the recent past as to the facts, and for the near future as a matter of potential development. Business Investment Since Late '55 Viewed in its quantitative relationship to the entire economy, as measured by the Gross National Product, the business investment program has been in a state of gradual transi tion during recent years. Starting in late ’54 and ’55 as a factor highly stimulating to gen eral business (exerting, under the circum stances, an inflation-promoting influence) it has shifted to a moderately stimulating factor and then to a merely sustaining factor. Such an evolution is demonstrated on the cover chart of this issue by the course of the colored line. The line called “ business investment” on the chart is a somewhat broader measure than the specific statistical series called “ new plant and equipment expenditures’ ’, which is familiar to the business public because of the surveys of intentions which accompany it. Business investment as shown on the chart and discussed in this article includes several components of the Gross National Product. Taken in this way, it may be compared with the other parts of the national product in re spect to the impact of changes in the various parts upon the behavior of the total.(2) Thus, business investment, as the term is used here, includes the following: outlays for producers’ durable equipment, expenditures for private n on resid en tia l construction,(3) and also the total impact of inventory changes; the latter includes the current values of additions to, or subtractions from, inventories at all levels — manufacturing, wholesale and retail. There was no question that business invest ment was a stimulating factor during 1956 (as shown by the black line of the cover chart) even though the rate of gain did not match that of 1955. The sharp rise in the business-investment line during the final quarter of ’56 was due mainly to a heavy rate of in ventory building, associated with the aftermath of the steel strike; then, in the first quarter of ’57, the inventory account tem porarily switched to a slight decumulation of stocks. Finally, the second and third quarters of ’57 witnessed the return of business in vestment, as here defined, to the plateau posi tion which seems to be characteristic of the recent period. (All chart entries for the third quarter of this year are based on early estimates.) How About "Consumer Investment"? During the year 1956, while business in vestment was rising moderately as already noted, there was an outright reduction in the pace of activity in residential construction and in the automobile industry, occurring in part as a reaction to the unsustainably large activity of the previous year. Easing in resi dential construction and in the auto industry represented two of the most widely discussed developments of the year 1956; the combined reduction of activity in autos and housing was understood to be acting in a direction opposite to the stimulation afforded by the continued rise in business investment— a sort of downward “ offset” . (i) The materials presented here run entirely in terms ( 2) This identification of “ business investment” , together of current dollars, without any adjustment for price changes. with that of “ consumer investment” which follows, represents That is because the subject matter deals with inter-relations of a slight rearrangement of the components of GNP as usually varieus parts of GNP, for which “ constant dollar” estimates published. For a brief discussion of the nature of this re on a quarterly basis are unavailable. Differences in price arrangement, and the reasons for it, se« “ Another Look at movements among1the various segments could, of course, affect the National Product” , Monthly Butrinest Review, Federal the relationships if viewed on a “ real” or physical basis. Reserve Bank of Cleveland, June 1958, p. 2. Concerning' the total GNP, it should be noted that since (*) Galled “ other” private construction as distinct from late 1956, GNP has continued to rise in terms of current residential construction in the GNP accounting. Includes in dollars; after allowance is made for the effect of price in dustrial and commercial construction, and also farm, public creases, GNP has probably been fairly stable since the end utility, and institutional construction. of last year. 3 Another way of stating the 1956 pattern of developments is to say that autos and resi dential construction, as sectors of the econ omy, were contributing to the relief of gen eral inflationary pressures, however reluctant were the participators. Surely, if autos and residential construction had been pushing to new and dizzy heights during 1956, such an event, in combination with the continued rise of business investment, would have made the task of holding back an inflationary price spiral even more formidable that it was in fact. (2) The moderate fluctuations in the two types of investment which have occurred since late ’55 have tended to be in opposite directions. In very few of the past eight calendar quarters have the two lines of the cover chart moved in the same direction. To see how such developments have oc curred in terms of components of the Gross National Product, the reader is referred again to the cover chart. The black line refers to “ consumer investment” , a term which is used here to include consumer outlays for autos and other durable goods and also the outlays for residential construction. Insofar as there has been a general level ing in the combination of consumer and busi ness investment since late ’55, when the in flationary problem re-emerged in sharp form, at least some implication for the effectiveness of credit restraint policy is apparent. Thus, it is probably more than a coincidence that the phases of leveling just noted have been concurrent with the Federal Reserve’s policy of credit restraint. As is well known, that policy shifted in general from ease to re straint during the second half of ’55, and from that time to the present it has been continued on the side of restraint. As may be seen from the black line on the cover chart, the total of “ consumer invest ment” slid off perceptibly during the final quarter of ’55 and the first three quarters of ’56. However, by the fourth quarter of ’56, there was a pickup in consumer investment; its course during the current year appears to be in the direction of maintenance or even renewed rise. (Consumer investment, as de fined here, rose during the first and third quarters of ’57 but declined in the second quarter.) The Two Kinds of Investment I f the two kinds of investment — “ busi ness” and “ consumer” — which have just been discussed are considered together in re spect to their behavior during recent years, several significant points may be mentioned in summary: (1) Neither type of investment, viewed individually, has shown anywhere nearly as great an amplitude of fluctuation since late ’55 as had characterized most of the postwar period, through and including the very sharp rise in both types of investment in late ’54 and ’55. 4 (3) As a result of the above, the total of business and consumer investment has shown a rather marked stability from late ’55 to the present. This effect is implicit in the behavior of the lines shown on the cover chart. It is shown more succinctly by the top line of accompanying chart B. So far as the outlook for investment out lays is concerned, it appears fairly likely that consumer investment will show further rises in the near future, e.g., in the final quarter of this year and perhaps during a good portion of next year. All three major types of con sumer investment— residential construction, autos and household equipment—now show some positive evidences of pickup from pre viously reduced positions, although it must be granted that there are important “ minus” as well as “ plus” factors in the outlook for all three. Other Important Sectors of Gross National Product So far, the discussion has turned on private investment outlays which are of a domestic as distinct from international character. Such consumer and business investment outlays are not the only parts of the national product which tend to be highly fluctuating and there fore of special importance in determining the pattern of changes in the GNP. There are two other segments of GrNP which are quite volatile; they happen to be two segments which showed an unusually marked rise dur ing ’56. These are Federal government ex penditures and net foreign investment. Let us examine each of these in turn, before proceeding finally to those sectors of the economy which characteristically show a growth, almost without interruption. Federal government purchases contributed signifi cantly to the rise in national product during *56 and the first two quarters of this year. An appre ciable rise In net foreign Investment was halted in the second quarter of this year. Federal Government and Foreign Investment Accounts The course of “ Federal government pur chases of goods and services, ’ ’ as a segment of the Gross National Product, is shown by chart A. An appreciable rise occurred during 1956 and the first two quarters of this year, mainly as a reflection of rising defense ex penditures. Such an increase, even though it was not of the spectacular magnitude which occurred in the Korean period (to be fol lowed by the rather sharp cutbacks in early ’54) was nevertheless a significant factor in the upward movement of Gross National Product last year and this year. From the second quarter of ’56 to the second quarter of ’57, the increase was from an annual rate of $46.4 billion to one of $51.1 billion. The outlook for the rate of Federal govern ment e x p e n d i t u r e s is now, once again, affected by announced plans to achieve cut backs in defense expenditures. The extent to which it becomes possible for governmental authorities to carry the general objective of cutback into actual effect, and especially the timing of such an accomplishment, are at present matters of speculation rather than of ascertainable schedule. It would probably be premature to assign any sharp downward movement to the near-future course of the top line of chart A ; however, the bulge which occurred in 1956 is not likely to be repeated, according to present indications. The bottom line of chart A, or “ net foreign investment” stands for that part of the Gross National Product which measures the total N OTE: The latest entry on this chart is the second quarter of 1957. change in assets and liabilities held by Amer ican interests in relation to the remainder of the world. (It does not directly include the Federal government’s mutual aid program.) Including as it does the effect of this coun try’s commodity export (or import) balance, this item tends to fluctuate. Although it does not constitute in itself a large fraction of the Gross National Product, changes in “ net foreign investment” occasionally amount to an appreciable part of the movement in the national product. During 1956 and early 1957, the rise in “ net foreign investment” did account for a significant part of the increase in Gross Na tional Product. Thus, from a position of “ minus $0.2 billion” in the first quarter of 1956 (indicating a net “ import” balance) net foreign investment rose to a position of “ plus $4.1 billion” in the first quarter of this year. The rise was largely attributable to a bulge in U. S. exports as a sequel to the Suez Canal crisis of last year. That was admittedly a temporary bulge. By the second quarter of this year, the foreign investment balance was 5 already pointed downward. Further de creases, although not necessarily sharp ones, appear to be expected in the calendar quar ters which lie ahead. A persistent and steady rise has tor many years been characteristic of consumer expenditures for nondurable goods and services. The same has been true of outlays by state and local governments. Summary of Fluctuating Sectors Taking into account what has already been indicated about the various fluctuating sec tors of the Gross National Product, it now be comes possible to make a brief summary of those findings. According to the 1956 pattern, business in vestment was tending to rise moderately, while consumer investment was easing off. The combination of the two types produced, in effect, a level. (See top line of chart B.) The prospects for the combination of business investment and consumer investment may now be somewhat on the “ up ” side, due to recovery tendencies in consumer investment. Two elements which during 1956 were tending to push up the Gross National Prod uct appear to be in process of shifting to a downward direction. These are “ Federal Tho turn of the two typos bat boon generally steady most of this period, the sum ment and the International rise. of private Investment since late *55. During of the Federal govern accounts was on the government purchases of goods and services” and “ net foreign investment.” (See bottom line of chart B.) The combination of all the fluctuating sectors, i.e., both top and bottom lines of chart B, might easily result in a “ standoff” or leveling for the calendar quar ters which lie ahead. No attempt is made here to forecast the quantities involved in order to guess whether the advances will equal the declines. I f such a standoff should occur, the question remains whether the Gross National Product will at long last cease its upward direction. The Growth Sectors To answer the question just raised, it would seem improbable that growth of the national 6 product will soon cease, even if there should be a standoff in the fluctuating sectors, the possibilities of which are sketched above. The reason is that there are very large parts of the Gross National Product which remain to be put into the picture and which have shown a steady upward trend, practically without interruption, during the entire postwar period. They are (a) consumer expenditures for nondurable goods and services, and (b) state and local government expenditures. The striking growth tendency of these im portant items is shown by chart C. It would seem entirely probable, considering all that is known of current trends, that the growth will continue over at least the near-term future. On this account, it would appear likely that even if the total combination of “ fluctuating sectors’ ’ should result in a horizontal movement, the persistence of gain in the “ growth sectors” would result in fur ther rise in the Gross National Product. Finally, due notice may be taken of a dis position on the part of some observers to brush off the significance of rises in Gross National Product on the score that they are so familiar. Thus, it is frequently noted that even during the business recessions of 1949 and 1954, the declines in Gross National Product were so slight as to be hardly notice able. “ It would take very bad news to pull down GNP” is one way in which statistical observers have sometimes approached the question. For correct perspective, however, it should be emphasized that the persistence of the rise in Gross National Product during the post war period is more reasonably interpreted as a reflection of the success of the economy (and also of the persistence of the inflation- The “growth’' sectors account for a large fraction of G ross National Product. N OTE: “ Growth” sectors mean consumer expenditures for nondurable goods and services + state and local government outlays. (Note also that scale of this chart is reduced as com pared with previous charts.) ary problem) than it is a reflection of any upward statistical bias in the measurement. In case of a serious setback, there is no ques tion that the Gross National Product will broadly reflect its measure. During the 193738 recession, for example, GNP dropped 6 percent from one year to the next; it declined by a considerably larger percentage between the peak and trough quarters. During the great depression of the early ’thirties, Gross National Product was cut in half. Although it is a matter of opinion only, most qualified observers today appear to doubt that a repeti tion of any part of the events of the ’thirties is now in prospect. 7 Building Activity in Fourteen Metropolitan Areas (Fourth Federal Reserve District) which has been used for many years to follow local and regional con struction trends has recently been sharpened, making it both a more useful and a more accurate indicator. The sharpened tool is the statistics on construction contract awards published by the F. W. Dodge Corporation. The new figures are available for the first seven months of 1957. Comparing the new national figures with totals for the Fourth Federal Reserve District and its metropolitan centers reveals some similar—and some di vergent—trends in building activity. A tool The New Contract Aw ard Figures This year, the Dodge organization made two major changes in their series on construc tion contract awards. First, the coverage was expanded from the 37 states east of the Rocky Mountains to all 48 states. The extension of coverage into the 11 western states makes it possible for the first time to derive from these figures a comparison of local and national trends. Secondly, a new, more accurate meth od is being used to compile the statistics on one- and two-family houses. The new figures issued by the Dodge Corpo ration are interpreted basically in the same manner as the statistics previously published. Construction contracts are usually awarded prior to the actual start of work on the site. Furthermore, the actual work is usually stretched out over a period of months—the construction time varying with the type of project. Thus, the level and direction of con tract awards presages the volume of work to be put in place in coming months. The new Dodge figures began with the uary 1957 totals. (Each month, revised data comparable to those for 1957 are lished.) At press time, totals for the 8 Jan 1956 pub first seven months of 1957 were available. Al though the figures are rather new and the record is fairly short, it is possible to draw some conclusions about year-to-year trends in construction activity among local metro politan areas. District Aw ard Volume Lags The dollar value of construction contracts awarded in the Fourth District through the first seven months of 1957 fell 7 percent short of the record volume awarded in the same 1956 months. For the country as a whole, a year-to-year gain of 3 percent from record 1956 levels was achieved in this same period. The major differences between District and national trends are in the heavy engineering and residential building categories. Nonresidential building award volume shows about the same year-to-year gain in the District as it does nationally. Heavy Engineering. Contracts for heavy engineering projects in the Fourth District totaled nearly $310 million through July or Table 1 CONSTRUCTION CONTRACT AWARDS During First Seven Months of 1957 CLASSIFICATION Valuation Percent Change (millions of dollars) From Year-Ago Fourth District Nonresidential Building 646 Residential Building.. . . United States Fourth United District States 6,932 + 4 + 3 599 7,770 — 8 — 2 Total Building............... 1,245 14,702 — 2 + o Heavy Engineering....... 310 5,157 — 22 +14 Total Construction....... 1,555 19,859 — 7 + 3 Source: F. W. Dodge Corporation. Fourth District totals de rived by Board of Governors of the Federal Reserve System. about 22 percent less than the volume awarded in the first seven months of 1956. In the U. S., the value of heavy engineering awards increased 14 percent so far this year as compared with a year ago. Most of the year-to-year drop in heavy engineering award volume in this District was centered in public works projects where the 1956 figures had included several large contracts for sewerage systems, amounting to some $76 million, awarded in the Pittsburgh area in January 1956. Award volume for other heavy engi neering projects in the District during the January-July months is running only slightly below the all-time high levels achieved last year. Residential Building. Awards for resi dential buildings in the Fourth District aggregated more than $599 million through the end of July, falling 8 percent short of the same 1956 period and continuing a down trend begun in 1956. As is the case nation ally, virtually all of the year-to-year decrease locally is due to cutbacks in the number of one- and two-family homes placed under con tract. Apartment building, on the other hand, has risen sharply in the District, continuing an uptrend from very low 1955 levels. Nonresidential Building. Although the value of contracts awarded for nonresidential buildings in the Fourth District shows about the same year-to-year rise as the national totals, the factors causing the rise are not the same. For the country as a whole, the award volume for commercial buildings was running about 6 percent ahead of a year ago at the end of July while similar awards were off sharply in the District. On the other hand, the school buildings awards in the District showed a substantial rise this year—after a two-year decline from the 1954 peak—whereas the national totals registered only a modest increase from record 1956 levels. Also, indus trial building awards in the District dropped by a percentage only about one-third as much as the 9 percent decline in the entire U. S. In the U. S., gains in nonresidential build ing awards offset declines in residential building, leaving total building awards frac tionally ahead of 1956 levels for the cumula tive total through July. In the Fourth Dis trict, however, the value of building contracts awarded so far in 1957 falls 2 percent short of year-ago totals, due to the sharper local drop in homebuilding activity. Building Aw ards in Metropolitan Areas Drop More than District Total Homebuilding activity in the larger metro politan areas of the Fourth District has fallen off more sharply from year-ago rates than has the District total. This sharp decline has de pressed total building activity(1) in these metropolitan centers even though their non residential building award volume has risen nearly twice as rapidly as the District volume. Residential building contracts awarded through July exceeded the dollar totals of the same 1956 months only in the Canton, Cin cinnati, Huntington-Ashland and Youngs town metropolitan areas. The other ten large metropolitan areas all show year-to-year de clines, with an extreme of a 42 percent drop in the Toledo area. For all fourteen metro politan areas, the 1957 dollar volume of awards in the January-July months averaged 14 percent below the 1956 level. The District total dropped only 8 percent in this period, due to a 14 percent increase in residential building awards in the remainder of the Dis trict. (See Table 2.) Contracts for nonresidential buildings were awarded in greater dollar volume dur ing the first seven months of 1957 than in the year-ago period in nine of the fourteen large metropolitan areas. The average increase over a year ago for all metropolitan areas was 8 percent. Outside of these large centers, non residential building awards through July of this year are 5 percent lower than the dollar volume awarded in the same 1956 months. Trends in Local Areas The figures in the last three columns of Table 2 illustrate the wide range of year-to( l ) “ Building” , in this context, includes only nonresidential and residential buildings. The F. W. Dodge Corporation does not report heavy engineering awards for metropolitan areas. 9 Table 2 BUILDING CONTRACT AWARDS IN MAJOR METROPOLITAN AREAS OF THE FOURTH DISTRICT During the First Seven Months of 1957 VALUATION (millions of dollars) STANDARD METROPOLITAN AREA PERCENT CHANGE FROM YEAR-AGO PERIOD Nonresi dential Resi dential Akron............................................................... Canton.............................................................. Cincinnati.......................................................... Cleveland........................................................... Columbus........................................................... 18.0 10.7 63.9 120.1 43.9 22.0 14.4 58.8 106.7 58.6 40.0 25.0 122.7 226.8 102.5 Dayton............................................................... 37.5 5.0 12.1 4.1 10.0 69.4 20.3 19.5 13.7 30.0 — 2 +282 + 35 — 12 +231 ____ Hamilton-Middletown...................................... Huntington-Ashland......................................... Lorain-Elyria..................................................... 31.9 15.3 7.4 9.6 20.0 Pittsburgh........................................................... Toledo................................................................ Wheeling-Steubenville...................................... Youngstown..................................................... 87.9 22.7 9.7 24.2 72.4 15.3 5.4 27.7 160.3 38.1 15.1 51.9 + 29 — 8 + 31 + 2 — Large Areas*.................................................... Other District.................................................... 484.2 161.5 448.8 150.6 933.0 312.1 + — 8 5 ____ Total District..................................................... 645.7 599.4 + 4 — Total 1,245.1 Nonresi dential Resi dential Total — + + — + 13 +203 + 3 — 25 — 7 —40 +73 +29 —21 + 8 36 — 33 — 6 + 31 — 8 — 24 +77 + 6 — 2 +77 8 42 2 1 + 9 —25 +17 + 1 14 + 14 — 4 + 3 8 — 2 57 10 70 18 38 — — + * Total of areas shown excluding Fifth District part of the Huntington-Ashland area but including Fourth District portion of the Johnstown metropolitan area (not shown above). Source: F. W. Dodge Corporation. Fourth District totals derived by Board of Governors of the Federal Reserve System. year changes among local metropolitan areas. Table 2, however, is based entirely on changes from the year 1956. The following rundown on local building trends gives—where possi ble— some perspective to current data. The back data are drawn from the old contract award series previously published by the F. W. Dodge Corporation. 1957. Through July, building awards exceed the pre vious record 1956 volume by 73 percent. Residential contracts are running about triple the high year-ago level, and nonresidential building awards top the 1956 performance by about 10 percent. Starting in 1956, homebuilding in the suburban parts of Stark County appears to have been “ catching up” with national trends since unusually low levels o f activity seem to have prevailed throughout the previous ten years. AKRO N. A large contract for an automobile plant near Twinsburg pushed 1956 building contract award volume to an all-time high. Measured against this record, the dollar amount o f nonresidential build ing work put under contract in the first seven months o f 1957 is down 57 percent, while total building awards show a 40 percent deficit. The value of resi dential building contracts let in the January-July period is 13 percent below the same 1956 months, marking the second year o f decline from the 1955 peak. C IN C IN N A T I. The dollar value o f building awards in the Cincinnati area also seem headed toward* a new record in 1957. Large dollar totals have been registered in both the nonresidential and residential building categories, pushing total building awards in the January-July period 29 percent ahead of the 1956 dollar volume for the same period. I f this margin can be maintained, the previous high o f 1955, when a large contract for a manufacturing facility built for the Atomic Energy Commission dominated the dollar total, will be exceeded. C A N T O N . Building contracts awarded in Stark County appear to be headed for a new dollar high in Residential building contracts awarded in the Cin cinnati area through the first seven months show a 10 3 percent gain over the 1956 pace, providing the mar gin needed to edge ahead o f the 1954 high i f main tained through the remainder o f the year. The 1957 totals include a publicly-financed apartment project, containing 376 dwelling units, covered by a $3,718,000 contract awarded in July. This year’s nonresidential building volume, which shows a year-to-year dollar gain of 70 percent, includes several large awards for hospital buildings and additions aggregating $9,620,000, a $3,100,000 award for a public school, a $2,500,000 addition to an industrial plant, and a $1,500,000 award for a chemical manufacturing facility. CLEVELAND. Building contracts awarded in the Greater Cleveland area through July ran about onefifth less than the record amount awarded in the year-ago months. Residential building award volume shows a year-to-year drop of 25 percent while the nonresidential total is down 18 percent. On the basis o f the January-July performance, it looks as if 1957 will rank as the third best building year, trailing both the 1956 and 1955 dollar totals. Last year, awards for a large downtown office building and several contracts for manufacturing buildings added the frosting that made the 1956 dollar volume a record. Among the large contracts awarded so far in 1957 are two for new printing plants totaling $20,400,000, a $6,735,000 hospital addition, and three contracts for new store buildings totaling $11,500,000. C O LU M BU S. Strength in the nonresidential build ing sector could push total building award volume this year slightly above the 1955 record. At the end of seven months, the value o f nonresidential awards was at a new high for the period, standing 38 percent above the same 1956 months. Over this same period, however, the dollar value o f contracts let for resi dential buildings registers a year-to-year drop o f 7 percent from the 1956 peak. On balance, all building awards in the Columbus area totaled 8 percent more dollars through July than in the year-ago period. Major nonresidential building contracts awarded in the January-July months o f this year included one $6,054,000 award for dormitories, an air terminal contract in the amount o f $3,294,000, and a $3,045,000 hospital addition. DAYTON. During the first seven months o f the year, the dollar value o f contracts awarded for buildings in the Dayton metropolitan area ran about one-fourth below the comparable 1956 period. Most o f the year-to-year decline was centered in residential building awards, which show a 36 percent drop from the record 1956 pace. Nonresidential building awards were only about 2 percent short o f the peak 1956 dollar figure for the January - July period. A $5,336,000 award for an A. E. C. test facility being built at Wright-Patterson Air Force Base and a $2,000,000 contract for a shopping center in Mont gomery County are among the larger awards made so far this year. C H A N G E IN B U IL D IN G C O N T R A C T A W A R D S STANDARD METROPOLITAN AREA Pet. change 7 mot. ‘57 from 7 mot. '56 in dollar value of building awardt - 50 -2 5 O +25 +50 +75 e r ie LORAIN'ELYRIA ■ ■ ■ ■ ■ ■ ■ CINCINNATI W HEELING-STEUBENVILLE J H PITTSBURGH ■ COLUMBUS ■ HAM ILTON - MIDD LETOWN ■ YOUNGSTOWN I HUNTINGTON-ASHLANO CLEVELAND DAYTON I H ■ h ■ TOLEDO ■ ■ ■ ■ ERIE. The volume o f building contracts awarded in the Erie metropolitan area through July of 1957 shows a sharp recovery from the very low dollar vol ume o f 1956. Last year, nonresidential building con tracts awarded in the area dropped to the second lowest dollar figure since 1948, while residential con tracts ran a close second to the 1950 high. So far this year, the trends are reversed; nonresidential building awards are running nearly 4 time* the dollar total recorded in the same 1956 period while residential contracts are one-third below a year ago. Major non residential projects this year include an award for a $2,226,000 trade school and an addition to a paper products plant valued at $2,000,000. H A M ILT O N -M ID D LET O W N . During the first seven months o f 1957, nonresidential building awards have boosted the building total 6 percent above the same 1956 months. The dollar value o f residential building contracts shows a year-to-year drop o f 6 percent but nonresidential awards are running 35 percent above a year ago. An April award of $1,750,000 for a hos pital addition is included in the 1957 totals. H U N T IN G T O N -A SH LA N D . Reversing a two-year downtrend, residential building contracts in the area registered a year-to-year increase o f 31 percent dur ing the initial seven months o f 1957. However, non residential building awards during this period are about 12 percent short o f the record dollar volume awarded in the same 1956 months. Altogether, total building contracts aggregated about 2 percent fewer dollars during the January-July months this year 11 than they did in the similar year-ago months. A con tract for a new $5,000,000 manufacturing building to be added to the area’s substantial primary metals industry was awarded in June. LO RAIN-ELYRIA . The Lorain County building award volume shows a year-to-year increase of 77 percent during the first seven months o f 1957. A $15,000,000 contract for a new automotive plant, awarded in June, comprises about one-half o f the dollar total so far this year, pushing nonresidential building volume to about 3% times the figure reached during the same year-ago months. However, the dollar value of contracts awarded for residential buildings shows a year-to-year drop of 8 percent during the initial seven months of the year. PITTSBURGH. The volume o f contracts awarded for nonresidential buildings during the first seven months of 1957, which is up 29 percent from a fairly good 1956 aggregate, suggests the possibility of a new record being set during 1957 in this category and in the dollar volume o f all building contracts. Residential building awards, however, are running 8 percent below the record 1956 level during the January-July months. But, the year-to-year margin estab lished by the large volume o f contracts for nonresi dential buildings pushed the dollar value o f contracts awarded for both types o f buildings through July to a position 9 percent above the same seven months of 1956. I f this margin can be maintained through the remainder of the year, total building awards will top the 1955 dollar high by a few percentage points. Among the large nonresidential building contracts awarded in the Pittsburgh metropolitan area so far in 1957 were three for hospital additions aggregating $12,572,000, two for educational buildings totaling $3,769,000, and one for a $2,500,000 store. TOLEDO. Total building contracts awarded in the first seven months o f 1957 were 25 percent below the dollar volume o f the comparable year-ago months. Contract awards for residential buildings in Lucas County continued a downtrend beginning in 1956, but did so at an accelerated pace, registering a year-toyear drop of 42 percent. The sharp drop in residential awards suggests that total building volume in 1957 might be the lowest in seven years, even though non residential building awards so far in 1957 registered a more modest 8 percent dip from 1956 rates. In the latter category, a contract for a $4,500,000 addition to a chemical plant, one for a $2,000,000 store building, and another for a $1,500,000 industrial building were among the large awards this year. W H EELIN G-STEU BEN VILLE. Recovering from an unusually low level in 1956, contracts for nonresi dential buildings rose 31 percent above year-ago rates through July of this year, boosting the dollar value of all building awards 17 percent above 1956 levels in the same period. However, contracts for residential buildings awarded in the six-county metropolitan area were running 2 percent under the high year-ago dollar total. A $2,000,000 building for the expansion of the area’s primary metals industry is included in the 1957 totals. Y O U N G ST O W N . The dollar value o f contracts awarded for buildings in the Youngstown metropoli tan area is slightly ahead o f year-ago levels at the end o f July. Slight year-to-year gains were registered in this period in both the residential and nonresi dential building categories. I f the current trend con tinues for the last five months o f the year, residential building awards in the area will hit a new dollar high, fractionally above the 1955 peak, while non residential building awards will be about 17 percent short of the 1955 record. NOTES Malcolm Bryan, President of the Federal Reserve Bank of Atlanta, recently spoke to the National Bank Division, American Bankers Association, on the subject, “ A Few Tasks Ahead.” Copies may be obtained from the Federal Reserve Bank of Atlanta, Atlanta, Georgia. * # # In addition, recent talks by two members of the Board of Governors of the Federal Reserve System are available directly from the Board of Governors, Washington 25, D. C. Titles of the addresses and their respective authors are: “ Saving Can Be Sold,” by C. Canby Balderston, Vice Chairman “ Federal Reserve Policy in Today’s Economy,” by Charles N. Shepardson, Member of the Board 12
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