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Monthly Review ALASKA FEDERAL RESERVE TWELFTH B A N K FEDERAL OF RESERVE j?anuakip 1962 WASHINGTON 3 n J . j j lie iJ / ih Review of Business Conditions Corporate Income Taxes and the Banking System . EGON o*C> 0 = i CALIFORNIA . . . SAN F R A N C I S C O DISTRICT IDAHO Review of Business Conditions activity continued to expand on a broad front according to available infor mation for November and December. Gains in December raised the industrial production index to 115 percent of its 1957 average, con tinuing the upward trend since the cyclical low in February 1961. Nevertheless, the D e cember unemployment rate remained un changed from November because of a reduc tion in the civilian labor force. Although the civilian labor force in 1961 averaged a mil lion higher than in 1960, the gains in recent months over a year earlier have been much smaller than this. In December the number of workers in the civilian labor force was only 10,000 higher than a year earlier. M ajor contributors to the December rise in industrial production were the continued in crease in auto assemblies and a nonseasonal rise in steel ingot production. The output of steel continued to rise in early January reach ing the highest weekly level since early in 1960. The production of autos rose 9 percent in December from the high level of output in November. Some nonseasonal easing in auto output is in prospect for January, however, judging from the volume of autos assembled during the first three weeks of January and production schedules for the remainder of the month. The unusual rise in December steel production may have stemmed in part from a buildup in inventories in anticipation of a possible summer steel strike. Nevertheless, m anufacturers’ inventories increased only slightly in November as supplies of finished goods declined, reflecting further gains in sales. The dollar volume of m anufacturers’ sales rose to a new high of $32.2 billion in November, with sales by durable goods pro ducers leading the advance. The increase was widespread among m ajor groups of durable producers, particularly in the auto industry. The preliminary November estimate of construction put in place was revised sharply upward due to a spurt in public construction u s in e s s B activity related largely to military facilities and highways. With a subsequent decline in public construction, the December estimate for total construction dropped 2 percent to a seasonally adjusted annual rate of $60 mil lion. Housing starts, seasonally adjusted, also declined in December for the second consecu tive month. The consumer sector continued to strength en. Personal income in December reached a record high. Seasonally adjusted retail sales during the month, however, declined 1 per cent from the record November figure, large ly as a result of an easing in auto sales. F o r the year as a whole, retail sales totaled $219.1 billion, a slight decline from the record 1960 level. The strong level of auto sales in N o vember was accompanied by the largest sea sonally adjusted increase in instalment credit for any month since June 1960. A uto sales continued at a high level in the first ten days of January. Despite sizeable advances in industrial ac tivity and retail sales in recent months, pres sure on prices has not been evident. Wholesale prices remained almost stable during the last three months of 1961 and, at the close of the year, were slightly lower than a year earlier. The consumer price index eased in Novem ber but was slightly above the index for N o vember 1960. M arket yields on corporate and municipal securities remained comparatively stable in December and early January, as did those on long-term United States G overnm ent issues. Yields on Treasury bills and other types of short-term paper trended upward during the same period, reflecting in part the pressure on the m arket of increased supplies of Treasury bills. In response to a change in Federal Reserve regulations, higher interest rate payments on savings (effective January 1) were announced by many commercial banks in the country. The new regulation permits payment of 3 Vi M ONTHLY REVIEW January 1962 LABOR FORCE DATA, ANNUAL AVERAGES (in thousands) Pacific Coast States C ivilian employment Unemployment Civilian labor force Rate of unemployment (percent of civilian (labor force) United States 1959 1960 1961 p 1959 1960 1961 7,628.2 7,750.9 7,810.1 65,581 66,681 66,796 393.0 478.2 572.3 3,813 3,931 4,806 8,021.2 8,229.1 8,382.4 69,394 70,612 71,603 4.9 5.8 6.8 5.5 5.6 6.7 ---- p— Preliminary. Sources: U nited States D epartm ent of Labor and state departm ents of employment. percent on regular savings accounts and 4 percent on savings or time deposits held for 12 months. Small increases in rates have also been announced by some savings and loan associations. District em ploym ent rose; unem ploym ent fell Gains in all major industry divisions pushed District nonagricultural employment Vi per cent higher in November, after allowance for seasonal factors. The largest increases oc curred in manufacturing, contract construc tion, and mining; however, the latter indus try was depressed by a labor dispute in A ri zona during October. All m ajor manufacturing industries on the Pacific Coast registered gains in November except the typically erratic canning and pre serving industry and prim ary and fabricated metals. Particularly sharp increases occurred in rubber and miscellaneous plastic products, electrical machinery, and transportation equipment. Within the latter industry, auto mobile manufacturers increased their payrolls by 14 percent; aircraft employment rose by 1.3 percent with additional hirings of 1,600 workers in California and 1,800 in Washing ton; and employment in Pacific Coast ship yards continued at the high levels of the past year. In the Los Angeles-Long Beach area, the improvement in aircraft employment was considerably greater than had been antici pated earlier in the year, but it only partly re flected stepped-up defense procurement. In the San Francisco-Oakland area, on the other hand, burgeoning defense activity was clearly responsible for the recent sharp reversal of trend. In San Diego, aircraft layoffs con tinued, reflecting prim arily the exhaustion some months back of a major producer’s backlog of orders for commercial jets. The average weekly hours of m anufactur ing production workers in the District rose from 40.0 hours in O ctober to 40.2 hours in November. This increase in hours worked plus a 3-cent rise in average hourly earnings pushed w eekly earnings to a record $109.75. The num ber of unemployed workers in the Pacific Coast States dropped by 1.5 percent in December, and civilian employment rose slightly to 7,910,200, on a seasonally ad justed basis. As a result, the rate of unem ployment in the three-state area declined from 6.2 in November to 6.1 percent for December, the same rate of unemployment as in the na tion. The rate of unemployment in the Pa cific Coast States averaged somewhat higher than nationally in 1961 for the second con secutive year but was closer to the national unemployment rate than in 1960. Nonagricultural employment in the Pacific Coast States increased slightly in December after seasonal adjustment; gains in manufac turing, finance, services, and government off set moderate losses in mining, construction, FEDERAL RESERVE BANK and transportation. Em ployment in wholesale and retail trade was unchanged from Novem ber. For the year 1961, nonagricultural em ployment on the Pacific Coast rose by just over 1 percent. This resulted solely from an expansion of employment in the service-pro ducing industries (trade, finance, services, and governm ent). Despite sizeable gains in the latter half of the year, employment in m anufacturing was down from 1960 by 20,400 workers (1.2 percent), and construction employment fell by 5,800 (1.6 percent). Reports from employers concerning hiring intentions in the next few months suggest further improvement in most major labor markets in the District. Although major sea sonal layoffs occur in trade, construction, and nondurables manufacturing during this period of the year, offsetting substantial gains are expected in durable goods, finance, service, and government. Reports from auto mobile assemblers generally reflect the sub stantial gains and equivalent optimism that has characterized the industry in major pro duction centers elsewhere in the country. Moreover, moderate but steady employment gains are anticipated in the next few months in ordnance, nonelectrical machinery, instru ments, and most other durables producing lines. Although employer reports suggested only moderate improvement in prim ary metals employment between November and Janu ary, recent gains in orders may generate great er than expected hiring. District construction activity increased in Novem ber The total dollar volume of contracts let in the District during November amounted to $571 million, 13 percent above the same month last year. The pattern of increase was much the same as that reported for the n a tion as a whole. Nonresidential contract awards rose 24 percent above 1960, partly because of gains in contracts for commercial OF SAN FRANCISCO and industrial buildings. Novem ber residen tial contracts were also above last year (35 p ercent). Single-family home construction contracts increased as they did nationally. Contracts let for apartm ent buildings also in creased in the District, however, in contrast to the decline shown in the national data. Heavy engineering contracts awarded fell 33 percent below Novem ber 1960, reflecting de clines in both public works and utilities con struction. In the former, this was due prin cipally to a drop in contracts let for streets and highway construction. O n a seasonally adjusted basis, the pattern of change from O ctober to Novem ber was similar to that for the year-ago comparisons. Total construction contracts let rose about 6 percent above O ctober due to gains in con tracts for residential and nonresidential build ings. Heavy engineering contract awards, on the other hand, declined. There appears to be little change in the mortgage rates prevailing in District m ort gage markets. Mortgage funds provided by District savings and loan associations seem to be readily available. Through November, the net increase in the share accounts of these as sociations continued to run substantially above 1960 levels, as has that for time de posits at District commercial banks. Second ary market purchases in the District by the Federal National Mortgage Association con tinued to rise, with the net increase in its sec ondary market holdings in November being the highest since May 1960. Lumber orders up m oderately in December A fter declining substantially during the latter part of November, Douglas fir new o r ders picked up moderately in December. They were, nevertheless, still below the level of fir output throughout most of the month, even though production declined sharply in the final week of December due to holiday shut January 1962 M ONTHLY REVIEW downs by a num ber of mills. The November decline in new business was the result of an order cutback by Eastern buyers and may have been due in part to tightness in inter coastal shipping service. The December 1 rail freight reduction may have also caused buyers who receive their shipments by rail to postpone their purchases in the latter part of November. W estern pine production re mained at relatively low levels throughout De cember, while orders picked up somewhat from the latter part of November. However, neither Douglas fir nor W estern pine orders in December suggest that a substantial pickup in demand is materializing. This may change, though, if single-family new home construc tion continues to improve. The moderate improvement in new busi ness that occurred in December was reflected in a slight rise in lumber prices during the latter part of the month and into January. Crow ’s industry average price of $72.27 per thousand board feet in early January was slightly above the December average price. M ix e d market dem an d for District metals The average weekly output of steel in the W estern area declined from November to De cember in contrast with an increase nation ally. Expansion of W estern steel production since the holiday period, however, was rela tively large. From the week ended December 30 to the week ended January 13, the output of steel in the West advanced 11.1 percent while steel production in the nation rose 9.2 percent. N ational steel production in the week end ed January 13 rose to 123.5 percent of the 1957-59 average, the highest weekly output of steel since the first week of April 1960. The vigor of the rise in steel output is further demonstrated by the increase in production from November to December on a monthly basis. Such a rise is contrary to the usual sea sonal pattern and stemmed from a sharp in crease in orders, spreading from automobile makers to other steel users, coupled with the beginnings of buying as a hedge against a possible industry-wide strike when steel labor contracts expire in m id-1962. Copper buying has picked up from the slow rate that prevailed in October and November. The rise is due partly to trouble in the Congo, increasing orders from brass mills, major users of refined copper, and to some copper buying for inventory buildup as a hedge against possible copper mine strikes at mid year. The copper industry is watching efforts at restoring peace between copper-rich Ka tanga Province and the central Congo Gov ernment. M ajor miners and smelters of zinc are pric ing prime western grades at 12 cents a pound at East St. Louis, the price reached after a rise of V2 cent in early December. The move to increase the price of prime western zinc was attributed to a steady drop in overall United States zinc stocks and a rise in ship ments as demand by the steel industry contin ued strong. Producer stocks of all grades at the end of O ctober were 150,000 tons, the lowest in a year and a half, after seven straight months of decline. O ctober shipments of re fined zinc were the highest in nearly IV i years, and industry sources believe that November shipments were even higher. Lead is suffering from continued excessive stocks and overproduction here and abroad. Some price cutting below the official quota tion of 10!4 cents a pound (New Y ork) is said to be taking place. Buying in the United States has dropped sharply in the past several weeks as consumers failed to enter the m ar ket in any large volume for January delivery as had been expected. Consum er income and expenditures rise Twelfth District personal income reached a record high of $65.9 billion in 1961, ac FEDERAL RESERVE BANK Tw elfth District d e p a rtm e n t store sa le s rose in latter part of 1961 1 9 4 7 - 4 9 = 10 0 OF SAN FRANCISCO trations declined somewhat with the approach of the holiday season. Despite the higher level of personal income in the District, consumers utilized more bank instalment credit to finance their current p ur chases during the July-November period than during comparable months of 1960. N ever theless, repayments continued to exceed ex tensions. As a result, the total volume of in stalment credit held by banks in the District declined through November. Farm receipts hit record h igh in October Source: Federal Reserve Bank of San Francisco. cording to estimates published by Business Week. This represents an increase of about 6 percent from the 1960 level. D uring the last three months of the year, personal income averaged $5.7 billion, which was slightly more than 2 percent greater than in the preceding quarter and 5 percent above the year-ago quarter. The expansion in personal income in the fourth quarter was relatively larger in the District than in the nation, with the latter having only a 3 percent increase from a year ago and less than a 2 percent rise from the third quarter. District departm ent store sales in 1961 rose 3 percent above the 1960 level. Much of this increase occurred in the last few months of the year, reflecting an active Christmas season. Part of the strengthening in depart ment store sales, however, results from the opening of new stores for which year-ago data were, of course, not available for comparison. Am ong durable goods, the most current data on new passenger car registrations in Califor nia suggest that November was the high month for 1961. During the first seven days of December registrations continued at a high level, exceeding the daily average for Novem ber. In the following two-week period, regis Receipts from marketings by D istrict farm ers in October jum ped to a record high for the month, $626 million. As m onthly returns in recent years generally reached their peak in October, the $626 million also represents a record flow of monthly income. A lthough re- L a rg e r e x te n sio n s of in sta lm e n t credit by Twelfth District banks in recent months Mi 11 i o n s of D o l l a r s Source: Board of Governors of the Federal Reserve System. January 1962 MONTHLY REVIEW ceipts from marketings of crops and livestock, separately, were not at a record high during the month, combined they reached a recordbreaking level of returns. Gains in October farm receipts from a year earlier occurred in all District States except Utah and Washing ton. The decline in Utah was very slight, but totaled 12 percent in Washington, largely as a result of a lower volume of marketings. Prospects for irrigation water supplies in 1962 vary considerably among District States as of January 1. Adequate water supplies are indicated for the Pacific Northwest States of W ashington, Oregon, and Idaho. The outlook is also more favorable in A rizona and Utah than a year earlier with the snowpack in Utah considerably above average and the heaviest since 1958. Nevertheless, a continuation of above normal snowfall is necessary if Utah reservoirs are to be replenished. In contrast with the sharp improvement in Utah, water supply prospects are even less favorable in California and Nevada than a year earlier. The dry conditions in these two states during the past three years is reflected in the ex tremely small volume of water in major reser voirs. W ithout a sharp im provem ent in m ois ture supplies during the remaining winter months, water shortages are expected again this year, particularly in the San Joaquin Valley. December increase in total bank credit brings yearly g a in to over $2 billion An increase of $464 million in December brought total loans adjusted1 and investments at District weekly reporting member banks to a level more than $2 billion above that at the end of December 1960. Slightly more than half the gain in bank credit in December was due to an increase in loans as credit demand was augmented by tax borrowing at mid month. Loans to public utilities during the 1 Adjusted to exclude valuation reserves and loans to domestic commercial banks. month rose $40 million, more than any other classified business loan category. The increase in business loans was approximately the same as in the corresponding period of the preced ing year. Although borrowing by business prior to the December 15 tax date was only about half that in 1960, loans continued up ward in the final week of the period in con trast to a decline a year ago. The December increase in business borrowing raised the vol ume of outstanding business loans to 6 per cent above the level at the end of 1960. Bank borrowing by sales finance companies asso ciated with the quarterly tax payment period was of about the same magnitude as in midDecember 1960. A further rise in real estate loans in December resulted in a yearly in crease of $133 million contrasted with a de cline in the preceding year. The substantial increase in consumer loans during December reflected demand for bank credit to finance automobile and Christmas buying. District weekly reporting banks increased their holdings of United States Government securities by $89 million in December. The rise of $173 million in bill holdings was p ar tially offset by a decline in securities in the 1- to 5-year maturity range. During this pe riod, banks added $137 million to their hold ings of securities other than Governments, the largest monthly increase in 1961. Demand deposits adjusted rose by $301 million and time deposits by $220 million during December. In the latter category, the largest increase was in deposits of states and political subdivisions as December tax pay ments were deposited. The yearly increase in total time deposits was $ 1.5 billion, with sav ings deposits accounting for about two-thirds of the gain. Demand deposits adjusted also rose by more than $500 million during 1961. During December, District banks were, on balance, net purchasers of Federal funds in sizeable amounts. The tightness in District bank reserve positions was reflected in the FEDERAL RESERVE BANK OF SAN FRANCISCO CHANGES IN SELECTED BALANCE SHEET ITEMS OF WEEKLY REPORTING MEMBER BANKS IN LEADING CITIES (dollar amounts in millions) Twelfth District From Nov. 29,1961 From Dec. 28, 1960 to Dec. 27,1961 to Dec. 27,1961 Dollars Percent Dollars Percent ASSETS: Total loans and investments Loans adjusted and investments! Loans adjusted^ Commercial and industrial loans Real estate loans Agricultural loans Loans for purchasing and carrying securities Loans to non-bank financial institutions Loans to domestic commercial banks Loans to foreign banks Other loans U. S. Government securities Other securities LIABILITIES: Demand deposits adjusted Time deposits Savings accounts 1.86 1.82 1.49 1.78 0.53 0.14 United States From Nov. 29,1961 From Dec 28,1960 to Dec. 27,1961 toDec. 27,1961 Dollars Dollars Percent Percent + 478 + 46 4 + 23 8 +101 + 29 __ 1 + + + + + — — 22 — 9.09 + 28 + 14.58 + 862 + 71 + 8.72 + 50 + 5.99 + + 14 + 14 + 45 + 89 + 137 + + + + + 93 + 40 + 103 + + 1,055 + 404 + + + + + 83.04 19.90 3.30 17.26 18.82 + + + + + + 301 + 22 0 + 60 + 2.50 + 1.67 + 0.56 7,33 6,17 1.41 1.26 5.68 + 2,250 + 2,157 698 + 32 4 + 133 + 50 + + + + + + + 9.40 9.06 4.48 5.94 2.49 7.44 + 663 + 5.67 + 1,532 + 12.89 + 97 0e + 9.92e + 3,937 + 3 ,729 + 2,891 + 81 7 52 + 29 + + + + + + + 3.32 3.18 4.03 2.54 0.39 2.37 + 9,370 + 9,293 + 3 ,5 60 + 77 9 + 57 5 + 144 + 8.28 + 8.31 + 5.01 + 2.42 + 4.48 + 12.96 + 21.53 + 921 + 23.35 763 + 14.20 + 177 + 208 67 293 315 523 + 15.98 + 11.43 + 1.77 + 0.93 + 4.46 + 77 — 98 + 1,200 + 3,700 + 2,033 + 5,38 — 13.05 + 7.65 + 12.11 + 19.92 + + + + 2,667 + 6,086 n.a. + 4.19 + 17.20 n.a. + 2,437 284 + + 311 3.81 0.69 1.04 2.97 e— Estim ated, n.a. N ot available. 1 Exclusive of loans to domestic commercial banks and after deduction of valuation reserves; individual loan items are shown gross. Sources: Board of Governors of the Federal Reserve System and Federal Reserve Bank of San Francisco. fact that the bulk of District Federal funds transactions were made at the discount rate of 3 percent. A v e ra g e interest rates on business loan s decline in December The quarterly interest rate survey covering the period December 1-15 showed a drop in the unweighted average interest rate on short term business loans made by District banks to 5.25 percent, a decline of 5 basis points from the 5.30 percent rate in September and the rate of 5.32 percent in December 1960. O ne-third of the total dollar amount of short term loans was made at the prime rate of 4.5 percent, a higher proportion than in Septem ber. There was a reduction in the dollar vol ume of loans at rates of 6 percent and over, with the 5-6 percent range remaining relative ly constant. Average rates on loans over one year rose to 5.30 percent, above the relatively low rates of 4.89 percent in Septem ber and 5.28 percent in December 1960 when several large atypical loans unduly influenced the average rate. The num ber of loans made, both short- and long-term, was below that in Sep tember, but the dollar amount in both cate gories was greater. The dollar volume of long term loans was also a slightly higher percen tage of total dollar volume than in September. District banks increase rate p aid on sa v in g s deposits The announcem ent by major District branch banking systems on January 2 that they would pay 3 Vi percent on savings de posits assured this as the “going rate” in the District, since many unit and smaller banks January 1962 M ONTHLY REVIEW had already stated their intention of paying the higher rate. Many of the banks will con tinue to compute interest on a daily basis and com pound interest quarterly. Some District banks have also announced a 4 percent rate on savings held for a 12-month period. Con ditions under which this higher rate will apply vary rather widely among the banks. Some will apply the 4 percent rate to regular sav ings deposits held for 12 months, while other banks are requiring a “ special” savings ac c o u n t o r savings certificates of a sp e c i fied minimum amount. The higher rate on savings attracted sufficient funds during the two-week period ended January 10 to in crease the bank savings accounts of individ uals, partnerships, and corporations at weekly reporting member banks in contrast to a de cline that usually occurs in the first part of January. 9 FEDERAL RESERVE BANK OF SAN FRANCISCO Corporate Income Taxes and the Banking System people probably think of loans to business firms as having been obtained to purchase inventories or to provide working capital while production is taking place. If these were the only m ajor reasons for bor rowing, it is likely that business loans would show a definite seasonal pattern related to the pattern of general business activity during the year. H ow ever, the m ovem ent in business b orrow ing w hich is m ost pronounced is a quarterly pattern of peaks which cannot eas ily be related to norm al seasonal shifts in business activity but appears instead to be related to corporate borrowing to meet Fed eral income tax payments. This article dis cusses alternative means by which corpora tions may prepare to meet their tax liabilities and analyzes available data on business loans from banks to determine roughly the nature and importance of “tax borrowing.” o s t M To illu strate this tax -b o rro w in g p a tte rn , C hart I has been drawn to indicate the move m ent of commercial and industrial loans dur ing each year since 1953. These movements do not seem to be norm al seasonal shifts, based on the fluctuations in business activity during the year, since it is not likely that dif ferent movements in the various industries would combine to produce such a regular pat tern year after year. Exam ination of changes in business loans broken down by industry groups from a sample of the weekly reporting banks tends to bear out this conclusion. Patterns in corporate tax paym ents Individual income taxes were placed, in large part, on a “pay-as-you-go” basis nearly 20 years ago. Before 1954, corporate income taxes were still not paid until the following year. However, in 1950, a plan was begun to A pattern in business loans It has been apparent for nearly a decade that there is a regular quarterly movement in loans to business firms by commercial banks. This is especially noticeable in the figure for commercial and industrial loans of the large city banks which report weekly to the Federal Reserve System. Borrowing by business firms seems to increase fairly substantially in the months of M arch, June, September, and D e cember and slack off somewhat in the months just afterward. The explanation which best seems to fit this pattern is that some business firm s are borrow ing to obtain funds with which to pay all or part of their taxes to the Federal G overnm ent.1 *It should be pointed out th at many corporations make divi dend payments in the four m onths in which these business loan increases occur. Some of this borrowing is probably related to those payments. T his factor makes it difficult to make precise estimates of tax borrowing. C hart I B usiness lo an s sh o w p e a k s in months corporations pay income taxes Billion s of D o l l o r t *The weekly reporting bank series were substantially changed starting in Ju ly 1959. The main effect on business loans was to exclude loans to sales and personal finance companies; revised figures are not available for earlier periods. Source: Board of Governors of the Federal Reserve System. M ONTHLY REVIEW January 1962 T able I TREASURY RECEIPTS FROM CORPORATE INCOME AND PROFITS TAXES (billions of dollars) Calendar Year Percent paid in Months Indicated March June September December Total for Year 1954 7.4 7.0 1.1 1.2 19.9 83.3 1955 6.8 6.2 1.1 1.4 18.6 83.6 1956 8.1 7.2 1.7 1.8 22.7 82.8 1957 7.3 6.7 2.3 2.3 22.2 83.7 1958 6.5 5.9 2.3 2.4 20.4 i of, n c c c i p i b r ti urn o u i j j u i o u u n j > i n* ■■ — \ 1959 5.5 4.8 3.3 3.2 20.2 82.7 1960 6.2 5,5 3.5 3.3 22.7 81.7 Source: United States Treasury D epartm ent. m ake co rp o rate incom e tax receipts come closer to being paid as income was earned. Under the Mills Plan, the percentages of cor porate income tax which were to be paid at q u arterly intervals w ere gradually revised. Starting in 1950, in which equal tax payments were due three, six, nine, and twelve months after the end of the corporation’s accounting year, the payments due in the last two periods were gradually reduced, and the first two in creased. By 1955, the entire paym ent was due, based on 1954 income, in the third and sixth months after the end of the accounting year. (W e will assume, as is the case for the majority of firms, that the accounting year ends on December 31; the income tax pay ments would then be due on M arch 15, June 15, September 15, and December 15 of the following year.) For the first time corpora tions in 1955 were also required to estimate that year’s income and pay two instalments on that year’s income tax in September and Decem ber.1 The percentages of the total tax to be paid in these two months were gradually raised in the next five years, and those in M arch and June lowered, until in 1960 the percentages were again equal for all four quarters. The difference in 1960 from the 1Strictly speaking, the estimate and payment are required only for corporations having a tax liability in excess of $100,000 plus any credit for foreign taxes paid. Although this only ap plies to about percent of alt corporations, Treasury figures indicate that this sm all number accounts for a very large share of total corporate taxes paid. situation in 1950 is that corporate income tax receipts now lag corporate profits by only six months instead of a full year. D ata on corporate income tax payments are shown in Table I, with the amounts paid during the four months indicated above. The am ounts paid into the Treasury by corpora tions have consistently been larger in M arch and June than in September and December. In view of this, tax borrowing would be ex pected to be larger in the first half of the year than in the second half. Prim ary im pact on the b an k in g system Although it was the quarterly pattern of business loans that first came to the attention of financial com m entators and economists, it has since been found that there are other ef fects on commercial bank loan dem and result ing from co rp o rate incom e tax paym ents. Therefore, the term “prim ary effect” will be used to define the effect of tax borrowing by nonfinancial business firms only. It hardly needs to be emphasized that busi ness firms as a group are continually bor rowing from commercial banks for various purposes. As of December 1961, commercial and industrial loans outstanding at all weekly reporting member banks totaled about $32 billion. A firm wishing to borrow to cover all or part of its corporate tax liability would FEDERAL RESERVE BANK constitute an additional source of loan de mand to that related to normal business activ ity. To measure the volume of tax borrowing is difficult in the present state of knowledge, and to a large extent arbitrary. The procedure used here has been to average the changes in total business loans that occurred in each of the tax-date months from 1953 to 1961, in clusive. In order to show only the changes in borrowing related to nontinancial firms, the monthly changes in loans to sales and per sonal finance companies have been excluded before July 1959.1 The results are shown in Table II. While the magnitudes of these loan changes are quite small relative to total business bor rowing from commercial banks, they repre sent large increases in loan dem and in a period of a month. These increases are, on the average, more substantial than those in other months of the year and, in some years, have been more than double the M arch figure shown in Table II. D ata from a sample of the weekly report ing banks indicate which industries seem to account for the tax borrowing observed in total business loans. Several industries show a fairly clear tax-borrowing pattern; these are metals and metal products firms, and public utilities and transportation enterprises. Sev eral others show what seems to be tax b or row ing at certain tim es during the period since 1951 (the year these data were first available), although this is not certain be cause of strong seasonal movements in the industries in question. The limitations of the available loan data prevent making anything but very broad generalizations. However, it is possible that variability in profits may account for the localization of tax borrowing in these particular industries and not, so far as can be seen, in the others for which we have data. It should be emphasized, though, that there is 1T he changes in business loans on which the averages are based are not completely com parable due to the tact that the changes in saies finance company loans are based only on a sample of the weekly reporting banks before July 19">9. OF SAN FRANCISCO T able IT AVERAGE CHANGE IN BUSINESS LOANS IN MONTHS INDICATED— 1953-1961 (millions of dollars) Average Loan Month March Increase $674 June 492 September 438 December 306 Note: The data in this table are for weekly reporting member banks. Changes in loans to sales and personal finance com panies, from a sample of the weekly reporting banks, were deducted from business loan changes prior to July 1959, when loans to sales and personal finance companies were removed from commercial and industrial loans and placed in a separate loan category. Source: Board of Governors of the Federal Reserve System. no evidence of any clear relationship between movements in profits of these industries and the tax borrowing they appear to do, even with suitable lags. Other w a y s to meet tax paym ents A business corporation which has Federal income taxes to pay has several ways to ob tain the funds to make the payments. One way, probably the simplest, is to allow the firm’s cash balances at banks to build up prior to the tax date. While this method may be used by both large and small firms, it is prob ably more characteristic of smaller businesses. Since W orld War II, large corporations whose cash balances are in the millions of dollars have shown renew ed in terest in m anaging these funds to earn a return on almost every dollar held, even for very short periods. Partly as a result of the rise in interest rates in re cent years, corporate treasurers have looked for ways to invest tem p o rarily idle funds. Money which is to be used, even in only a few days, to make a tax paym ent can earn $69.40 per day if $ 1 million is invested at 2 V2 percent per annum. A co rp o rate tre a su rer has m any choices open to him in investing his funds. Securities issued or g u aran teed by the U nited States Governm ent are often used in this way. There is no risk of default; an active and continuous m arket for these issues exists, and the short- M ONTHLY REVIEW January 1962 C h a r t II C o rp o ra tio n s reduce G o v e rn m e n t securities h o ld in g s in tax date months B i l l i o n s of D o l l a r s I960 1961 Source: U nited States Treasury Departm ent. ness of their time to m aturity makes Treasury bills and other short-term Federal securities practically free from risk of loss if sold before th eir m atu rity dates. In recen t years the Treasury D epartm ent has sold what are des ignated as tax anticipation securities. Issued either as bills sold at a discount, or as certifi cates of indebtedness which bear a fixed cou pon rate of interest, these securities may be turned in at the Treasury in paym ent of Fed eral taxes. Since they usually are sold to m a ture one week after a tax date but are received at par with full interest accrued, there is some incentive to buy and hold them for tax pay ment purposes. They also, in effect, enable the Treasury to make some advance collec tion of taxes. Although monthly estimates of corporate holdings of T reasury securities have been m ade by the T reasury D epartm ent since 1939, the monthly Survey of Ownership of Federal securities gives detailed information on corporate holdings for a sample of just under 500 firms. The movements in the total of these holdings, though available only since February \ 960, are similar to those observed in the longer series and have been used in C hart II, with a breakdown by maturities. A definite decline in holdings can be seen in the m onths co rp o ratio n s m ake th eir tax p ay ments, and the relative sizes of the declines are more or less in conformity with the rela tive sizes of the tax payments made in those months as well. In addition to securities issued, or guaran teed, by the United States Government, sev eral financial in stitu tio n s offer sh ort-term securities which are particularly well suited for tem porary investment of corporate funds. Sales finance companies, to finance p art of their lending operations, sell short-term paper both on the open m ark et and directly to buyers. In the direct placem ent of these is sues, the c o rp o ratio n p u rchasing them can specify the date on which the securities will mature. The advantage of matching exactly the date the securities m ature and the date the funds are needed is that it gives the corporate treasurer virtual certainty of both the princi pal amount and the interest yield. On the other hand, if the treasurer is forced to buy, for example, a Treasury certificate of indebt edness that m atures well after the time he needs the funds, an increase in interest rates in the m eantim e m ay have depressed the price. The treasurer may have to take a capital loss that offsets part of the accrued interest on the certificate, and the resulting yield may prove not to have been worth the trouble of investing the funds. Dealers in United States G overnment se curities have developed an interesting type of short-term security in connection with financ ing their operations. This security is called a repurchase agreement. A dealer will sell a block of Treasury bills (for exam ple) to a large corporation. A t the time of the sale, he agrees to buy the same securities, or their equivalent, back into his portfolio at some later time, often as soon as one day later. A n FEDERAL RESERVE BANK OF SAN FRANCISCO T a b l e III CORPORATE TAX PAYMENTS AND RELATED ITEMS (millions of dollars) Increases in Month Treasury receipts from corporaie taxes' Treasury tax anticipation b ills1 Repurchase agreements of corpora tions2 Sales finance company paper3 Corporate holdings of U. S. securities1 Business loans at banks9 September 1960 3,492 * 403 359 1,392 570 December 1960 3,331 * 237 657 6 67 184 409 726 81 309 March 1961 5,799 1,680 192 22 June 1961 5,246 1,606 17 t 21 September 1961 3,251 928 279 186 678 329 December 1961 n.a. * 414 n.a. n.a. 81 3p t n.a. N ot available. *No issue m aturing a t th a t time. tlncrease. p— Prelim inary. 1 U nited States Treasury D epartm ent. 2 Federal Reserve Bank of New York. 3Board of Governors of the Federal Reserve System. Loan data are those of weekly reporting member banks. interest charge, often appearing as the spread between the sale price and the repurchase price, is paid by the dealer for the use of the funds involved. For the corporation, this al lows precise tailoring of its investment to the time the funds are needed, and there is very little risk of any kind attached to the trans action. In Table III, a summary has been made of some of the factors felt to be involved in cor porate tax payments. Mainly for reasons of d ata availability, only six consecutive tax dates have been used to illustrate the changes in loans and securities holdings which can be related to corporate tax payments. Some of the items in Table 111 require a brief explanation. T reasury receipts from corporate income taxes as shown include pay ments by financial as well as nonfinanciat firms, since separate data are not available. Since many of the Treasury tax anticipation bills are held until final maturity, the amount shown includes only those which were actu ally u sed in m aking tax p ay m en ts. T he declines in repurchase agreements of corpo rations with Government securities dealers are for the week including the tax date; the other items are m onth-to-m onth changes.1 C orporate holdings of United States Govern ment securities represent changes in totals held by the sample of firms surveyed monthly by the Treasury and exclude, to avoid double counting, changes in those corporations’ hold ings of tax anticipation bills. The figure used for sales finance company paper includes only the amounts shown as directly placed with investors; there is no inform ation now avail able on total indebtedness of these firms on a current basis. Although these figures do not account for total corporate income tax pay ments, they are at least indicative of some of the amounts involved. Secondary effects of tax borrow in g on the b a n k in g system It has been noted above that the banking system has placed upon it a dem and for loans associated with tax payments that may be as much as three-quarters of a billion dollars. This increase in loans is assumed to be en tirely due to borrowing by nonfinancial cor porations. Certain financial enterprises also 'C hanges in business loans are based on differences between loans outstanding on the last W ednesday of the preceding m onth and the last W ednesday of the month in question. January 1962 MONTHLY REVIEW need additional bank loans at tax dates. This arises from their need to continue financing their operations when funds previously fur nished to them by nonfinancial corporations are withdrawn for tax-paym ent purposes. Sales finance companies depend for their o p erating funds upon two m ain sources. S hort-term p a p er is sold into the m arket through dealers and, in larger amounts, is placed directly with large nonfinancial cor porations, as discussed above. The other m a jor source of funds is the commercial banks; as of December 1961, the weekly reporting member banks had about $3 billion in loans outstanding to sales and perso n al finance com panies. A lthough d a ta on outstanding loans are of comparatively recent date, they indicate definite increases around tax dates, especially those in June and December. These lo an s, lik e those of o th e r b u siness firm s, appear to be repaid fairly quickly after the tax date has passed but still constitute an additional source of loan dem and at the same time as the tax borrowing of nonfinancial corporations. Table IV shows changes in loans to and in directly placed paper of sales and personal finance companies. D ata on total loans out standing to these firms were not available until July 1959. Despite the differences in coverage of the series before that date, the information will indicate the pattern of bor rowing in this industry. The increases in bor rowing are more prom inent in December than in M arch or June. This would be expected on the grounds that sales finance company paper would compete with Treasury tax anticipation issues, which have not generally been avail able in December. The declines in borrowing in September probably are due to seasonal factors affecting the lending operations of these firms. T able IV CHANGES IN FINANCING OF SALES AND PERSONAL FINANCE COMPANIES (millions of dollars) r Year Changes in: 1953 Bank loans Directly placed paper 1954 Bank loans Directly placed paper 1955 1956 — Bank loans Directly placed paper Bank loans Directly placed paper — March June 15 n.a. 8 n.a. — 29 n.a. — — 84 45 September December 170 — 194 16 36 — 67 56 98 26 — 239 32 — 126 — 98 482 — 243 158 45 59 — 136 — 107 — 50 516 — 432 — 228 72 1957 Bank loans Directly placed paper 292 2 315 — 294 184 — 277 569 — 269 1958 Bank loans Directly placed paper 106 — 229 58 — 355 — 88 — 202 486 — 359 1959 Bank loans Directly placed paper — 235 41 — 470 92 — 96 — 280 737 — 389 359 — 134 — 60 — 359 594 — 657 — 206 — 186 1960 Bank loans Directly placed paper 227 148 1961 Bank loans Directly placed paper — 1 34 — 22 50 21 699p n.a. n.a. Not available, p — Preliminary. N ote: The data for bank loans from 1953 through June 1959 are based on changes in loans to sales and personal finance companies as reported by a sample of the weekly reporting member banks. Since Ju ly 1959 loan changes are based on loans outstanding to such companies at all weekly reporting banks. The other data represent changes in am ounts outstanding of finance company paper sold directly to investors. Source: Board of Governors of the Federal Reserve System. FEDERAL RESERVE C hart BANK OF SAN FRANCISCO III G o v e rn m e n t securities d e a le rs tend to lose fu n d s from corporations in ta x date months M i l l i o n s of D o l l a r s m u c h le s s c le a r ly in M arch and Ju n e; there were, as mentioned above, Treasury tax anticipation bills m a tu rin g in th o se m onths, and the dealers re d u c e d th e ir p o sitio n s su b stan tially in M arch, lessen in g th e n eed for funds. Other effects of tax b orrow ing Source: Federal Reserve Bank of New York. G overnm ent securities dealers are in some what the same position as the finance com panies. Most of the funds for carrying their securities positions, other than those obtained from corporations, are borrowed from com mercial banks. If the dealers wish to m ain tain more or less the same level of operations, the funds lost from m aturing repurchase agreem ents at tax dates m ust be obtained from commercial banks. Again, it should be emphasized that this additional loan demand comes at the same time as does regular tax borrowing. The increased loan demand from the dealers and the sales finance companies can be defined as the secondary impact of cor porate tax payments on the banking system. Loans from commercial banks and repur chase agreements of corporations with Gov ernm ent securities dealers are shown in C hart III. The shortness of the time period covered m akes generalizations difficult; however, there are some indications of the pattern men tioned above. Loans from banks increased substantially in Septem ber and D ecem ber 1960, as repurchase agreements tended to decline at the same times. This shows up It was mentioned ear lier in this article that one possibility in preparing to make tax payments would be simply to allow bank balances to increase and then be withdrawn to make the payment. C hart IV shows the movements of dem and deposits of individuals, partnerships, and cor porations, plotted weekly, during 1960 and 1961. The tendency for these deposits to rise just before the corporate tax dates may be due in part to deposits of the proceeds of securities holdings which have been liq u i d a te d . H ow ever, p a rt of the m o v em en t undoubtedly represents simple cash accum u lation.1 If a corporation is large enough to use its accumulated funds in securities invest ment, it is not likely that even one day’s inter est would be sacrificed. The transfer of several billions of dollars in tax p ay m en ts fro m p riv a te to p u b lic accounts might well be expected to disturb money markets. However, the movements of short-term interest rates, as shown for the past three years in Chart V, give no such indication. A major element in preventing such consequences is the use of Treasury Tax and Loan accounts in commercial banks to accumulate tax revenues until they are needed ‘ T he upw ard movement in April is probably due to accum ula tions for the personal income tax. There does not seem to be any evidence of personal tax borrowing in the "a ll other loans” category, however. January 1962 M ONTHLY REVIEW measure of tax borrowing used (the average for Federal expenditures. The Federal R e of changes in business loans in the tax date serve System also makes additional reserves available to member banks at tax payment months covering the past nine years) is ad dates, thereby sm oothing the transfers of mittedly a rough approximation, it may serve funds at such periods. a useful purpose in giving some idea of the From the standpoint of the monetary and additional loan dem and that can be expected credit mechanism, the major effects of cor in the final month of each quarter. porate tax payments are that they increase Primary and secondary aspects of corpo the demand for bank credit by both nonfirate tax payments are distinguished on the nancial corporations and the financial insti grounds that there are two distinct sources of tutions discussed above. It is not possible, additional loan demand. The prim ary impact given the limitations of available data, to give is the result of the direct demand of business exact estimates of this tax-borrowing loan firms for funds with which to make Federal demand. However, some tentative figures can income tax payments. Due to the fact that be shown, based on average increases in loans som e large nonfinancial co rp o ratio n s also to business firms and to sales finance com prepare for tax payments by holding securi panies in the tax paym ent months since 1953. ties issued by sales finance companies and by These are indicated in Table V. The short rep u rch ase agreem ents w ith G overnm ent ness of the time period for which loan data securities dealers, these financial firms also are available for Governm ent securities deal need to seek bank loan accomm odation when ers reduces the usefulness of a corresponding the corporations desire the return of their estimate for their increased loan demand. It invested funds for tax -p ay m en t purposes. should be emphasized that the estimates of These two different sources of loan demand increased loans to business corporations and sales finance companies are probably con are reinforcing, not offsetting, and it is their servative. The decline in loans to sales and total effect on the demand for bank credit personal finance companies in September is which is important. probably due to seasonal C h a r t IV factors, which also would affect the loan increases B uildu p in d e m a n d d e p o sits related to corporate in the other months. ta x payments Su m m ary In a n e c o n o m y in which the unit of measure for financial flows is the billion, steady progress toward greater knowledge of th e fa c to rs affectin g movements of funds is a n ecessity. T he p re se n t study may contribute to a better understanding of the ebb and flow of credit demands on the banking sy ste m . A lth o u g h th e B i l l i o n s of D o l l a r s FEDERAL RESERVE BANK OF SAN FRANCISCO C hart V The movement of such s u b s ta n tia l su m s fro m M o n e y m a rk e t ta k e s t a x p a y m e n ts in stride privately owned corpora P t r c t n t ptr Annum tions to the Treasury De partm ent is a task which might well be beyond the capacity of even our well developed m onetary sys tem. From Table I it can be seen that amounts in excess of $20 billion an nually have to be trans f e r r e d in p a y m e n t o f c o rp o rate incom e taxes. However, this has not ap parently acted to disrupt the working of the money Source: Board of Governors of the Federal Reserve System. m arket. Several factors can, and apparently have, planned for the operate to soften the impact of these huge extra loan demand in advance, thus prevent financial flows on the monetary system. The ing a last minute liquidation of secondary re use of Treasury Tax and Loan accounts, into serves to provide for it. Finally, the Federal which receipts from income taxes and other Reserve System also aids in smoothing the revenues are channeled tem porarily until im p act of tax borrow ing by adju stin g the needed for Federal expenditures, protects the volume of reserves to provide for tem porary commercial banks from sudden and drastic strains on the banking system of this nature. losses of reserves. Tax anticipation securities In the period approximately from the Civil allow advance collection of income taxes, in W ar to World W ar I, the m onetary system effect, and reduce the amount necessary to be was plagued by recurrent crises in the money transferred on the tax date. Since tax bor market, mostly due to the annual need for rowing is highly predictable as to timing, if funds for crop movements. C orporate income not as to total amount, the commercial banks taxes, with the resulting need for movement T able V AVERAGE TAX AND TAX-RELATED BORROWING (millions of dollars) Month Non financial corporations1 (1953-61) Sales and personal finance companies2 (1953-61) Government securities dealers3 (1960-61) March 674 112 133 919 June 492 170 632 1,294 September 438 * 556 994 December 306 498 842 1,646 ‘ Decrease. 1 See T able II for source and method of com putation. 3 See Table IV for source and method of computation. 3 Change in bank borrowing by dealers in week of tax-paym ent date. Source: Federal Reserve Bank of New York. Total January 1962 M ONTHLY REVIEW of large sums at intervals, could have proved as disturbing to the banking and monetary system as did the flow of farm products into the industrial and distribution networks in the last century. The advent of the Federal Reserve System in 1914 effectively removed those earlier disturbances. By making avail able additional reserves to member banks at tax payment dates, it has also facilitated the large transfers of funds at such periods. Stud ies of this type aid in developing a better understanding of those forces which underlie the sm ooth functioning of o u r m onetary mechanism. 19 FEDERAL RESERVE BANK OF SAN FRANCISCO B A N K IN G A N D CREDIT STA TISTICS A N D B U S IN E S S IN D E X E S — TW ELFTH D ISTR IC T 1 (I n d e x e s : 1947-1949 = 100. D ollar a m o u n t s in millions of dollars) Condition items of all member banks2' 7 U.S. Gov’t securities Bank rates Demand deposits adjusted3 Total time deposits Bank debits index 31 cities1- 6 Year and Month Loans and discounts 1929 1933 1939 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 2,239 1,486 1,967 8,839 9,220 9,418 11,124 12,613 13,178 13,812 16,537 17,139 18,499 495 720 1,450 6,619 6,639 7,942 7,239 6,452 6,619 8,003 6,673 6.964 8,278 1,234 951 1,983 10,520 10,515 11,196 11,864 12,169 11,870 12,729 13,375 13,060 14,163 1,790 1,609 2,267 7,502 7,997 8,699 9,120 9,424 10,679 12,077 12,452 13,034 15,116 42 18 30 140 150 153 173 190 204 209 237 253 270 1960 D ecem ber 17,139 6,964 13,060 13,034 258 1961 Ja n u a ry February M arch April M ay Ju n e Ju ly A ugust Septem ber O ctober N ovem ber D ecem ber 16,751 17,525 17,517 17,637 17,632 17,578 17,504 17,779 18.028 17,901 18,212 18,499 6,984 6,991 6,916 7,436 7,393 7,571 7,935 7,863 7,955 8,190 8,182 8,278 13,010 12,750 12,860 13,222 12,865 12,935 13,206 13,212 13,317r 13,901 13,944 14,163 13,121 13,639 13,754 13,999 14,289 14,371 14,492 14,656 14,786 14,867 14,874 15,116 254r 256r 273r 266r 265r 268r 267r 262r 277 291 265 293 Total nonagri cultural employ ment Total mf’g employ ment 3.95 4.14 4.09 4.10 4.50 4.97 4.88 5,36 5.62 ‘60 118 121 121 127 134 139 138 146 150 152j> ‘57 130 137 134 144 154 161 153 165 165 163 p 5.50 150 150 150 150 150 151 152 152 152 153 153 154 154p short-term business loans6’ 7 5 48 sioO 5.45 5.42 Industrial production (physical volume)1 Year and month Crude Refined Retail food prices ;• s 102 52 77 100 100 96 104 104 96 89 94 88 87 30 18 31 120 122 122 132 141 140 143 157 156 175 64 42 47 115 113 113 112 114 118 123 123 125 162 87 159 127 161 161 161 160 162 163 162 164 165 166 167 168 84 83 83 88 81 85 86 84 87 99 100 92 154 164 160 164 153 162 167 157 170 164 165 175 127 127 127 127 127 126 126 125 126 127 126 Exports Cement Electric power Imports Total Dry Cargo Tanker Total Dry Cargo 190 110 163 92 186 171 141 133 166 201 231 176 188 241 150 247 7 i07 80 194 201 138 141 178 261 308 212 223 305 243 108 175 130 145 123 149 117 123 123 138 149 124 72 95 144 162 204 314 268 314 459 582 561 686 808 128 24 125 146 139 158 128 154 163 172 142 138 154 29 26 40 120 136 145 162 172 192 209 224 229 252 271 97 145 140 141 163 166 187 201 216 221 263 269 ’57 103 733 1,836 4,239 2,912 3,614 7,180 10,109 9,501 11,699 14,209 155 151 129 133 141 137 276 274 220 271 306 338 .97 175 826 1,046 254 245 15,744 21,915 159 176 178 168 169 188 157 160 163 171 182 111 152 162 172 191 187 183 180 174 181 139 134 137 133 143 143 124 107 138r 148p 277 276 285 283 285 289 293 235 248 264 261 265 224 232 247 318 362 363 331 331 290 299 324 118 95 124 163 171 128 138 138 779 666 952 759 865 684 1,027 647 218 233 252 286 292 267 297 274 15,39-1 11,98' 19,265 13.13E 15,85( 11,53i 20, 02; 10,35-! 95 40 71 114 113 115 116 115 122 120 106 107 116 110 87 52 67 98 106 107 109 106 106 105 101 94 92 91 78 50 63 103 112 116 122 119 124 129 132 124 130 134 55 27 56 112 128 124 131 133 145 156 149 158 174 161 1960 November December 100 99 91 91 135 137 101 101 103 114r lllr lllr 110 91 91 92 92 92 91 91 91 92 92 92 134 134 131 135 143 143 143 140 142 144 144 Steel’ Copper7 10 103 17 80 115 116 115 113 103 120 131 130 116 99 129 1929 1933 1939 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 January February March April May June July August September October N ovember Dep’t store sales (value)6 Waterborne Foreign Trade Index7' Petroleum1 Lumber Car loadings (number)5 Tankei 1 A djusted for seasonal v ariation, except where indicated. E xcept for banking and credit a n d d e p artm e n t sto re statistics, all indexes are based upoi d a ta from outside sources, as follows: lum ber, N ational L um ber M a n u fac tu rers’ A ssociation, W est C oast L um berm an’s Association, a n d W esterc Pine A ssociation; petroleum , cem ent, a n d copper, U.S. B ureau of M ines; steel, U.S. D e p artm en t of Com m erce a n d Am erican Iron a n d Steel In stitu te electric power, Federal Pow er C om m ission; nonagricultural and m anufacturing em ploym ent, U.S. B ureau of L abor S ta tistic s a n d cooperating stat< agencies; retail food prices, U.S. B ureau of Labor S ta tistics; carloadings, various railroads a n d railroad associations; a n d foreign trad e , U.S. D epartm ent of Com m erce. 2 A nnual figures are as of end of year, m onthly figures as of last W ednesday in m onth. 3 D em and deposits, excluding in terb an k and U.S. G overnm ent deposits, less cash item s in process of collection. M onthly d a ta p a rtly estim ated. * D ebits to to ta l deposit* except in te rb an k prior to 1942. D ebits to dem and deposits except U.S. G overnm ent and in te rb a n k deposits from 1942. 6 D aily average * Average ra te s on loans m ade in five m ajor cities, weighted by loan size category. 1 N ot ad ju ste d for seasonal v ariation. 8 Los Angeles S an Francisco, a n d S eattle indexes com bined. 9 Com m ercial cargo only, in physical volume, for th e Pacific C o a st custom s d istricts plus Alaskj and H aw aii; sta rtin g w ith Ju ly 1950, “ special categ o ry ” exports are excluded because of security reasons. 10 A laska and H aw aii are includec in indexes beginning in 19.50. p— Prelim inary. r— Revised. 20
@FedFRASER