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This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) 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.