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MONTHLY
BUSINESS
REVIEW
of

the

Volume 33

FEDERAL

RESERVE

BANK

DaUas, Texas, November 1, 1948

Dallas
Number 11

IMPLICATIONS OF THE ECONOMIC OUTLOOK
TO BUSINESS PRACTICES

For more than three years the country has enjoyed an unusually high level of economic activity.
During most of the postwar period virtually all of the basic economic indexes have risen steadily as
first one and then another inflationary development gained strength or appeared on the business scene.
On a few occasions readjustments have occurred in certain areas of the economy; some of these have
been quite marked in degree, as for instance the break in prices of basic farm commodities early in
1948. Each such development of an economic "sOft spot" has been followed by a period of some uncertainty and hesitation in the upward trend, as businessmen, economists, and others have engaged in
mental speculation as to whether the readjustment of the particular moment might not be the "beginning of the end" of the postwar boom. In each instance, however, underlying strength in other sectors
of the economic system or the introduction of new and powerful inflationary forces have overcome
tbe momentary downward pressures, and the indexes of economic activity have quickly regained or
exceeded the high levels that prevailed prior to the particular readjustment. Moreover, the effective
demand for goods as represented by the money supply and credit resources has been so strong as to
push prices steadily higher.
There is no simple explanation of the business cycle. In fact, there is probably no generally accepted theory as to the causes of business fluctuations. Too many factors, complex and often unpredictable or not subject to accurate measurement, influence the trend of business to permit the development of a simple, clear explanation of the cycle or a definitive forecast as to the precise timing and
magnitude of the future course of economic activity. In some respects, perhaps, economics is somewhat
more of an art than a science. Judgments must be made with respect to the economic influence and
impact of forces which simply do not lend themselves to statistical measurement-to cite only one such
force, public reaction to a given set of economic circumstances. Consequently, different appraisals of
the strength or trend of economic activity are not uncommon, as different analysts give varying weights
to these more or less uncertain and immeasurable factors .
Perhaps the views of economic and business analysts with regard to the trend of business can be
grouped into three major categories. Virtually all analysts have recognized that as a result of wartime
and postwar developments there are numerous maladjustments in the economy that must be corrected
in one way or another. However, views differ as to the ultimate consequences of such imbalances and
readjustments. Some analysts seem to be of the opinion that a rather substantial degree of deflation is
virtually inevitable, as a corrective aftermath to the inflation which the country has experienced, before
the economy can regain a reasonably balanced condition. Moreover, some of this group, observing the
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MONTHLY BUSINESS REVIEW

increasing number of "soft spots" which have appeared during the past year, seem to be of the opinion
that the peak of the boom has been reached (or very nearly so) and that notable deflationary trends
may become apparent within the foreseeable future-perhaps within the next 6 to 12 months. Disregarding the element of timing, historical analysis and comparison tend in a sense to lend support to
the views of this group, for the record of history does show that great inflations of the past have been
followed by sharp deflationary movements.
A second group, while not necessarily disputing the possibility of an ultimate deflationary movement of considerable proportion as a corrective of the past several years of inflation, seems to hold to
the opinion that the forces of inflation stiU are strongly dominant and, unless offset or restricted by
control measures of considerable strength, will result in more inflation, possibly of a seriously dangerous
character. Furthermore, since inflation tends to produce distortions among various elements in the
economic structure, their view leads to the conclusion that maladjustments in the economy may become
even more pronounced or that new imbalances may appear. Analysts of this group readily acknowledge
the existence of "soft spots" in the economy and, in fact, admit that they may increase in number,
but they believe that, relatively speaking, such "soft spots" are more or less minor in importance when
compared with the net inflationary impact of other forces. Among such forces are the contemplated
expenditure for national defense in a troubled and uncertain world, the recovery and rehabilitation
expenditures to restore some degree of balance and strength to the economic and political systems of
other nations, government policies of a domestic nature which are admittedly inflationary, and the
large money supply which will continue to represent an abnormally strong effective demand when
directed toward the obtainment of what, at best, can be only a gradually increasing supply of desired
goods and services.
Finally, there are those analysts who hold a more "middle of the road" outlook as to the trend
of business and economic activity in the foreseeable future. This more moderate view inclines toward
the conclusion that the Nation is at or near the peak of the boom in most economic areas. They recognize the probability of the continuance of comparatively strong inflationary forces, but they believe
that during the past three years the economy of this Nation has tended to "grow up" to a considerable
degree to the increased money supply; that readjustments which have occurred may have been more
far-reaching in their effects than perhaps has been believed; that "soft spots" in the economy may be
more basic than some have considered them to be; in brief, that while the economy will continue for
some time to be subject to deflationary readjustments and inflationary pressures, these counteracting
forces may tend to offset each other, with the consequence that economic activity and the principal
economic indexes will tend to move in a more or less sideways direction within a comparatively narrow
range of fluctuation.
Assuming no worsening of the European situation, analysts in this latter group do not anticipate
substantially more inflation, for they believe that such factors as recurrent and varied readjustments
in the economic system, the lack of speculative attitudes, the awareness of the dangers of inflation, and
the tendency on the part of businessmen and others engaged in economic pursuits to exercise more
caution than is typically characteristic during an inflationary boom will tend to be sufficiently restrictive and deflationary to offset anticipated inflationary developments. On the other hand, they do not
consider as inevitable, nor do they anticipate, a sharp, severe depression or recession of the type which
has followed previous wars or inflations. They believe that in many respects the present economic
framework is notably different from that of the past and that various price and income supporting
factors, such as government farm price supports, a high wage structure, a national policy of maintaining a high level of employment, and the need to maintain national income to support a high level of
taxation, will combine with a very considerable underlying strength in the economic system to moderate
significantly deflationary trends that may develop. These analysts, like those who foresee a different
over-all trend, do anticipate various and perhaps numerous readjustments from time to time in different
sectors of the economy, and they recognize that these readjustments may in some cases be moderately
severe; but they believe that offsetting strength in other areas will tend to balance out, within reaSOnably close limits, the effects of such depressive adjustments as may occur.

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177

A review of current business and trade journals, government publications, and the publications
of the many economic, research, and forecasting organizations reveals clearly the presence of these
conflicting economic views as to the future. Moreover, there are often shades of difference in degree
and in timing among analysts who anticipate deflation, inflation, or a more moderate sideways trend.
Obviously, the uncertainty regarding the economic outlook complicates and multiplies the problems
of businessmen and others engaged in economic activity. It becomes especially confusing perhaps to
those who tend to rely in their judgments upon the views of analysts or the statements and expressions
of opinion which appear so frequently in publications, for those views and statements often differ
notably. The fact, however, that appraisals of the business outlook differ should not lead the businessman to conclude that he cannot profit greatly by attempting to keep himself informed of current
trends or that he cannot take very practical steps to protect his position against any adverse pressures
that may arise.
A large and increasing volume of business statistics and statistics relating to general economic
conditions is now available and provides the basic data by which each businessman should attempt to
appraise the position of his industry and his own company. Moreover, such economic data and information, as well as views and opinions of analysts, have been much more widely disseminated and more
avidly sought by businessmen in recent years than ever before. There are evidences that the predictions
which have been so widely expressed through virtually all media useful in reaching the business public,
conflicting as they have frequently been, have tended to instill a degree of prudent caution that has
been lacking in previous boom periods. Perhaps as a result of the very uncertainty caused by conflicting
views, businessmen may have taken preventive measures in their operations which, in their totality,
have tended to mitigate or restrict the full influence either of depressive or of inflationary forces which
have prevailed from time to time during the postwar period. Furthermore, warnings of the dangers
of excessive inflation or the proximity of serious deflation may have induced many businessmen to
withhold actions which, if taken, might have contributed to greater economic excesses and maladjustments. It is often said that if the potential strength of all of the inflationary forces to which our
economy has been subjected is considered, it is surprising that the country has not experienced an
even greater degree of inflation than that which has occurred. While they certainly have not been the
sole restrictive factors, attitudes and practices of businessmen and others engaged in economic activity
have been contributing factors in slowing at times the inflationary course. On the other hand, an unwillingness to be stampeded by adverse developments-some of which have been of significant importance-and a recognition of the underlying strength of the economy have contributed to checking
the spread of such depressive developments to other areas of the economy.

It is admitted by virtually all analysts that readjustments in various lines of business, industry,
agriculture, and other types of economic enterprises will occur, regardless of the direction of the
over-all or net trend of economic activity. If our economy should experience more inflation, it would
not be a balanced sort of inflation in the sense that all lines of activity would be affected in the same
degree or even in the same direction. Some lines of economic activity would enjoy inflationary gains
to a much greater degree than those which might appear in other lines, while still other parts of the
economy might be confronted with positively depressionary forces. The same statement would be
equally valid and significant in the event that the economy should experience a considerable degree
of deflation or if the over-all course of most economic indexes should follow a more or less sideways
trend. In other words, regardless of the net trend of economic activity, readjustments will occur
and will affect different businesses or industries or productive enterprises in different degrees.
Consequently, in the face of that virtually assured outlook, it seems obvious that everyone engaged
in economic activity should look to the condition of his own business affairs to be certain that he will
be able to withstand successfully the impact of whatever forces may impinge upon his operations.
This does not mean, either by statement or implication, that one should "stop doing business" or
should restrict his operations unwisely; it does mean, however, that everyone should examine his
operations objectively and impassionately with a view toward determining the true condition of those
various basic elements that combine to provide-if they are sound-the foundation of a sound business

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MONTHLY BUSINESS REVIEW

or-if they are unsound or unbalanced-contribute to an unstable economic unit incapable of coping
with significant adverse economic conditions. In this respect there are several sound lines of action
which can be suggested in a constructive sense to businessmen and others. These suggestions are by no
means new; surely they are known by most persons engaged in economic activity. Their restatement
and reconsideration in this article are considered warranted on the basis that repetition may impart
emphasis to their importance and may induce the appropriate action in a larger number of cases.
Under any circumstances, of course, every effort should be made to operate business and economic
units in such a manner as to achieve the highest practicable degree of efficiency. During the intermediate and, in fact, moderately advanced phases of the business cycle, however, errors in business
or economic judgments or tendencies to condone or overlook loose or inefficient operating practices
are not likely to be particularly dangerous or costly, although obviously such shortcomings do tend
to aggravate the trend toward a lack of sound balance in economic units and to reduce the profitableness of their operation. During the past few years while the country has been experiencing a steadily
rising inflationary spiral it has been stated frequently (perhaps with some levity but nevertheless much
truth) that it hasn't been necessary to be a good businessman, merchant, banker, industrialist, farmer,
or other type of economic enterpriser to operate an economic unit with considerable success. As long
as virtually all trends were pointed upward while effective purchasing power and demand were abnormally large In relation to the available supply of goods and services, mistakes could be absorbed and
tolerated.
Undoubtedly, merchants have sold goods during the past three years which could not have been
sold without loss under a different set of economic conditions. Manufacturers have produced goods
which have been eagerly purchased by wholesalers, retailers, and the consuming public, although it
has been generally recognized that some of such merchandise would not have found ready buyers if
a more adequate or appropriate supply of goods had been obtainable. Bankers have made some loans
which have paid out satisfactorily because the borrowers have found their operations profitable as a
result, at least in part, of the inflationary framework in which they have operated their businesses.
In fact, it may not be an exaggerated or particularly critical statement to say that there may have
been some enterprisers who have been successful and profitable in spite of their inherent weaknesses
or mistaken judgments.
Notwithstanding their different opinions regarding the over-all outlook for economic activity,
it is now generally recognized by virtually all business analysts that supply is coming into better balance
with demand in an increasing number of lines of merchandise and lines of business. It is also generally
admitted that consumers are steadily becoming more value-conscious in their purchasing. Except in
comparatively few instances, consumers are no longer "eager-buyers"; in fact, they are tending
strongly to revert to the position of "shoppers." The rising cost of living has begun to bear with
increasing severity upon larger groups of the population. These facts, so widely recognized, are evidences of and contributing factors to the increasing competition that is developing in the economic
system.
The months ahead may prove to be a testing period when economic units will establish by the
nature of their operations whether they are sound or unsound, whether they can operate satisfactorily
and with efficiency under uncertain and more keenly competitive conditions, and whether the total
effect of their operations which will combine into the total economic pattern will result in a stable
or unstable economy. Plainly expressed, the economy perhaps is now in a period when it will be determined whether enterprisers are good retailers, good manufacturers, or good farmers or bankers or
workers-whatever the case may be. In terms of profits, sales, loans and investments, production, and
most other standards, business units have been reasonably successful in their operations during the
past few years, although it must be admitted that to some considerable extent their excesses have
:lggravated the inflationary development that has occurred. Now, can those business units demonstrate
that they can be as efficient and as successful in their operations under more difficult and less generally
favorable conditions?

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Although no business can divorce itself from the influences of the general economic trend, there
are certainly few business units that are so efficiently operated that a careful re-examination of practices and policies will not yield favorable results and better enable the business unit to meet adverse
economic developments. No one can know more completely the true condition of an economic enterprise than the operator of that unit, but even he must appraise periodically the character and quality
of his operations and must introduce such improvements or eliminate such wasteful practices as will
tend to . give long-run stability to his organization. Among the various elements of a business which
should be carefully studied and appraised are purchasing and selling practices and policies, price trends
and price policies, production or labor-management efficiency, the credit position of the business
itself, the credit position of the customers of the business, the outlook and present position of the
industry of which the business is a part, and over-all operating flexibility which should enable it to
meet shoft-run fluctuations and attain long-run stability.
The importance of adhering to sound and proven policies and practices becomes much more vital
to a business as competition increases and "free spending" tends to subside. The quantity, quality, and
age of inventories, the amount of outstanding orders and the duplication of orders, the purchase price
of merchandise in relation to the probable purchasing power limits of the consumer, and the rate of
turnover of merchandise may represent problems for study by the business enterpriser.
It is somewhat of a truism that inventories are never excessive until sales turn downward. At that
time, however, it ,is usually too late to meet the problem without some loss. Therefore, the prudent
course would seem to be to study past and current inventory-sales ratios and, in addition, to determine what would be the effect upon the inventory and profit p~sition of the business if sales should
turn down (or up) by, say, 5 percent, 10 percent, or possibly some larger amount. Are current inventories in proper proportion to current sales in terms of past experience? Would a 5 or 10 percent
decline in sales volume entail an unreasonable risk to the operating position of the business? How much
of a decline in sales volume could the business experience before reaching the point where inventory
risks would become dangerous? On the other hand, is the inventory position such that an otherwise
probable increase in sales might be prevented because of inadequate stock? These' are questions that
must be answered by the individual business enterpriser, and they involve risks that are inherent in the
operation of most businesses. These risks cannot be avoided entirely, but it should be the objective of
each business to hold them to that limit which would represent a normal operating risk.
During periods of economic uncertainty it is important not only to the individual business firm
but to the stability of the entire economy that duplication of orders and abnormally long commitments
be avoided. Duplication of orders or long commitments tend to deprive a business and, in fact,
the whole economy of the flexibility that should be possessed if new situations are to be met promptly
and successfully. A flexible business can change its practices quickly to adjust to changing economic
conditions which may impinge upon it, and in the long run such a business will enjoy much greater
stability in its operation.
Since it can no longer be assumed that customers will buy readily whatever merchandise is made
available to them, it becomes increasingly important to study carefully the customers' response to
merchandise offerings. If certain types of merchandise are moving slowly, what are the causes? Is the
merchandise priced out of line? Is it aged in the sense that better and more desired merchandise is
available? Are the sales of the particular business unit keeping pace with the trend or rate of sales for
the industry of which that unit is a part? It is an established fact that the trends of sales of different
firms in the same industry do not always move forward at the same rate. In fact, sometimes even the
direction of the trends is different. Attempts should be made by the individual business operator to
determine why and to what extent the rate of sales of his business differs from that of other like
concerns in his industry. By relating or comparing the sales trend of his business with the trend of
sales in his industry to determine differences in rate of growth and then by re-examining sales policies
in the light of existing conditions, an enterpriser may be able to initiate changes and improvements
which will result in sales practices more compatible with the sales problems confronting his business.

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Sales practices that are quite appropriate and successful during the upward swing of an inflationary
period are not in all respects the same sales practices that are most appropriate for other sets of economic conditions. Perhaps a business may find that it has not kept pace with the changing sales practices of its competitors as they have been modified to meet the new conditions confronting the industry.
At previous points in this article references have been made to the importance of eliminating
wasteful practices from the operations of business units. It is difficult to point out or to suggest specific practices which involve elements of waste, for frequently waste in a particular operation that is
performed inefficiently or in the failure to perform a certain operation is quite small when considered
singly, even though the total of many such inefficient practices may mark the difference between
profitable and unprofitable operations as competition for the customer's dollar tends to increase. Moreover, an intimate knowledge of the specific operations and operating problems of the business unit
and an understanding of the wayan operation is being done and the way it should be done to be
performed most efficiently are needed to determine whether wasteful and profit-consuming practices
exist. Obviously, the management of such a business is best qualified to evaluate the efficiency of the
labor-management combination.

It is important that one does not allow himself to be misled by the thought that operating wastes
are negligible, for small though they may appear to be in dollar amounts, nevertheless they absorb the
net profit on many times their amount in sales. Each economic enterpriser should seek to determine
how much net profit is being consumed annually in inefficient methods and operations. To the retail
merchant, the wholesaler, or the manufacturer, the question becomes, "How many dollars of sales
must be made to offset unnecessary and removable costs?" To the banker, "How many dollars of loans
must be made to provide an interest income sufficient to offset wasteful practices?" To the farmer,
"How many dollars of net farm income are lost because of unnecessarily low yields?" It is evident
that questions such as these become vitally important to an enterprise when sales income tends to
increase at a slower rate or as increases no longer appear or are transformed into actual declines.
Another strong reason for seeking to improve productive and business efficiency at this time lies
in the substantial increases which have occurred in wages and the high wage rate structure that has
been established. To the extent that this development has tended to raise the "break-even point" of
business and industry, it is especially important to search for ways and means of performing the
productive and distributive functions more efficiently so that costs per unit of output may be lowered.
Again, in this respect as with other operating problems, the businessman might well ask what effect
a changing sales volume of one or another amount would have upon his operating position, and then
he should seek to discover means of meeting such a situation if it should arise. Improvement in efficiency
of operation certainly offen a first and sound approach to this problem.
Despite the increases that have occurred in the general commodity price indexes during the past
year or more, price declines of many major or important commodities have been so numerous as to
dispel any doubt of the probability of considerable price fluctuation in diverse directions within the
total price structure. Although the trend of the general price level even in the foreseeable future may
be a subject of disagreement among analysts, there is general agreement that the prices of some commodities which appear to have spent fully their inflationary force will tend to ease downward or, if
artificially supported, will tend to fluctuate around those support levels; prices of other commodities
which are closely approaching an adequate supply will rise more slowly and finally the advance will
cease, while still other commodities may be subject to substantially further price increases. The reason
for calling attention to this uncertain and mixed price outlook is not to confuse the issue but to
emphasize what should be a very obvious point, i.e., business units engaged in the distribution or sale
of goods do not sell their products "at the general price level" but at the prices which prevail in the
market at the time of sale for each particular item of merchandise. It is much more important that
the businessman study carefully the data and other information of a price-making character which
may indicate the probable price trend of the p roducts he sells than it is for him to devote his time
and energy to a study of the general price situation, important though that may be.

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Prices of goods and services are, in a sense, simply tags which reflect changing values as expressed
in terms of dollars. Moreover, as every businessman or producer knows, the vast majority of these
price tags tend to change or fluctuate constantly. Sometimes for considerable periods the fluctuations
are relatively minor in amount and, hence, inconsequential with respect to their effect on the business
picture. At other times, however, fluctuations are much wider and require a reconsideration and
modification of the pricing policies of a business. Therefore, one cannot assume that price lines, once
established, are firm and unchangeable for a prolonged period of time. Especially during periods when
the economic outlook for different types of enterprises is somewhat uncertain, flexible pricing policies
determined on the basis of sound and reliable price information are essential if the individual business
is to hold its position and maintain pace with whatever changing economic conditions may arise.
Many articles have been written and there has been much discussion regarding the importance
of sound control of bank credit. Government authorities vested with responsibility of control of the
volume of credit, the Federal Deposit IIisurance Corporation, responsible for the guarantee of bank
deposits and consequently strongly interested in bank credit trends, and private banking groups led
by the American Bankers Association have combined their efforts toward the end of maintaining a
sound credit condition in the Nation's banking system. Businessmen and other nonbanking trade
creditors should give equally careful consideration to the soundness of the trade credits which they
extend. Trade credit associations are aware of the possible credit problems which may develop in the
months ahead and have emphasized the importance of precautionary measures on the part of their
memberships. Since nonbanking trade creditors consist of many diverse and, in a practical sense, somewhat unrelated groups, the same unified emphasis probably has not been given to the importance of
proper control of trade credit as has been the case with respect to bank credit. The fact that the trade
credit problem, however, may not have been so widely publicized should not be allowed to lull businessmen and other non banking trade creditors into a false sense of security.
Most reports and statistical data point to a rather steady increase in the amount of receivables
outstanding and a gradual but steady slowing down in the rate of collections. Credit men engaged in
businesses operating at the retail and wholesale levels of distribution and representatives of trade credit
associations are agreed in their judgments that their credit problems are becoming more numerous and
their collections more difficult, while the demand for trade credit continues very strong.
Comparatively speaking, the trade credit situation at present is better than that which prevailed
during the several years preceding the war, but, nevertheless, the tendency toward a weakening of
credits has become more noticeable as the months of this year have passed. During the past year rising
prices, especially of such major goods and services as foods, clothing, rents, and home furnishings,
have resulted in increasing substantially the consumer's expenditures for essentials of the cost of living
and have exerted an increasingly sharp impact against consumer incomes. As consumers have increased
the amount of their outstanding indebtedness, business firms likewise have tended to increase the
amount of their outstandings as short-term financing of the increased demand for working capital has
extended upward through the several levels of distribution. Consequently, there has been a stronger
tendency to resort to the use of credit, even though the paying ability of many debtors may not now
be as strong as it was earlier in the postwar period. Figures showing the increase in consumer credit
during the past 18 months clearly reflect the strong credit demand, while the declining collection rate
indicates the less favorable paying position of the debtors.
Trade creditors are entitled to receive and should insist upon obtaining as complete and satisfactory
credit information from their prospective debtors as banks are accustomed to receiving from their
borrowers. Financial and operating statements, credit reports from reporting agencies, and other available information should be obtained on business trade debtors. These statements and reports should be
analyzed carefully, especially with the objective of noting any changes which may have developed
during the preceding several months either in the debtor's financial condition or in his paying practices.
In addition, careful attention and study should be given by the creditor to developments in the debtor's
industry to determine as accurately as possible whether conditions more or less beyond the immediate

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MONTHLY BUSINESS REVIEW

control of the debtor might affect the proposed credit adversely. A careful, complete credit analysis
has the double value of enabling the creditor fum to protect its own position against the dangers
inherent in an accumulation of uncertain or slow credits and, also, to be in a better position to assist
its debtors through advice and sound counsel to strengthen their debt-pay.ing power.
But most business firms and economic enterprisers are at the same time both a creditor and a
debtor, and it is just as important that a firm not allow itself to become overinvolved as a debtor as
it is to avoid becoming overextended as a creditor. Moreover, as bank credit policies tend to become
tighter and as interest rates tend to rise, the credit problems of the trade creditor who is overextended
or the trade debtor who is overinvolved are likely to be magnified. Slow credits tie up larger amounts
of working capital, and as borrowed working capital becomes more difficult to obtain or more costly,
creditors must face the alternative of increasing their equities or of improving the quality of their
credit portfolios. Likewise, trade debtors who may have become overinvolved and find themselves
unable to refinance or solve their credit problems through access to liberal bank credit may not be able
to make the necessary adjustments without serious losses.
Credit policy should give proper weight to the fact that the time to appraise credits carefully
and to take essential steps to improve their quality is before the credits have proved to be bad. Generally
speaking, trade credits have not yet suffered serious deterioration, although weaknesses have become
more frequently apparent. Readjustments which may be expected to occur in the months ahead in
various areas of the economic system may tend, in many instances, to affect credit positions unfavorably. Before those readjustments occur is the proper time to undertake sound, constructive credit steps.
Although it is certainly not within the power of businessmen and others engaged in economic
activity to exercise control over many of the forces which exert a direct and very marked influence
upon the trend of business activity, enterprisers are in a position to formulate, guide, and control
within the limits of reasonable risk policies and practices within their own organizations. Moreover, if
those individual business policies and practices are soundly conceived with respect to general economic
conditions and the framework within which individual economic units must operate, much progress
1"ill have been made toward establishing a sound, stable economy. Certainly under a system of private
enterprise the individual economic enterpriser must be prepared to accept the responsibility for the
conduct of his own business unit in such a manner that it will contribute to the strength of the system
which is composed of a multitude of large and small economic enterprises. As previously stated, the
lines of action that have been suggested in the preceding pages are not new, nor do they represent all
of the steps which should be taken in view of prevailing economic uncertainties. They do relate,
however, to common problems which are likely to confront, in one degree or another, most enterprisers
in the months ahead. Consequently, they are suggestions which deserve emphasis and which should be
given careful consideration by everyone who is engaged in any sort of economic activity.

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Review of Business. Industrial. Agricultural. and rmancial Conditions
DISTRIGr SUMMARY
Prospective production of cotton, corn, grain sorghums,
sweet potatoes, and peanuts declined in the Eleventh Federal
Reserve District during September, and the October 1 forecast
indicated smaller production than in 1947 for all major crops
except grain sorghums and for most minor crops. The estimated
per acre yield for most crops is about equal to or less than the
yields last year and the 1O-year average yields. The condition of
livestock and ranges also deteriorated during the past month,
due to the continued drought. In the important wheat-growing
areas of northwest Texas and eastern New Mexico, rains are
urgently needed for the seeding and germination of grain.
However, farmers are making rapid progress with the harvesting
of crops, and operations are nearing completion in many areas
of the District.
Consumer purchases at department stores and furniture stores
increased sharply from August to September and were at a substantially higher level than in September 1947. In each case, ,he
increase over the preceding month was larger than the usual
seasonal expansion. The ratio of credit sales to total sales increased further in September, indicating an extension of the
trend toward the use of credit in making purchases at these
types of stores.
Daily average production of crude petroleum in the Eleventh
District rose to a new peak in September at a level about 6 percent higher than in the corresponding month last year. The inCrease from August to September in this District contrasts with
a decline in other areas of the country, reflecting the effects of
labor disputes on the West Coast. The 43-percent decline in
the value of construction contracts awarded in this District in
September as compared with August is much more pronounced
than the decline for the United States.
During the four-week period ending October 13, the loans
of weekly reporting member banks in the District showed an
increase of $24,000,000, reflecting a seasonal expansion in the
use of credit for commercial, industrial, and agricultural purposes. To provide funds for expanding loans and for meeting
deposit withdrawals and the higher reserve requirements which
became effective in the latter part of September, the reporting
banks during the four weeks made net withdrawals of $19,000,000 from their balances with correspondents and reduced
their investment holdings by $51,000,000.
BUSINESS
The dollar sales of reporting department stores in the Eleventh
Federal Reserve District increased 22 percent from August to
September, which is more than the usual seasonal amount, and
exceeded by 15 percent the value of sales in September 1947.
The increase in sales over those a year ago was larger than in
any other Federal Reserve District and compares with a gain of
6 percent for all reporting stores in the United States. In view
of the unusually sharp increase in sales of weekly reporting department stores between mid-August and September 20 and
the subsequent sharp decl ine, it appears that buying of durable
goods prior to the effective date of Regulation W may have
augmented sales considerably in the District. Another factor
contributing to the larger September sales volume was the
heavily advertised promotional sales featuring store-wide price
reductions. Reflecting the greater than seasonal expansion, the
adjusted index of department store sales in the District rose to
423 percent of the 1935-39 average from 419 percent in August
and compares with 368 percent in September 1947. The index,
however, is still well below the all-time peak of 448 percent
reached in April of this year.

The dollar value of inventories of reporting department stores
in the District increased further by 2 percent from August to
September and at the end of September was 26 percent greater
than a year earlier. The adjusted index of department store
stocks, which makes allowance for the usual seasonal variations,
rose from 364 percent of the 1935-39 average in August to 379
percent in September. The rise in the adjusted index in August
and Septem ber is moderate in contrast with the ' sharp decline
that had occurred between February and July of this year. Outstanding orders, which had increased substantially in June and
July, decreased in August and September and at the end of September were 29 percent lower than a year earlier. Outstanding
orders are now at the lowest level for this season since 1942.
The ratio of September collections on regular accounts to
accounts receivable at the beginning of the month was 52 percent. While this ratio was sl;ghdy larger than that for August,
it was the lowest for any September since 1941. The ratio of
September collections on installment accounts outstanding at
the first of the month remained at 18 percent for the fourth
consecutive month.
WHOLESALE AND RETAIL TRADE STATISTICS

•

Percen~ta~g~.:eb~':,:ng~.~in~~~W==
Number :===4~
Net sales-Stockl t
of
Sept. 1948 from
9 mo. 1948
Sept. 1948 from
reporting September Aug:uat
compo with September August
Retail trade:
fimuo
1947
19.8
9 mo. 1947
1947
\9.8
Department stores:
Total 11th Dist; ....
48
16
22
12
26
2
4
8
14
I
8
6
7
6
25
6
22
2
Fort Worth ..••••••
4
4
II
10
23
I
Houston ... . . •.••••
7
43
30
29
37
2
San Antonio •.•..•
15
11
11
10
17
- 2
Shreveport, La; ••••
3
12
30
20
Other cities •.•. •..•
18
10
24
8
36
Furnit.ure stores:
Total 11th Dist.. .. .
43
17
12
13
I
Dallas ••. ••••••••
4
46
10
•
- 2

~II::.~:::::

~:~~o~h~::::::::

Sao Antonio.......
Wholesale trade:·

Automotive supplies

Dru.......... . . . . .

:4
3

_:20

8ZJ~~: ::::::::

-2~

Hardware.........

·s5

_. ~

- .i

-I~

Tobacco &: product&.
10
4:
.5
1
13
2
·Compiled by United. State. Bureau of CensUi. (Wholesale trade figure. preliminary,)
lStocb at end of month.
tIndica~ change lese than one-half of one percent.

INDEXES OF DEPARTMENT STORE SALES AND STOCKS
Daily average aalea-(UIU-3111- 100)
UnadjUJt.ed •
AdjUl!ed--- - Sept.
August
July
Sept.
Sept. •~ugust
July
Sept.
11148

11 th District,
Dllllns .. . , . ,
Houston .. ...

44.

416
552

1948
365
333

426

1945
331

287

407

1947
381,
392r
386

1948
.4 23
3i5
516

11148
419
39\
484

19.8
.3.
399

1947
368r
363,
361

AdjUl!ed
July
1948
1948
364r
358

Sept.

503

Stecb-(lU36-39-100)
UnadjUlled'

Sept.

August
July
1948
1948
1945
424
11th District.
411 r
387
·UDadju.s~ for seasonal variation.

Sept.

HI47
319

11148
37g

A""ust

11147
285

r-Re't'ised.

The sales of retail furniture stores during September showed
a gain of 12 percent over the high August volume and exceeded
those in September last year by 17 percent. The sharp percentage
increase in credit sales and a corresponding percentage decrease
in cash sales, together with the rise;n end-of-month receivables,
suggest that substantial buying in anticipation of the reinstitution of controls of installment credit may have occurred in September. The ratio of credit sales to total sales in September rose
to 90 percent as compared with 88 percent in August and 83
percent in September 1947. Accounts receivable outstanding at
the end of September were 8 percent larger than at the end of

184

MONTHLY BUSINESS REVIEW

A ugust and were 63 percent greater than on the corresponding
date in 1947, the largest year-to-year gain reported for any
month this year. Collections also increased from August to September and were about 5 percent in excess of those a year ago.
Inventories at furniture stores showed little change during September, but tho gain over the corresponding month last year
widened from 6 percent in August to 13 percent in September.

Continued drought over most of the Eleventh Federal Reserve
District during September and early October caused further
deterioration in growing crops and in livestock ranges and delayed the seeding of small grains and cover crops. The dry, open
weather, however, enabled farmers to make rapid progress with
harvesting operations. In the dry areas livestock showed some
shrinkage, despite continued supplemental feeding, but made
fair to good gains in other areas. Moderate to heavy mid-September rains brought relief to the southern and some coastal
counties of Texas, and scattered showers in New Mexico, central
and east T exas, and northern Louisiana early in October provided temporary relief in those areas.
Department of Agriculture estimates on October 1 for crops
in Texas indicated lower production than a month earlier for
cotton, corn, grain sorghums, sweet potatoes, and peanuts. The
indicated production for 1948 for the State of Texas for all
major crops except grain sorghums and for most minor crops
is smaller than in 1947. In the case of most crops, the indicated
yield per acre is about equal to or less than the 1947 and the
1937-46 average yields. In contrast, current estimates for the
United States indicate aggregate production of all crops in record volume during 1948 at a level 8 percent abon the previous record set in 1946. Current forecasts are for record crops
of corn, soybeans, peanuts, pecans, and cranberries and nearrecord crops of wheat, oats, flaxseed, rice, grain sorghums, dry
beans, and citrus fruits.
CROP PRODUCTION- Un thousands of bushels)
Average

Estimated

Statu in Eleventb District*-

Average

Estimated

Oct. 1, 1948 1937-1 6
1947
Oct. 1, 1948
Wi.n ter wheat .
45,686
124.270
:;4,169
113.001· 238,71 2·
169.60281
Corn .. . ..
70,422
48.592
46,167
123.919
87.664
99,775
0......
34.3 70
31 ,248
14,734
65,166
69,006
40,004
Bntley. . . ..
4,049
2,520
2,370
12.120·
9.23081
1 J ,213 11
CottOIl!,. ..
2,894
3,437
3,250
4,348
4,685
4,880
Allhny .... . ..
1,383
1,436
1,319
4.271
4.744
4,817
PotatoCll, Irish. . . . .
4,31 1
4,536
4,400
9,978
9.260
8.726
Potatoes, sweet...
5,121
4,675
3,760
14,366!1.
12,565!1.
114346
Rice.
15,588
23 ,700
23,M2
36,991°
45,155°
46:207°
·"Figures are combined totals for fi ve States lying wholly or partly in t he Eleyenth Federal
Reserve District: Texas, Arizona, w uisia na, New Mexico. and Oklahoma.
tIn thousands of
bales. tIn thousands of tons. "Arizona , New Mexico, Oklahoma, and Texas. 4Louisiana,
Oklahoma, and Texas.
cwuisiaoa and T exas.
1937-16

1947

SOURCE: United Stlltes Department

TEXAS COTION PRO DUCTIO N BY CROP REPORTING DISTRI CTS
(In t housands of bales- 500 lb. gross wt.J

1948

Crop
reporting
districts

AGRICULTURE

- - - - Teu ll

extreme south and is well under way in central areas. Threefourths of the crop has been picked in northcentral and northeast counties, and harv" t is in full swing on the High Plains.
In Oklahoma and northern Louisiana, good progress is being
made, with more than half the crop picked.

or Agriculture.

The October 1 estimate of the cotton crop in the United
States was 140,600 bales less than on September 1, but the forecast of 15,079,000 bales for the year is 3,222,000 bales greater
than production in 1947 and would be the largest crop since
1937. The indicated per acre yield of 310.3 pounds is the largest on record. In T exas, the October 1 estimate of 3,250,000
bales was 50,000 bales below that a month earlier and 187,000
bales less than in 1947. Reflecting chiefly the effects of the
deterioration of the crop in the High Plains, the indicated yield
for the State was lowered to 173 pounds per acre, which is 25
pounds lower than last year's yield. As a result of the early maturity and rapid harvesting of the crop, ginnings in Texas prior
to October 1 totaled 1,561,000 bales, which is nearly 50 percent
of estimated production for the year and the highest percentage
ginned by that dat e since 1943. Good progress was made with
the harvest in all parts of the District. Southern, coastal, and
central counties of Texas have virtually completed picking, and
stalk destructi(,m for insect control has been completed in the

I-N .. ...
1-3, . ..... .. ... .. .. .
2 . ....... .....

3 ...

4 ...

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

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

6 .....

7.....
8 .. ...
9.....
10.

105
380
17
587
11 9
80
27
227
106
131

1946
35
198
270
14
482
96
99
1.5
18S
46
220

1947
105
946
494
15
810
185
113
32
315
129
293

1,794

1,669

3,437

1945

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

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

State ... .. ..... , .......

ind icated
October 1
150
675
495
18
760
210
140
27
270

ISS

1948 as
percent
of 1947
143
71
100
12.
94
114
124
84

350

120
119

3,250

The 'rexas corn crop showed a further deterioration during
September, and the estimate of 46,167,000 bushels on October 1
is smaller than in 1947. Because of a steady decline in acreage,
this year's crop will be the smallest since 1934. Although about
half the State corn acreage was planted to hybrids this year, the
yield, estimated at 16,5 bushels per acre, is lower generally than
anticipated and is only slightly above the 10-year average.
Prospective production of grain sorghums in Texas has been reduced materially by the prolonged drought during recent
months, and the October 1 estimate of 77,764,000 bushels is
4 ,714,000 bushels lower than on September 1. Because of the
large acreage, however, the production forecast indicates the
second largest crop of record in Texas. Good yields are being
harvested in the northern Panhandle, but in areas south of the
Canadian River yields are fair to poor, with many nonirrigated
fields being pastured or CUt for bundle feed.
Harvesting of rice in Texas is nearing completion, with the
October 1 estimate indicating a production of 23,092 ,000 bushels, the second largest crop of record. While yields were reduced
somewhat by short water supplies and salt water infiltration
during the summer, weather has been favorable for harvesting.
The October 1 estimate of the Texas peanut crop is slightly below the September 1 forecast, with harvesting under way in
all areas. A near-record crop of pecans is in prospect for Texas,
with an October 1 production forecast of 47,250,000 pounds,
representing increases of 3,000,000 pounds over the September 1
estimate and 26,250,000 over last year's harvest. Insect damage
has been light, and the crop is maturing satisfactorily in all
sections. The Oklahoma pecan crop is estimated at 18,000,000
pounds, less than half of the record crop in 1947, while Louisiana anticipates a record crop of 15,000,000 pounds. Estimated
production of sweet potatoes in Texas on October 1 was 3,760,000 bushels, a decline of 235,000 bushels from the September 1
estimate, with per acre yield below the average.
The initial forecast of the 1948-49 Texas grapefruit production at 18,500,000 boxes is 20 percent below last year's production and the smallest crop since 1943. The orange crop, estimated at 4,500,000 boxes, is 14 percent below that last season.
A severe freeze in J anuary and near-freezing temperatures in
March reduced the se t of grapefruit in all areas and greatly reduced prospects for the orange crop in the Winter Garden and
Laredo areas, Unusuall y dry weather and a shortage of irrigation
water caused excessive shedding in May and June, However, the
crop has developed favorably during recent weeks and fruit is
sizing rapidly. A few shipments of fruit have already been made
from the Lower Rio Grande Valley.
Although mid-September rains delayed field work and necessitated some replanting, the Texas fall and early winter vege-

185

MONTHLY BUSINESS REVIEW
table crop made good progress in late September and early October. Moisture conditions are satisfactory in both the Lower
Rio Grande Valley and the Laredo-Winter Garden-Eagle Pass
districts. Eggplants and peppers are moving to market, and
prospects for the tomato crop are favorable.
CASU RECEIPTS FROM FA RM MAR KETINGS
(In thousands of dollan)
July 1948
July
Cumubtive receipts
1947 - January I to July 31_
State
Cropo Livestock Total
Total
1948
1947
M lona . .. . ..
I 12,540 I 3,388 I 15,928 I 14. 119 1 11 8.190 I 105,482
Lcuisiana .... .
2,M4
0,843
12,187
11.989
140.797
108.476
New Mexico ..... . ..
4,336
4,918
9,254
12.393
65.917
61.358
Oklahoma .... ..
43, 139
36,m
79,2H
77.2H
373.602
351.722
Texas ..
75,018
81,211
156,229
166.m
983,536
843 .397

Total. ........ 1137,577 1135,295 1272,872 1282,516 11,682,0<2
SOURCE: United Statal lXpnrtmcnt. of Agricult.ure.

11.470.435

CASH RECE IPTS FROM FARM MARKETI NGS
(In

thousands of dollars)

August 1948

Cropo Li vestock
Total
Stat.
Arizona . . ... .... ... . 1 3,024 1 3,668 I 6,692

Louisiana ........... .
New Mexico ... .. . . ..
Oklahoma . ...... , ...
Texas .... , .... "., . .

17.327
2.882
25 .606
108,555

12,286
5,967
39,833
63,795

29,613
8.849
6M39
170,350

AUgu$t
Cumulative rec:eipta
1947 -Janua.ry 1 to August 31Total
1948
1947
I 5.308 I 124.882
110.790
23 ,101
131,577
1700<10
9,318
H,766
70,676
47,807
399,629
439.0< 1
153,787 1,153,886
997.184

Total. ........ 1155,394 11 25,4 29 12SO,943 1239,321 11.962,985
SOURCE: UniLec.l Stnt.es Departmeot or Agriculture.

11 ,709.766

Range and pasture feed continued to deteriorate during September and early October in all sections of the District except
southern and coastal counties of Texas, where general rains in
September improved feed supplies. Cattle and calves are gaining
rapidly in those counties and are making fair gains on cured
feed in the North Pl ains. Livestock in other areas are showing
some shrinkage, despite increased supplemental feeding. Range
feed improved temporarily in some Edwards Plateau and Plains
counties as local showers gave temporary relief from the drought.
The average condition of Texas ranges on October 1 was reported at 72 percent of normal, which is 1 point below that
a month earlier and 9 points below average. Range conditions,
which usually improve about 2 points during September, deteriorated sharply in east Texas and the Trans-Pecos areas this
f
year.
Marketings of livestock resumed the normal seasonal pattern, as combined September receipts at the Fort Worth and San
Antonio markets were 11 percent greater than in August. Total
LIVESTOCK RECElPTS-{Number)
- - -Fort Worth - - - - - - B nn Antonio - - _
Sept.
Sept..
August
Sept.
Sept.
Augo8t.
Claa
1948
1947
11148
1948
1947
1948
CaW....... .... ......... 75, 14 0
91,71 3
39,238
29.133
4&,914
39.238
Cal • .,................. .. 37,811
51,080
33,615
23,607
33,558
33.615
H""".... .. .............. 33,675 3&.183
7,&25
9,055
&,&77
7.625
Sheep ................... 102,898
115,947
98,571
67,148
8. ,148
98,571

COMPARATIVE TOP LIVESTOCK PRICES

(DDllars per hundredweight)
- - -Fon Worth- - - _ - - San Antonio - - _
Sept.
Sept.
August
Sept.
Sept.
August
1948
1947
1948
1948
1947
1948
Claao
m .50
m .w
Beefsteers , .. .. ......... . ~I.OO
28 .00
22 .50
31.00
28 .00
22 .00
28 . &5
Stocker steera ... , ...... ..
Heifers and yearlings, . .. . 31.00
27.50
33 .W
27 .W
23.00
27.00
18.00
23 .50
22 .00
17 .W
24.00
Butcher COW! . •.•.••••••. 2250
2800 I 24 .00
28 .00
29.00
23 .25
28.50
CalveI .. . .. ...... .... .
29 .W
29 00
30 00
28 .00
27.75
28 .25
H""" .. ..... ...... ... .
25 .50
23 50
2900
24 .00
22 .00
27 .00
Lambs . . ..... ...... . . .

m.oo

rn .oo

m.oo

receipts at both markets were 15 percent below those in September last year, however, with all classes of livestock (except
hogs and sheep at San Antonio) sharing in the decline. Fewer
livestock at major markets reflects, in part at least , the general

decline in numbers of all livestock that has been evident during
recent years. Several years of dry weather in some range areas
have forced rather severe liquidation of cattle and sheep. Another factor that may be contributing to the decline in marketings is the desire on the part of producers to hold larger numbers of young stock for r~placements.
Prices received by farmers for most grains and cotton were
generally unchanged between August 15 and September 15, remaining at or near support levels. Some strengthening in the
cotton market has been evident recently, reflecting the lower
estimate of the 1948 crop and prospects for some increase in
exports. Declines in livestock prices occurred early in October,
with as much as 20 percent being experienced in prices of some
classes, but prices strengthened somewhat later in the month.
Among the factors contributing to the declines were the slowing
down in packer demand for livestock, particular! y hogs, and
increased shipments to major markets.
FINANCE
Reflecting the seasonal demand for funds by business and industry in this District, total loans at the selected member
banks in leading cities increased by almost $24,000,000 between
September 15 and October 13 . That increase was due to a rise
of more than $25,000,000 in commercial, industrial, and agricultural loans and minor increases in loans to brokers and dealers
in securities and real-estate loans, offset by slight declines in
other loan categories.

If the trend of previous years is approximated in the remaining months of this year, commercial and industrial loans probably will show further increases as seasonal demands for working
capital expand in preparation for the usual fall and holiday upturn in business.
Total investments of the selected member banks in the District declined by almost $51,000,000 during the four-week
period ended October 13 , with approximately $49,000,000 of
CONDITION STATISTICS OF WEEKLY REPORTING MEMBER BANKS

IN LEADING CITIE8-E"'veoth Federal Reserve District
(In thousands of dollars)
October 13 , October 15, September 1.5,
Item
1948
1947
1948
Total loa.us and invem.mente . .... . ... ...... . ... ... . $2 .2 60,~ 12,208,7740 12,287,623
Totalloao.s-NeLt ........... .... ....... .. .. .... 1,063 .896
1,0<0,1 15
912,682" 1,046,089
Totalloans--Groee................. . ........... 1.070 ,070
Commercial, ioouaLrial. and agricultural loan. . ..
737,611
617,973
71 2,574
Loans to brokers &lid deAlers in 8e<lurities.... . . . .
6,890
8,027
6,355
Otber loa08 (or purcha.sing or carryina eeeuritiel . .
58,093
71 ,242
W.086
75,967
ReaJ.estat6Ioans.... . . . ..... .. ........ . . . ....
88,6M
88,013
Loana-to banks..... . . . . ... .. ...... .. .. . . .. . . .
456
127
557
All o~ber loona , . . . . . . . . . . . . . . . . . . . .. .. . . .. . . .
178.366
139.346
178,524
Total invmt.ments ... ... ................... . . .. . 1,190.734
1,294.092
1,241,534
U. S. Treasury bills . ... .. . . .. .. .. .. .. .... .. .. .
28.722
22,281
44.523
190,883
U. S. Trea8ury certificates of indebtedness.......
210.106
197.077
U. S. Treasury note!... .. .. .... .. .. .. .. .... .. .
79,b51
128.520
116,690
844,295
U. B. Government bonds (incl. ltd. ohligations). .
752,440
761,717
108,113
Other securitie8 . .. . .. .... .. .. . .... . ..... .. ...
119,916
121,527
Reaervee with Federal Reserve Bank, .. . . . . .. . . .. .. .
546.233
493.755
516,058
326.1 76
315,392
Balances with domestie banD ..... .... .. .... .. .. ...
296,792
1,810,465
Demand deposit9-it.djuated· . . . .. . .. .... . . . .. . ... . 1,916,202
1.937.858
378,013
Time d~81t.a ... . . . . . . ............ .. .. .. .. .. . . .. .
415,025
416,094
United States Government deposita.. .... .. .. .. .. .. .
a9,564
34.041
37.000
683,084
Interbank deposita....... ..... . .. .. . ..............
509.254
597.0SO
None
Borrowings from Federal Reservs Bank . . . . . . . . . . . . .
NOIlC
NOlle
· Includea an demand deposita other tban interbank and United States Government; le88
cash iLems reported &8 on hand or in pfOceas o( collection.
tAfter deductioos C
or ~ r v~ and unallocatod eharge-ofl'a.
-Prior to June 30, 1048, the individual classes of loons were reported net; however, the
amount o( reserves deducted subeequent to June 30, 1948, wa.s ao 8man as to have DO significan t
effect upon the comparability of the data.

the decline represented by a decrease in holdings of United States
Government securities. These banks reported a reduction in
their holdings of United States Treasury notes by $37,000,000,

186

MONTHLY BUSINESS REVIEW

largely reflecting the retirement by the Treasury of Treasury
notes during the period, and declines of almost $16,000,000 in
Treasury bills and more than $9,000,000 in United States Government bonds. Adjustments in investment accounts represented
one of the methods used by member banks to meet the higher
reserve requirements which were ordered by the Board of Governors of the Federal Reserve System effective September 16
for the country member banks and September 24 for reserve
city member banks.
Gross demand deposits of the member banks in the District
increased during September by approximately $91,000,000, with
about two-thirds of the increase occurring at the reserve city
banks and the remainder at the District's country banks. Total
demand depo';ts of the District's member banks reached more
than $5,203,000,000. In contrast with the increase in gross
demand deposits, total time deposits of the District's member
banks declined by approximately $2,000,000, with about $1,200,000 of t~e decrease being reported by country banks. The
relative proportion of gross demand deposits held by the reserve
city and country banks of the District showed little change from
previous months, as the reserve city banks reported total demand
deposits of $2,508,000,000, compared with total deposits of
$2,696,000,000 for the country banks.
GROSS DEMAND ""'1 D TIME DEPOSITS OF MEMBER
E ~vcll Ut

B.~ N KS

Federal Rese"c District

(A\'croges of daily 6gure:J. In thoU3llDda of dollan)

Combined tot.a.l

G,,,,,
Date
demand
September 1946 ... ....... 14.860.41)3
· 4,925,000
September 1947 ...
· 4,997.780
Mo.y 1948 ...
.. 5 ,044 . 9~2
June llJ48 ...
July 104B.
August 1948
September 1948 . . .

· 5,09. ,434
.. 5,112.411
• . 6,203.768

Reserve city ba/lks
Gross

Tim.
demand
Time
1498.697 $2.360.7011 1316.200
MO,511
2;100,750 337.863
569.656 2,384,586 358,943
576.282 2.~15.5;9 364,MB
587,716 2,~56,933 375.215
591,551 2.449,802 379,863
5890619 2,508,252 378,943

Country banks

ended September 29, although subsequent weeks showed minor
increases.
MEMDER DANK RESERVES AND RELATED FACTORS
Eleventh Federal Reserve Dis trict

(In millions of do11ars)

Cumulative clmogel

Changes in weeks ended

-4 weeks

ended

OcL 13,

Oct. 6,
1948

Item
1948
Federnl Reserve creditlocaL . . . . . . ..... . .. .. - 8 . 3

Intc.rdi8trict oommen:ial a:
fin o.ncial trnusacUons . ..

21. 9
T reasury opcru.t ions. . . . . . - 1. 2
Currency t1"8.Il9ll CtiOU8 . • • •• - 4 . 5

Ot~~~::S°si~!hBank ..

OLber Federal Reserve

accounts ............. .
Member bank reecrve
balances .•. • . • .... . . , . .

6.3

1948
-

16 . 9

23 . 5
- 18.4

23 . 6

1.8

95 . 5
- 4 .8
- 12 .4

3 .2

0.2

0.1

0.3

0.5

0.1

0.3

6.5

3.8

~2.2

3.7

6i.8

70.5

55.9
- 2 .2
- 2. 5

2.9

8.1

Jan. 1 to
Oct. 13,

-26 . 9

5 .8
17 . 0
- 7. 2

Ser:if'
3.5

2 .8

0 .2

Ser:i:9,

Oct. 13,
1948

11-4 .2
10 . ~

0.7

Note: Amounta preceded by a minus sign reduce ~rvea; all othel'l add to reeervea.

Bank debits during September were about 5 percent above
those of August and 20 percent higher than those in September
1947. Substantial increases in bank debits were reported from
Monroe and Shreveport, Louisiana, and Austin, Corsicana, Lubbock, and Waco; largest declines were reported by banks in
Texarkana and Corpus Christi. The turnover of deposits on an
annual rate basis increased slightly during September to reach a
rate of 13.9 as compared with 13.4 in the preceding month.
During the past few months, the annual rate of turnover of deposits has shown a very slight but steady increase, with the increase during September being somewhat more notable than
those of immediately preceding months.

Gro83
demand

Time

$2.~09,694

$182.~ 88

2,564 ,254
2,613,203
2,629,383
2.839,501
2,662,009
2,695,51.

202.648
210.713
211,734
2 12,501
211 .748
210.576

During the four weeks ended October 13, inter district commercial and financial transactions resulted in an inflow of funds
into the District amounting to approximately $96,000,000.
Other factors affecting member bank reserves included a decline in Federal Reserve credit m this District and an outward

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

OF DEPOSITS
(Amounts in thousands of dollars)
-

-Debitll

Pctg.change over EDd~f.fIlontb
Sept. August
depositaCity
1947
1948 Sept. 30. 19~8
1~8
Arizona: Tucson ...... , 57,1109 13
1
$ 84,330
Louwana:
Monroe . .. ... . •.. .
40.142
23
22
~1 .651
148,439 20
183,164
Shreveport . .. . . . . .
20

New Mexico: Roewell .
Tua.s:
Abilene • ...• . . . . . .
AmariDo ........ . .

Austin .. . . ... ... . .

Beaumont ... . . . ...
Corpus Christi . . ...
Corsicana . . ... . . • .
Dallaa . . .... ......

EIPaoo . . ... ..... .

NEW MEMBER BANK
The Almeda State Bank, Houston, Texas, located in the
territory served by the Houston Branch of the Federal
R eserve Bank of Dallas, was admitted to ."embership in
the Federal Reserve System on October 22, 1948. This
bank hes capital funds of $249,400, inclmJing capital of
$200,000, surplus of $25,000, and undivided profits of
$24,400. Its officers are: J. W. Keeland, President; David
T . Searls, Vice President; W. P. Traylor, Vice President
and Cashipr.

Sept.

Fort Worth .... ....
Galveston . .• _. . . ..

Houston .. .. . .
laredo . . .....
Lubbock . ..
Port Arthur .
Sun Angelo . . .

San Antonio . . .

13.153 -

35,869

91,807

119,718
101,320
80,331
12.835
1,020,967
115.00'
326,532

67.463
1,065.597
16,334
59.734

17
17
22
35
3
17
19
25
11
9
SO

•7

17,678"

9
3
17
3
- 9
26
6
8
7
-3
3
2
11

3~ .214

3 1,515
239,742
15,910

I3,SM,349

54.420
56.946

17
15

Totnl- 24 cities . .... 13,867.244

~2.315

Sept•
1948
8.2

Scp'.
HH.7
7.7

19~8

11 .6
10 . 9
8 .8

]0 . 1
10 .2
9.'

10.0

10 .3
13 . 1
13 .8
12 .5
12 . 0
7.9
16 .8
12.4
13 . 9

9.6
11.6
11.8

9A
12 . 5
11.6
11 . 8

10 . ~

10 .6
9 .8
9 .0
8. 3
9 .1
10 .2
83

13 . 0
6 .8
15.4
10 . 6
13 .0
8.S
12 . 7
8 .8
11 . 9
9.6
8 .9
8.8
7.8
9.0
U.O
7.6

13 . 9

11 . {)

8.4
14 . 4
8 .0
11 .3

August

8 .3
9.~
8.~

13 . ~

6.5
16.1
11 . 5
13.3
8.B
I~.O

7.8
10 .0
1O . ~

9.2
8 .9
10.4
8 .6
9 .0
7.9
13 . ~

·Demand and ti me deposita a ~ the eod of the month include certi6ed and officers' checks
outstaodi ng but. eJ:clude deposits to the credit. of bRnks.

tThis

fi~re includes only one bank in Texarkana. Texas.

Teurkana,
$27,535.

Total debits (or all banka in
exa&-ArkaollM, IIlcluding t.wo banks located in the Eighth District aUiounted to
'

t lndicates change of leM than olle-half of

flow of funds resulting from Treasury operations and currency
transactions. The net effect of these movements of funds resulted in an incre"c of almost $58,000,000 in member bank reserve balances. Most of this increase occurred during the week

001 ,978
22.139
61.892
38,552
38,038
317,405
'2,821
53.625
83.583
82,374

3
- 19
9
15
7

Texarkanat .. . .
Tyler. . ... .
'Waco . . ... . . .
Wichita Falls ..

41 ,834

82.652
103.500
95.763
79,500
19,839
731.089
110,713
284,409
95,826

Annual f'3te of t.UrDover

0116

peroellt.

Principal changes in the condition of the Federal Reserve
Bank of Dallas during the month ended October 15 showed
substantial increases in gold certificate reserves, holdings of

MONTHLY BUSINESS REVIEW
United States Government securities, and member bank reserve
deposits. As a result of an inward movement of funds, largely reflecting the trend of commercial and financial transactions, total
gold certificate reserves of this Federal Reserve Bank increased
from $549,212 ,000 on September 15 to $623,033,000 on October 15. Holdings of United States Government securities of
this bank increased by almost $9 8,000,000 , while member bank
reserve deposits, reflect ing the higher reserve requirements, rose
by approximately $8 6,000,000. Federal Reserve notes in actual
circulation, in response to an increasing seasonal demand for currency, rose by almost $8,000,000 to reach a total of $625,206,000 at the end of October.
CONDITION OF THE FEDERAL RESERVE BANK OF DALLAS

Sept. 15;
1948
$549.212
792
8,602
9W,988
970,382

875,194
617,275

SAVINGS DEPOSITS
Eleventh Federal Rcser'ie District
September 30, 1948
City

report ing

S:lVlllgs

banks

depositors
32,759

Louisiana: Shreveport . . .• •

Pe rcenta~e change in

savings epomta from

Amou nt of
savings

deposits

Sept, 30,
1947
5,8

August 31,
1948
- 0,1

- 9,2
- 0 .4
- 5.0
- 2 ,5
- 1.5
3 ,6
97,5
- 5 ,5
- 3 ,7

I 24,853,040 -

TClB.9:

Beaumont . .... . ... . . . .
Dallaa .. •.• .. . . . .. . . • .
EI Pnao,., .,. ,," , ....
Fort Worth ..•. . . . . .. , .
GalveJton .. •.. . .•. . . •.
Houston . ... . . . . . ..•• • .
Lubbock " . • """ " "
Port Arthur ... . . .. . ...
San Antonio . . . . ...•. •.

Wichit.a. Falls .. ... . .. •.
AU other ••••••...• , •••. •

3
8
2
4
4
8
2
2
5
3
3
55

12,152
142,413
35,997
43,051
23,291
101,451
1,425
6,340
37,971
10,133
7,075
63 ,075

6,171,739
77,745,755
22,494,803
33,975,021
21,858,464
72,821,273
3,548,542
4,805,527
45,214,517
9,825,825
4,504,022
>3 ,783,906

2 ,3
0 ,3

1. 2
0 ,2
0 .5
0 ,2
- 0.3
- 0 ,2
105. 1
- 1.3
- 0 .6
0 ,5
- 0 ,9
- 0, \

TotaL . ... ... .

102

517,1 33

1381,793,444 -

0,7

0. 2

Waco ....... . . . . . . . .. .

1.6

INDUSTRY
The value of construction contracts awarded in the Eleventh
Federal Reserve District during September declined sharply from
the level that had been maintained in other recent months but
was slightly larger than the total for September last year. Total
awards in the District during September amounted to $43,328,000 as compared with $75 ,8 83,000 in August and a monthly
average of about $70,000,000 during the first eight months of
the year. The decline from the preceding month, which was
general among all classes of construct ion, was much more pronounced than for the country as a whole but may represent only
a temporary slowing down, inasmuch as recent reports from
various sources indicate a marked increase in awards during October, particularly in the residential category. There are indications that completed houses are becoming more difficult to sell
at present high prices and numerous proj ects of all types are
being deferred because of high cost s of construction.
VALUE OF CONSTRUCTION CONTRACTS AWARDED
(In t housa nds of dollars)

September
j948®
Eleventh District-total. . I 43,328
18,259
Residential. . .. . . . . . . . .
25,069
All other" ". ,," "'"
United St3ws· - t otal.. . . .
702.192
Residenti.'l.1. .......... .
279.6.58
482,534
All other ............. .

September
1947
I 38,899
13,033
25,866

· 37 stateS east of the Rocky Mountains,

SOURCE: F. W . Dodge Corporation.

August
1948

I 75.883

268.543

24,748
51,135
854 ,091
337,550

3~1,453

510,541

6-l9,9J6

September 1948

No,

Gily

Valuation

Percentage
Percentage change Jan . Ilo Sept. 30, 1M8 ehan~e
valuation trom
valuation
Sept .
Au gust
No.
Valuation trom 194 7
1947

Louisiana:
S:lreve;xm .

308 I 1,480,140

- 17

109
209
239
403
281

408,485
907,672
1,450 ,654

1,370

6,867,>36
1,251,965
2,042,846
354,637

- 17
9
- 11
18
- 6
- 5
23
- 49
No chg.
24
122
- 12
12
-20
61

1948

J a nuary 1 to September 30

1048®
I 503,951
200,923
393,Q28

1047
I 489,919
179.807

310,112

i ,345.773

6.626.1 11

2.790,476
4,550,297

2,287 ,267
3,338,844

®--PrcliUliuary.

2,992 I 24.813, 757

185

4,062,620
8,692,689
18,768,694
7,525,743

19
40
25
55
17
71
46
10
62
51
31
45

T el:'ls:

Abilene .. , •.• , •
Amarillo .• , • . ..
Au8t in . . .......
BeAumont ......

~lra~~ ?h~~~t~: :

EIP""",.,.,.,.
Fort Worth ..
Galv('f3ton .....

H9UStoU • • .•••• •

Lubbock " " " ,
Port Arthur .. , ,
&n Ant.onio ... ,
Waco . . .... , ...
Wichita FalliJ • . •

221
541
145
502
273
176
1,333
140
113

671 ,W5
916 ,465

7,842.950

2.023,004
187,468
3,068,210
830,732
305,600

24
- 2'
- 36
- 35
11
30
110
4
105
- 3
128
61
10
11
13

Total ... , .... 6,472 130,519,468

October 15, October 15.
Hem
1948
1947
Total gold certi fi cate reser vC8 •• , . • .• . •. • .•. • • • .• .. I 623 ,033
1.122,315
Discounts ror member banu . . ... . ... . . .
2,4 18
100
Foreign loan8 on gold .. . ..• . •.. ... .....
8,373
1,139
U. S. (ffivemment securities . .. . . . ...... . . •..... . . 1,068,766
9i2 .536
Tota l eamin1 M8ete ........ .
1,069,547
973,775
Member ball reserve deposits . .... . .. . . .
962,218
822,587
Fed eral Reserve notes ill actual circulation.
625,206
621,229

Num~ r

BUILDING PERMITS

-----

(In t housands of dollars)

Number of

187

849
1,798
2,981
3,304
2,739
12,399

1,207
6,124
1,467

6,828
2. 178

1,302
11.316

1,371
712

12,979,254
71,576,113

7,985,76 1
21,980,3 18
3.162,292

77,279,747
11,497,280
2,540,711
27,829,087

3,210,866

40
62

68 ,667 1313.412,643

9.627,9 11

Daily average production of crude petroleum in the District
rose to a newall-time peak of 2,710,000 barrels during September, exceeding the August rate by 16,000 barrels and that in
September last year by 157,000 barrels. In areas outside the
Eleventh District production amounted to 2,666,000 barrels
daily, representing a decline of 157,000 barrels from the August
rate but an increase of 21,000 barrels over the rate in September
last year. The decline from August to September reflected primarily the effect of strikes in California, where production declined sharply early in the month. Production in that State
recovered rapidly following the resumption of work, and by
mid-October production in the United States was at a new
peak rate.
CRUDE OIL PRODUCTION-(Barrels)
Sept.ember 1948
Total
production

Daily BVg.
production

863,000
5,387,000
14,838,250
7.51 7,500
5.. ... .. ... , ... ,,'
1,477,500
6 .. .. , .. ... .. , . ,, '
9,274,250
Other 6 . .... . .•...
3,tlO3,000
1,577,500
7b "., . , ." " ",
70 ....•.•..... . . . .
1,34 5,250
21,233,250
8 .......... " "
4,200,000
9 ........ ",.,,'
2,tlO2,2,; o
10 ........ " . " .
Total Texaa ... . . . .... , .. , , 73 ,9 18, 750
New Mexico ........
3,958,000
North Ului.siana ... , .. . ... ,
3,421,100
Total Eleventh District. , ...
81,297,850
Outside Eleventh District. .. ,. 79,g76,200
United States . . . . ... . . ....... 161,274,0.;0

28,71)6
179,567
4M ,W8
250,583
40,250
309.142
120,100

Teua:

Area

District I .. , ...... ,
2,. ,. ,., . ,.
3 ,., . .•. . ,
4, . .. , . , ."

52,583

44 ,842
707,775
140,000
86,742
2,463.958
131,933
114,037
2,709,928
2,665.873
5,3 75,801

Increase or decrease in daily
average production from
August 1948 September 1947
-2 15
tlO9
1,145
183
100
4,653
-266
1,693
1,145
4,401
1,971
594
16,013
- 740
755
16,028
- 157,214
- 141,186

4,526
18,822
-4.482
2,433
8,390
- 58
1,595
11 ,498
3,682
70,1 75
11 ,815
397
128,703
14,688
13,1 99
156.680
20,676
177,356

SOURCE: Estimated from American Petroleum Inlltitute weekly reports.

Refinery operations as measured by crude oil runs to refinery
stills also declined during September as a result of the labor
disputes in California. In August, crude oil runs to refinery
stills in California averaged about 875,000 barrels daily, and reports indicate that output in that State may have been reduced
by as much as one-half. Crude oil runs to stills in other parts
of the United States averaged 4,782 ,000 barrels daily in September, or 68,000 barrels more than in August.
Drilling activity as measured by the number of new well completions reached new peaks during August both in the District
and in the United States and apparently remained at or near
the higher levels during September and early October. In the
District, completions totaled 1,344 in August as compared with
1,237 wells in July and 976 wells in August 1947. Total completions during the first eight months of 1948 numbered 8,977
wells, reflecting an increase of 2,076 wells or about 30 percent
over those in the corresponding period of 1947. In the Nation,

188

MONTHLY BUSINESS REVIEW

total completions of 23,559 wells during the eight months were
4,134 wells or about 21 percent more than in the corresponding
period last year.

products at the end of September were either lower or only
moderately higher than the respective totals at the beginning of
the season.

Uncertainty regarding· the future trend of prices of crude
petroleum and refined products developed late in September
when a major purchaser raised the posted price of crude petroleum 35 cents per barrel. Thus far, the increase in the posted
price has been met by onl y a few independent operators, and
press reports suggest that the price increase is being resisted
strongly by the major companies. It is anticipated that developments will result chiefly from the operation of competitive
forces bearing upon the demand for and the supply of crude
petroleum.

In Texas, where ginnings are most advanced, receipts of cottonseed have been especially large even though the indicated
production of cotton this year is smaller than in 1947. During
the first two months of the season, receipts totaled 435,000
tons but crushings were less than half of that amount. Shipments of products from mills in lexas have also been in large
volume.

On the basis of the estimated production of cotton and the
average ratio of lint cotton to cottonseed, it appears that the
production of cottonseed in the United States will amount to
about 6,100,000 tons as compared with 4,700,000 tons in 1947
and a 10-year average of 4,900,000 tons. Reflecting the larger
production of cotton and the rapid progress with harvesting, the
movement of cottonseed to crushing mills during August and
September has been in much larger volume than in the comparable period of 1947. In the United States, mill receipts of
cottonseed during the two months totaled 1,604,000 tons or
about 26 percent of the estimated total producion for the season, whereas about 36 percent of the cotton crop had been
ginned prior to October 1. Crushings during the two months,
which amounted to 708,000 tons, were 57 percent greater than
in the same period last season. Production of cottonseed products
has shown a corresponding increase and most of the output has
been moving into trade channels. Consequently, mill stocks of

COTTONSEED AND COTTONSEED PRODUCTS
September 1048

_ _ T.... _ __ _ _ ·United Statea--

4b~~ Sef1:~~ ~ra:!.Ia!~ Set!~m:~~
Cottonseed received at mills (toIlll) . . . . .
Cottonseed crushed (tons) .. ... . . . . . . . .
Cottonseed on hand September 30 (tonI)
Production of productB:
Crude oil (thousnod pounds) ... . . . . '
CAke and meal (tollll).
Hulls (Lona) . . . . .. . . . .. . ... .

43M 05
2ll.943
287.666

334 ,725
155,473
233,680

1,603,600
707,521
9U,2 19

9.17,335
451 .U 2
6OS,01l

63,898
11)4,097
47,779
73.035

'6,246
73,617
34,218
50,763

216,927
322,559
160,841
222,23'

13 6,673
205,323
105,217
138,1 07

7,798
8,1166
17,668
31.S08

28,.55 1
7.5,2.50
58,()()S
14G,69 1

36,582
38.424
48.751
115,4i7

Li nte!'8 {running bale.) . . . .. .
Stocks on hand September 30:
Crude oil (thousand pounds).. . .
6,926
Cake and meal (toni) . . . . . . . . . . .
28,823
Hull! (tona) . . . . .. .. .. ... . . . . .
20,1 .55
Linters (running bales) . .. . . . . . . .
60, 139
SOURCE: United StaLes Bureau of Censua.

DOM ESTIC CONSUMPTION AND STOCKS OF COTTON-(ll.les)
September

September

1948
15,309
739,1 39

1947
1l ,646
728,606

U. S. stoeks- end or month:
In consuming estabm't! . .. 1,282,404
Public stg. & compreMeI . . 4, 140,31 9

1,139,357
2,588,052

Consumption at:

TeXll8 mills . ... . . .. .... ..
United States mil18 .... . ..

August
19-48
12,090
728.732
1,246,848
1,723,616

~hfsu:!~~ ~I~~~~?
27.399
1.467,871

23 ,533
1,441 ,4;0

Full text of Review (Federal Reserve Bank of Dallas) : November 1, 1948

FRASER