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The Role of the Money Supply
In the Conduct of Monetary Policy
November 6, 1973
The Honorable William Proxmire
United States Senate
Washington, D. C.
Dear Senator Proxmire:
I am writing in further response
to your letter of September 17,
1973, which requested comments
on certain criticisms of monetary
policy over the past year.
As stated in your letter, the
criticisms are: (1) "that there was
too much variation from time to
time in the rate of increase in the
~oney supply, that monetary pollCy was too erratic, too much characterized by stops and starts'" and
.(2) "that the money supply h~d
~ncreased much too much last year,
ln fact that the increase would
have been too much even if we had
?een in the depths of a recession
lnstead of enjoying a fairly vigorous economic expansion."
. These criticisms involve basic
lSsues with regard to the role of
llloney in the eC(!Illomy, and the
role that the money supply should
lay in the formulati(m and execu. lOn of monetary policy. These
lSs~es, along with the specific
POInts you raise, require careful
ekamination.

i.

Criticism of our public policies
It Du~ing the past two years the
tnerlcan economy has experienced a substantial measure of
Prosperity. Real output has inCreased sharply, jobs have been
created for millions of additional
Workers, and total personal inCOtne-both in dollars and in terms
llusiness Review I December 1973

of real purchasing power-has risen
to the highest levels ever reached.
Yet the prosperity has been a
troubled one. Price increases have
been large and widespread. For a
time, the unemployment rate remained unduly high. Interest rates
have risen sharply since the spring
of 1972. Mortgage money has recently become difficult to obtain in
many communities. And confidence
in the dollar at home and abroad
has at times wavered.
Many observers have blamed
these difficulties on the management of public economic policies.
Certainly, the Federal budgetdespite vigorous efforts to hold
expenditures down-continued in
substantial deficit. There has also
been an enormous growth in the
activities of Federally-sponsored
agencies which, although technically outside the budget, must still
be financed. The results of efforts
to control wages and prices during
the past year have been disappointing. Partial decontrol in early
1973 and the subsequent freeze
failed to bring the results that were
hoped for.
Monetary policy has been criticized on somewhat contradictory
counts-for being inflationary, or
for permitting too high a level of

interest rates, or for failing to bring
the economy back to full employment, or for permitting excessive
short-term variations in the growth
of the money supply, and so on.
One indication of dissatisfaction
with our public policies was provided by a report, to which you refer in your letter, on a questionnaire survey conducted by the
National Association of Business
Economists. Of the respondents, 38
per cent rated fiscal policy "over
the past year" as "poor"; 41 per
cent rated monetary policy "over
the past year" as "poor"; only 14
per cent felt that the wage-price
controls under Phase IV were
"about right." If this sampling is
at all indicative, the public policies
on which we have relied are being
widely questioned. Many members
of the above group, in fact, went on
record for a significant change in
fiscal policy. In response to a question whether they favored a variable investment tax credit, 46.5 per
cent said "yes," 40 per cent said
"no," and 13.5 per cent expressed
"no opinion."
Let me turn now to the questions raised in your letter and in
some other recent discussions
about monetary policy. I shall discuss, in particular, the role of

A Letter by
Arthur F. Burns
Chairman of the Board of Governors
Federal Reserve System

1

money supply in the conduct of
monetary policy; the extent and
significance of variability in the
growth of the money supply; and
the actual behavior of the money
supply during 1972-73.
Role of money supply
For many years economists have
debated the role of the money supply in the performance of economic
systems. One school of thought,
often termed "monetarist," claims
that changes in the money supply
influence very importantly, perhaps even decisively, the pace of
economic activity and the level of
prices. Monetarists contend that
the monetary authorities should
pay principal attention to the
money supply, rather than to other
financial variables such as interest
rates, in the conduct of monetary
policy. They also contend that
fiscal policy has only a small independent impact on the economy.
Another school of thought places
less emphasis on the money supply
and assigns more importance to the
expenditure and tax policies of the
Federal Government as factors influencing real economic activity
and the level of prices. This school
emphasizes the need for monetary
policy to be concerned with interest rates and with conditions in the
money and capital markets. Some
economic activities, particularly
residential building and State and
local government construction,
depend heavily on borrowed
funds, and are therefore influenced
greatly by changes in the cost and
availability of credit. In other categories of spending-such as business
investment in fixed capital and inventories, and consumer purchases
of durable goods-credit conditions
playa less decisive role, but they
are nonetheless important.
Monetarists recognize that monetary policy affects private spending in part through its impact on
2

interest rates and other credit
terms. But they believe that primary attention to the growth of
'the money supply will result in a
more appropriate monetary policy than would attention to conditions in the credit markets.
Needless to say, monetary policy
is-and has long been-a controversial subject. Even the monetarists
do not speak with one voice on
monetary policy. Some influential monetarists believe that monetary policy should aim strictly
at maintaining a constant rate of
growth of the money supply. However, what that constant should be,
or how broadly the money supply
should be defined, are matters on
which monetarists still differ. And
there are also monetarists who
would allow some-but infrequentchanges in the rate of growth of
the money supply, in accordance
with changing economic conditions.
It seems self-evident that adherence to a rigid growth rate rule,
or even one that is changed infrequently, would practically prevent
monetary policy from playing an
active role in economic stabilization. Monetarists recognize this.
They believe that most economic
disturbances tend to be self-correcting, and they therefore argue
that a constant or nearly constant
rate of growth of the money supply
would result in reasonably satisfactory economic performance.
But neither historical evidence,
nor the thrust of explorations in
business-cycle theory over a long
century, give support to the notion
that our economy is inherently
stable. On the contrary, experience
has demonstrated repeatedly that
blind reliance on the self-correcting
properties of our economic system
can lead to serious trouble. Discretionary economic policy, while
it has at times led to mistakes, has
more often proved reasonably successful. The disappearance of busi-

ness depressions, which in earlier
times spelled mass unemployment
for workers and mass bankruptcies
for businessmen, is largely attributable to the stabilization policies
of the last thirty years.
The fact is that the internal
workings of a market economy
tend of themselves to generate
business fluctuations, and most
modern economists recognize this.
For example, improved prospects
for profits often spur unsustainable
bursts of investment spending. The
flow of personal income in an age
of affluence allows ample latitude
for changes in discretionary expenditures and in savings rates.
During a business-cycle expansion
various imbalances tend to develop
within the economy-between aggregate inventories and sales, or
between aggregate business investment in fixed capital and consumer
outlays, or between average unit
costs of production and prices.
Such imbalances give rise to cyclical movements in the economy.
Flexible fiscal and monetary policies, therefore, are often needed
to cope with undesirable economic
developments, and this need is
not diminished by the fact that
our available tools of economic
stabilization leave something to
be desired.
There is general agreement
among economists that, as a rule,
the effects of stabilization policies
occur gradually over time, and that
economic forecasts are an essential
tool of policy making. However, no
economist-or school of economicshas a monopoly on accurate forecasting. At times, forecasts based
largely on the money supply have
. turned out to be satisfactory. At
other times, such forecasts have
been quite poor, mainly because of
unanticipated changes in the intensity with which the existing
money stock is used by business
firms and consumers.

Changes in the rate of turnover
of money have historically played
a large role in economic fluctuations, and they continue to do so.
Por example, the narrowly-defined
money stock-that is, demand deposits plus currency in public circulation-grew by 5.7 per cent between the fourth quarter of 1969
and the fourth quarter of 1970.
But the turnover of money declined during that year, and the
dollar value of GNP rose only 4.5
per cent. In the following year, the
growth rate of the money supply
increased to 6.9 per cent, but the
turnover of money picked up
briskly and the dollar value of
GNP accelerated to 9.3 per cent.
The movement out of recession in
1970 into recovery in 1971 was
~hus closely related to the greater
Intensity in the use of money.
Occurrences such as this are very
common because the willingness
to use the existing stock of money,
?xpressed in its rate of turnover,
IS a highly dynamic force in economic life.
Por this as well as other reasons,
the Federal Reserve uses a blend
of forecasting techniques. The behavior of the money supply and
other financial variables is accorded careful attention. So also
are the results of the most recent
Surveys on plant f
and equipment
~pending, consumer attitudes, and
Inventory plans. Recent trends in
key producing and spending sectors are analyzed. The opinions of
businessmen and outside economic
analysts are canvassed, in part
tphrough the nationwide contacts of
ederal Reserve Banks. And an
assessment is made of the probable
course of fiscal policy, also of laborInarket and agricultural policies,
and their effects on the economy.
. Evidence from all these sources
IS Weighed. Efforts are also made
to assess economic developments
through the use of large-scale
Business Review I December 1973

econometric models. An eclectic
approach is thus taken by the
Federal Reserve, in recognition of
the fact that the state of economic
knowledge does not justify reliance
on any single forecasting technique. As economic research has
cumulated, it has become increasingly clear that money does indeed
matter. But other financial variables also matter.
In recent years, the Federal
Reserve has placed somewhat more
emphasis on achieving desired
growth rates of the monetary
aggregates, including the narrowlydefined money supply, in its conduct of monetary policy. But we
have continued to give careful attention to other financial indicators, among them the level of
interest rates on mortgages and
other loans and the liquidity position of financial institutions and
the general public. This is necessary because the economic implications of any given monetary
growth rate depend on the state of
liquidity, the attitudes of businessmen, investors, and consumers toward liquidity, the cost and
availability of borrowed funds, and
other factors. Also, as the nation's
central bank, the Federal Reserve
can never lose sight of its role as
a lender of last resort, so that financial crises and panics will be
averted.
I recognize that one advantage
of maintaining a relatively stable
growth rate of the money supply is
that a partial offset is thereby I?rovided to unexpected and undeSIred
shifts in the aggregate demand for
goods and services. There is always
some uncertainty as to the emerging strength of aggreg~te ~emand.
If money growth is mamtamed at
a rather stable rate, and aggregate
demand turns out to be weake~ ,
than is consistent with the nation s
economic objectives, interest r~tes
will tend to decline and the easmg

of credit markets should help to
moderate the undesired weakness
in demand. Similarly, if the demand for goods and services
threatens to outrun productive
capacity, a rather stable rate of
monetary growth will provide a restraining influence on the supply
of credit and thus tend to restrain
excessive spending.
However, it would be unwise for
monetary policy to aim at all times
at a constant or nearly constant
rate of growth of money balances.
The money growth rate that can
contribute most to national objectives will vary with economic conditions. For example, if the aggregate demand for goods and services
is unusually weak, or if the demand
for liquidity is unusually strong,
a rate of increase in the money
supply well above the desirable
long-term trend may be needed for
a time. Again, when the economy
is experiencing severe cost-push
inflation a monetary growth rate
that is r~latively high by a historical yardstick may have to be tolerated for a time. If money growth
were severely constrained in order
to combat the element of inflation
resulting from such a cause, it
might well have seriously adverse
effects on production and employment. In short, what growth rate
of the money supply is appropriate
at any given time cannot be. determined simply by extrapolatmg
past trends or by some preconceived arithmetical standard.
Moreover, for purposes of conducting monetary policy, it is
never safe to rely on just one concept of money-even if that concept
happens to be fashionable. A variety of plausible concepts merit
careful attention, because a number of financial assets serve as a
convenient, safe, and liquid store
of purchasing power.
The Federal Reserve publishes
data corresponding to three defini3

tions of money, and takes all of
them into account in determining
policy. The three measures are:
(a) the narrowly-defined money
stock (M1 ), which encompasses
currency and demand deposits
held by the nonbank public; (b) a
more broadly-defined money stock
(M2 ), which also includes time
and savings deposits at commercial banks (other than large negotiable time certificates of deposit);
(c) a still broader definition (Ma),
which includes savings deposits at
mutual savings banks and savings
and loan associations. A definition embracing other liquid assets
could also be justified-for example, one that would include
large-denomination negotiable
time certificates of deposit, U.S.
savings bonds and Treasury bills,
commercial paper, and other shortterm money market instruments.
There are many assets closely
related to cash, and the public can
switch readily among these assets.
However money may be defined,
the task of determining the amount
of money needed to maintain high
employment and reasonable stability of the general price level is
complicated by shifting preferences of the public for cash and
other financial assets.
Variability
of money supply growth
In the short-run, the rate of
change in the observed money
supply is quite erratic, and cannot
be trusted as an indicator of the
course of monetary policy. This
would be so even if there were no
errors of measurement.
The record of hearings held by
the Joint Economic Committee on
June 27, 1973 includes a memorandum which I submitted on
problems encountered in controlling the money supply. As indicated there, week-to-week, monthto-month, and even quarter-to4

quarter fluctuations in the rate of
change of money balances are frequently influenced by international
flows of funds, changes in the level
of U.S. Government deposits, and
sudden changes in the public's attitude towards liquidity. Some of
these variations appear to be
essentially random-a product of
the enormous ebb and flow of funds
in our modern economy.
Because the demands of the
public for money are subject to
rather wide short-term variations,
efforts by the Federal Reserve to
maintain a constant growth rate of
the money supply could lead to
sharp short-run swings in interest
rates and risk damage to financial
markets and the economy. Uncertainties about financing costs could
reduce the fluidity of markets and
increase the costs of financing to
borrowers. In addition, wide and
erratic movements of interest rates
and financial conditions could have
undesirable effects on business and
consumer spending. These adverse
effects may not be of major dimensions, but it is better to avoid them.
In any event, for a variety of
reasons explained in the memorandum for the Joint Economic
Committee, to which I have previously referred, the Federal Reserve does not have precise control
over the money supply. To give
one example, a significant part of
the money supply consists of deposits lodged in nonmember banks
that are not subject to the reserve
requirements set by the Federal
Reserve. As a result there is some
slippage in monetary control. Furthermore, since deposits at nonmember banks have been reported
for only two to four days in a year,
in contrast to daily statistics for
member banks, the data on the
money supply-which we regularly
present on a weekly, monthly, and
quarterly basis-are estimates
rather than precise measurements.

When the infrequent reports from
nonmember banks become available, they often necessitate considerable revisions of the money supply figures. In the past two years,
the revisions were upward, and
this may happen again this year.
Some indication of the extent of
short-term variations in the recorded money supply is provided
below. Table 1 shows the average
and maximum deviations (without
regard to sign) of Ml from its
average annual growth rate over a
three and a half year.period. As
would be expected, the degree of
variation diminishes as the time
unit lengthens; it is much larger
for monthly than for quarterly
data, and is also larger for quarterly than for semi-annual data.
In our judgment, there need be
little reason for concern about the
short-run variations that occur in
the rate of change in the money
stock. Such variations have minimal effects on the real economy.
For one thing, the outstanding
supply of money is very large. It is
also quite stable, even when the
short-run rate of change is unstable. This October the average
outstanding supply of Mh seasonally adjusted, was about $264
billion. On this base, a monthly
rise or fall in the money stock of
even $2 ~ billion would amount
to only a 1 per cent change. But
when such a temporary change is
expressed as an annual rate, as
is now commonly done, it comes
Table 1
DEVIATIONS IN Ml FROM
ITS AVERAGE RATE OF GROWTH,
1970 THRU MID-1973

Form of Data

Monthly ..
Quarterly
Semi-annual

-

Annual Rates
of Change,
In percent _
Average
Maximum
Devl a t~
Deviation

.. .

3.8
2.4
1.8

8.8
5.5
4.1

-

out as about 12 per cent and attracts attention far beyond its
real significance.
The Federal Reserve research
staff has investigated carefully the
economic implications of variability in Ml growth. The experience
of the past two decades suggests
that even an abnormally large or
abnormally small rate of growth of
the money stock over a period up
~o six months or so has a negligible
Influence on the course of the econOmy-provided it is subsequently
offset. Such short-run variations
in the rate of change in the money
supply may not at all reflect Federal Reserve policy, and they do
not justify the attention they often receive from financial analysts.
The thrust of monetary policy
and its probable effects on econ~mic activity can only be deterlllIned by observing the course of
the money supply and of other
lllonetary aggregates over periods
lasting six months or so. Even
then, care must be taken to mea~ure the growth of money balances
In ways that temper the influence
of short-term variations. For exalllple, the growth of money balances over a quarter can be mea~ured from the amount outstanding
In the last month of the preceding
qUarter to the last month of the
cUrrent quarter, or from the average amount outstanding during the
preceding quarter to the average
III the current quarter. The first
llleasure captures the latest tendencies in the money supply, but
lllay be distorted by random
C~anges that have no lasting sig~ficance. The second measure
ends to average out temporary
~ctuations and is comparable to
e data provided on a wide range
of non-monetary economic variables, such as the gross national
Product and related measures.
A. comparison of these two ways
of llleasuring the rate of growth in
llu .

Slhess Review I December 1973

Table 2
GROWTH RATES OF MONEY SUPPLY
ON TWO BASES
Annual Rate
of Change.
In per cent

M

1972

1973

I
II
III
IV
I
II
III

...
...
...
.. .
...
...
.. .

Q

9.2
6.1
8.2
8.6
1.7
10.3
0.3

5.3
8.4
8.0
7.1
4.1
6.9
5.1

Ml is shown in Table 2 for successive quarters in 1972 and 1973.
The first column, labeled M, shows
annual rates calculated from endmonths of quarters; the second column, labeled Q, shows annual rates
calculated from quarterly averages.
As may be seen, the quarterly
averages disclose much more
clearly the developing trend of
monetary restraint-which, in fact,
began in the second quarter of
1972. Also, the growth of Ml)
which on a month-end basis appears very erratic in the first three
quarters of 1973, is much more
stable on a quarterly average basis.
For example, while the level of Ml
did not expand significantly between June and September, the
quarterly average figures indicate
further sizable growth in the third
quarter. For purposes of economic
analysis, it is an advantage to
recognize that the money available
for use was appreciably larger in
the third quarter than in the second quarter.
Experience of 1972·73
During 1972, it was the responsibility of the Federal Reserve to
encourage a rate of economic expansion adequate to reduce unemployment to acceptable levels. At
the same time, despite the dampening effects of the wage-price
control program, inflationary pressures were gathering. Monetary

policy, therefore, had to balance
the twin objectives of containing
inflationary pressures and encouraging economic growth. These objectives were to some extent conflicting, and monetary policy alone
could not be expected to cope with
both problems. Continuation of an
effective wage-price program and a
firmer policy of fiscal restraint
were urgently needed.
The narrowly-defined money
stock increased 7.4 per cent during
1972 (measured from the fourth
quarter of 1971 to the fourth quarter of 1972) . Between the third
quarter of 1972 and the third
quarter of 1973, the growth rate
was 6.1 per cent. By the first half
of 1973, the annual growth rate
had declined to 5.8 per cent, and
a further slowing occurred in the
third quarter.
Evaluation of the appropriateness of these growth rates would
require full analysis of the economic and financial objectives,
conditions, and policies during the
past two years, if not longer. Such
an analysis cannot be undertaken
here. Some perspective on monetary developments during 1972-73
may be gained, however, from
comparisons with the experience
of other industrial countries, and
by recalling briefly how domestic
economic conditions evolved during this period.
Table 3 compares the growth
of Ml in the United States with
that of other industrial countries
in 1972 and the first half of 1973.
The definitions of Ml differ somewhat from country to country,
but are as nearly comparable as
statistical sources permit. It goes
without saying that each country
faced its own set of economic conditions and problems. Yet it is useful to note that monetary growth
in the United States was much
lower than in other major industrial countries, and that it also
5

was steadier than in the other
countries.
The next table shows, in summary fashion, the rates of change
in the money supply of the United
States, in its total production, and
in the consumer price level during
1972 and 1973. The table is based
on the latest data. It may be
noted, in passing, that, according
to data available as late as January 1973, the rate of growth of
Ml during 1972 was 7.2%, not
7.4 %; and that the rate of increase in real GNP was 7.7 %, not
7.0 %. In other words, on the basis
of the data available during 1972,
the rate of growth of Ml was below
the rate of growth of the physical
volume of over-all production.
The table indicates that growth
in Ml during 1972 and 1973 approximately matched the growth
of real output, but was far below
the expansion in the dollar value of
the nation's output. Although monetary policy limited the availability
of money relative to the growth
of transactions demands, it still
encouraged a substantial expansion
in economic activity; real output
rose by about 7 per cent in 1972.
Even so, unemployment remained
unsatisfactorily high throughout
the greater part of the year. It was
not until November that the unemployment rate dropped below 512
per cent. For the year as a whole,
the unemployment rate averaged
5.6 per cent. It may be of interest to recall that unemployment
averaged 5.5 per cent in 1954 and
1960, which are commonly regarded as recession years.
Since the expansion of Ml in
1972 was low relative to the demands for money and credit, it was
accompanied by rising short-term
interest rates. Long-term interest
rates showed little net change
last year, as credit demands were
satisfied mainly in the short-term
markets.
6

Table 3
ANNUAL PER CENT RATES OF GROWTH IN MONEY SUPPLY
4th Qu arter 1971
to 4th Qu art er 1972

4th Qu art er 1972
to 2nd Qu arter 1973

7.4
14.1
14.3
15.4
23.1

5.8
10.0
4.2
8.7
28.2

United States
United Kingdom ...
Germany
France ..
Japan ...

Table 4
MONEY SUPPLY, GNP, AND PRICES IN THE U.S.
(Per cent chang e at annual rates)

4th Qu arte r 1971 to
4th Qu art er 1972

Money supply (M I ) . . .
Gross National Product
Current dollars
Constant dollars . .... . .. . ... .
Prices
Consumer price index (CPI)
CPI excluding food .....

In 1973, the growth of Ml moderated while the transactions demands for cash and the turnover
of money accelerated. GNP in current dollars rose at a 12 per cent
annual rate as prices rose more rapidly. In credit markets, short-term
interest rates rose sharply further,
while long-term interest rates also
moved up, though by substantially
less than short-term rates.
The extraordinary upsurge of
the price level this year reflects a
variety of special influences. First,
there has been a world-wide economic boom superimposed on the
boom in the United States. Second, we have encountered critical
shortages of basic materials. The
expansion in industrial capacity
needed to produce these materials
had not been put in place earlier
because of the abnormally low level
of profits between 1966 and 1971
and also because of numerous impediments to new investment on

4th Qu art er 1972 to
2nd Qu art er
3rd Quarter
of 1973
of 1973

7.4

5.8

5.6

10.6
7.0

12.1
5.4

11.7
4.8

3.4
3.0

7.1
4.0

7.8
4.1

ecological grounds. Third, farm
product prices escalated sharply
as a result of crop failures in
many countries last year. Fourth,
fuel prices spurted upward, reflecting the developing shortages
in the energy field. And fifth, the
depreciation of the dollar in foreign exchange markets has served
to boost prices of imported goods
and to add to the demands pressing on our productive resources.
In view of these powerful special factors, and the cyclical expansion of our economy, a sharp advance in our price level would have
been practically inevitable in 1973.
The upsurge of the price level this
year hardly represents either the
basic trend of prices or the response of prices to previous monetary or fiscal policies-whatever
their shortcomings may have been.
In particular, as the above table
shows, the explosion of food prices
that occurred this year is in large

part responsible for the accelerated rise in the over-all consumer
price level.
The severe rate of inflation that
we have experienced in 1973 cannot responsibly' be attributed to
monetary management or to public policies more generally. In
retrospect, it may well be that
monetary policy should have been
a little less expansive in 1972. But
a markedly more restrictive policy
would have led to a still sharper
rise in interest rates and risked a
premature ending of the business
expansion, without limiting to any
significant degree this year's upsurge of the price level.
Concluding observations
The present inflation is the most
serious economic problem facing
O~Ir country, and it poses great
difficulties for economic stabilization policies. We must recognize,
r believe, that it will take some
time for the forces of inflation,
which now engulf our economy and
others around the world, to burn
themselves out. In today's environment, controls on wages and prices
cannot be expected to yield the
benefits they did in 1971 and 1972,
when economic conditions were
~uch different. Primary reliance
In dealing with inflation-both in
the near future and over the longer
term-will have to be placed on fiscal and monetary policies.
!he prospects for regaining
brI<;:e stability would be enhanced
y Improvements in our monetary
and fiscal instruments. The con?uct of monetary policy could be
~proved if steps were taken to
Increase the precision with which
the money supply can be controlled by the Federal Reserve.
art of the present control probem stems from statistical inadequacies-chiefly the paucity of data
~nl deposits at nonmember banks.
so, however, control over the

r

nUsiness Review I December 1973

money supply and other monetary
aggregates is less precise than
it can or should be because nonmember banks are not subject to
the same reserve requirements as
are Federal Reserve members.
I hope that the Congress will
support efforts to rectify these deficiencies. For its part, the Federal
Reserve Board is even now carrying on discussions with the Federal
Deposit Insurance Corporation
about the need for better statistics
on the nation's money supply.
The Board also expects shortly to
recommend to the Congress legislation that will put demand deposits at commercial banks on a
uniform basis from the standpoint
of reserve requirements.
Improvements in our fiscal policies are also needed. It is important for the Congress to put an
end to fragmented consideration
of expenditures, to place a firm
ceiling on total Federal expenditures, and to relate these expenditures to prospective revenues and
the nation's economic needs. Fortunately, there is now widespread
recognition by members of the
Congress of the need to reform
budgetary procedures along these
broad lines.
It also is high time for fiscal
policy to become a more versatile
tool of economic stabilization.
Particularly appropriate would be
fiscal instruments that could be
adapted quickly, under special
legislative rules, to changing
economic conditions-such as a
variable tax credit for business investment in fixed capital. Once
again I would urge the Congress
to give serious consideration to
this urgently needed reform.
We must strive also for better
understanding of the effects of
economIc stabilization policies on
economic activity and prices. Our
knowledge in this area is greater
now than it was five or ten years

ago, thanks to extensive research
undertaken by economists in academic institutions, at the Federal
Reserve, and elsewhere. The keen
interest of the J oint Economic
Committee in improving economic
stabilization policies has, I believe, been an influence of great
importance in stimulating this
widespread research effort.
I look forward to continued cooperation with the Committee in
an effort to achieve the kind of
economic performance our citizens
expect and deserve.
Sincerely yours,
Arthur F. Burns

7

Federal Reserve Bank of Dallas
December 1973

Statistical Supplement to the Business Review
Total credit at weekly reporting
banks in the Eleventh District rose
moderately in the four weeks ended
November 21, as a sizable increase
in total loans exceeded a decline in
security holdings. With a moderate
reduction in total deposits, the
growth in bank credit was financed
mainly through increased borrowing from non deposit sources.
Total loans expanded sharply, as
business loan demand was substantially higher-probably reflecting increased inventory accumulation.
Real estate loans rose but at a
slower pace than usual. Reduced
residential construction has probably moderated demands for interim
construction financing. Growth in
consumer loans also moderated.
In contrast to comparable periods
of other recent years, District banks
reduced their security holdings over
the four weeks. Holdings of Government securities declined slightly,
with decreases in holdings of Trea\
sury bills and other short-term
Government issues more than offsetting increases in holdings of intermediate and long-term notes and
bonds. Moreover, the banks substantially reduced their holdings of
municipal obligations.
Total deposits contracted moderately, as a decline in demand deposits exceeded an expansion in
time and savings deposits. The volume of large CD's increased only
slightly, and District banks met the
rise in credit demands largely by increasing their borrowings in the
Eurodollar market.
Registrations of new passenger automobiles in the four largest metropolitan counties of Texas-Bexar,
Dallas, Harris, and Tarrant-increased 45 percent in October. The
increase was lwgely attributed to

the filling of fleet orders placed by
Texas businesses earlier in the year.
But despite the gain, total registrations were only 0.5 percent greater
than in October 1972. Cumulative
registrations for the first ten
months of this year were 12 percent
higher than in the same period last
year. Dallas had the largest cumulative gain, a 14-percent increase.
Both Harris County (Houston) and
Tarrant County (Fort Worth) had
13-percent cumulative increases,
while Bexar County (San Antonio)
showed a 7-percent rise.
Department store sales in the
Eleventh District were 8 percent
higher in the four weeks ended N 0vember 24 than in the corresponding period in 1972. Cumulative
sales through that date were 12 percent greater than in the comparable period last year.
Seasonally adjusted total employment in the five southwestern
states rose 0.6 percent in October,
reaching a level 3.5 percent higher
than a year before. This was the
fourth consecutive sizable monthly
gain, following sluggish employment growth earlier in the year.
The unemployment rate remained
at 4.0 percent.
Every major nonagricultural employment category except government rose in October. Particularly
impressive were the gains in both
durable and nondurable goods manufacturing. In nonmanufacturing,
however, only service and trade employment experienced more rapid
growth than in September.
The seasonally adjusted Texas industrial production index advanced
0.8 percent in October, the third
consecutive monthly gain. In the

past two months, however, the rate
of increase has slowed. Much of the
slowing in October centered in durable goods manufacturing-the
most sensitive cyclical component
of the index-suggesting that the
state's industrial output may be entering a period of reduced growth.
After sizable gains in the preceding two months, mining output increased only slightly in October.
Crude petroleum production was
essentially unchanged from a
month earlier. Total output of utilities fell, as the distribution of electricity was down over 5 percent.
The drop in demand for electricity
was due to the unusually mild
weather in October.
Higher oil and gas prices have stimulated a sharp increase in drilling.
Nationwide, the number of rotary
rigs in operation in October was the
largest since late 1969-and the largest for any October since 1965. Of
these, more than 60 percent were
drilling in states of the Eleventh
District, and almost half of the District total was in Texas. With 405
rigs in operation, Texas drilling activity was 22 percent more than a
year earlier.
Drilling was off slightly from a
year earlier in Louisiana, but the
220 rigs in operation represented a
gain of some 7 percent over September. Compared with October
1972, nearly 44 percent more wells
were being drilled in Oklahoma and
nearly 24 percent more were being
drilled in New Mexico.
Agricultural prospects in the Eleventh District remained good in N 0vember as farmers continued harvesting bumper crops and made excellent progress in seeding winter
(Continued on back page)

;;ONDITION STATISTICS OF WEEKLY REPORTING COMMERCIAL BANKS
~ Ieventh

Federal Reserve District

;Thousand dollars)
Nov. 21,
1973

Oct. 24,
1973

Nov. 22,
1972

1,280,908
9,705,980

884,008
9,573,591

1,155,718
8 ,591,470

Commercial and industrial loans .
Agricultural loans, excluding CCC
certificates of interest .......
Loans to brokers and dealers for
purchasing or carrying:
U.S. Government securiti es . ........ ..................•
Other securities ..................................
Other loans for purchasing or carrying:
U.S . Government securities .
Other securities ....................................
Loans to nonbank financial institutions:
Sales finance , personal finance, factors,
and other business credit companies .......
Other .
Real estate loans .................................
Loans to domestic commercial banks
Loans to foreign banks ...........
Consumer instalment loans .................
Loans to foreign governments, official
Institutions, central banks, and international
Institutions
Other loans .
Total Investm ents .

4,31'8,616

4,254,252

294 ,952

283,607

227,801

435
45,519

860
49,457

1,308
92,924

4,829
458,418

7,146
472,506

7,173
468,999

144,482
693,264
1,378,918
35,919
59 ,336
1,051,892

135,913
648,348
1,372,505
29,114
74,717
1,049,966

153,431
761 ,632
1,158,942
21 ,067
16,676
941 ,926

20
1,219,380
3,943,037

270
1,194,930
4,001 ,172

0
994,281
3,713 ,575

Total U.S. Governm ent securiti es ..
Treasury bills ........................................
Treasury certificates of Indebtedness ..
Treasury notes and U.S. Governm ent
bonds maturing:
Within 1 year
1 year to 5 years
After 5 years ...................................................
Obligations of states and political subdivisions:
Tax warrants and short-term notes and bills .
All other ............................................................
Other bonds, corporate stocks, and securities:
Certificates representing participations In
fed eral ag encr, loans .. .. ......................
All other (includ ng corporate stocks) .
Cash Items In process of collection ......
Reserves with Federal Reserve Bank ..
Currency and coin .............................................
Balances with banks In the United States ......
Balances with banks In foreign countries ................
Other assets (Including Investments In subsidiaries
not consolidated)

949,796
125,853
0

962,597
158,1 26
0

;;.SSETS
ederal funds sold and securities purchased
under agreements to re sell ..........
!jth er loans and discounts, gross ..

..

TOTAL ASSETS .. .................... "

Nov. 21,
1973

LIABILITIES

3,745,310

---984,323
177,797
0

Total demand depOSits ........................................
Individuals, partnerships, and corporation s ..
States and political subdivisions ..
U.S. Governm ent ...............
Banks In th e United States .....................
Foreign :
Governments, official Institutions, central
banks, and international Institution s .
Commerc ial banks ..
Certified and officers' ch ec k~': etc . .
Total tim e and savings deposits ...................... ...
Individuals, partnerships, and corporation s:
Saving s deposits .
Other time deposits ......................
States and political subdivisions .......................
U.S. Governm ent (Including postal savings) .
Banks In th e United States .
Foreign:
Governments, official institution s, central
banks, and International Institutions .....
Commercial banks ...............................
Federal funds purchased and securities sold
under agreements to repurchase
Oher liabilities for borrowed money
Other liabilities .....
Reserves on loans .
Reserves on securities ..
Tolal capital accounts .

130,081
522,924
170,938

162,008
487,946
154,51 7

104,048
2,609,509

140,056
2,627,641
9,442
261,436
1,851 ,187
1,217,317
128,981
536,294
15,500

14,832
224,214
1,395,610
821 ,915
99,929
435,216
11,777

839,445

821 ,136

18,949,094

3,753
45,501
93,814
6,118,240

1,138,566
3,873,323
1,781 ,414
19,424
111,278

1,134,890
3,843,758
1,727,898
21,437
114,143

1,201,429
3,304,316
1,461,580
29,726
107,089

26,320
20

25 ,400
20

13,000
1,100

2,964,1 54
157,291
573.392
167,808
14,107
1,251,489

2,804,636
321,268
570,668
168,435
14,434
1,242,250

1,920,670
85,731
432.799
141,057
17,829
1,161,085

18,949,094

---- ---19,029,186 16,861,572

Eleventh Federal Reserve District

Sept. 26,
1973

Oct. 25,
1972

ASSETS
Loans and discounts, gross ....... ..........................
U.S. Government obligations ...
Other securities ............................ .... ......
Reserves with Federal Reserve Bank ...
Cash In vault ...................... .......................
Balances with banks In the United States ..
Balances with banks In foreign countrles e
Cash Items In process of collection ...........
Other assets e .
...... ,", .... ,', ........

19,091
2,225
6,213
1,599
347
1,386
16
1,886
1,574

18,945
2,244
6,089
1,562
350
1,249
17
1,722
1,523

16,154
2,328
5,363
1,723
326
1,334
15
1,888
1,233

34 ,337

33,701

30,364

TIME DEPOSITS

DEMAND DEPOSITS
Total

1971 : October ..
1972: October ..
November .
December ..
1973: January ..
February .
March .
April ..
May ....
June
July ....
August.. ......
September ..
October ....

Oct. 31,
1973

Adjusted'

U.S.
Government

11 ,562
12,866
12,844
13,439
13,636
13,270
13,203
13,237
13,136
13,218
13,259
12,941
13,039
13,289

8,052
9,034
9,321
9,688
9,802
9,516
9,454
9,550
9,502
9,551
9,567
9,492
9,442
9,461

229
264
222
289
317
379
395
331
341
279
261
172
208
239

Total

Savings

9,977
11 ,618
12,009
12,261
12,501
12,811
13,038
13,249
13,336
13,374
13,396
13,507
13,618
13,795

2,480
2,770
2,786
2,812
2,815
2,817
2,848
2,855
2,859
2,884
2,868
2,857
2,854
2,863

1. Other than those of U.S. Government and domestic commercial banks, less cash ItemS
In process of collection .

RESERVE POSITIONS OF MEMBER BANKS

Eleventh Federal Reserve District
(Averages of dally figures . Thousand dollars)

1,720
11 ,772
13,856

1,584
11 ,317
13,716

1,788
11,107
11 ,710

27,348
3,309
1,299
2,381

26,617
3,394
1,347
2,343

24,605
2,409
1,191
2,159

34,337

33,701

30,364

Item
Total reserves held ..
With Federal Reserve Bank .
Currency and coin
Required reserves
Excess reserves .......... .. .... .. .. .. ..
Borrowings .
Free reserve s "

e - Estimated

3,745
56,101
96,871
6,867,546

(Averages of dally figures. Million dollars)

19,029,186 16,861,572

Item

..... " .........

4,930,000
533,035
147,995
1,230,063

636,362

Eleventh Federal Reserve District

TOTAL LIABILITIES AND CAPITAL
ACCOUNTSe .

---6,984,161

DEMAND AND TIME DEPOSITS OF MEMBER BANKS

----

(MIllion dollars)

Total deposits ........... " ..... "
Borrowings ...... .. .
Other lIablllties e .... .. .......... "., .....
Total capital accounts e
..... "

7,039,949
5,153,170
308,109
150,105
1,271,848

210,995
2,279,211

9,431
270,253
1,522,657
985 ,478
113,750
543,860
13,979

----

3,177
57,925
93 ,055
6,950,345

140,954
470,547
195,025

CONDITION STATISTICS OF ALL MEMBER BANKS

TOTAL ASSETSe . ......................

6,870,508
4,910,567
506,434
88,639
1,210 ,711

TOTAL LIABILITIES, RESERVES, AND
CAPITAL ACCOUNTS .

Date

LIABILITIES AND CAPITAL ACCOUNTS
Demand deposits of banks ..
Oth er demand deposits
Time deposits ...... .......................
..................

13,820,853 13,907,495 13,102,401

Total deposits ..

----

Nov. 22,
1972

Oct. 24 ,
1973

5 weeks ended
Nov. 7, 1973

1,822 ,236
1,513,871
308,365
1,819,002
3,234
113,755
- 110,521

--

4 weeks ended 4 weeks ended
Oct. 3, 1973
Nov. 1, 1972

1,796,089
1,482,997
313,092
1,796,588
-499
151 ,535
- 152,034

1,951,896
1,668,597
283,299
1,929,517
22,379
21,444
935
_

BANK DEBITS, END-OF-MONTH DEPOSITS, AND DEPOSIT TURNOVER

SMSA's in Eleventh Federal Reserve District
(Dollar amounts In thou sands, seasonally adjusted)

DEB ITS TO DEMAND DEPOSIT ACCOUNTS'
DEMAND DEPOSITS'

Percent change
Oct.
1973
(Annual-rate
basis)

Standard metropolitan
statistical area
ARIZONA: Tuc son
.............. ,., .....................
LOUISIANA: Monroe ......
Shreveport
.........................
NEW MEX ICO: Roswell'
TE XAS: Abilene
...... " •.......••••.................................. ..
Am arillo
.................... ....................
Auslln.
..................
Beaumont-port Art'h ur-Orange
Brownsvilie-Harlingen-San Benito
Bryan-College Station .......
Corpus Christi ..... :.................. ..... ................ " ....
Corslcana 2
Dallas ...........................
EI Paso .. .. .
Fort Worth .... .. ...
Galveston-Texas City ... ::.
Houston .................. ..............
Killeen-Temple ...... .. ............
....................
Laredo .... .. ... ......................... .....................
Lubbock ........................ ... ..........................
MCAlien-Pharr-Edlnburg ............................
Midland .........................
Odessa ................
San Angelo
San Antonio .........
Sherm an-Denison .....................
Texarkana (Texas-Arkansas) .
Tyler .........................................
Waco ...................
Wi chita Falls .. .... .. .....
Total- 30 c enters

Sept.
1973

Oct.
1972

$13,365,576
4,669,655
17,476,030
1,291,055
3,232,789
10,893,985
16,365,527
8,530,636
3,322,144
1,643,327
8,336,440
672,482
216,378,527
11,954,796
35,109,485
3,636,494
183,425,261
2,371 ,099
1,690,630
8,282,125
3,431 ,904
2,988,078
2,320,008
2,273,496
26,938, 692
1,582,652
2,038,807
3,148,730
4,865,118
3,690,704

- 7%
- 1
4
9
-2
6
- 1
3
18
- 5
-2
2
- 2
- 5
10
- 2
12
1
5
4
11
16
0
6
0
- 6
7
- 1
7
4

39%
9
21
30
18
17
25
18
33
7
6
27
41
20
19
- 4
27
17
37
39
23
22
23
24
18
21
19
- 6
23
20

37%
19
21
21
21
27
17
18
22
14
15
25
30
18
12
15
20
25
26
40
32
17
21
24
19
18
13
10
17
17

4%

29%

23%

Annual rate
of turnover

Oct. 1973 from

$605,926,252

10 months,
1973 from
1972

Oct. 31 ,
1973

Oct.
1973

Sept.
1973

Oct.
1972

$354,126
122,949
340,205
50,619
138,118
226,903
430,571
293,656
124,538
57,346
281,792
38,727
2,929,101
319,361
878,408
126,586
3,270,737
115,368
65,091
212,277
157,911
164,501
109,146
84 ,012
914 ,574
82,298
91 ,111
124,729
155,424
153,261

38.2
38.7
52.3
25.5
23.5
48.0
37.7
29.3
26.8
28.9
29.7
17.2
76.3
37.6
40.4
28.9
55.3
20.2
25.5
38.4
22.0
18.2
21 .6
28.3
30.1
19.3
22.2
25.2
32.2
24.3

41 .0
39.7
52.4
23.5
23.7
46.9
37.3
28.9
24.0
30.3
29.5
16.1
78.0
39.7
37.3
28.5
49.6
19.9
25.0
35.5
19.9
16.1
22.4
26.5
30.2
20.3
21.2
25.6
29.7
23.6

30.9
35.9
46.6
22.8
22.8
45.9
30.8
26.1
24 .5
29.1
30.2
14.7
54.4
31 .4
37.2
28.8
45.3
18.7
23.7
31 .9
19.8
16.1
17.4
23.2
26.6
17.0
20.2
28.0
27.2
23.0

49.2

47.7

39.9

$12,413,446

1. Deposits of Individuals, partnerships, and corporallons and of states and polilical subdivisions
2. County basis

CONDITION OF THE FEDERAL RESERVE BANK OF DALLAS
BUILDING PERMITS

(Thousand dollars)
Nov. 21,
1973

Oct. 24 ,
1973

Total gold cerllfic ate re serves
Loans to member banks .......... ...........................
Other loans .. .. ..........................
...................
Federal agency obllgallons ..
~ .S . Governm ent securilies ........ ..
otal earning assets .. ...............
Member bank reserve deposits
Federal Reserve notes In ac tual
clrculallon ........

488,13b
31,895
0
77,257
3,309,81 2
3,418,964
1,637,433

676,011
181 ,061
0
73,015
3,215,171
3,469,247
1,832,663

302,317
13,075
0
52,696
3,116,348
3,182,119
1,384 ,976

2,395,277

2,370,621

2,221,198

Percent change

VALUE OF CONSTRUCTION CONTRACTS
(Million dollars)
January- October
Area and type
FIVE SOUTHWESTERN
STATES ' .........................
Residenllal building .. .. .
Nonresldenllal bUlldln~ ......
Nonbulldlng construc t on ..
UNITED STATES .............. ..
Resldenllal building
Nonresldenllal building ......
_ Nonbulldlng construcllon ..

VALUATION (Dollar amounts In thousands)

Nov. 22,
1972

Item

Oct.
1973

Sept.
1973

Aug.
1973

1973

1,132
385
356
391
8,983
3,673
2, 758
2,552

904
385
368
152
8,151
3,638
2,719
1,794

1,199
467
385
347
10,303
4,233
3,241
2,828

10,158
4,645
3,461
2,052
86,608
40,721
26,971
18,916

1. Arizon a, Louisiana, New Mexico, Oklahoma, and Texas
r - Revl sed
NOTE : Details may not add to tot als becau se of round ing .
SOURCE: F. W. Dodge, McGraw-Hili, Inc.

1972r
9,697
4,931
2,582
2,183
77,443
38,290
22,686
16,467

Oct. 1973
from

NUMBER

Area

ARIZONA
Tucson
LOUISIANA
Monroe-West
Monroe ..........
Shreveport .. ......
TEXAS
Abilene .... ... ......
Amarillo ...
Auslln ..
Beaumont .. ...
Brownsville .
Corpus Christi .
Dallas ...............
Denison ...... .. .. ..
EI Paso ....
Fort Worth .
Galveston ......
Houston ..
Laredo
Lubbock .. ......
Midland .
Odessa
Port Arthur ........
San An gelo .
San Antonio
Sherman .......
Texarkana .
Waco ...........
Wichita Falls
Total-26 cilies .

Oct.
1973

10 mos.
1973

Oct.
1973

10 mos.
1973

416

5,122

$5,524

$139,323

62
597

759
4,714

1,779
6,107

705
80
167
1,582
4,755
380
1,953
227
107
969
2,739
220
2,067 16,176
28
269
5,118
515
378
3,688
61
539
2,408 26,005
45
427
136
1,529
61
774
39
996
93
973
61
775
1,525 17,423
36
365
71
517
254
2,079
100
760

2,877
6,788
16,782
1,270
9,557
6,348
12,198
814
17,117
15,395
2,873
70,026
865
9,050
653
3,849
461
657
13,295
404
295
996
8,311

--------10,134 101,711 $214,091

Sept.
1973

Oct.
1972

10 months,
1973 from
1972

- 52% - 34%

- 7%

24,401
71 ,845

- 9
- 24

124
46

10
43

22,275
46,075
201,607
33,946
32,515
49,759
271 ,894
3,639
156,440
105,074
10,115
588,851
15,579
66, 188
11,322
15,083
5,173
8,877
201,163
5,516
5,170
32,055
35,782

713
190
201
- 87
1,641
1
- 63
- 11
34
192
491
149
122
22
40
320
227
- 20
- 27
- 58
59
- 76
244

223
29
12
2
650
56
- 29
373
10
40
70
38
981
95

51
59
- 3
40
168
- 7
- 17
39
4

$2,159,667

31%

33
1,663
138
8
- 29
40
8
- 73
538
28%

34
- 13
10
27
29
- 31
- 31
8
21
3
- 15
- 17
- 2
170
6%

LIBRARY
Frf)FPII/

f' r

LABOR FORCE!
,

DAILY AVERAGE PRODUCTION OF CRUDE OIL
(Thousand barrels)

E.

PLOYMENT, AND UNEMPLOYMENT

Five Southwestern States'
Percent chang e from
Oct.
1973

Area
FOUR SOUTHWESTERN
STATES ............................ ..
Louisiana .......................... ..
New Mexico
Oklahoma .......... .
Texas ................................ ..
Gulf Coast .............. .
West Texas .......... .
East Texas (proper) ....... .
Panhandle ............ .. .. .
Rest of state .... .. ........ ..
UNITED STATES .... ..

Sept.
1973

Oct.
1972r

Sept.
1973

Oct.
1972

6,754.6
2,241 .8
267.6
527.0
3,718.2
732.4
1,918.1
251.2
64.2
752.3
9,342.6

6,758.3
2,249.8
271 .0
523.3
3,714.2
732.1
1,900.0
252.5
66.0
763.6
9,377.1

6,910.0
2,440.7
295.0
554 .8
3,619.5
732.2

- 0.1%
- .4
- 1.3
.7
.1
.0
1,0
- .5
- 2.7
- 1.5
-.4%

- 2.2%
- 8.1
- 9.3
-5.0
2.7
.0
6.0
18.0
-.8
- 6.0
- 1.6%

(Seasonally adjusted)

1,~~~:~
64.7
800.2
9,494 .0

r- Revised
SOURCES: American Petroleum Institute
U.S. Bureau of Mines
Federal Reserve Bank of Dallas

Thousands of persons

Percent change
Oct. 1973 from

Oct.
1973p

Oct.
1972r

Sept.
1973

Oct.
1972

9001 .3
8640.8
360.4
4.0%

8762.4
8398.1
364 .3
4.2%

0.6%
.6
.6
' .0

3.3%
3.5
-.5
' - .2

7170.7
1249.9
704 .3
545.6
5920.8
235.5
503 .3

7135.5
1238.4
698.0
540.4
5897 .2
234.9
499.2

6885.1
1201.8
662.4
539.4
5683 .3
231.8
470.1

.5
.9
.9
1.0
.4
.3
.8

486.8
1712.5
391.3
1169.3
1422.1

Civilian labor force
Total employment.. ............
Total unemployment
Unemployment rate ............
Total nonagricultural
wage and salary
employment ....................
Manufacturing ............... .... .
Durable .....
Nondurable ...
Nonmanufacturlng
Mining ................... , .....
Construction .............
Transportation and
public utilities ... ...... .
Trade ...........................
Finance ...... ... ....
Service ...... .. .. .... .
Government .................

Sept.
1973

9052.9
8690.3
362 .6
4.0%

Item

483.4
1703.2
388.8
1162.4
1425.3

467.6
1641 .9
367 .3
1120.8
1383.8

.7
.5
.6
.6
-.2%

4.1
4.0
6.3
1.1
4.2
1.6
7.1
4.1
4.3
6.5
4.3
2.8%

1. Arizona, Louisiana, New Mexico, Oklahoma, and Texas
2. Actual change
p - Preliminary
r-Revlsed
NOTE: Details may not add to totals because of rounding .
SOURCES: State employment agencies
Federal Reserve Bank of Dallas (seasonal adjustment)

CROP PRODUCTION
(Thousand bushels)
FIVE SOUTHWESTERN STATES'

TEXAS

Crop
Cotton'
Corn .. .. ....
Winter wh eat..
Oats .. ....
Barley .....

~rcee;·:::::

.............
Sorghum grain ....
Flaxseed ...........
Hay' ...... .. ..............
Peanuts' ... .........
Irish potatoes'
Sweet potatoes' .

Pecans' .
Soybeans ....

1973,
estimated
Nov. 1
4,829
60,800
98,600
26,650
3,510
648
22,040
421 ,600
80
5,230
471,000
2,991
665
23,000
11,475

1972
4,277
39,560
44 ,000
9,720
1,980
630
22,122
319,780
165
4,109
480,455
3,182
813
75,000
5,460

1971

1973,
estimated
Nov. 1

1972

1971

6,606
73,493
281,721
35,088
21,196
2,046
43,534
487,126
80
11,959
764,940
6,317
3,640
109,000
55,271

6,140
52,795
150,115
16,149
19,334
1,890
42,089
378,218
165
9,944
743,566
6,665
4,113
99,300
47,371

4,053
55,241
119,825
12,001
26,300
1,1 58
43,704
366,400
70
10,303
602,315
6,810
3,763
75,200
45,742

2.614
44 ,160
31,416
5,994
1,320
378
23,868
303,004
70
4,114
366,795
3,299
788
24,000
2,781

1. Arizona, Louisiana, New Mexico, Oklahoma, and Texas
2. Thousand bales
3. Thousand hundredweight
4. Thousand tons
5. Thousand pounds
SOURCE: U.S. Department of Agriculture

crops. The month began with crop
production in the five states of the
District running ahead of last year
by over 22 percent.
On the strength of an estimated
record yield of 419 pounds per acre
in Texas, cotton production in the
five states is expected to exceed 6.6
million bales. Grain sorghum production is due to approach 490 million bushels- largely because of the
unprecedented 422 million bushels
harvested in Texas.
Cattle and calves on feed in
Texas and Arizona on November 1
numbered just under 3 million
head, showing only slight monthto-month and year-to-year gains. In

INDUSTRIAL PRODUCTION
(Seasonally adjusted Indexes, 1967 - 100)

-

Oct.
1973p

Area and type of Index
TEXAS
Total industrial production
Manufacturing ......................
Durable ..... ............ .................
Nondurable
Mining .......................... ,.
Utilities .. . ...................... ,"" ..
UN ITED STATES
Total Industrial production .
Manufacturing .......................
Durable ..
Nondurable
Mining
Utilities

Sept.
1973

Aug .
1973

Oct.
1973

142.0
147.8
163.0
136.9
125.8
150.0

141 .2
146.0
161 .3
134.9
125.5
156.7

138.3r
144.0r
159.0
133.2r
120.6r
153.2r

131 .5
133.9
146.3
125.0
121 .9
146.2

127 .8
127.1
124.5
131.1
112.7
157.6

127.1
126.5
123.5
131.0
112.9
155.8

126.5
126.5r
123.0r
131 .2r
112.3r
154.8r

119.2r
118.5r
113.Br
125.2r
110.2r
147."

p - Preliminary
r - Revised
SOURCES: Board of Governors of the Federal Reserve System
Federal Reserve Bank of Dallas

October, placements into feedlots
and marketings had continued to
lag behind a year before, but marketings were up significantly from
the previous month. Through the
first three quarters of the year, beef
production in the five states was
about equal to the output last year.
The increase expected in the fourth
quarter, however, should give livestock produ cers in the Southwest a
record year.
The index of prices received by
Texas farmers and ranchers in the
month ended October 15 was down
7 percent from the previous month.
But the index was still 47 percent
higher than a year earlier. Because

of a drop in prices received for meat
animals, livestock prices were down
9 percent from a month earlier.
Crop prices fell 5 percent, with declines in prices for corn, sorghum,
wheat, and cotton partly offset by
higher prices for rice, oats, barley,
and peanuts.
Nationwide, the index of prices
farmers paid in the month ended
October 15 was unchanged from the
previous month but was 16 percent
higher than a year earlier. Lower
prices paid for feed and livestock
generally offset higher wages and
prices paid for most off-farm inputs.