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I

I

I

the boom could be attributed to prestrike inventory
accumulations, which were artificially boosting production, employment, and income.
However, there were several basic factors supplying
significant support to the over-all economic advance.
Chief among these were the growing level of consumer
purchases, both on a cash and a credit basis; the moderate expansion of plant and equipment expenditures;
and substantial gains in construction activities, especially in the early part of the year. Also pushed into
the background by prestrike considerations were the
gains being made in industries not connected with steel
or its substitutes.
When the strike actually developed in mid-1959, the
impact appeared much more slowly and less significantly than had been expected, since steel inventories
proved adequate for nearly 4 months of operations.
During the early weeks of the 117 -day strike, businessmen and consumers generally maintained an optimistic
outlook. tending to view the strike as a mere interruption in the basic upward march of the economy. However, as the weeks lengthened into months and with
other strikes developing in the copper industry and at
the docks, confidence lessened, and the possibilities of
an economic downturn were given more consideration.
After the Taft-Hartley injunction suspended the strike
for 80 days, some measure of optimism returned, although there was still caution in many quarters over the
longer-term outlook because of the potential renewal
of the steel strike in early 1960 and the possibilities of
strikes in other areas.
The central issues in labor-management disputes this
past year included the usual pressures for wage and
fringe benefit increases which have become very common in other recent years. Problems of the measurement
of labor productivity; the proper shares of labor, consumers, and stockholders in the fruits of increased output; and the extent of management responsibility for
workers' welfare and fringe benefits were all subjects of
major consideration. In addition, though, the "work
rules" issue was a significant point of dispute, not only
in the steel strike but in others as well. Management's
plea for flexibility in job assignments and in the introduction of labor-saving machinery or techniques met
with labor's insistence that work rule changes threaten
the worker's job security and are really an attempt to
destroy the union's control of its members. At this writing, no solution had yet been reached, although the
Kaiser settlement provides for a tripartite committee to

I

BUSINESS REVIEW

1 :1960

study the distribution of gains from increased productivity and another committee to study the work rules
question.
The broad impact of the strikes can be shown by reference to the changes in gross national product. Quarterly changes during 1959 were gains of $13.1 billion
and $14.3 billion in the first half, followed by a decline
of $5.9 billion and an advance of approximately $8 billion in the second half. Gross national product averaged
about $480 billion for the full year, or $38 billion over
1958. Of this total expansion in gross national product, net inventory accumulation provided $8 billion,
and rising consumption expenditures netted $18 billion;
other gains amounted to $3 billion in producers' durable
equipment, $4 billion in construction, and $5 billion in
government spending.
Labor Unrest and Its Effects

As might be inferred from the above, the principal
disturbing element in the 1959 economic picture was
the prevalence of labor unrest. Man-hour losses from
strikes during 1959 were the largest since 1946. There
were evidences of strike impact in nearly all major economic indicators, but perhaps the most vivid example
was the shift in business inventories. The steel labor
dispute was well publicized in early 1959; and manufacturers, wholesalers, and retailers began to stockpile steel
or its semifinished or finished equivalent. About 13 million tons of steel were placed into inventories from J anuary 1 through July 15, and many durable goods producers increased their finished product stocks. For
example, automobile manufacturers produced enough
cars to meet the rising demand and still enlarge new car
inventories in dealers' hands to more than 900,000
units. Apparently, many manufacturers of consumer
durable goods stockpiled steel or finished products as,
despite rising sales, there was an ample supply on dealers' shelves even in late November.
Total business inventories increased at an annual rate
of $6 billion in the first quarter and $10 billion in the
second quarter, with durable goods producers accounting for a large part of the total advance. After the strike
started, inventory liquidation in the third quarter
reached an annual rate of $1.5 billion, although the
rate of liquidation was restrained by stock accumulation
by firms showing sales declines because of the falling
output of steel-using industries. By the fourth quarter,
with steel mills reopening on November 7, inventory
shifts were about offsetting so that the total for the year
showed a $5 billion rate of accumulation.

These tremendous swings in inventories had marked
effects upon both the total economy and individual manufactur rs' however the rate of indu trial production
wa les everely affected than might be upposed. For
the whole year the indu trial production index averaged
149, or 11 percent above the 1958 level, with output
gain of 14 percent for durable goods 10 percent for
nondurable good, and 5 percent for minerals.

In other areas of industrial production, steady gains
brought nondurable goods output to new records, with
good advances in paper and printing, chemical, textile,
and apparel industries. However, defense contract cancellations reduced aircraft production, and declining
levels of home building slowly cut output of building
materials. Minerals production reflected crosscurrents
of severe reductions (because of strikes) at iron ore and
copper mines and moderate gains in cement, clay products, gas, and oil mining operations.

BUSINESS INVENTORIES AND DURABLE
MANUFACTURERS' ORDERS
UNITED STATES
(Seo!onoll),odjlJltllld)

BIU.tOPf5 OF DOLL A.AS

INDUSTRIAL PRODUCTION

BILL IO~s 0'- DOLLARS

100

I 00

UN ITED STATES

,"etHT
180

TOTAL BUSINESS INVENTORIES

90
8 ti

-..............

-

( Sealonally adJuted Indues, 1947-49-\00)
ptR~eHT

180

90

-.- '

I

85

80

80

170t--------'----

----ll70

160t-------

5

150'1-------20

-

-~~

I~

10

......" NEW ORDERS
DURABLE GOODS MANUFACTURERS

'958

1ge9

20

~ ,
Io
5

' 1 - - - - - - - -- - t - - - - - - - - - - - j 1 2 0

E-Eltimated
SOURCE, U S Oepcutmenl of Commerce.

II 0,1r----;-:'g:":"ti8=-------1----:-:
, 9:-:::'9::-----" 11 0
E-Esllmated.
SOURCE: Board of GovernOrl.Fealral Renrv. Sy,llm.

The rapid growth of industrial production to a new
record in June reflected mainly the advancing levels of
primary and fabricated metal, automobile, and machinery production, but broad gains were noticeable in
most other manufacturing areas. The steel industry operated at near-optimum levels of 90 percent of capacity
for much of the first half of 1959; then, the strike cut
operations to about 13 percent of capacity from July 15
to November 1. After the injunction, rapid recovery to
new weekly records in December brought the yearly
output to about 95 million tons, or 10 percent over the
1958 figure.
Automobile companies produced over 4 million cars
before model shutdowns, but output was curtailed by
steel shortages, especially during November and early
December. The favorable reception of the new models,
particularly the "compact" cars, and the end of the steel
strike resulted in heavy production in late December
and an annual output of about 5.5 million units. With
inventories reduced to relatively low seasonal levels,
high production is expected for some months to come.

Strike effects in the construction industry were perhaps less important than other economic and financial
developments. Although total construction in 1959 was
almost 11 percent above 1958, the peak activity was
early in the year, with a noticeable tapering commencing in the spring. This pattern was especially prominent
in residential building; private nonfarm dwelling starts
reached a peak annual rate of 1,434,000 in April, followed by moderate reductions for the remainder of the
year to a level of about 1,200,000 units and a full-year
average of nearly 1,325,000 units, or 16 percent over
the previous year. Steel shortages were important in
limiting apartment building in the fourth quarter, but
general residential construction also reacted to the
somewhat tighter mortgage markets, the reduced volume of V A and FHA mortgage commitments, and the
slowly growing overhang of unsold new and old homes.
Highway construction, hampered by reduced availability of Federal funds for the interstate network and
BUSINESS REVIEWI
1:1960

31

by steel shortages in late 1959, still turned in a creditable performance, advancing 5 percent over 1958. Nonresidential building and industrial construction, both
. curtailed by steel shortages, were 1 percent and 18 perf cent, respectively, below the year-earlier totals.
I

Personal income figures reflected a slower rate of
growth due to the strike, but reductions in wage and
salary income were offset by increases in other types of
income, especially personal interest income and unemployment compensation payments. Moreover, net additions to consumer credit were made in substantial volume throughout the year, averaging almost $525 million
per month. Total consumer credit increased an estimated $6.3 billion to reach $51.9 billion, with instal. ment credit advances accounting for $5.4 billion of the
, increase.
I

I

UNITED STATES
IILUOH5 elf" DOlLARS

IILl.rOHS 0' DOLI.AR"

20

20

191f----+-~+-L-+__II____I___I-__1__I- 1 9

Strike effects on employment were less noticeable,
partly because the striking workers were counted as
employed. Nevertheless, the rate of gain in early 1959
I slowed markedly; and, for the year as a whole, employment averaged only 2.5 percent over 1958. Unemployment in the fall reflected the secondary effects of the
strikes; however, with the sharp reductions early in the
year, the 1959 average of 3,835,000 unemployed was
I well below the 4,681,000 level of 1958. Long-term
structural unemployment - aggravated by work force
reductions at coal mines, railroads, and automobile
plants - was particularly important in certain limited
areas.

I

RETAIL SALES

Reflecting the continued gain in personal income,
the availability of consumer credit, and the generally
optimistic attitude of consumers, retail sales rose more
than 8 percent in 1959 and furnished substantial support to the entire economy. Increased buyer attention
upon consumer durable goods (automobile sales, especially, advanced almost 30 percent over a year earlier)
mainly accounted for the rise in consumer instalment
credit. Personal consumption expenditures for nondurable goods and services also remained at high levels.
As a r.esult of the continued growth in final demand,
total busmess sales also advanced, although at an irregular pace, as steel buying influenced sales by durable
goods manufacturers and wholesalers. The rising sales
levels and improved economic outlook shaped an environment conducive to improved levels of private capital investment. Plant and equipment expenditures rose
more than 6 percent over 1958 despite slowdowns due
to steel shortages, some precautionary deferments, and

I BUSINESS

REV I EW

1:1960

1959 I

....

18 ~

....... i '

l

iB

17f----+-~-11---l---II----1-----:!---1I
I-------!~--L 17
----,~ . ~~

"

"

---

19158

---

16f-----r
---=r---· -f--__II____1_---.-+--I--+--I~ 16
151---+-I----l-__I'-__I_-I-+--I--+--I~15

E·[ltimlltld

SOURCE : U S Oeporlm.nl of Comm.rc ••

the restraining effects of the reduced availability of longterm funds.
General price stability at both wholesale and retail
levels marked most of 1959 and provided a basis for
"real" gains in personal income. To some extent, however, this stability was deceptive: Farm and food price
declines more than offset the increases in industrial
prices at wholesale levels. Consumer prices advanced
about 1.5 percent, but food price reductions partially
offset steady increases in prices for rent, transportation,
and services.
Southwestern Economic Conditions

With the pattern of national economic conditions
strongly influenced by the steel strike, one might suppose
that every region in the country would show a similarly
marked effect, but this was not true for the Southwest in
1959. The strike of a few thousand workers at steel
mills, layoffs at major steel-using companies, and some
slowdowns at other metalworking plants were the principal effects of the steel strike in the Southwest.
Much more important to the general level of economic activity in this area were the recurring problems
of the oil industry, the copper strike, the cancellation of
some large defense contracts, and the slowdown in Federal spending for the interstate highway system. These
forces slowed the rate of growth in the southwestern
economy and, indeed, caused a leveling during the latter two-thirds of the year.
The petroleum industry of the District showed some
improvement over the recession lows of 1958, but its

recovery was limited by excessive inventories of major
refined products. District well completions rose 6 percent and footage drilled increased 26 percent, but these
gains were heavily weighted by gas well completions and
development drilling. Wildcat drilling declined 2 percent from 1958 and 26 percent from 1957.
Similarly, District crude oil production, at 3,061,000
barrels per day, was 5 percent above the 1958 level but
9 percent below the average output in 1957. Although
some improvement in production was registered early in
1959, cutbacks were ordered in the spring, and a reduced level of output was maintained throughout the
summer and fall, with only modest improvement in the
final month of the year. Texas bore the major share of
the curtailment, as the number of allowable producing
days was held to 123 for the year, compared with 122
days in 1958.

CRUDE OIL PRODUCTION AND REFINING
ELEVENTH FEDERAL RESERVE DISTRICT
M.llUO~S

OF IIAJtPlEt..S

t.lILLlONS OF URR£LS

4.0

4 .0

,. ~.t-------

CRUDE OIL PRODUCTION

-

-

where the metal is produced; and about 15,000 workers
were idled, mainly in New Mexico and Arizona.
Another restraining force in the District economy was
the cancellation of major aircraft contracts and the reduction in Federal Government spending for a number
of projects. The impact of contract cancellations caused
a decline of nearly 8,000 in aircraft employment during 1959. More than offsetting this decline were large
employment advances in electronics, metals, machinery, building materials, and furniture, as well as more
modest but continuing gains in nondurable goods output. Thus, manufacturing employment in 1959 rose 1.4
percent, and Texas industrial production increased 7
percent.
Total nonagricultural employment in the District
states rose 1.5 percent to average 4,285,000 workers,
with the government, construction, trade, and manufacturing segments showing the largest gains. Mining and
transportation and utilities employment actually declined. Unemployment in Texas averaged about 4.6
percent of the civilian labor force during 1959, contrasted with 5.3 percent in 1958.

--135

TEXAS INDUSTRIAL PRODUCTION
{Seasonally odJutled Indues,1947-49 z loa 1
PERCE NT

5

275

•

250

--~----------1Z.0

._........., :-:" ......_-:;;i'

......., .....,,..,- \; .,~ ...../-' ... ,
OURABLES

225 ~.

NONDURABLES

17

5/"r - ..- ......

SOURCES : Americ:an. P'troleum Institute

~

US Bureau of Mines.

15 0

The nationwide demand for petroleum products rose
about 5 percent during 1959. Nevertheless, with growing stocks of refined products, high-level imports, and a
5-percent increase in national refinery output, pressures
developed which forced production cutbacks and encouraged price cutting of crude oil and a wide range of
petroleum products, especially gasoline. District refinery operations were 6 percent over the 1958 level but
were 1 percent below the 1957 rate.
The copper strike was of greater importance to the
Southwest than to the Nation. With nearly one-third of
all domestically mined copper coming from the Southwest, there was an immediate impact on the localities

'"
12 ~r-100

~

2~0

.,

225

=-,_.

200
1.:1,1 0 - - - -'7:
19""58: - - - -- - '------..:19:=':59:----...,....1.5
E· e: . Ullltlil "

, ......, .

...--.., ,

,...__ ... " . . _ _ - -........

•200
I 75

•
./
I
T OTAL /
I 50
........ .. ..!.................
[
....
1
................
I 25

-'.

•••••••••• ·'MINERALS

1958

195 9

I 00

E - Estima ted
SOUR CE redera l Reser ve Bon k al 0 0 1101

Construction activity in the District states reflected
some of the same influences affecting the national pattern, especially the strikes in Arizona and Texas. For
the year as a whole, though, the value of construction
contracts awarded in the District states totaled an estimated $3.9 billion, or only about 1 percent below the
record 1958 total. Awards for residential building, the
major expansive force in the construction industry durBUSINESS REVIEW

1:1960

I

ing the year, increased 7 percent to about $1.8 billion
- a new high. Home building was at a record level in
every month during the first half of 1959, but year-toyear losses occurred in residential contract awards during the final 6 months. Nonresidential construction decreased from 1958, with the largest declines in public
works and utilities construction. Total nonresidential
construction tended to strengthen as the year progressed, however, despite some apparent slowdown in
highway construction in mid-1959. A part of the improvement could be attributed to the rising trend in commercial and industrial building activity.
The agricultural situation in the District states during 1959 generally was satisfactory as measured by most
indicators. The physical volume of production exceeded
the record achieved in 1958 by about 2 percent, as crop
output remained nearly the same and livestock output
increased 5 percent. The expiration of the Acreage Reserve Program, which released approximately 3.8 million acres in the District states in 1959, was a factor in
maintaining high-level crop output.
Weather conditions sharply influenced the output of
many important crops in the District. Lack of adequate
moisture during the fall and winter of 1958 severely
reduced the output of spring-harvested small grains,
with winter wheat output down 20 percent from a year
ago and oat production off 45 percent. Barley and rye
production were 17 percent and 29 percent, respectively, below the 1958 levels. By late spring, however,
weather conditions improved, and spring-planted crops
generally made rapid and favorable development. Except for isolated areas, favorable growing conditions
prevailed in major crop areas until harvesttime, when
inclement weather slowed harvesting and damaged the
grades or quality of some crops. Nevertheless, the output of most spring-planted crops exceeded the yearearlier levels.
Sorghum grain production in the District states was
about 2 percent larger than in 1958; cotton output, 8
percent higher; and the rice crop, 17 percent larger. Increases in output also were noted for corn, flaxseed,
citrus fruits, and some vegetables. Minor decreases
occurred in the outturn of hay and peanuts, mainly as
a result of poor harvesting conditions.
Cattle and calf numbers in the Southwest, following
the trend established during 1958, continued upward
during 1959; thus, beef production increased, and
breeding herd numbers rose. Similarly, sheep and goat

I

BUSINESS REVIEW

1 :1960

numbers continued to expand, with consequent gains in
the output of wool and mohair. Paced by an exceedingly
high rate of lay per hen and larger laying flocks, total
egg production in the District in 1959 increased about 3
percent. On the other hand, the persistently low level of
broiler prices encouraged growers to reduce chick placements, and total broiler output in the Southwest was
about one-tenth smaller than the very high output in the
previous year.
As a consequence of high-level output of livestock
and crops in both the Nation and the District in 1959
and the large stocks of farm commodities, prices received by southwestern farmers during the peak fall
marketing period were 7 percent under a year earlier.
The 5-percent decline in crop prices and the 9-percent
drop in livestock prices offset the increase in fall marketings, and cash receipts from farm marketings in 1959
are expected to be slightly below the approximately $4
billion received in 1958. Total cash farm income also
fell below the year-earlier level, as Government payments declined because of the expiration of the Acreage
Reserve Program. Net income of southwestern farmers
and ranchers probably declined an even greater amount,
since farm production costs in the Southwest continued
upward.
MAJOR SOUTHWESTERN ECONOMIC INDICATORS, 1959 AND 1958

Indicator and unit

1959.

1958

Percent
change

ELEVENTH FEDERAL RESERVE DISTRICT
Crud. oll production (Borrol. por day). . • • • • • • • •• 3,061,000
Crudo run. to 'oRnery ,fill. (8arrols per day)...... 2,256,000
Woll compl.~an........................... .. .
22,716
Ind." of deportment .tor ••01 •• (19~7.49 - 1 00)...
172

2,920.000
2,136,000
21,359
159

4 .8
5.6
6.4
8.1

4,220,700
3,945,287
4,028,819

-.6
-3.2

5,953
196,780
22,182
305,087

8.5
-19.9
17.4
2.0

fiVE SOUTHWESTERN STATES'

4,285,050
Voluo of construction contract. award.d (51,000) ... 3,922,000
Ca.h ,ecelpt> from fo rm morketlng. (51,000) .••••. 3,900,541
Crop production.
6,457
Cotton 11 ,000 bole.) ....................... .
157,687
Winter Wheat (1,000 bu.hel.! ••..•••••.•••••••
26,046
Rice 11,000 bag.) ........................ . .
311,098
Groin ... ,ghuIM 11,000 busheb) .............. .
Nonagricultural employme-n", ••••••••••••.•••••••

I

1.5

Arizona , louisiana, New Mexico, Oklahoma, and Texas .

e -

Estimated .

SOURCES : American Petroleum Institute .

F. W. Dodge Corporation.
'State employment agencies .
The Oil and Gas Journal.
United States Bureau of Mines.
United States Deportment of Agriculture.
World Oil.

Despite the problems and difficulties faced by the
Southwest during 1959, the income of her people and
their purchasing continued upward. While personal income probably rose less than 4 percent, retail trade increased about 7 percent over a year earlier. The southwestern consumers concentrated their increased spend-

ing at automobile, eating and drinking, apparel, and
general merchandise outlets.
D· trict department tore ale ro e 8 percent over
195 a incre ed con II mer buying at the larger number f t re. combined to improve the department t re
hare f total retail trade. e peciaJly in uburban area.
redit ale ro e in about the ame pr porti n a the
change in total ale but c Uection impr ved lightly.

Invent ry build-up at the Di trict' department tores
lagged behind the r· e in ale but advanced teadily
throughout the pring to a rec rd high in June. After
that ea onally adju ted inventorie remained at about
the . ame level. except for a light ri in October and
Novemb r. The end-oF-year tock index at 174 percent
of tbe 1947-49 average, h wed an -percent in rea e
over a year earlier.
Financial Conditions

The impact of economic expansion upon money and
credit markets was clearly discernible in 1959, demonstrating once again the close interrelationships between
economic activity and financial conditions. In contrast
with most of 1958, when demands for credit were relatively sluggish, 1959 witnessed a convergence of credit
demands from virtually every sector of the private economy. These demands alone were sufficient to exert increasing pressures on credit markets during the year,
but adding to the strain were the unusually large credit
demands of the Federal, state, and local governments.
Thus, aggregate demands for credit reached an all-time
high.
Breadth, as well as strength, was a characteristic of
the demand for credit in 1959. In the business sector of
the economy the teady advance f borr wing wa related to ri ing . ales payrolls inventorie production,
and capital pending. In tlle can umer e tor, the h avy
credit demand were timulat d primarily by enlarged
purcha e f consumer durable . Indicative of the e _
Lent t whieh the e pureha
added t pr ure in
redit marke wa the e timated 6. biJJion e pansi n
in consum r credit outstanding - an inerea e appr ima.tely matching the unu uaUy large gain recorded in
1955.
Banks, finance companies, and others have been increasing the quantity, and extending the terms, of
consumer credit they offer through a number of new devices, such as check-loan accounts, charge-it plans, universal credit cards, and other types of revolving credit.

While these new forms of credit extensions have not
been sufficiently tested to allow a firm judgment of their
permanent value or effect upon consumer equities, it is
apparent that many of these devices make it even easier
for a consumer to obtain new loans and, in a period of
credit restraint, may enlarge the consumer's portion of
available credit.
The recent increases in consumer credit have been
unusually large. There may be explanations for this
development, but a continuously increasing rate of
extensions has unfavorable implications. Under such
circumstances, relaxation of terms (as to maturity or
creditworthiness, or both) and the perhaps questionable broadening of the use of consumer credit present
problems that should not be disregarded. Of particular
importance is the recent trend toward providing consumer credit for a wider array of consumption items, a
development which may be somewhat inconsistent with
the long-established purposes of consumer credit. The
basic purpose of providing consumer credit for the purchase of major items of expenditure without an immediate full cash settlement is being stretched to include
credit for small and recurring expenditures. This expansion in the use of consumer credit may further erode
consumer equities.
Of equal importance to the growth of credit demands
in 1959 was the acceleration of private residential construction activity, which produced a parallel increase in
the volume of mortgage credit demands. State and local
government bond flotations also expanded in 1959;
and, although declining from the previous year's level,

LOANS AND INVESTMENTS
ALL COMMERCIAL BANKS IN THE UNITED STATES
IUlLIO~5

I ILLlOrti Of DOU.AflS

0" DOlLA"S

120

120

110'1---- -- - - - - + - - - - - ---=:71•110
1001 - - - - - - - - I - -- ....fI'-.= - - - - --jIOO
90)r=------~--------~90

- ...., .......--""""'-

....
80

/ -

'"

INVESTMENTS"

I-----~

80

70L---c-=,g=
5So----.---J.-----;;;19"'1i9.----......-J70
~- ~~'~~:'se,~UClure chan"". in '9~9 oo<l.cI "bou! $600
million 10 loo"s Gnel $400 million 10 in¥nltll.fIIs

BUSINESS REVIEW
1 :1960

I

corporate security issues remained large. Despite the
large amounts of credit required by the groups of borrowers listed above, however, the greatest single influence was the heavy credit needs of the Federal Government.
The extent to which the commercial banking system
was called upon to meet the expanding credit requirements was reflected in the behavior of bank loans. As
the recovery movement gained momentum, loan applications at commercial banks rose sharply, particularly
in the real-estate and consumer loan categories. In the
first quarter, when business and securities loans customarily show seasonal declines, loan accounts remained
I relatively stable as a result of the strong upward moveI ment in real-estate and consumer credit extensions. Con, tinuing strength in these loans coincided with a large
I increase in business loans during the second quarter,
and by midyear the rate of loan increase at commercial
banks had reached an all-time high.
Because part of the strength in business loan demand
was related to the prestrike build-up of inventories, loan
demand was widely expected to moderate in the third
quarter; but, despite liquidation of inventories during
that quarter, both the volume of loan demand and the
rate of loan growth continued close to the midyear rate.
Not until early in the final quarter of the year did the
economic effects of the steel strike find reflection in a
temporary moderation of loan demand. Subsequently,
the delayed impact of the strike upon credit demands
was obscured, as strong seasonal and nonseasonal demands emerged to boost the year-end loan total to a new
peak. For the year as a whole, loan expansion at commercial banks reached approximately $12 billion - an
increase slightly exceeding the previous record gain of
1955.
Within the framework of a relatively constant supply
of reserve funds, commercial banks financed the $12
billion loan increase by drawing down cash accounts
and liquidating approximately $9.5 billion of investments. As a result, commercial bank liquidity declined,
and bank reserve positions were subject to mounting
pressures. These developments, paralleled by continued
strength in the volume of loan applications, caused
commercial banks to adopt more selective lending policies and prompted increases in the prime lending rate
from 4 percent to 41;2 percent in May and from 4V2
percent to 5 percent in September.
In the District, as in the Nation, strong credit demands were the dominant influence on banking activity.

I

BUSINESS REVIEW

1 :1960

MEMBER BANK LOANS AND INVESTMENTS
ELEVENTH FEDERAL RESERVE DISTRICT
BU.. L IONS o ,.aaLLo- AIIIS

5.0

4.ei~------~/-:!~~~~-----i

4. ~

4 .0

3.5

INVEST~ENTS """'"
3.0

2·&,\,,----,.,,-19'=8--

---L----;-;:
: - ; : - - - - - - l.'
19&9

Loan applications at District banks, which had risen
sharply throughout most of 1958, continued to expand
in early 1959. Consumer and real-estate loans provided
much of the impetus to the rising loan volume, but business loans also expanded rapidly. Sales finance companies, trade establishments, and public utilities were
particularly heavy borrowers during the first half of the
year.
After midyear, loan expansion in the District moderated somewhat, influenced in part by a reversal of the
upward movement in real-estate loans and by a slackening in the rate of increase in the consumer loan category. Continuing efforts of the banks to apply more
selective lending policies and their attempts to reschedule loan maturities in order to obtain funds were additional factors in explaining the slower rate of loan
growth. For the year as a whole, total loans at member
banks rose an estimated $300 million, or about 6 percent over a year earlier.
In contrast with 1958, when bank deposits in the District rose sharply (partially in response to the monetary
policy of credit ease), deposit expansion in 1959 was
slight. Despite a continuation of the upward movement
in time deposits, total deposits at member banks in
the District followed a generally declining trend during
the first 7 months of the year. This downward movement, which conformed to the seasonal deposit pattern,
was reversed in August; and for the remainder of the
year, total deposits expanded, although time accounts
drifted downward. Preliminary estimates indicate that
year-end total deposits of District member banks, at

$10.7 billion, were approximately unchanged from the
previous year's level.
In financing the $300 million loan expansion in 1959,
District banks relied heavily upon the liquidation of approximately $200 million of investments. Sales and redemptions of certificates of indebtedness accounted for
most of the liquidation, but other investment accounts
also showed decreases. The remaining $100 million of
loan growth was financed largely by reducing cash accounts and increasing borrowings.
At the national level, the presence of heavy credit
demands operated to provide an expansive influence on
the money supply throughout 1959. However, a rapid
rate of monetary expansion would have undermined the
soundness of the economic growth. Consequently, a
major objective of Federal Reserve policy in 1959 was
to limit monetary growth to a rate which, while supporting the economy's sound growth requirements, would
not contribute to the development of economic excesses and imbalances.
Federal Reserve credit policy, which had shifted from
ease to mild restraint in response to changes in economic
and credit conditions in 1958, became slightly more restrictive in the early part of 1959. System sales and redemptions of $1 billion in Government securities during
January and February prevented a seasonal build-up in
reserve funds. Although the System purchased almost
$700 million of Government securities between the end
of February and the end of June, these purchases only
matched the reserve drain caused by the continued outflow of gold, and credit policy shifted toward greater
restraint. Average borrowings rose steadily from a level
of $508 million in February to $921 million in June.
Similarly, the banking system's net borrowed reserves
moved from a level of around $50 million in January
and February to $513 million in June.
In line with the move toward greater restraint, discount rates at the Reserve banks were advanced from
21/z percent to 3 percent in early March and, as keen
competition for funds continued to push market rates to
higher levels, to 31/2 percent in late May.
In the last half of the year, with the economic picture
clouded by work stoppages, pressures on bank reserve
positions were generally maintained at the June levels.
A verage borrowings continued to fluctuate around $1
billion, and net borrowed reserves held fairly stable at
around $500 million until late November. Under the
force of mounting credit demands and declining liqui-

MEMBER BANK RESERVES
UNITED STATES
MI LLiONS OF OOLLAAS

MILLION! 0"- DQLL-*'"

+1,200

+1.200

+ 1,000

.
BORROW I NGS

+BO

.........-~ +1000

~~ ,

V

/

+600 r - '

......:

~

. _ ........ ""

+400 ~.1

0

..,.;:

....... J
_

.....

.

-,

\

t

r-=

X·
-

l .~

+200ll

+800
HOO
E

+400

EXCESS RESERVES

+200

'~'"
\ ,~._-.-,----------~o

-200~------\-_11-_"
,REE RESERVES

- 200
".

.,-_.,."...-.

-400'1-------~--- \

c
, ;. - 400

-600,L--~19~SB----L----:-:19:-:cS9:-=------l-600

r·[,fh".,,,.

5DuACEl lhor'll gt GO'" ,*,I,'''''ot ", ..rn a,II. III.

dity in the banking system, however, the money market
tightened, interest rates (including the "prime rate")
rose, and then Reserve bank discount rates were advanced from 31/z percent to 4 percent.
The recovery-inspired private demands for credit,
coupled with the Treasury requirements and those of
state and local governments, exerted increasing pressure
upon the available supply of funds. With banks already
heavily committed in loans and with only a small buffer
of secondary reserves, this pressure was quickly reflected
in rising interest rates. While an easier credit policy
would have enlarged the total supply of available bank
reserves, such a move would have stimulated credit expansion with further inflationary pressures.
In the short-term sector of the market, rates on 91-day
Treasury bills rose from around 2.80 percent in January to about 3.25 percent in June and to a level of
around 4.50 percent in December. Prices on intermediate- and long-term Government securities also gave
ground steadily. Average yields on 3- to 5-year Government securities, which had held fairly stable at
around 3.86 percent during the first 3 months of the
year, advanced to 4.45 percent in July and to about
4.75 percent in December. In part, the sharp ascent of
yields in this sector of the market during the last half
of the year reflected a concentration of new Treasury
offerings in the 3- to 5-year range. Yields on long-term
Governments showed a much slower rate of advance,
moving from 3.90 percent in January to 4.09 percent
in June and to approximately 4.15 percent in December.
BUSINESS REVIEW
1:1960

I

91

SHORT-TERM MONEY RATES
••

~p'O~'.~T~P'~.~~.U~~

______~I~
W '~"~I)______~~~~

------l3

.\
2

:-

ir.

---.....J2

~-,~

!

lh.. p.

··."':-\-I,M -----I----------------I

\1"

TRE ASURY BILLS
.1·0"",

erally confined its financing operations to the short end
of the market.
As interest rates continued to rise as a result of the
excessive demand for capital funds, the problem concerning long-term financing was aggravated. The market, reacting to the forces of demand and supply, soon
placed the yield on long-term instruments above the
4% -percent ceiling imposed, by the Second Liberty
Bond Act, on Treasury securities with a maturity of
more than 5 years. Despite intensive efforts on the part
of the Treasury during the 1959 Session, Congress did
not see fit to remove or raise this ceiling; consequently,
new issues beyond the 5-year maturity range could not
be offered in the last half of the year.

O L---~
lg~
58~----L-----~
19=
S9~--~ O

During 1959, interest rates rose sharply in response
to developments influencing the forces of credit demand
and supply. As noted above, demands for credit from
virtually all segments of the economy mounted rapidly
to record levels, placing additional pressure upon available supplies of loanable funds. This pressure, in turn,
was translated into higher interest rates, particularly in
the short-term area, where the largest volume of new
Treasury issues was concentrated.
The developing pressures which influenced the shortterm market did not appear as quickly or strongly in the
I long-term market. However, the growing plant and
I equipment expenditures of business, the credit needs of
a booming residential construction industry, and the
capital requirements of state and municipal governments brought increasing demands into the long-term
area as the year progressed.

I

I

I

I

The Treasury problems this past year were born

r

seasonal deficit in the final 6 months of the calendar
year, which had to be financed in a strongly competitive market; partly from the attrition in refundings; and
partly from the steady passage of time, which had
shortened the average maturity of the public debt and,
consequently, brought the Treasury into the market for
refundings more often than before. Since the Treasury
must compete with other borrowers for the available
supply of funds -- paying the going rate, whatever it
may be -- and since the demand for long-term funds
was very heavy, the Treasury had an increasingly difficult time in entering the long-term area and, thus, gen-

I partly of a $12.5 billion deficit for fiscal 1959 and the

I BUSINESS

REV I EW

1 :1'960

Recognition of this situation by the market, together
with the even larger volume of short-term financing
which could be anticipated, and recognition that such
short-term financing might be expected to be absorbed
by the banks both added to the pressure on short-term
rates. Moreover, in financing the budget deficit, many
of the new financings had been placed in short-term
instruments which had been purchased by nonfinancial
corporations as a temporary investment until additional
funds were needed. One of the major and continuing
problems of the Treasury has been to place this debt
into the hands of more permanent investors.
Among the most powerful forces operating in the direction of higher interest rates and stronger money
market pressures in 1959 were the magnitude of the
Federal Government's credit requirements and the concentration of short-term maturity issues. Although a
modest amount of funds was raised in January by a 21year bond and again in March by the reopening of a
10 112 -year bond, later cash offerings were limited to
securities having maturities of less than 5 years. Of the
$27 billion in new cash raised during the year ($3.4
billion of which was to meet attrition on refundings),
almost $18 billion represented the sale of issues maturing in less than 1 year.
In refunding $38 billion of securities maturing in
1959, the Treasury issued almost $20 billion of obligations maturing in 1 year or less, an additional $10 billion maturing in 12 Yz months, and almost $9 billion of
securities maturing in 3 to 5 years. In addition to these
offerings, the Treasury, using its new advance refunding privilege, provided for the optional exchange of
approximately $1.6 billion of Series F and G savings
bonds into 4 3,4 -percent notes maturing in May 1964.

BUSINESS

REVIEW

BUSIN ESS, AGRICULTURAL, AND FINANCIAL CONDITIONS

A more than seasonal rise carried Eleventh District department store sales to a record
November level. Various durable goods items scored substantial year-to-year gains, but wearing apparel
sales provided the major area of strength. Department store inventories also rose more than seasonally
from October to reach another new high at the end
of November. Influenced by inadequate dealers'
stocks, new car registrations in the District's four
most populous areas were below October but were
still greater than in November 1958.
District oil operations improved during early December under the impetus of more than seasonal
gains in demand. Crude oil production in the District
rose 4 percent to 2,997,000 barrels per day, and
crude runs to refinery stills increased 3 percent.
Allowable producing days for Texas in January have
been held at the 10-day December level, while Louisiana and New Mexico allowables have been raised
2 percent and 3 percent, respectively.
General rains during mid-December were beneficial, particularly to small grains and winter forage.
Harvesting of 1959 crops is virtually complete, and

Department store sales in the
Eleventh District rose more than
seasonally from October to reach
a record November level that was
9 percent above the previous
November high a year ago. The seasonally adjusted
sales index was 182 percent of the 1947-49 average,
compared with 170 in October and 167 in November
1958. Christmas-season sales continued strong in early
December, scoring a 2-percent gain over the first 2
weeks in December 1958 and topping the high level in
the corresponding period in 1956. Cumulative sales
for the 11 months ended November 30 were 9 percent
greater than in the comparable 1958 period.

good progress has been made in preparing for the
1960 season. Prospects for winter vegetables and
citrus fruits continue good, and production is expected to be larger than a year earlier.
Employment of nonfarm workers in the District
states showed a substantial seasonal gain in November, led by increases in trade and manufacturing employment. However, unemployment rose because of steel shortages and cutbacks in aircraft
manufacture.
Industrial production in Texas was up slightly in
November as a result of the resumption of steel production and general gains in nondurables output.
Construction contracts awarded in the District
states advanced more than seasonally in October,
with strength in nonresidential construction more than
offsetting a further decline in residential awards.
Loans, deposits, and investments expanded at the
District's weekly reporting member banks during the
4 weeks ended December 16. Seasonal factors provided the major stimulant to deposits and loans.
Member bank reserve positions eased moderately in
November, and average borrowings from the Federal Reserve Bank declined.

Department store sales in most of the major metropolitan areas in the District during November showed
good gains from a year earlier. The Houston and Dallas
INDEXES OF DEPARTMENT STORE SALES AND STOCKS
Eleventh Federal Reserve District
(1947.49

= 100)

SALES (Daily ayerage)

STOCKS (End of month)

Seasonally

Seasonally
adjusted

Doto

Unadjusted

adjusted

Unadjusted

1958, Noyember.... .
1959, September. • . .
October. • • • . •
Noyember.. .. •

190
160
177
208

167.
167
170
182

192

182

203
206p

185
187p

189r

172

r -Revised.
Preliminary.

p -

BUSINESS REVIeW

1:1960

11

I

I

DEPARTMENT STORE SALES AND STOCKS
iPercentage change In retail value)
STOCKS
(End of month)

NET SALES
Nov. 1959 from
Area

Total Eleventh District •••••
Corpus Christi ••• • ••••••••
Dallas:.: • •••.••.••••••••
EI Paso ••••. •• . •••. •••••
Fort Worth ••..••.•••••••
Houston ••••••••••••••••

San Antonio •••• ••• •.••• •
Shreve port, la ....•......
Waco ••••.•••....•... ••
Other cities •••••••••••••

Oct.
1959

Nov.
1958

4
-2
1
-1
7
7
2
12
0
7

9
8
14
-3
5
16
8
5
5
9

tions during the month were still 12 percent more than
in November 1958 in the four areas; and for the year
to date, cumulative registrations were 37 percent greater
than in the comparable 1958 period.

Nov. 1959 from
11 months,
1959 from
1958

9
3
12
3
6
12
5
6
7
10

Oct.
1959
4
0
-2
1
2
0
4
0
3

Nov.

1958
9
3
15
0
2
21
2
2
1
5

Agricultural activity throughout
most of the District is seasonally
slow. General rains during midDecember were quite beneficial
in most areas, although harvesting of crops in late sections was delayed. The precipitation was especially helpful to wheat and other small
grains. The moisture should promote the rapid growth
of small grains and winter grasses and reduce hazards
of grass fires. Harvesting of cotton in northwestern sections of Texas and the irrigated regions of Arizona and
New Mexico is in the scrapping stage. Flax planting is
under way in south Texas, particularly in a few areas
where see dings had been delayed until moisture conditions improved.

areas recorded the largest increases - 16 percent and
14 percent, respectively - while the gains in most of
the other areas were 5 percent or better. However, EI
Paso sales were down 3 percent from November 1958.
All areas recorded advances for the year as a whole,
but sales in the larger areas scored the greatest increases,
reflecting in part the influence of the opening of new
Harvesting of winter vegetables is active, and prepstores in these cities during the year. Cumulative sales
gains in individual metropolitan areas ranged from 3 aration for planting of spring crops is under way in
percent in Corpus Christi and EI Paso to 12 percent south Texas. Most onions have been transplanted in the
Laredo area and are well advanced in other sections.
in Dallas and Houston.
Blight has appeared in some carrot fields in the Lower
Year-to-year comparisons of November sales by type Valley, and mildew has occurred in some cabbage and
of goods at the District's department stores reflected
lettuce fields. The acreage of winter vegetables for fresh
a fairly wide degree of variance. In the hard goods
market in Texas is estimated to be 15 percent above
departments, sales of radios, television sets, and musical
1958 but 16 percent below the 1949-58 average. The
equipment and sales of domestic floor coverings both outlook for citrus fruits continues favorable; 1959 proadvanced more than 20 percent, but sales of major
duction in Texas is placed at 38 percent above a year
household appliances were 6 percent below a year ago.
earlier, and that in the District is 47 percent greater.
In the soft goods departments, sales of women's and
misses' coats and suits rose 17 percent, and sales of
The December precipitation sharply boosted grazing
men's clothing gained 15 percent. Sales of women's and prospects throughout virtually all sections of the Dismisses' 'accessories also were good, rising 10 percent trict. In parts of New Mexico, heavy snows were a
above a year earlier.
problem in some livestock areas, but losses are expected
Inventories at District department stores at the end to be relatively light. Current moisture conditions,
of November were up 1 percent from the end of October coupled with warm weather, should promote the rapid
and exceeded the year-earlier level by 9 percent. The
seasonally adjusted stock index rose slightly to 187 perCITRUS FRU IT PROD UCTI ON
cent of the 1947-49 average, which is well above the
{In thousand. of boxes'
172 figure for November 1958. Orders outstanding at
Average of 10
the end of November also were substantially above a
seasons ended
Indicated
1958-59
1948-57
1959-60
State and crop
year earlier, after rising 4 percent over the previous
ARIZONA
month.
1,450
610
1,072
Oranges ••• • ••••••••••••••
New car registrations during November in the four
most populous areas in the District dropped 16 percent
below the preceding month, as depleted dealers' stocks
were generally inadequate to meet demand. Registra, B U'S IN E S S REVIEW

1: 1960

Grapefruit ••••.••••••••.• •
LOUISIANA
Oranges, ••........•..••..
TEXAS
Oranges • •••...••...•...•.
Grapefruit ••••••••••• • •• ••

2,800

1,870

2,604

245

220

186

3,200
5,800

2,300
4,200

1,676
3,800

SOURCE, United Stoto. Department of Agriculture.

development of small grains and furnish good winter
~razing. Despite periods of inclement weather, most
hvestock have remained in good condition. Range feed
conditions prior to the mid-December rains in most
of the District states were below a year earlier but
were considerably better than the 10-year (1948-57)
average.
The index of prices received by Texas farmers and
ranchers for all farm products declined 2 percent during
the month ended November 15. At 262 percent of the
1910-14 average, the index was 8 percent below the
year-earlier level. Crop prices were 2 percent higher
than a month earlier but were 3 percent below the
corresponding date in 1958. Prices for livestock and
livestock products were down 4 percent from the midOctober figure and 12 percent from a year ago.
Stimulated largely by seasonal influences, loan volume expanded
further at weekly reporting member banks in the District. Gross
loans (excluding domestic interbank loans) rose $29.9 million in the 4 weeks ended
December 16, compared with a gain of $45.4 million in
the corresponding weeks of 1958. In the recent period,
gains were concentrated in commercial and industrial
loans and consumer-type loans, which were up $11.3
milJion and $13.6 million, respectively. Loans to nonbank financial institutions (principally sales finance
companies) also showed a sizable increase of $10.0
million. On the other hand, agricultural loans, realestate loans, and loans to finance securities transactions
declined moderately.
Investment accounts at the District's weekly reporting banks advanced $49.3 million during the 4-week
period. Treasury bill holdings rose moderately, but the
largest gains occurred in non-Government investments
and in holdings of Treasury notes and bonds maturing
within 1 year.
Seasonal influences on total deposits were apparent in
late November and early December. Demand balances
~t the reporting banks showed a substantial 4-week
IJ1crease of $164.8 million, largely reflecting the buildup in balances of individuals and businesses. Much
smaller gains occurred in government balances and
interbank balances. Time deposits continued to decline,
however, as these accounts came under the contractive
influence of withdrawals by state and local governments.
On December 16, total deposits at the District's weekly

CONDITION STATISTICS OF WEEKLY REPORTING
MEMBER BANKS IN LEADING CITIES
Eleventh Federal Reserve District
(In thousand. of dollars'

Item

ASSETS
Commercial and industrial loans .• ... .•. .... ••
Agricultural loans.... ......................
loons to brokers and dealers for purchasing
or carrying :

U. S. Government securities ... .... .. .. .....
Other securities . ........................
Other loons for purchasing or carrying:

U. S. Government securities . . ..... ..... ....
Other securities . ............ .... . ... ....
Loons to nonbank flnancial Institutions:
Sales flnonce, personal flnance, etc ... .......
Savings bonks, mtge. cos., ins. cos., etc ... ....
Loans to foreign banks . ....................
loans to domestic commercial banks .... ... ....
Real·estate loans . .. .. . ................. . ..

All ather loans ...... .. ....................
Gross loans . ...........................
less reserves and unallocated charge-offs ..
Net loans . ...................... . ......

Troasury bill..............................
Treasury certiflcates of indebtedness . •...... ..
Treasury notes and U. S. Government bonds,
Including guaranteed obligations, maturing :
Within 1 year ..........................

After 1 but within 5 years .. .... •... ......
After 5 years ..... ....... . .. ............
Other securities . .......... . .......•.......
Total Investments ••••••••••••••••••••••••

Cash items in process of collection . ...........
Balances with banks in the United States .. .....
Balances with bonks in foreign countries . ......
Currency and coin . ... .... .... . ... . . .......
Reserves with Federal Reserve Bank .... .......
Other assets . .............................

TOTAL ASSETS .......................

Dec. 16,
1959

Nav. 18,
1959

1,537,854
31,825

1,526,528
33,363

Dec. 17,
1958

46,081

5,298
12,439

743}
11,810

23,632

8,942
183,645

10,301 }
188,215

181,106

142,085
113,011
440
52,215
207,211
724,252

127,396
117,663
159}
43,465
210,288
710,678

14,068
230,012

-- --2,980,609 2,782,558
50,243
45,872
-- --- --2,969,443 2,930,366 2,736,686
-- --- 58,852
- - - 45,913
76,573
3,019,217
49,774

39,568
99,168
776,550
320,853
361,152

--1,656,143
--538,627
515,669
1,953
52,600
546,917
219,829

39,749

169,553

65,812}
791,246 1,186,056
319,506
344,614
333,044

-- --1,606,840 1,765,226
-504,818
- - -504,994
-480,176
2,417
50,267
558,789
205,460

527,059
2,326
53,424
571,767
202,069

6,501,181

-- --6,339,133 6,363,551

3,010,552
127,834
237,064
1,049,768
16,100
74,085

2,901,691
107,490
226,276
1,031,198
16,449
67,536

3,052,546
73,481
166,213
1,067,968
18,272
60,196

1,056,733
6,255
421
158,797
6,61'2

1,055,B98
6,255
421
168,941
7,484

1,057,739
7,130
421
219,163
6,416

93,253
123,006
540,701

97,764
108,913
542,817

18,300
111,875
503,831

6,501,181

6,339,133

6,363,551

LIABILITIES AND CAPITAL ACCOUNTS
Demond deposits
Individuals, partnerships, and corporations .. ..
United States Government . . . .............
States and political subdivisions . ...........

Banks in the United States .................
Banks In foreign countries . ............ . ...
Certlfled and offlcers' checks, etc .. ..... ... .

Total demand deposits .•....... .. .• . . ..
Time deposits
Individuals, partnerships, and corporations .. ..
United States Government . ...............
Postal savings . ....... ... ...... . ... ... ..
States and political subdivisions . . . .........
Banks in the U. S. and foreign countries .. .. ..
Total tim e deposits ....................

Total deposits ••.•... ..... ... .. .....
Bills payable, rediscounts, etc . . ........ .. ....

All other liabilities ......•..................
Capital accounts . .................. . ......

TOTAL LIABILITIES AND CAPITAL ACCOUNTS

--- --- --4,515,403 4,350,640 4,438,676
--- --- ---

-- --- --1,228,818 1,238,999 1,290,869
-- --- --5,744,221 5,589,639 5,729,545
--- ---

NOTE.-Efloctive July 1, 1959, this se ries was revis ed . Tho revised form Includes
soveral new items, the most important of which is loons to flnanclal institution s pre viously reported against other loan categories . Comparable yeor·earlier flgure s f~r the
new items wlll be shown when they become availabl e.

reporting member banks were almost unchanged from
the year-earlier level.
Pressures on member bank reserve positions moderated somewhat in November, and member banks in the
District reduced their borrowjngs from the Federal
Reserve Bank. On a daily average basis, reserve balBUSINESS REVIEW

1 :1960

I

RESERVE POSITIONS OF MEMBER BANKS

also rose. On December 16, the Bank's Federal Reserve
notes in actual circulation reached a record high of
$821.4 million, or almost 3 percent above a year earlier.

Eleventh Federal Reserve District
(Avercges of daily figures. In thousands of dollars)'
November

October

November

1959

1959

1958

552,632
546,512
6,120
21,254
-15,134

550,340
543,199
7,141
26,422
-19,281

566,483
556,306
10,177
9,406
771

461,903
414,061
47,842
9,976
37,866

447,438
408,144
39,294
18,913
20,381

449,166
400,461
48,705
4,645
44,060

1,014,535
960,573
53,962
31,230
22,732

997,778
951,343
46,435
45,335
1,100

1,015,649
956,767
58,882
14,051
44,831

Itom

RESERVE CITY BANKS
Reserve balances •••.• . .•..•.•.•••
Required reserves ••••••••••••••••

Excess reserves ••••..•••••.•....•
Borrowings •••••• • •••••••••••••••
Free reserves ••••••••••••••••••••

COUNTRY BANKS
Reserve balances •••• ••••• ••.. . • .•
Required reserves ••••••••••••.•..
Excess reserves • •• •..•••••••••..•
Borrowings ••.• " ••...•••••.•••••
Free reser'ttes •••• •• ••••••••••••••

All MEMBER BANKS
Reserve balances •••••••••••••••••
Required reserves ••••••••••••••••

Excess reserves •••••••••••••.••••
Borrowings •••••••••••.••••.•....
Free reserves ••••••••••••••••....

I

ances in November were $16.8 million above the October average. Slightly more than one-half of the reserve
gain was absorbed by an increase in required reserves,
which reflected deposit expansion in the District, but
average excess reserves also rose $7.5 million. As they
gained funds, member banks reduced their average
indebtedness at the Federal Reserve Bank by $14.1
million. Improvement in bank reserve positions occurred at both reserve city banks and country banks,
but gains were concentrated at country banks.

I

Late in November, the Board of Governors an-

I nounced t.hat, effective .December 1, 1959, country

banks havmg vault cash m excess of 4 percent of their
I net demand deposits would be permitted to count the

excess as part of their required reserves. Effective

I December 3, 1959, banks classified as reserve city and
central reserve city banks were permitted to count vault
cash in excess of 2 percent of their net demand deposits.
Earning assets of the Federal Reserve Bank of Dallas
advanced $36.1 million during the 4 weeks ended
December 16. Increased holdings of Government securities, reflecting System purchases to provide funds to
the market on a seasonal basis, accounted for $22.6
million of the expansion. Discounts for member banks
CONDITION OF THE FEDERAL RESERVE BANK OF DALLAS
(I n thousands of dollars)

Dec. 16,

lIe m

1959

Noy.18,
1959

Dec. 17,

Total gold certiflcate reserves •••••..••..•.••
Discounts for member banks ••.•......••...•
Other discounts and advances •.•..•..••••••
U. S. Government securities •••....•••••••...
Total earning assets •••••.•.•. . ..•••••••••.
Member bank reserve deposits •• ••• • .•••• . ..
Federal Reserve notes in actual circulation •••••

711,271
24,305
260
1,083,313
1,107,878
959,739
821,355

769,290
10,750
348
1,060,678
1,071,776
999,625
807,210

745,628
15,450
328
1,026,057
1,041,835
966,864
799,501

I

BUSINESS REVIEW

114

1: 1960

1958

NEW MEMBER BANK
The Northgate National Bank of EI Paso, EI Paso,
Texas, a newly organized institution located in the
territory served by the EI Paso Branch of the Federal
Reserve Bank of Dallas, opened for business December
14, 1959, as a member of the Federal Reserve System.
The new member bank has capital of $200,000, surplus
of $200,000, and undivided profits of $100,000. The
officers are: W. L. Sibley, President; Harold W. Ensey,
Vice President; and Norman L. Callahan, Cashier.

Crude oil production in the District advanced seasonally by
nearly 4 percent during the first
half of December, as allow abIes
in both Texas and New Mexico
were increased from the November levels; however, the
production rate of 2,997,000 barrels daily was 7 percent
below a year earlier. Crude oil production outside the
District rose only 1 percent in December but averaged 4
percent greater than a year ago. Imports of both crude
oil and refined products registered sharp seasonal advances in November and early December. In the 5
weeks ended December 11, imports of refined products
rose 41 percent and averaged 7 percent more than a
year earlier. Crude oil imports increased 7 percent from
November to about the same level as a year ago. Total
imports registered a year-to-year advance of 3 percent.
District refinery operations showed a seasonal rise
of 3 percent during the first part of December, with
crude runs to stills averaging 2,274,000 barrels daily
- which is virtually unchanged from the December
1958 level. Refinery operations outside the District
increased less than seasonally but also equaled the yearearlier level. Crude oil stocks during early December,
at about 252,600,000 barrels, were relatively stable and
in good balance with seasonal requirements but were
2 percent lower than a year ago.
Demand for major petroleum products advanced
more than seasonally during November and the first
half of December. Below-normal temperatures in major
heating areas during November precipitated sharp increases in sales of kerosene and distillate fuel oils. In
addition, industrial users, rapidly recovering from the

,

steel strike, purchased unseasonably large quantities of
residual fuel oils. Refinery and bulk terminal deliveries
of major petroleum products in the 5 weeks ended
December 11 averaged 8,636,000 barrels daily, or 2
percent greater than a year earlier.
Stocks of major petroleum products at the middle of
December were in considerably better balance with
industry requirements than in previous months. Although refinery production in the United States rose
slightly less than seasonally in November and the first
half of December, stocks of kerosene and distillate and
residual fuel oils declined rapidly at all levels, principally because of unseasonably high sales. As a result,
heating oil prices rose sharply during November and
approached the year-earlier levels. Warmer weather
during the first part of December halted the rise in
heating oil prices, although prices remained firm. Gasoline prices were seasonally weak, particularly in the
Midwest.
The improved inventory position of the petroleum
industry and estimates by both purchasers and the
United States Bureau of Mines of rising crude oil demand have encouraged regulatory agencies to increase
allowable production in January. Louisiana allowables
unchanged since the middle of 1958, have been raised
2 percent, and crude oil production in southeastern
New Mexico is scheduled for another 3-percent gain.
Allowable output in Texas will continue on a 10-day
schedule, but production is expected to increase slightly
because of added production from discovery wells.
Nonagricultural employment in
the District states, after a moderate seasonal increase in October,
showed a larger seasonal rise of
13,200 workers in November to
reach a total of 4,323,500. The largest November increases were in trade and manufacturing employment.
The rise in manufacturing employment reflected both
normal seasonal gains and the suspension of the steel
strike, partially offset by cutbacks in the automobile
and other industries as a result of continued steel
shortages.
Unemployment in Texas increased 15,200 workers,
or more than seasonally, in November to reach 162 100
which is 4.5 percent of the civilian labor force. '
,
Industrial production in Texas was up slightly in
November. The major factors accounting for the gain
were the return of striking steelworkers and the general

INDUSTRIAL PRODUCTION

=100)

(Seasonally ad lusted indexe., 1947·49
October
1959

September

November

1959p

1959

1958

169
209
244
192
130

168
206
243
189
131

170
210
249
192
132

165
197r
231r
181r
134r

148
150
156
144
123

147
150
156
144
117

149
152
158
147
116

141
143
151
135
123

November

Area and type of index

TEXAS
Total industrial production •..•
Total manufactures •••••.•••
Durable manufactures ..•••..
Nondurable manufactures •.••

Minerals .•..•............ .
UNITED STATES
Total indu5trial production ..•.
Total manufactures •••••••••
Durable monufactures •......
Nondurable manufactures • •••
Minerals ••••.• . • . .••••••• •

Preliminary.

p r -

Revised.

SOURCES, Board of Governors of Ihe Federal Reserve System.
Federal Reserve Bank of Dallas.

expansion in nondurable goods production, which more
than offset production losses in transportation equipment manufacturing and in crude oil mining. The automobile assembly plant in the Dallas-Fort Worth area
that had closed in late October resumed operations on
December 9, and there were indications of recovery in
other steel-using industries during December.
Construction contract awards in the District states
turned upward in October by 8 percent, or more than
seasonally, as strength in nonresidential construction
more than offset a further decline in residential awards.
Total contract awards for the first 10 months of the year
amounted to $3.4 billion, or 1.5 percent lower than in
the same period of 1958. Residential awards showed an
II-percent gain, while "all other" awards were down
11 percent. Indicating the continuation of the recent
downtrend in residential building, FHA applications
for proposed new home construction in the District
states decreased about 400 units to a level of approximately 4,500 in October.
NONAGRICULTURAL EMPLOYMENT

Five Southwestern States I
Percent change

Nov. 1959 from

Number of persons
Type of employment

November
195ge

10101 nono;ricultural
wage and . ala ry work.... 01,323,500
Manufacturing. . .••. •. •••
n9,300
Nonmonufoctu';nQ . . . ..•• , 3,H4,200
Mining. • • .. .. .. • .. .. •
2A 2,800
Canltructlon .... . . . . . ..
306,100
Tranlporlallon and pubnc
utilill... • •• • . . . . . • • •
398,600
Trod... . . • . .. .. • .. . . . 1,065,600
financo.. .. . .. • . . • . . • •
190,900
Service........ .......
514,700
Govemmo.l. • • • • • • . • • •
825,500

October
1959

November
1958r

Oct.
1959

Nov.
1958

4,310,300
774,500
3,535,800
243,400
309,000

4,276,900
772,600
3,504,300
248,500
314,600

0.3
.6
.2
- .2
-.9

1.1
.9
1.1
-2.3
-2.7

398,300
1,057,100
190,900
512,900
824,200

395,400
1,047,800
186,600
501,800
809,600

.1
.8
.0
.4
.2

.8
1.7
2.3
2.6
2.0

Arizona, louisiana, New Mexico, Oklahoma, and Texas.
e - Estimated.

I

r -

Revised.

SOURCES,

State employment agencle •.
Federal Reserve Sank of Dallal,

BUSINESS REVIEWI
1:1960

151

BANK DEBITS, END-Of-MONTH DEPOSITS
AND ANNUAL RATE OF TURNOVER Of DEPOSITS

CONDITION STATISTICS Of All MEMIIER BANKS
Eleventh Federal Reserve District

(Dollar amounls In thousandsl

(In millions of dallarsl

Debit. to demand
"deposit accoun.s 1
Percent
change from

November

1959

Ar-eo

Oct. Nov.
1959 1958

ARIZONA
Tucson •••••••••••••• $ 220,691
-3
LOUISIANA
Monroe ........ . ... . .
83,218
3
Shreveport ..... . . . ...
301,337
-6
NEW MEXICO
Roswell •••••••••••••
42,531
-2
TEXAS
Abilene •••••...••• . •
97,282
-3
Amarillo ••••••••••••
233.034
2
Austin ••••••••••••••
203.740
-3
Beaumont ••••••••• • •
148.522
-6
Corpus Christi •••• • •••
174.639
-9
Corsicana •••••••••••
17.425
-5
Dallas •••••••• • ••••• 2.683.062
2
EI Paso •...•••••••••
370.692
-2
Fort Worth ••.•••••••
732.206
-5
Galveston •••••••••••
90.602
-3
Houston ••••••••••••
2.409.053
-6
Laredo •......•.•.••
26,468
-4
Lubbock •••• .. ..• .. .
255,712
11
Port Arthur •• .. ... ...
58,584 -15
San Angela ••• ••• • ••
52.231
-8
San Antonio •• • • •••. •
574.743
-5
Texarkana' .• .. • . •.•
20.842 -10
Tyler .•.•.••••......
81.880
2
Waco ••....•••.•••.
98.977 -21
Wichita Falls .... • .. .
120.068
0
Tatal-24 cities •••••••• $9.097.539

-3

Annual rate of turnover

Nov. 30,
,.59

Nov. Oct. Nov.
1959 1959 1958

22

$ 144,057

18.6

20.3

19.0

22
11

53,695
196,938

18.7
18.7

18.6
20.3

16.7
18.2

28

32.798

16.1

17.3

13.2

19
22
27
1
1
1
17
18
8
9
13
10
20
-4
10
13
6
1
4
19

64,718
119.005
154.321
111.300
108.603
20.006
1.133,720
168.306
380.125
63.767
\.265.747
22.176
121.829
44.120
45,437
374.120
16.306
59.532
68,581
105.435

18.1
23.6
16.1
16.9
19.1
10.3
28.2
26.3
23.3
17.4
23.0
14.3
26.5
16.2
13.8
18.6
15.6
16.4
17.2
13.7

18.7
23.6
17.2
19.0
20.8
10.8
27.7
27.1
24.8
18.2
24.8
15.0
25.6
19.3
14.9
19.2
18.1
16.1
22.0
13.9

16.0
19.1
15.1
16.2
17.6
9.2
24.4
23.2
21.7
15.4
20.8
13.1
22.9
16.0
13.3
15.6
14.2
16.0
16.4
11.2

14

$4.874.642

22.6

23.4

20.0

1 Deposits of individuals, partnerships, and corporations and of sfates and political
subdivisions.
2 These figures include only two banks in Texarkana, Texas . Total debits for all banks
i. Texarkana, Texas.Arkansas, including one bank located in the Eighth District,

amounted to $46.041,000 for the month of November 1959.

VALUE OF CONSTRUCTION CONTRACTS AWARDED
(In thousands of dollarsl
January-October

Area and type

October
1959

FIVE SOUTHWESTERN
STATES' •••.....•.
317.309
Residential •••••• • •
139.029
All other ••...•.. • .
178.280
UNITED STATES •••. . • 3.134.500
Residential. ••••••• 1,514.953
All ather .•....•• • • 1.619.547

Item

Nov. 25,
1959

Oct. 28.
1959

Nov. 26.
1958

ASSetS
Loans an d dluo""ts . • •• • ...•••• •. • •. • •••
Unlted Sta te. Governmenl ob Ug o lions . ••• ••
O ther J"ecurities . .. ... .. . . . ... . .. ... .....
ReJene1 with F.d e ..a l R ese~ Bonk . .. ... ...
Ca&h in vaulte ..... . . . . . ..... ..... . ..... . .
Balane.. with bank, In ,h. Uniled S,al"' . . • .
Balances with ba nla in for.tQn CQuntrin*.•• •
Cat.h ('ems in procon of collection ••• •• • •••
Other assets- . . .. . .. . .. ............ .. . . .

4.755
2.535
850
975
141
1,063
3
542
319

....743
2.562
845
944
150
1,016
3
499
304

4.441
2.795
804
1.032
139
1.080

Demand deposits]

September
1959

October
1958

294.402
146,562
147.840
3.032.490
1.455.917
1.576.573

359.459
178.605
180.854
3.309,024
1.595.041
1,713,983

1959

TOTAL ASSEtse ..•.•••••••.•........

11 .183

11.066

11.087

LIABILITIES AND CAPITAL ACCOUNTS
Demand deposits of banks .......
Other demand deposits ...................
Time deposits ••

1.167
6.719
2.096

1.112
6.709
2.098

1.133
6.874
2.076

Total deposits ••••••••••••...••••••••
BorrowinQse • .•••••••••••••.•.•••••.•.•
Other lIa blliliese .•.....................
Total capital accountse •
••••••••••••••••

9.982
122
134
945

9.919
105
116
926

10.083
17
124
863

TOTAL LIABILITIES AND CAPITAL
ACCOUNTSe .....•.•....... • .. • .. .

11.183

11,066

0

0

e -

GROSS DEMAND AND TIME DEPOSITS Of MEMBER BANKS
Eleventh Federal Reserve District
(Averages of daily figures. I. millions of dollarsl
GROSS DEMAND DEPOSITS
Date

Total

Reserve
city banks

1957, November.
1958, November.
1959, July ••. • ..
August . • ..
September.
October. ••
November.

7.327
7.828
7.662
7.643
7,779
7.782
7,919

3.524
3.832
3,760
3.770
3.858
3.820
3.823

3.397.341 3,450,752
1,606,533 1,442.746
1,790,808 2,008,006
31,714,027 30.279.846
15,077,614 12.534.797
16,636,413 17,745,049

Change from

16

October
1959

November
1958

2.849.8
2,484.5
459.9
1.092.0
130.2
108.0
694.4
252.0
113.3
4.003.1
6,852.9

3.098.3
2,744.2
517.6
1.219.0
152.1
106.7
748.8
242.9
111.2
3,885.6
6,983.9

44.3
42.5
7.9
34.5
3.3
-.9
-2.3
1.5
.2
33.7
78.0

-204.2
-217.2
-49.8
-92.5
-18.6
.4
-56.7
10.6
2.3
151.2
-53.0

Estimated from American Petroleum Institute weekly reports.
2 United States Bureau of Minel.

1 :1960

Country
banks

3.803
3.996
3.902
3.873
3.921
3.962
4.096

1.644
2.090
2.159
2,125
2. 113
2.099
2.100

879
1,131
1.122
1.099
1.087
1.078
1,077

765
959
1.037
1.026
1.026
1,021
1.023

VALUATION (Dollar amounts in thousands)
Percent change

Nov.
1959

ARIZONA
Tueson ••
718
LOUISIANA
549
Shreveport ••.•
TEXAS
Abilene •••• • ••
143
Amarillo •• . . .•
228
Austin ••••••••
213
243
Beaumont •••••
54
Corpus Christi .•
Dallas •.•.. • .. 1.747
EI Paso •...•.•
566
609
Fort Worth ••••
Galveston •••••
85
Houston •••••• 1.024
Lubbock .•.••.
202
143
Port Arthur ••••
San Antonio •.• 1.000
Wac.o •• •• • • ••
187
Wichita Fall, ••
76
o . .. .

November
1958'

BUSINESS REVIEW

Reserve
city banks

BUILDING PERMITS

Area

October
1959'

1

Tato l

Nov. 1959
from

NUMBER

(In thousands of barrelsl

SOURCES:

TIME DEPOSITS

Country
banks

195 8

DAILY AVEaAGE PRODUCTION OF CRUDE OIL

ELEVENTH DiSTRiCT • ..•..•• 2.894.1
Texas •••••••••••••••••• 2.527.0
Gulf Coast •... •. ...•..
467.8
West Texas ••••••••••• 1.126.5
East Texas (proper) .••..
133.5
Panhandle ••••••••••••
107.1
Rest of State ..•...•...
692.1
Southeastern New Mexico ••
253.5
Northern louisiana • •••••••
113.5
OUTSIDE ELEVENTH DISTRICT. 4,036.8
UNITED STATES •• ... •...... 6,930.9

0

Estimated .

Arizona, Louisiana, New Mexico, Oklahoma, and Texas.
SOURCE, F. W. Dodge Corporation.

Area

•••••••

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

0

1

November
1959'

3

507
286

. .

Total-17 cities ... 7,787

11 mos.
1959
7.667

Nov.
1959

11 mos.
1959

$ 2.849 $ 36.562

Oct. Nov.
1959 1958

11 months,
1959 from
1958

-35

205

161

5.345

2.167

25.951

36

0

-11

2,429
3.455
3.430
3.886
890
24.360
6.757
8.730
1.253
15.882
3.562
2.074
15.555
2.502
1,915

1.832
1.931
2.546
1.320
798
10.454
5.041
6.108
98
14.030
2.844
413
2.635
967
346

26.040
33.733
53.934
20.321
18.426
158.470
60.991
55.845
3.622
204.734
53,063
9.232
55,272
16,457
12.989

45
-32
-50
-63
1
-7
3
43
-57
-55
-39
-28
-23
-69
-68

-3
38
-40
37
-32
-9
7
49
-85
-28
-34
-44
-43
54
-56

29
35
21
8
-13
11
1
11
-7
-5
34
-7
-2
20
48

-33 -12

9

109.692 $56.379 $845.642