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MONTHLY BUSINESS REVIEW oft h e FEDERAL Volume 35 RESERVE BANK of Dallas Dallas, Texas, November 1, 1950 Number 11 THE BUILDING MATERIALS SITUATION IN RELATION TO THE SOUTHWEST KEITH W. JOHNSON, Industrial Economist Federal Reserve Bank. of Dallas The Korean crisis, which brought about the immediate formulation of plans for an expanded defense program, created new problems for the building materials industries. Throughout the first half of 1950 the rising tide of construction activity had placed added burdens upon many such plants which were already operating at or near capacity. In fact, a growing tightness in the supply situation had been taking place for several months; and in the case of a few items, critical shortages were in prospect as a result of transportation difficulties, demand in excess of capacity production, and other factors. The impact upon the building materials industries of the outbreak of hostilities in late June was immediate and extensive. The initial development was an intensive wave of speculative buying by contractors and distributors who were endeavoring to cover near-term requirements for projects under way and to accumulate a backlog of supplies as a protection against sharp price advances and future shortages or priorities. Manufacturers immediately stepped up their operations and, at the same time, bought heavily of raw materials. This unusually heavy demand, imposed upon an already tight supply situation, induced sharp price increases, especially on some items. Wholesale prices of building materials increased about 11 percent from late June to early October, and much sharper advances occurred on such items as lumber. The above-mentioned conditions were aggravated by widespread efforts of owners and contractors to rush completion of present projects and to get new projects under contract as rapidly as possible. Prospective homeowners closed contracts for home purchases in anticipation of higher prices and restrictions on mortgage credit. Many industrial concerns which had been considering plant expansion entered into definite contracts when it became evident that prospective demand would justify immediate action. The result of these developments has been record volumes of both residential and total construction. It is inevitable that the stepped-up defense program will have repercussions upon the building materials industries, as certain basic materials are diverted from civilian construction to military construction or to the production of war materiel. Estimates indicate that construction this year had been using substantially all the cement produced, 70 percent of the lumber, a third of the lead, 14 percent of the steel, 10 perr.ent of the aluminum, and 5 percent of the copper, all of which have important military uses. Types of building requiring especially large amounts of defense materials are likely to be most seriously affected by cutbacks. Large industrial and commercial building projects, unless needed directly or indirectly in connection with the defense program, could be particularly handicapped by tightness of steel. Steel and other metals are used in some of the key components of many types This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) 178 MONTHLY BUSINESS REVIEW of buildings, e.g., in structural steel; nails; plumbing, heating, and electrical equipment; and builders' hardware. Scarcity of one or several of these items can seriously retard or discourage construction projects almost as fast as shortages of the bulkier structural materials-lumber, brick, and cement. Shortages of lumber, while affecting most types of construction, will particularly handicap residential building, which, alone, has been using a third of the Nation's lumber output and accounting for nearly half of the use of lumber in construction. On the other hand, except for some local military construction, many important construction materials are of small military significance, e.g., sand and gravel, stone, slate, brick and other clay products, gypsum, and asphalt. These materials, together with lumber, cement, and steel, account for the bulk of the basic materials used in construction. It may be noted, also, that many of the military requirements are for materials of relatively little direct significance to the construction industrymodern warfare requires immense quantities of petroleum, textiles, food, paper, and numerous other nonconstruction materials. Moreover, the defense program at its present and prospective levels will not require the immense quantities of construction materials used during World War II. With most of the war plants built during that war still available on either a stand-by or a conversion basis, far less war plant construction will be required. The industrial plants built during the postwar period also, in many cases, will make less necessary the building of additional war facilities. The airfields, military bases, and other military and naval construction of the last war will lessen the need for such work during the present emergency. The use of raw materials in the production of war materiel also will be less than during World War II-at least so long as the defense program does not become an all-out war effort. The impact of military requirements upon WHOLESALE PRICES OF BUILDING MATERIALS bui1ding materia Is shouId be gradua1, since defense IN THE UNITED STATES expenditures, which averaged about $1,300,000,- """" ".,," "" !''' 000 per month before the Korean crisis, are not ~O'ci r· ---.----r--'----'---"-----''---!· i;hp expected to rise to a rate of $3,000,000,000 per , oOf-- --j-- - + -- - + -- + - - - f - --I--f month until about mid-1951 and may not reach $5,000,000,000 monthly until about mid-1952. , oof-- --j-- - + - - - +- -+ - - - f - --I--I- --l.oo However, it is anticipated that only about two- 'o~J---+--+---+--+---f---+,I-,-=l'oo thirds of the increase in expenditures will be for hard goods. Furthermore, many such defense goods > ooJ-..--/A- - + --:-::+:--:-::-+--- f -c:;;"'o/"----oJ>oo are highly processed, so the cost of the basic materials will be but a fraction of the total cost of the finished products. Nevertheless, it seems certain that sizable quantities of materials will be required each O~--;;';;;:__---;=--~;__-;:!;;_----==;;---:f.-:---::!~ year for defense purposes and that some of these ,., ",. ",. . us reqUIrements WI'11 b e at t he expense 0 f t h e con- ",. "'"'' "".,," struction industry. In the case of certain materials, it is probable that defense requirements can be met largely by bringing into use presently idle plant or mine capacity, particularly marginal capacity, and through operation of existing plants for longer hours. Moreover, expansion of gross productive capacity at even 2.5 percent per year, a rate often accepted as the typical peacetime rate of growth, could provide a sizable percentage of the increase in defense production, particularly if the expansion should occur largely in industries producing for defense purposes. In line with the latter assumption is the announcement that steel production capacity is to be increased by over 9 percent during the next 2 years. This increase of steel capacity by 9,400,000 tons per year would equal over 80 percent of the steel requirements of the construction industry in 1950. SOUftG[ 1L/1't(,I U Of' L.A IO!! STAl lSTlGS Hence, considering the expansion of productive capacity and its most effective utilization, the gradualness of the unfolding of defense expenditures, the fact that many building materials are of small military use, and the fact that much of the military requirements are for nonconstruction materials, it seems likely that the contraction in construction will result chiefly from relatively moderate military inroads on certain material supplies, particularly steel and other metals, and the diversion of construction labor to other fields of activity. ' Only full-scale war would be likely to lead to a duplication of the 1943-45 period of wartime restrictions on construction. , . . ' MONTHLY BUSINESS REVIEW 179 As to how much of each type of building will be possible during the next 2 years, a few observations may be made. It is generally agreed that residential building will be cut back substantially, reflecting the high costs and shortages of building materials and the regulation of real estate mortgage credit on new construction."C The all-time peak this year of about 1,300,000 housing starts is expected to be reduced to some 800,000 to 850,000 dwelling-unit starts annually during the next year or so. However, even 800,000 units a year would exceed the number of starts in any but peak or near-peak boom years prior to 1949. Nonresidential construction is likely to show divergent trends, comprising as it does a wide variety of types of construction of differing significance to the defense program and requiring varying amounts of defense materials. Those types of nonresidential construction of value to the defense effort are likely to be encouraged. Military structures and a few defense plants are obvious examples, but justification on the basis of contribution to defense industries can be made for many kinds of construction, including much road and street work, sewer and water works, and utility and other construction improving the efficiency of community life and economic activity. Numerous cities over the country are in urgent need of additional hotel facilities. In many areas more office space will be required for essential governmental activities. Contract awards for various other kinds of commercial, as well as industrial, building have been increasing for some months. Such building appears economically justified even at high costs for construction, since the very high level of general business activity, especially in the larger cities, will continue to generate both business confidence and a strong demand for larger floor space on which to conduct the tremendous and expanding volume of American business and production. Modernization of many plants will also be pushed. In the oil and gas and related industries, numerous construction projects, including refineries, petro-chemical plants, and pipe lines, were planned prior to the Korean crisis and are likely to be pushed to completion, if sufficient materials are available. A high proportion of these projects, of course, are in the Southwest. On the other hand, several types of nonresidential construction projects, the need for which is not urgent, may be deferred indefinitely either because of the high cost factor or because of the shortages of labor or basic defense materials such as steel, copper, and aluminum. The amount of such construction to be deferred is likely to increase and to extend to a wider variety of projects as defense production is accelerated. On the whole, however, it appears that total nonresidential construction may be better sustained than residential building, partly because the urgency of some types of construction will counterbalance the effect of restrictions on other types and partly because nonresidential construction prior to -the Korean crisis did not reach, relatively, the high level attained by residential building. In view of the fact that the construction materials supply situation may have an important bearing upon the future volume of total construction, as well as its distribution among the various types of construction, a review of the economic importance of the industry, its growth during the past decade, and some of the more important technological developments in recent years should be beneficial in appraising the outlook for building materials supplies and for the various types of construction. 'On July 19 the initial controls over housing credit went into effect, pl'Oviding an additional 5 percentage points on down payment l'cquircments for all J!'HA loans, FHA appraisals on the basis of July 1 costs, reduction of the maximum mortgage limit on single-family dwellings from $16 ,000 to $14,000, and down payments of at least 5 percent on GI loans. The availability of Federal Home Loan Bank credit to member institutions was cut, public housing starts dUl'ing the last half of the year were restricted to 30,000 dwelling units, and effective August 1 a down payment requiremen t -10 percent-was set for FHA-insured loans for the modernization and repair of houses. Effective October 12, Regulation X covering conventional loans and companion regulations covering FHA and VA loans brought under still stricter contl'Ol all privately financed 1- and 2-family houses started after noon of August 3 and on which commitment s were not made prior to the effective date of the regulations. These l'egulations cover loans for more than $2,500 with more than lS-month maturity on major improvements and additions, as well as new construction. The down payment requirements range from 10 percent for houses selling for $5,000 and under to 50 percent on houses costing $24,250 and up. The down payment s must be cash and cannot be borrowed, except against equities in life insurance policies. The maximum maturity is 20 years, except for mortgages on houses priced at $7,000 or less, on which properly amortized loans may "un as long as 25 years. Compliance is required of all lenders who, during the past year, made three or more real estate loans aggregating more than $25,000. 180 MONTHLY BUSINESS REVIEW The production of building materials has followed, to a considerable extent, the fluctuations of construction but has been influenced by the level of general business activity, since many building materials are widely used outside of construction. The index of construction materials production ot the United States Department of Commerce, after rising during the war construction boom of 1941-42 and faUing thereafter until 1945, rose to a peak in 1948. After a decline in 1949, the index recovered and this year may rise even higher, to about 50 percent above the 1939 level. However, the industrial production index of the Board of Governors of the Federal Reserve System rose appreciably more, 75 to 80 percent, during the same 1939-50 period. The somewhat smaller rise of the construction materials index reflects, in part, the relatively high level of this type of production in the base year, 1939. Another factor is that during the war period building materials were, for the most part, less required than some other manufactured products. After the war the production of buildmg materials was hindered somewhat, in that such production had to expand in an economy already running near full capacity. Important, also, have been the technological advances in construction, resulting in a gradual decrease in the amount of materials required to build houses and many other types of construction. If the construction materials index should include such products as glass, building blocks, synthetic products of various types, asphalt tile, air-conditioning equipment, and certain other materials-the production and use of which expanded rapidly in the postwar period -a gain somewhat larger than 50 percent might have been registered for the 1939-50 period. Though building materials as a group did not rise as much as total industrial production during the 1939-50 period, some individual building materials made spectaclilar gains. The increasing acceptance of gypsum lath a,nd board in place of wooden lath is reflected in a 600-percent rise in the production of gypsum board and a 124-percent rise in the case of gypsum lath. The residential building boom has absorbed very large amounts of these two products. Similarly, the output of softwood plywood, use of which was stimulated by wartime experience, rose 150 percent. Warm-air furnace production rose 90 percent, a gain resulting from the housing boom, as well as from the switch from heating systems requiring cast-iron radiators. The production of the latter by 1950 was down 45 percent from the 1939 level. The switch from coal furnaces to oil and gas heat in residences is reflected in the drop of mechanical stoker output by 1950 to about 80 percent below 1939. Other materials which have shown large production gains include fabricated structural steel, cement, and asphalt-prepared roofing. An appreciable part of these production gains has been made in the Southwest, notably in such industries as gypsum products and cement. An indication of the magnitude of building materials production is value added by manufacture. In the five southwestern states wholly or partly in the Eleventh Federal Reserve District-Arizona, Louisiana, New Mexico, Oklahoma, and Texas- value added by manufacture of building materials in 1947 approximated $400,000,000, or 13 percent of the total for all manufacturing in this area. In the Nation, only 8 percent of the total value added by manufacture was accounted for by building materials production, although such production involved value added of over $6,000,000,000 in 1947. Employment in building materials manufacturing in the five southwestern states, which has averaged recently about 100,000 persons, represents 2 percent of total employment in the area, or about the same percentage as in the Nation. An even larger contribution to employment results when the building materials are utilized by the construction industry, which employs about 300,000 men in the five southwestern states and about 2,500,000 in the Nation. The building materials industries are particularly large users of certain natural resources. Construction, which is the end-use of a high proportion of the total output of numerous basic materials, absorbs about 85 percent of the gypsum, 80 percent of the sand and gravel, 75 percent of the clay, 75 percent of the stone, about 70 percent of the lumber, and over a third of the lead, as well as most of the slate, asbestos, and asphalt. Many of these resources are widely available and of too Iowa value per pound to be shipped great distances. Such resources gain their value chiefly because they are put to use by the building materials producers and the builders of the region. In this respect, tbe resources utilized in building materials tend to be of more immediate advantage to the Southwest than some other resources of potential future value. MONTHLY BUSINESS REVIEW 181 Important factors in the tendency toward localized utilization of building materials resour::es are the wide dispersion of construction ac.tiviry, which takes place in every community; the rather low value per pound of many of these materials; and the wide availability of many of the basic construction materials. Such materials as sand and gravel are nearly always obtained within a comparatively short distance of the building site, while cement, brick, and tile are also preferably produced near the point of use. As a result of these tendencies, both construction and the building materials industry tend to stimulate local and regional business activity. The strength of this stimulus to business activity is an important factor in sustaining income and employment, as is indicated by the fact that in 1949 construction accounted for about 17 percent of all production in the Southwest and about 12 percent in the Nation. This construction activity, in turn, is necessary for the normal functioning of all other industries. In the Southwest it is particularly important, since a continued flow of construction materials is necessary for the erection of the plants and equipment, houses and stores, and other buildings and structures required for the dynamic economic growth of the area. Another way in which the building materials industry contributes to the economic development of the Southwest is through its very large requirements for, and hence stimulation to, transportation. Even though long hauls of many of these materials are avoided when possible, building materials account for a considerable proportion of the pay load of the railroads, trucks, ships, and barges of the Nation. The total weight of the 1947 output of building materials in this country exceeded 550,000,000 tons, an amount greater than that of all the agricultural production in the Nation. It is probable that building materials account for about one-fourth of the tonnage of commodities hauled in this country. Such materials represent about one-sixth of all rail shipments and keep approximately a million trucks busy. Nearly every type of building material of any economic importance is produced in the Southwest. Both in this area and in the Nation the most important single material is lumber. Its output in the five southwestern states has averaged about 9 percent of the national total in recent years, with Texas accounting for about 4 percent and Louisiana, almost as much. Lumber production in the Nation in 1950 is expected to exceed the 1948 postwar peak of 36,000,000,000 board feet. Production this year is up about 18 percent from 1939 in the Southwest and 23 percent in the Nation. The larger rate of gain for the Nation reflects the increased tapping of the rich timber resources of the West Coast. These gains are appreciably less than those made in the production of most other building materials. This fact is in keeping with the trend of lumber output over the last half-century, during which the all-time peak in lumber production in the United States was achieved in 1906 and 1907, when annual production totaled 46,000,000,000 board feet. This record was not equaled during the building boom of the 1920's, and it is unlikely to be equaled during the present boom. The relative lag in lumber output as compared with other building materials reflects widespread shifts to other types of materials, induced, in part, by the higher cost of lumber, resulting from decreased supplies from eastern forests and the heavier reliance upon western forests more distant from the major consuming centers. LUMBER PRODUCTION IN THE SOUTHWEST AND THE NATION • " "IZOH A, NEW MEXICO, OIIlAHO t,l A SOURCE US OCPAIIITMfHT OF CO M"' ERct In addition to lumber itself, the planing mills and related plants and shops in the Southwest . provide a large, diversified, and widely distributed output of doors, window sash, moldings, screens, Venetian blinds, and cabinet work. Much of this processing of lumber, as well as related materials, could be classed as off-site construction. This is even more true of prefabrication of houses and other buildings in a number of cities of the area. Also important in the Southwest is the production of railroad cross ties, piles, poles, plywood, veneer, and wooden awnings in large volume for local consumption, as well as for sale in other areas. 182 MONTHLY BUSINESS REVIEW A factor in the loss of relative standing of GYPSUM BOARD AND lATH. AND FLOOR AND WAll rilE. lumber among the building materials, particularly PRODUCTION IN THE UNITED STATES in the Sou thwest, has been the rise in the u tiliza tion """ ••'"' '". '''' nOOft nu: 800 of gypsum board and lath. The 1950 production .,000 of these gypsum products in the Nation is expected ,,"00 ' ' \ . - } 000 to reach about 5 times the 1929 output and 3.4 / V times that of 1939-gains made largely at the ex- .poo .00 pense of wooden lath. Despite these gains and a 10/ percent increase in output capacity within the 3,000 >00 GYPSUM BOARD : " ' / current year, shortages have been widely reported ANO LATH---...! ~ throughout the country. Factors inducing the ',000 / 1 ' 200 switch to gypsum board and lath include the more 1.000 ~ I ./ ~ r~L~~~T~~~.------,..J~--- 100 rapid rise of lumber prices than of gypsum prod01--',,,",,,>--, "'"-:-"":--r 0 uct prices j the rise in wages of lathers j the saving .,," "" ".. ..., .•• in labor time, as well as wages, to be made by the ~:,::;";~;~,i,~~:~:::;·"··"'" change; the greater standardization of construction . ..... ".. mow"'. in multiple-unit projects; the saving of construction time when early completions are desired; and liberalization of building codes to permit the use of gypsum board and lath. Gypsum board is in especial demand on jobs where quick, inexpensive, dry-wall construction is desired. Gypsum products, including plaster as well as board and lath, are produced in five Texas cities and in Arizona and Oklahoma. With recent increases in capacity, Texas probably ranks first among the states producing gypsum products. AltO WAU.. IIIIUIOIfI 01' SQ UARE f££f "' 11.1.101015 OIF SCUARE HU J - Another southwestern product replacing, to some extent, a timber product is asphalt roofing. Prepared asphalt roofing, as well as asphalt shingles and roll roofing, has been used increasingly to provide water-tight, fire-resistant construction. Other forms of asphalt, as well as road oil, are used in street and highway construction. The southwestern petroleum refineries produce about one-fourth of the national output of asphalt. /---1-" , '------( / CEMENT AND GYPSUM PRODUCT PLANTS IN THE SOUTHWEST 0 «""" """' OCUOt,.. ""'" "ou In cement production, the Southwest has been gradually improving its position relative to that of the Nation. Cement production has set new records each year since 1947, and this year should approximate 17,000,000 barrels in Texas and 210,000,000 barrels in the Nation, with Texas accounting for about 8 percent of the national total. Texas production in 1950 will exceed that of last year by about 13 percent, while the increase since 1939 will approximate 13 3 percent. These gains considerably exceed those of the Nation. The Southwest, as a whole, tends toward approximate self-sufficiency in cePORTLAND CEMENT PRODUCTION ment production, with Texas producing somewhat IN THE UNITED STATES AND TEXAS TU~ more than it uses and, hence, supplying part of the '''''IUl! •'LUOHS •• requirements of adjoining states. However, occa•,., sional shortages may lead to movements of cement 00 o from distant centers of production. Cement plants _UN I TED STATES are located in seven cities in Texas, as well ali in the ~ I Arizona. Plants / " / • states of Oklahoma,ofLouisiana, andproducts as conf or the production such cement l..\_ _ ,. / I 00 o crete block, pipe, and post are found in numerous I I ,I \ cities in the Eleventh District. '........." ... , ~tT~.n_ U!fIT[O SUT£S ""LLION S Of' 376 - POUHtl 'ARREL 0# 376-"eU NO \ '0 ~ 0 19U .. ... --" .. -- r-/' .'V ,------ '\ ........ '''0 SOURC[ , U '.BUREAU 0' N INES. ItI~O fi GURES E5TI ".UE O. _ .. - ... \~ -. 1/t.1 • /'TEXAS 193' 1940 ~" ~ 0 The long-term trend in brick consumption has been downward during the past 40 years, as other materials have been gradually displacing brick, especially in such uses as paving, sidewalks, large MONTHLY BUSINESS REVIEW 183 commercial buildings, and certain other types of buildings. Cement and steel, in particular, have gained at the expense of brick. On the other hand, brick as a fire-resistant material has made some inroads on lumber consumption, particularly in larger cities. During the postwar construction boom, brick production has increased somewhat. In 1950 about 5,400,000,000 bricks should be produced in the United States, representing little change from last year and a gain of only 14 percent from 1939. The 1950 output will equal little more than one-half the 1925 production and about a fourth of the 1910 peak output. Reflecting the long-term decline of the industry is the obsolescence of many brick plants, particularly in the less rapidly growing parts of the country. In the five southwestern states, brick production has amounted to about 8 percent of the national total in recent years. Since brick and structural clay tile are made from a rather widely available raw material, these products are produced in the vicinity of most of the larger cities of the Southwest. However, lack of suitable clay has prevented production in some regions of the area, as in parts of West Texas. Drain tile is also widely produced in the Southwest, while tile for walls, floors, roofing, and chimneys is made in or near many of the larger cities. The decentralized character of the brick industry has resulted in wide geographical variations in production trends, with declines in some areas during recent years but increases in the Southwest, where some spot shortages have been reported. The structural steel used in the erecticn of large and medium-sized buildings, as well as in "OJ"'" ",""" bridges and some other types of construction, is 400 •2 I largely fabricated from basic steel shapes produced in steel mills. While the basic steel production is 2 000 I concentrated chiefly in the older industrial areas a~ I600 of the North, the fabrication of basic shapes into U~~cW~:; ..- ..... __ '\: finished structural steel is somewhat more widely ! ~l:.t_/.- I ,_ \ , _ _ _ , _, ,, '00 distributed geographically, with considerable fab• , ' ~l<"'<' rication of this type taking place in the larger cities r"./;:.;:/\~,~ f.t ?~ Y. _ 8 00 4 of the Southwest. The commencement of steel pro"-'J \ ,- : , ' duction within the Southwest is favorable to the 4 00 2 .~ further expansion of structural steel output in the 2, area, where even in 1947 there was produced nearly 0 " 7 percent of the total national output. The recently announced program for the expansion of steel capacity in the Nation by nearly 10 percent by the end of 1952 improves the longer range outlook for steel product supplies. BRICK. TILE.AND CLAY SEWER PIPE PRODUCTION IN THE UNITED STATES COMI,ION AHe F.C~ 8RI0il I LLI~S ~, . 'I.\\C\...,.. SEWER PI P[ \' la2~ 1930 tr ~ ~O"'I.IOH .'" ' ' '1 19l~ AND 19~a 1''' 5 SOURCE ' U S DEPAR TMENT OF COllfM[ I'I e [ 1'~ FIG URES E5TI /IIATt:~ ~ 1932·19)' ($T1WATEo. At a number of industrial centers in the Southwest, steel pipe, concrete reinforcing bars, metal lath, nuts and bolts, screws, and wire nails are produced; while ornamental iron and such sheet metal products as ducts, gutters, downspouts, flashing, and vents are made in dozens of cities in the area. Other southwestern steel products include sinks, smokestacks, metal roofing, window frames, screens, STEEL CONSTRUCTION MATERIALS PRODUCTION Venetian blinds, and metal awnings. Aluminum is IN THE UNITED STATES also used in making the latter five products, as well 3:~\)'i"""" "~'''''i'-''''-i'i2' '';--'''~~. .~~~,--~--,-~~'''''''''''''~ as in shutters and interior trim. Paint and related materials for prolonging the life and improving the appearance of buildings and structures are produced in the larger cities of the Southwest, Output in the Nation in 1950 is expected to be up about 5 percent from 1949 and about 60 percent above 1939. 2,500}----+--- -f---- - J---+---.,/----J 2,0001---+-_--1_ _ _-41. '--+---""''-=+'-----1 '00 Among the more highly fabricated building materials and components produced in the Southwest, fans, ventilators, and air-conditioning and 'f . . . 11 . d ·""·"".""."''',,,"m. pun ylng equipment are especla y Important an are made in numerous cities of the area. The warm summers, together with rising incomes, have been important in the encouragement of this type of $OIJRC[· U S Oe:'UTIoIe:IrIT 01' GOWfllE ll CoL 11 $0 FIGUR ES (6T l fllAIEO. 184 MONTHLY BUSINESS REVIEW production in the Southwest. In this field the growth in recent years has been as large as or larger than in any other section of the country. Furnaces, space heaters, and hot-water heaters are also made in a number of cities in the area. Allied in purpose to both the heating and the air-conditioning equipment are the insulation materials used to conserve heat in winter and to keep out heat in summer, as well as to increase fire resistance. Among the insulating materials produced in large volume in the Southwest are rock wool, sawdust, cottonseed hulls, fire-proofed cotton, vermiculite, and perlite. Vermiculite is a type of mica, while perlite is a volcanic glass; both expand when heated, becoming lightweight aggregate with excellent thermal and acoustical insulation properties. The foregoing review of developments in the construction and building materials industries highlights the facts that over-all construction, as well as most of its important components, is running at or near the all-time peak, that comparatively rapid strides have been made during recent years in the production of many building materials, and that in the case of most of these products, output capacity has kept pace with demand. It has been emphasized that most of the materials used in construction are widely distributed throughout the country and are available in ample quantities to meet prospective demands. The major deterrents to the maintenance of construction at current levels, under existing and prospective conditions, are likely to be the uncertain or decreased availability of construction lab:>r and of supplies of certain products which are essential to most types of construction. In the case of both labor and specific materials, it seems likely that the defense program will compete to an increasing extent. Steel could prove to be an important bottleneck if defense requirements should reduce the amount available for the production of such key building items as nails, pipe, concrete reinforcing bars, structural steel, and plumbing, heating, and electrical equipment. As supplies of iron and steel available to the building materials industry are reduced, the output of the plants affected will be curtailed correspondingly. Similarly, the nonferrous metals, including particularly copper and aluminum, deserve watching, since they are vital to the prodlJction of electrical equipment, copper pipe and tubing, and some types of roofing, wall panels, window frames, blinds, awnings, and a variety of other building products. A shortage of electrical equipment would prove particularly serious to the building industry, while many of the other products requiring copper or aluminum are either necessary or desirable for the maintenance of quality standards in construction. The fabricating facilities for the production of plumbing, heating, electrical, and other metal or partially metal products might prove insufficient for the construction industry if an appreciable proportion of such facilities were diverted to the production of defense products. This could retard construction just as effectively as an insufficiency of the metals used in making these products. Similarly, with both the Armed Forces and defense production absorbing increasing numbers of workers, a labor shortage might develop in the building materials field, particularly in the lumber, brick, and other industries where wage rates tend to be lower than in defense plants. Loss of output of building materials from this source, likewise, would reduce construction activity. Transportation could also prove to be a bottleneck, with distant supplies of lumber, plumbing goods, and other building products being less available to the construction industry of the Southwest if defense shipments should utilize a substantial proportion of the transportation system. Government controls over the production or use of materials could further affect the availability of materials for construction, while additional controls over certain types of construction could affect the demand for materials. Such controls would tend to allocate the resources and productive capacity of the country to those industries and uses deemed of greatest importance to defense. It should be recognized, however, that to the extent that natural forces bring about a desirable distribution of labor, materials, and plant capacity between the building materials and construction industries and defense requirements, the need for controls will diminish. MONTHLY BUSINESS REVIEW 185 Review of Business, Industrial. Aglicultural, and Financial Conditions DISTRICT SUMMARY Department store sales in the Eleventh Federal Reserve District in recent weeks returned to more normal seasonal levels, Department store sales in the Eleventh Federal Reserve District in September, although showing a less-th an-seasonal increase from the high August level, registered a 15-percent increase over sales of September last yea r. Heavy buying of consumer durable goods in the week immediately preceding the reimposition of consumer instalment credit controls contributed significantly to the large September sales volume. During the first 2 weeks of October, sales returned to more normal seasonal levels, with the year-to-year gain amounting to only 5 percent. Department store stocks at the end of September, reflecting heavy inventory buying in the weeks immediately following the outbreak of Korean hostilities, rose to a record high. Furniture store sales in September showed a slight decline for the second consecutive month but were almost one-third higher than in the same month last year. Nonfarm employment in Texas reached its fourth successive new peak in October at a level about 4 percent higher than a year earlier. The value of construction contract awards in the District in September, although 21 percent below the August record, was 71 percent higher than a ycar earlier and 9 percent higher than the average for the first 9 months of this year. Both residential and nonresidential awards declined as compared with those in August. Crude oil production in the District reached a new peak in September of 2,929,000 barrels daily but declined moderately in October as a result of lower Tcxas allowables. Benefiting from open weather, farmers in the District have made good progress in recent weeks in harvesting mature crops and seeding small grains and winter legumes. The outlook for total crop production in the District has changed only slightly during the past 2 months, as crop losses in some areas generally have been offset by improved prospects in other sections. Livestock are in good condition throughout most of the District, being favored by a plentiful supply of range and pasture grass. The general level of farm prices in Texas, after rising for nine consecutive months, was halted in October when prices of most major commodities held steady or declined. Loans of the weekly reporting member banks in the District increased $63,334,000 between September 13 and October 18, to reach a record total of $1,386,743,000. Commercial, industrial, and agricultural loans accounted for approximately 67 percent of the gain. Total investments declined $45,679 ,000, as holdings of Governments dropped rather sharply. Total deposits increased $33,624,000, despite the decrease of $25,094,000 over the first 4 weeks of the period. BUSINESS On October 13 the Board of Governors of the Federal Reserve System announced that Amendment No. 1 to Regulation W, tightening instalment credit controls, would become effective on October 16. This amendment reduces the maximum maturities on instalment credits from 21 to 15 months for automobiles and from 18 to 15 months for appliances and furniture. The minimum down payment on automobiles remains at one-third; the down payments on appliances are increased from 15 percent to 25 percent and on furniture from 10 percent to 15 percent. The maximum maturity on home improvement credits remains at 30 months and the minimum down payment at 10 percent. Down payments are now required on all articles costing $SOar more. as consumer hard goods sales declined noticeably following the reimposition and subsequent tightening of consumer instalment credit controls. Total sales at reporting department stores in the first half of October were 5 percent above a year earlier, or a little lower than the year-to-year increases prevailing in the months immediately prior to the initiation of hostilities in Korea. September sales at district department stores showed a lessthan-seasonal rise over the inflated volumes of July and August, when scare buying was rife. Nevertheless, sales were the highest for any September on record, rising 9 percent above the August volume, 15 percent above September a year ago, and 2 percent above September 1948. Heavy anticipatory buying of television sets and other consumer durable goods in the week immediately preceding the reimposition of Regulation W on September 18 was an important factor boosting September sales. The year-to-year increase in district sales in September was noticeably larger than that shown in department stores throughout the Nation, but district stores experienced a smaller increase in sales from August to September than the national average. For the first 9 months of this year, sales at district department stores have averaged 13 percent higher than in the corresponding period of 1949, as compared with a 5-percent increase for the Nation's department stores. Sales of consumer durable goods, with the exception of television sets, declined noticeably in September from the extremely high levels of July and August but equaled or exceeded the high volumes of the pre-Korean months, May and June. Major household appliance sales, for instance, although down 2 percent from August, were slightly higher than in June and were 34 percent larger than in September a year ago. Sales of furniture and bedding were 4 percent lower than in August and 9 percent lower than in July but were higher than in any other month on record, exceeding year-earlier levels by 25 percent. Domestic floor covering sales showed a similar picture. On the other hand, "les in the television, radio, and phonograph department were 5 5 percent greater than in August and 261 percent higher than in September 1949, when television sales were still in relatively modest volume. Soft goods departments generally had satisfactory sales records in September but continued to lag behind the durable goods departments. Sales of women's and misses' apparel and accessories showed year-to-year increases for the fifth consecutive month. Women's and misses' dress sales were 12 percent above a year ago, following a 2'I-percent year-to-year increase in the previous nlonth, while women's and nlisses' coat sales were 2 percent higher than a year earlier as compared with a 7-percent gain in August. Moreover, women's and misses' accessory sales were up 5 percent over a year ago, after having shown a 17-percent year-to-year increase in the preceding month. Men's clothing sales continued their favorable showing, with a year-to-year gain of 11 percent, and silverware and jewelry sales showed a large increase over year-earlier levels for the fourth consecutive month with a 39-percent rise. Although instalment sales were noticeably lower in thc last half of September after Regulation W was imposed, total instalment sales for the month showed a 4-percent gain over the high August volume and were 40 percent above Septem- 186 MONTHLY BUSINESS REVIEW ber of last year. It should be noted, however, that this yearto-year increase is the smallest for any month this year. Charge account and cash sales continued for the fifth consecutive month to show ga ins over year-earlier levels, with increases of 10 and 4 percent, respec tively. The September ratio of collections to instalment receivables outstanding remained unchanged at 12 percent for the fourth successive month. Instalment receivables, nevertheless, rose 6 percent during the month and at the end of September were almost double the amount outstanding on the same date of 1949. Charge account receivables, also, showed a marked increase and at the month's en d were 16 percent higher than a year earlier. WHOLESALE TRADE STJ.TISTIOS - - - - -Percentage changei n ' - - -- _ - - - - - 'Net sales,- -- - - - Stockst-Sept. 1950 from 9 mo. 1950 Sept. 1950 from Sept. Aug. compo with Sept. Aug. 1949 1960 9 mo. 1949 1949 1950 Linea of trade :· Automotive supplies . ........ . -21 -29 Drugs and sundries . .... .... , . 16 5 Dry goods .. ......... , ........ . . . -22 Grocery (voluntary-group and ruuline wbolesalers not sponsoring groups) ..... . ....... ......... , 2 - 5 Hardware .. . . . . . ........ ,.".... 15 -13 Industrialsupplies . .. ........ . , . . . 34 7 Tobacco products ........ ,....... 10 - 3 Wines and liquors . .... . .. , .. . . . .. - 8 -48 • Preliminary data. Compilcd by Uruted States Bureau of CensWl. t Stooks a.t end or mouth. I fndica.t.e3 chauge of lel;5 than one-balf or 1 percent. , is - 14 1 27 U6 14 9 2 4 1 -6 4 -5 -4 3 16 35 RETAIL TRADE STATISTICS - - - - - Percentagechange i n ' - - - - _ - - - - N c t sa.1cs---_- _ Stocks'-Sept. 1950 from 9 mo. 1950 Sept. 1050 rrom Sept. Aug. compo with Sept. Aug. 1949 1950 9 mo. 1941) HJ49 )950 Departwent 8torClj: Total Elevcnth District .. CorpUli Christi . .............. Dallaa . ... . .... ............ Fort Worth . ... . Houston ...... . ..... .......... .. San Anklnio . ....... ... .. .. .. .. . Shreveport, La .. .... Other cities . .. .... Furniture store!: Total Eleventh District .. ......... Dallas ...................... Houston ............. .. .. . ...... . Port Arthur . ...... , .......... San AotOllio ............... .. .. . . Shreveport, La.. ............ .. . . . Wichita FalliL ........ . . .... ... Household Rppliance stores: Total Eleventh District . .... Dallas .......... ... . . ... • Srock! at end of month. 15 5 14 16 17 9 -12 13 4 10 4 13 9 22 7 13 32 32 30 13 12 13 13 9 17 9 15 24 14 25 13 26 32 23 - 1 19 66 18 26 25 20 -11 -13 -7 6 -2 108 120 8 12 9 1 15 5 7 10 8 31 14 26 14 3i io 5 11 Daily average sales-(1935-39 = 100) - - - Unadjusted·--_---Adjustcd _ __ Sept. AUg. July Sept. Sept. Aug. July Sept. 195U 1950 1950 1949 1950 1960 1950 1949 4H 399 429 405, 420 449 537 375, 438 376 367 385 395 443 610 347 472 405 503 4SOr 441 460 621 420r Stocks- ( 193~9 = 100) - - - Una.djusted' - - ----Adjusted-- _ Sept. 1950 Eleventh District.. .......... Aug . 1960 July 1950 Sept. 1949 Sept. 1950 Aug. 1950 July 1950 Sept. 1949 439p 402 351 367 4.26p 406 374 Wholesale prices in the aggregate have tended to level out during the past several weeks, following a marked rise in July, August, and the first half of September. The sensitive Daily Spot Index of 28 Basic Commodities of the Bureau of Labor Statistics on October 20 was about 1 percent below the postKorean high on September 15, although 25 percent above the level immediately preceding the opening of Korean hostilities . Moreover, the BLS All Commodity Wholesale Price Index, after reaching a high point in the week ended September 19, declined for three consecutive weeks and then rose slightly in the week ended October 17 to 168.7 percent of the 1926 average. At this level, the index was 0.6 percent lower than 4 weeks earlier but 7.2 percent higher than in the immediately pre-Korean week. Prices of farm products and foods have shown a small decline since the middle of September, while prices of other commodities have continued to show a rising tenden cy. District farmers, taking advantage of open weather during recent weeks, have made rapid progress in harvesting mature crops, in preparing land, and in seeding small grains and winter legumes. Seeding of winter wheat in the northwestern section is virtually completed, despite the interruption caused by earlier rains. Grain seeded during August in the northern High Plains is making rapid grow th and is in need of grazing. Early October rains in the Lower Valley improved commercial vegetables and the prospects for citrus fruit production, but more moisture is needed in the coastal areas and in scattered parts of the range country. 356r r Revised. ~ Furniture store sales in this Di,trict in September showed a small decline for the second consecutive month but were almost one-third higher than a year earlier and were slightly above the former record September volume of 2 years ago. Credit sales, in contrast with total sales, actually rose slightly, despite consumer instalment credit controls which became effective in the latter part of the month, and were 33 percent larger than in September 1949. On the other hand, cash sales were down 11 percent from August, although showing a substantial increase (18 percent) over year-earlier levels for the third successive month. Collections were little changed, and accounts receivable outstanding, although up 3 percent from the previous month, continued to show about the same 25-percent gain over year-earlier levels as in July and August. Furniture store stocks in September rose 7 percent, following a 3-percent increa se in August and a 2-percent increase in July, and at the end of the month were 26 percent higher than a year earlier. AGRICULTURE INDEXES OF DEPARTMENT STORE SALES AND STOCKS Eleventh District .. Da.llM .. . Houston ......... . the corresponding date of bst year. Part of this increase in stocks is undoubtedly due to the higher prices on stock replacements, but the physical volume of stocks is now probably at an all-time high. Orders outstanding declined moderately, in accordance with the normal seasonal pattern, but at the end of September were 35 porcent higher than a year earlier and 15 percent higher than on September 30, 1948. Preliminary, Unadjusted ror 6easoDaJ varia.tion. The heavy invent ory buying on the part of merchants in the weeks immediately following the outbreak in Korea is now being reflected in a substantial increase in stocks. Stocks at district department stores on September 30 reached the highest level on record, showing a greater-than-seasonal (8 percent) rise f rom a month previous and a 24-percent increase over Cotton harvest has made excellent progress in the southern Low Rolling Plains and is active over the southern High Plains. Picking is virtually complete in the upper coastal and southcentral counties of Texas, but harvest has continued in northcentral and northeastern counties where opening of bolls has been retarded by excessive rains during September and by heavy foliage. The generally favorable outlook for cotton in west Texas appears to have compensated for losses sustained by farmers in the northcentral and northeastern counties, as the Department of Agriculture has made no change in its MONTHLY BUSINESS REVIEW estimate of 2,775,000 bales for the State. The estimate of the United States crop was lowered only 13,000 bales, or to 9,869,000 bales On October 1. Cotton ginnings in Texas through September 30 totaled slightly more than 1,000,000 bales, or 36 percent of the estimated crop, compared with 35 percent to the same date last year. Cotton ginned in the State through this date averaged higher in grade and longer in staple length than that ginned during the corresponding period last season. TEXAS COTTON PRODUCTION BY CROP REPORTING DISTRICTS (In thousands of bales-500 lb. grOM wt.) Crop reporting district I. N.... ....................... 1.s •. .................... 2 .... ................. 3 ... . ... . ...... . . ............ 4 ... . . . . . ................. ... 5 ..... . . . .•.•.........•...... 6 .......... .... .. ........ ....... 7 .......... 8 ...... 9.. ...... 10 ....... ... ...... ... 1948 116 558 496 22 773 226 140 20 278 170 355 1949 U9 I,m 1,119 61 1,069 360 190 88 505 212 626 State. ............... .............. 3,153 6,<H0 SOURCE, United States Department of Agriculture. 1950 indioated October I 90 776 465 14 460 110 146 40 210 118 358 2,775 1950 .. percent of 1949 35 49 42 23 42 31 76 45 42 56 57 46 The movement of cottonseed to crushing mills increased seasonally in Texas and Oklahoma during October, The quality of seed marketed was very good on the whole, although seed in SOme localities contained an excessive amount of moisture; also, occasional lots of .eed contained unduly large amounts of free fatty acid. Wagon lot prices for cottonseed at Texas gin points at mid-October ranged from $75,00 to $100,00 per ton, with an average price of $90,30 per ton, which compares with $37,80 per ton about the same time a year ago. Crude cottonseed oil sold at terminal points in Texas on October 27 at 18.25 cents per pound, f,o.b. tank cars, which compares with 15.75 cents a month earlier and the season's high of 19 cents on September 1. The cotton market has been in a very unsettled condition during the past several weeks. On October 10 the Department of Agriculture announced interim export allocations for United States cotton for most importing countries other than Canada, This action, which provides for export of 2,000,000 NORTHERN .HIGH PLAINS I-N 187 bales of cotton from tills countl'y in the period from August I, 1950, through March 31, 1951, establishes country-bycountry allocations to insure equitable distribution among importing countries and to assure an adequate domestic supply, The effect of this announcement on the cotton market was immediate and sharp; cotton fell $2 0.00 per bale within a week. Subsequent reports that the export allocations would be reviewed gave new strength to the market; prices then rose, regaining much of their previous losses. The Secretary of Agriculture announced on October 23 that the export allocations would be increased to 2,146,000 bales for the period ending next March. The controls continue, however, to have a deflationary effect on the domestic cotton market, although prices on foreign markets have skyrocketed since American Cotton exports were placed under control. Combining of grain sorghums on the High Plains continued in October, but there is some danger of losses of late planted acreage if frosts occur early. Harvest is complete in other areas. The estimate of production of sorghum grain in Texas, placed at 121,000,000 bushels, is a record high for the State and compares with about 93,000,000 bushels harvested in 1949, The large crop this year is attrib utable to a large increase in acreage, as yields, averaging 22.5 bushels per acre, are down 1.5 bushels from a year ago. The market for grain sorghums weakened during the past 2 months under the pressure of record production. Prices on the Fort Worth market in late October were about 15 cents per cwt. below the July peak, CROP PRODUCTION (In thousands (If units) To."", States in Eleventh District- Estimated Estimated Oot. 1, Average Oct. I, Unit 1950 1949 1939-48 1950 1949 ConI . .. 64,272 120,410 108,626 bu. M,730 58,208 Oats..... bu. 31,000 34,020 31,195 50,535 55,682 Burley •.. 10,160 bu. 1,750 2,774 4,009 10,550 4,282 Cotton .. . bale 2,775 6,040 2,720 8,119 Hay ............. Ion 5,022 4,827 1,420 1,358 1,366 h ish potatoes .... bu. 4,560 6,780 2,720 3,686 7,U3 Sweet. potatoes ... bu. 5,119 16,37S 14,555 5,500 6,776 R ice ............ cwt. 10,178 7,873 21,323 21,229 10,879 Sorghum gra.in .... bu. 92,676 02,954 142,083 114,426 121,006 333,450 283,952 398,975 456,130 Peauuts .... lb. 283,200 4,7101 18,8001 29,2001 Broomoornt. ton 4,3001 9,3001 ·Arizona, Louisiana, New Mexico, Oklahoma, and Texas. ~Droomcorn data are in t.crill8 of toIlS rather than thousands of tons. OUnCE: United State::! Depu.rtmcnt of Agriculture. Average 193~8 114,406 61,468 12,822 4,088 4,519 10,011 14,326 17,755 76,018 384,143 23,0101 Excessive rainfall in northcentral and northeast areas of Texas during September caused some loss to the State's corn crop. Production was estimated on October 1 at 65,730,000 bushels--<lown about 1,600,000 bushels from the September 1 estimate, The current estimated yield per acre at 21 bushels compares with 22,5 bushels last year. Corn price support rates for the 1950 crop will average $1.47 per bushel on a national basis, compared with $1.40 for the 1949 crop, Prospects for rice production in Texas improved during recent weeks as harvest has made good progress without interference from storms or excessive rains, Production in the State is estimated at 10,879,000 100-lb. bags, or 700,000 bags over last year. Yield per acre, at 2,300 pounds, is a near-record . The rice market in Texas and Louisiana held steady during the past month; demand was principally from domestic trade, as export demand was limited. Zenith and Blue Bonnet varieties sold during most of October at $8.40 and $11.30 per cwt" milled basis, respectively, at Texas and Louisiana cornmon points. These prices, however, are about $1.00 to $ 1.50 below prices prevailing when harvest of the new crop began. CROP REPORTING DISTRICTS OF TEXAS Production data relative to other important field crops in Texas and in the five states of the Eleventh District are shown in an accompanying table, It will be noted that, as compared with last year, smaller crops of oats, barley, Irish 188 MONTHLY BUSINESS REVIEW potatoes, peanuts, and broomcorn have been or will be harvested. In most instances, the smaller production of these crops is due to reduced acreage, although in some instances smaller yields have been a factor. In contrast to these declines, the five states probably will harvest larger crops of hay and sweet pota toes this year. of feeder cattle, at record levels, is causing a cautious attitude on the part of both cattle feeders and financing group'. Feeder and stocker steers sold on the Fort Worth morket at the end of Oc tober for a top price of $30.00 per cwt., compared with $22.50 a year carlier. Production of citrus fruits in Texas during the 1950-51 season will about double that of last season, which was the first full growing season since the January 1949 freeze disaster. The grapefruit crop is estimated at 12,000,000 boxes, while production of oranges is estimated at 3,500,000 boxes. The development of this year's citrus crops was mostly under favorable conditions. Trees, for the most part, had made a surprising recovery from the severe free ze damage and were in good condition for the 1950 bloom. In contrast to the increase in citrus fruit production, smaller crops of peaches and pears were harvested in the State, as shown in the accompanying table. TOP LIVESTOCK PRICES (Dollal1l per hundredweight) Fort Worth market ~t'oe1~~t!!;;~: .::::::: :::::: :: ::::::::: :: Slaughter cows ............•..•.•.•••... . • .. Slaugbter heifers Ilnd yearlings .•.•.•.••.. ... . ~~~~;e:a~~~::::::::::::::::::::::::::: : Slaughter lambs ...................•.•.. Hogs ............... • .• . . " ..... ... . . .... . September IQ50 $30.00 30.00 23.W 30.26 30.00 35.00 29.00 23.75 September 1949 $24.60 21.60 18.00 26.00 24.60 24.60 23.00 22.60 August 1950 $30.00 30.00 22 .60 3000 30.00 30.00 30.00 24 .75 LIVESTOCK RECEIPTS (N umbe, ) The Lower Rio Grande Valley vegetable area received good rains during October, which were beneficial to growing crops and stimulated growers' interest in planting hearty vegetables for winter harvest . Much of the Coastal Belt is still very dry. Tender-type vegetables in the Laredo, Winter Garden, and Eagle Pass sections continue to make good progress. Early planted winter vegetables in these areas show more advanced growth than those in the Lower Valley. Reflecting the effects of the droughty conditions in south Texas during the early fall, production of late fall snap beans is estimated at 125,000 bushels--40 ,000 bushels below last season. The estimate of the fall eggplant crop is placed at 94,000 bushels-down 6,000 bushels. The 592,000-bushel fall pepper crop is off 54,000 bushels. The acreage of late fall tomatoes is estimated at 13,300 acres, compared with 15,200 last year. PRODUCTION 01' FRUITS AND NUTS (10 t.housand!! of units) Teuo Estimated Oct. 1, 19W 1949 bu. 783 2.400 Pears ......... bu. 270 484 Grapefruit ..... bo"" 12,000 6,400 3,500 1,760 Or lOges •••.••• box.. PecaDll, •••..•. lb. 31,500 29,000 ·Arizo~ Louisiana, New Mexico, Oklahoma, Unit Peaches ....... SOUR State6 in Eleventh DistricL· Estimated Average Oct. t. 193_8 1950 1.743 1,389 374 628 18.187 IMOO 3,676 4.840 29,616 W.590 and Texas. 1949 3,516 911 9,800 3,105 70,000 Average 1939-48 2,670 740 21,431 4,837 60,471 : United States Department. or Agricult:ll'e. Range and pasture conditions are good throughout the District, except in southern, Coastal Bend, and upper coastal counties of Texas and in scattered sections of New Mexico and Arizona. Ranges generally are in better condition than in September and are better than usual for this season of the year. All classes of livestock are doing well on the plentiful range and pasture grass, except in the dry coastal areas where some cattle have been fed cottonseed cake to hold shrinkage to a minimum. Cattle have been turned on wheat in the northern High Plains, and throughout the wheat belt there was heavy contracting of stockers for November 1 delivery to run on wheat pastures. Livestock continue to move to market at rates slightly below those of comparable weeks of last year, since farmers and ranchers are still holding back breeding stock for further expansion of herds. Developments in the cattle feeding situation point to a continued high volume of cattle feeding this season. The movement of feeder cattle into the Corn Belt since July 1 is higher than in the comparable period of most recent years, although substantially below the record receipts last year when a greatly accelerated early movement from the Northern Plains states resulted from dry weather and shortages of feed. The price Fort Worth market Cattle .. . ....•.•. . .. ... . ... ... Calvl!S ......... . . . . . . .... . .. . l1eg8 .............. . . . . Sheep . .......... . Sept. 19W 49,614 40,909 46,656 36,39 1 Sept. 1949 62.846 27,002 33,881 bS.343 AU(. 19W 66.732 31,440 40,290 60,847 San Antonio market Sept. 1950 24.139 23,707 7,268 Sept. 1949 25,329 13,934 22,347" 61,607- 6.900 A"". 1960 31,28.1 24,565 8,262 29,355' 'lnc1udea goata. The number of sheep and lambs to be fed for the winter and spring market is expected to be smaller than the number fed last year. The small supply of lambs and a broadening demand for breeding stock are the principal reasons for the reduction in lamb feeding. The wheat pasture areas of Kansas, Oklahoma, and Texas have made very good progress, but the supply of lambs will not fulfill the demand for feeders, prices of which have been at record levels. The top price for feeder lambs on the Fort Worth market in late October was $26.00 per cwt. for common and medium classes. Farm prices in Texas continue to average near the record high level attained in September. The Agriculture Department's mid-September indcx of prices received by Texas farmers for alJ agricultural commodities, the most recent index figure available, was 344 percent of the 1910-14 base, after having increased for the ninth consecutive month. Contributing most to the advance were the sharp increases recorded for cotton, cottonseed, and wool, together with moderate increases in prices of meat animals, poultry, and dairy products. Price developments since mid-September indicate that the upward movement of the general level of farm prices in Texas may have been halted, at least temporarily. On October 23, Middling 15 / 16-inch cotton sold in the 10 spot markets for an average of 39.48 cents per pound, compared with the season's high of 41.20 cents on September 23. As compared with midSeptember quotations, wheat prices on the Fort Worth Grain and Cotton Exchange on October 23 were off fractionally, barley was down 14 cents per bushel, white corn was down 58 cents per bushel, while oats and yellow corn made net gains of 1 cent per bushel and grain sorghums rose 4 cents per cwt. Most classes of cattle on the Fort Worth market held steady, but hogs were lower b y $1.50 per cwt. Poultry prices on the Dallas wholesale market, on the other hand, showed some seasonal increase, with hens up 2 to 3 cents per pound and eggs higher by 5 to 10 cents per dozen. FINANCE Reports from selected member banks in leading cItIes of the District indicate that between September 13 and October II loans increased, while investments and deposits declined. 189 MONTHLY BUSINESS REVIEW Changes balances balances 327,000 period. in other major accounts include an increase in reserve with the Federal Reserve Bank and a decrease in with domestic banks. Total resources declined $21,and amounted to $3,814,569,000 at the end of the Loans of these banks increased $45,590,000 between September 13 and October II, as all c.lajor categories of loans showed growth. Commercial, ind ustrial, and agricultural loans rose by $29,578,000, while the category "all other," including a substantial amount of consumer loans, increased by $8,328,000. Loans reached a record total of $1,368,999,000 on October II, reflecting a gain of $288,852,000 over those of a year earlier. The growth in loans during the 4 weeks ended October 11 represented a continuation of the uninterrupted week-to-week increases in total loan volume w hich began July 12 . During this 13-week period, loans expanded by $15 2,361,000, or at an average weekly rate of almost $12,000,000 . Approx:imately 72 percent of the growth occurred in loans for commercial, industrial, and agricultura l purposes, but real estate and "all other" loans also showed rather sharp gains. The growth from July 12 to October 11 resulted in the establishment of new record highs in successive weeks after July 19. The underlying strength of the increased loan demand during both the 4-week and the 13-week periods ended October 11 was based, in large measure, On the special circumstances created by the outbreak of hostilities in Korea and on the emergence of seasonal factors in the business situation. These two additional factors gave an especially buoyant tone to the total demand of businesses and others for bank credit, as they were superimposed upon existing high levels of economic activity. Total investments declined by $39,533,000 between Septcn1ber 13 and October II, as holdings of United States Government securities showed a decrease of $42,994,000. The liquidation of investments affected all type~ of Government securities with the exception of Treasury bills, which showed an increase of $14,614,000, and was distributed approximately evenly among certificates, notes, and bonds. Treasury refunding operations on September 15 and October 1 affected both the composition and the level of holdings of Government securities-contributing directly to the decline in certificates and bonds and indirectly to the increase in bills. Although total proceeds from sales and cash redemptions of the maturing issues were not reinvested in Government securities, a portion of the funds was devoted to increasing holdings of Treasury bills. In contrast with the decrease in holdings of Governments, investments in other securities increased $3,461,000, continuing the trend which has prevailed during the greater part of the year. The liquidation of holdings of Government securities provided funds to finance the greater part of the loan expansion which occurred at the selected member banks in leading cities of the District. Additional funds to meet the increased demand for loans and to increase by $23,650,000 the reserve balances with the Federal Reserve Bank were obtained through withdrawals of $20,899,000 from balances with correspondents and a reduction of $29,831,000 in cash items in the process of collection. • Despite the fact that deposit growth created by loan expansion exceeded deposit liquidation due to the decrease in investments, total deposits of the weekly reporting member banks declined $25,094,000 during the 4-wcek period. All categories of demand accounts-with the exception of interbank deposits, which increased $35,677,OOO-declined during the reriod, with the total shrinkage more than accounted for by the decrease in demand deposits of individuals, partnerships, and corporations. Quarterly income tax payments constituted a factor in the downward trend of demand deposits of individuals and businesses, but these effects were largely offset in the last week of the period, as this category of deposits increased $69,503,000. On October 11 total deposits were $3,559,536,000, as compared with the year-earlier total of $3,269,995,000. Reports for the week ended October 18, the most recent period for which data are available, indicate an extension of the trends in loans and investments which prevailed during the preceding 4 weeks; but the decrease in deposits in the earlier period was more than offset by a sharp rise in demand deposits during the following week. Demand deposits rose by $59,997,000, as increases of $30,313,000 in domestic interbank deposits and $27,299, 000 in demand accounts of individuals and businesses were reported. Funds which were otherwise available during the week were augmented by the $6,146,000 decline in investments. The total supply of funds was utilized, in part, to meet the increase in loans, amounting to $17,744,000, and to add $18 ,248 ,000 to balances with correspondents. Also, reserves with the Federal Reserve Bank rose $7,533,000 to a total of $494,787,000 on October 18, a record high for any weekly reporting date tlus year. CONDITION STATISTICS OF WEEKLY REPORTING MEMBER BANKS I~ LEADING CITIES - Eleventh Federal Reserve District (In thousands of dOURrfI) October II, October 12, Sept. 13, Item 1950 1949 1950 Total loons (gross) and investmenb.... . 52,647.759 S2.434.~ 52.641.702 Tot.alloo.ns-netl... . . . . ................... . ... l,3M,501 1,070,215 1.309.862 TOfl~~c~Es~~~~e~~ifni;~~fti1~~·~:~:::: l'~~!:~i l'~!:iii l'~~:i~ Other loans for purcbasing or carrying securities.. 60.576 50,546 Real-estate loans .. .. ............. . . ... . . ..... Loans to banks . .. . . . . . .. .. .. .. .. . .. . . . . . . . . . . 112,685 89,001 56.401 109,421 600 409 200 All otber loans.. .. .... .. ......... . . ... . ... ... 257,461 202,08.5 249,133 Tota investments. ... .. ............ ..... . . . . ... 1,278,760 1,364,388 1,318,293 U.S. Treuury bills..................... . ... . . 114,504 116.009 99.890 57,218 339,043 75,703 U. S. Treuury certificates of indebtedness.. . . . . . U. S. Treaaury notes......... . .. . ............. 319,739 44.101 337,439 U. S. Government bonds (inc. gtd. obligations)... 633.207 729,742 664,630 154,092 125.493 150.631 Other securities. . . . . .. . . . . . . . . . . . . . . 487,254 469,377 463.604 .Resen·es with Federal Resenre Bank.. . llalances with domestic banks........... 333.255 298.607 354.154 Demand deposits-adiusted·........... 2,1 15,7 13 1,942,356 2,136.833 Time deposits except Government.......... 439,019 4"9,705 436,376 United States GovernmCllt deposits.. . . . . .. . 57,1"5 51,026 69,608 Interbank demand deposits......... ....... 689.555 614,257 653,878 Borrowings from Federal Rcsc.rvc Bank. • . . . 0 0 300 • Includes all demand deposits other than interbank and United States Government, less casb items reported as on band or in proct8l!l of collection. t After deductions (or reserves snd unallocated charge..affs. GROSS DEMAND AKD TIME DEPOSITS OF MEMBER BANKS Eleventh Federal.Reser\'e District (Averaaes ordaily figures. In thousands of dolla.rs) Combined total Gross Date demand September 1048 .. . Se l)tember 1949 ... May 1950 .. June 1950 . .. July 1950 .. .. August 1950. . September 1950 ... 15,203,768 5,1 046,942 5,481,505 5,550,468 5,640,371 6,685,670 5,726,835 Time $580,519 1JoI8,045 670,514 669,715 660,748 656,792 659,286 Reserve city banks Gross 12,508,252 Time S.'l 78,943 2,503,549 "21.452 demand 2,627,316 2,684,393 2,757,150 2,779,305 2,806,806 Country banks G_ 423,428 424,252 416,753 409,987 410,905 demand Time $2,695,516 1210.576 2,643,393 226,593 2,854,189 247,086 2,866,075 245,463 2,883,221 243,995 2,906,265 245,805 2,919,829 248,381 Gross demand deposits of all member banks in the District averaged $41,065,000 higher in September than in August, with Reserve city banks accounting for approximately 67 percent of the gain. Time accounts also averaged higher in September than in August, with the increase at all member banks amounting to $3,494,000 and with country banks accounting for approxin1ately 74 percent of the increase. Gross demand deposits of all member banks in the District averaged $5,726,635,000 during September, while time deposits averaged $659,286,000. 190 MONTHLY BUSINESS REVIEW Debits to deposit accounts reported by banks in 24 cities of the District were 2 percent higher in September than in August but 27 percent higher than in the comparable month of last year. The strength of economic activity which has prevailed in the Southwest throughout the greater part of the changes for the new 13-month 1 Y4-percent note which was offered to holders of the certificate amounted to $5,253,589,000, leaving approximatel y J 6 percent, which was retired in cash by the Treasury. SAVING S DEPOSITS BANK DEBITS, END.oF·MONTH DEPOSITS, AKD ANKUAL RATE OF TURNOVER OF DEPOSITS Scplcmoo, 30, 1950 Number of (Amollnts in thousands or doJlsl1I) ---Debita... City Arizona: Tucson Louisiana: Monroe ... . Shreveport . .. September Depoeits · Percentage change from Aug. Annual rate September 30, 1950 81 ,497 or turnover 19bO 64,880 Sept. 1049 28 1950 8 42,641 160,187 9 17 -5 8 43,543 181,597 10,107 28 -2 22,118 10. 2 10.1 10.4 51,708 107,743 153,699 114,S09 111,728 14,314 65 5 -2 24 5 -8 16 47.860 92,672 109.573 88.657 91.139 20,304 877,224 127,166 324,853 95,962 1,029.936 21,632 80,49S 37,971 48,005 359,673 22,634 bO,600 78,502 91,868 13.0 13.8 16.8 16.2 14 .6 8.6 18. 4 10.2 12.6 16.2 12 .1 12.8 0.0 16. 3 13 .3 11.9 15.0 9.6 15.4 9 .6 12.2 11.2 10 .9 1l .3 10.3 12 .4 8.5 13 . 4 8.6 10 .6 10 .6 9.4 12.2 13.8 13.3 14.3 16 . 7 7.3 18 .6 13.4 14.9 8.9 15.4 10.1 Sept. 1950 9.5 Sept. 1949 7.8 Aug. 11.8 10 . 4 10.9 10.0 1l.8 0.8 1950 8.5 New Meneo: Roswell . . TeX&!: Abilene ......... . Amarillo ....... , . Austin . . . .... , ... Beaumont .. , ..... Corpus Christi .. .. Corsicana .. . .... . Dallu .......... . 1,328,29b EJ Paso .... .. . . .. 141,368 Fort Worth 409,289 GalveatoD.. 77,778 Houston .. . 1,314,381 Laredo ... , 17,521 Lubbock ... 82,83b Port Arthur . . San Angclo . . .. San Antonio . .. Texarkanat .. .... . ~ler .......... . . R ...... : .... ca Wichita FaU, . ... . 36,849 43.662 334,212 19,387 48,488 75.716 66.869 19 8 26 32 -3 26 23 32 16 28 16 51 6 46 36 36 IS 33 26 , -2 2 8 1 -7 , 4 9 i 16 4 II 2 lU 11.6 8.6 11.0 10 .7 10 . 1 1l .3 8 .9 11.0 10. 6 8 .5 9.b 7.7 9.8 10 . 1 7.8 Total- 24 cities .... 54,836.465 I •. , 27 $4,024,514 1404 12 .6 Indicates change of less than one-baIr of 1 ~rcent. DebiLe to d~it. accounts except inlerbao accounts. • Demand an time depoeits. including certified and offiecru' checks out&tanding but excJudina deposita to the credit of banks. t Thia figure includes only one bank in To:arklltla, TClI:lL8. Total debits for all banks in Te1atkana. Tela,a..Arkansaa, including two bauke locllted in t.he Eighth District. amounted t() 531,177,000 for the montb. of September 1050. ! year continues to be reflected in the excess of month-to-month debit figures over year-earlier totals. The turnover of deposits, representing the average annual rate of use of deposit accounts, was 14.4 in September as compared with 14.2 in August and 12,6 in September 1949. City Loumana : Shreveport ...... Tcxas: Beaumont . . . . . Dallas ... . ... . EI Pa.o ....... Fort Worth .... Galveston .... . Houston .. ......... Lubbock .......... Port Arthur . ...... San Ant.onio ....... Waco ......•...... Wichita Falil . ..... All oLber . ........... ToLaI. .. . re~rting anks Number of savings depoeitors Per ce n~e change in savings cp05it.3 from Amount of eavins;s de()06lL8 Sept. 30, 1949 August. 31, 1900 43,535 $ 24,036,404 - 4.7 0. 1 3 12.141 144,764 9.4 2.4 1.6 2.6 1.9 0.2 19.0 - 10.6 - 3.3 2 .8 0 .8 2.6 -U S 2 4 - -1.3 -0.5 8 2 2 b 3 3 M 67,408 M47.024 184.108.40.2069 21.841.700 34.619.322 20.874.015 73,963,838 3.827,877 4,075,062 (2)154,724 10.411,4-43 4,631 .535 b6.121,602 102 530,OOS 1378,1l0,475 32.924 44.2l7 22.176 9'.344 2.108 6.000 41.647 10.492 4 8,289 - 0.7 - 0 .8 - 0.7 0.2 - O.b -3 .3 - 1.4 - 0 .3 -0 .5 - 0 .03 -0 .3 INDUSTRY Industrial activity in the Eleventh Federal Reserve District continued at a very high level in September and October. The Texas Employment Commission estimates that nonfarm employment in Texas rose to about 2,430,000 persons at midOctober, a level approximately 4 percent higher than a year earlier. This marks the fourth consecutive record in such employment, with prospects that employment in November and December wiIi establish successively higher records. The employment gains during September and October reflect major increases in the aircraft, automobile assembly, and shipbuilding industries, as well as some rise of employment in the apparel, chemical, and fabricated metals industries. Outside of manufacturing, employment increased in retail and wholesale trade, schools, and service establishments. A moderate seasonal downturn occurred in construction employment. VALUE OF CONSTRUCTION CONTRACTS AWARDED Total earning assets of the Federal Reserve Bank of Dallas increased $28,190,000 between September 15 and October 15, with the growth more than accounted for by the increase in holdings of United States Government s~curities. Other principal changes in the sta tement of condition include an increase of $49,456,000 in total gold certificate reserves, a decrease of $3,850,000 in discounts for member banks, and a decrease of $3,365,000 in member bank reserve deposits. Notes of this Bank in actual circulation on September 15 amounted to $620,540,000, an increase of $7, 224,000 over the monthearlier total but a decrease of $2,855,000 from October 15, 1949, CONDITION OF THE FEDERAL RESERVE DANK OF DALLA S (In thous.a.ods of dollars) October 15, October 15, 1950 1949 Total gold certificate reservCtJ ...... . .. ...... .... . $666,398 1674,629 Di.ecountH for member banks. .. . ........ . . .. . 265 327 Foreign loam on gl)ld . ...................... . . 3,220 o U. S. Government sccuritice ............. . . . . 767,306 886.671 Total earning 866ets . ................ . 886,936 770,853 \iember bank reserve deposits ....... . S24,42b 767,98b Federal Reeerve notes in actual circulation . . 620,MO 623,39b Item Sep~ 15, 1950 $616,942 4,lIb o 8M,631 abS,H6 827,790 613.316 On September 29 the Secretary of the Treasury announced the completion of refunding operations for the 1 lis-percent oertificate of indebtedness which matured October 1 and which was outstanding in the amount of $6,247,587,000. Total ex- (In thoUiJands of dollan) September 1950p $ 106,376 44,493 61.883 1,286,MI September 19.9 $ 62,Q88 as.298 26,790 1,071,674 603,522 668,152 Eleventh District-total .. . Residential . .......... . All other . ............ . United Stat.es·-lotal .... . Residential .. . .. ...... . M9.b8b All other . ........ . . . . . 736,956 p-Pt-e.liminary. ·37 states east of the Rocky 'Mountains. SOURCE: F. W. Dodge Corporation. Au~ust 19bOp $133.889 62.916 70,973 1,54S.S76 7M,106 794,770 January 1 to September 30 1950p $ 876,676 407,346 469,330 11,109,746 5,235,896 5,S73,850 1949 $ 555,b67 204,504 351,063 7,393,908 2,867,b98 4,b26,310 The value of construction contracts awarded in the District during September totaled $106,000,000, or 21 percent less than the all-time peak of the previous month but 71 percent above the level of a year ago. Despite the sharp drop from August, the September figure is 9 percent above the 1950 monthly average. During the first '9 months of 1950, awards totaled $877,000,000, or 58 percent more than during the same period last year, exceeding all previous 12-month totals except that for 1942. Residential construction contract awards for September, ill which amounted to $44,000,000, were 29 percent less than .. in August, though 26 percent more than in September of last year. The September 1950 level of residential awards is only 2 percent below the very high monthly average for the year to date. Prior to this year, the September figure was exceeded 191 MONTHLY BUSINESS REVIEW only by that for May 1946. During the first 9 months of 1950, residential awards totaled $407,000 ,000, or nearly twice the year-earlier figure. BUILDING PERMITS September 1950 If the transaction price is Percentage Percentage change Jan, 1 to Sept. 3D, 1950 cbaD.JSe valuation Crom_ valuation City Number Valuation Sept. 1949 Aug. 1950 Number Valuation Crom 1949 Lcmisiana: Shreveport . .. . 479 4.157.468 149 49 3,724 , 25,818,798 43 Texas: Abilene ..... . 210 Amarillo ... . 277 Austin ..... . 242 Beaumont .... . 316 Corpus Christi. 410 Dallas .. _ 2.131 El Paso ..... 315 l<'ort Worth .... 809 Galveston .... . 194 Houston ...... . 854 Lubbock ..... 286 Port Arthur... . 200 San Antonio . .. I ,m Waco .... . . . .. 195 Wichita Falls . . 55 1,513 ,480 1.913 ,475 3,161,708 542,899 1,572,302 14.338,251 1.794,939 3,700,140 246,540 12,008,900 1,563,771 383,218 4,936,947 789,431 281,860 Total . ... ...... . 8,490 $52,905,329 - - 293 11 33 12 55 138 3 11 18 97 60 16 52 35 70 62 -20 -10 27 -62 -41 8 -40 -37 1.591 2,934 3.401 3.151 4.096 18.651 3,583 8,000 1,585 -40 79 -19 -74 -46 2,963 1,899 15,30.1 2,354 1,100 11.306,200 16.821,306 31,437,557 8,484.366 20,624,603 97,138,066 19,866,666 37,568,437 5,851,046 131,425,583 19.209.863 4,785,454 41,914,369 15,627,319 4,109,684 128 31 88 17 72 70 131 75 - 25 111 129 47 67 00 - 4 -28 85,482 $491,989,817 The maximum loan value is More than $2,500 but not more than $ 5 ,000 90 percent of the value More than $5,000 but not more than $9,000 $4,500 plus 65 percent of excess of value over $5,000 More than $9,0 00 but not more than $15,000 $7,100 plus 60 percent of excess of value over $9,000 More than $15,000 but not more than $20,000 $10,700 plus 20 percent of excess of value over $15,000 Over $20,000 $11,700 plus 10 percent of excess of value over $20,000 but not less than 50 percent of value 77 ~87 -so 11,071 Nonresidential construction contract awards in this District, which amounted to $62,000,000 during September, were 13 percent below the high August figure but 131 percent more than the year-earlier figure and 19 percent above the monthly average for 1950 to date, During the first 9 months of 1950, nonresidential awards totaled about $470,000,000, or a third more than during the corresponding period of last year. Commercial, utility, and educational construction account for over half of the increase. With the October 10 announcement of Regulation X by the Board of Governors of the Federal Reserve System, credit controls became effective on all privately financed 1- and 2family houses started after noon of August 3 and on which commitments had nOt been made prior to October 12. Regulation X applies to conventional loans, as distinguished from loans made, insured, or guaranteed by federal agencies. A companion announcement by the Housing and Home Finance Agency placed FHA loans under restrictions corresponding to those of Regulation X; at the same time, the Veterans Administration announced new requirements whereby veterans have an advantage over non veterans of from 5 to 10 percentage points on maximum loan limits. These regulations have for their aims the cutting back of the rate of home building by about one-third of 195 volume, the easing of the inflationary demand for building materials, and increased availability of materials for defense. Regulation X covers loans for more than $2,500 with more than 18-month maturity on 1- and 2-family unit housing, and its terms apply to major improvements and additions, as well as to new construction. The new down payment requirements provided by this regulation range from 10 percent for houses selling for $5,000 and under to 50 percent on houses costing $2 4,250 and up. Down payments must be cash and must not be borrowed, except against equities in life insurance policies. All mortgages subject to the new regulation will carry a maximum maturity of 20 years, except mortgages on houses priced at $7,000 or less, on which properly amortized loans may run as long as 25 years. The regulation contains a hardship provision permitting any per~ son or builder who made substantial commitments before Au, gust 3 with a view to building new housing to apply for relief to his regional Federal Reserve Bank. Compliance with the regulation is required of all lenders, a "lender" being one who, during the past year, made three or more real estate loans aggregating more than $25,000, ° Under Regulation X the basic nllrumum down payments are derived from the maximum loan values computed on the following basis: For FHA loans, the maximum loan value may be less than indicated above when the appraised value is less than the transaction price. The minimum down payments for GI loans are computed on the following basis, assuming a transaction price not exceeding reasonable value: If the transaction price is The minimum down payment is $5,000 or less 5 percent of value More than $5,000 but not more than $6,000 $2 50 More than $6,000 but not more than $9,000 $25 0 plus 25 percent of excess of value over $6,000 More than $9,000 but not more than $12,000 $1,000 plus 30 percent of excess of value over $9,000 More than $12, 000 but not more than $15,000 $1,900 plus 55 percent of excess of value over $12,000 More than $15,000 but not more than $20,000 $3,550 plus 75 percent of excess of value over $15,000 More than $20,000 but not more than $24,250 $7,300 plus 85 percent of excess of value over $20,000 Over $24,250 45 percent of value Some easing of building materials shortages has been reported recently. The prices of a few lumber items have declined moderately but are still above July 1 levels. Better transportation has been a facror in this improvement, together with lessened demand for inventory accumulation. Cement and gypsum board continue in tight supply, and various other materials are still subject to spot shortages. Crude oil production during September reached new alltime peaks of 2,929,000 barrels per day in the Eleventh District and 5,901,000 barrels per day in the Nation. In the District, production averaged 166,000 barrels daily more than the previous month and 718,000 barrels daily more than a year earlier. In the Nation, production was up 205,000 bar- 192 MONTHLY BUSINESS REVIEW rels daily from August and 1,047,000 barrels daily from September last year. The production rates in early October in both the District and the Nation were moderately lower than in September, due to reduction of production allow abies in Texas by 63,000 barrels daily as compared with those in effect on September 1. A further reduction of Texas allowables amounting to 38,000 barrels per day was announced for November. CRUDE OIL PRODU CTION (Barrels) September 1950 Total production Dailyavg. production IncrCtlSC or decrease in daily nvcrage production from Sept. 1949 Aug. 1950 TUM District I South Central. ... 923,500 30,783 3,668 2 Middle Gulf.... 4,588,550 152,952 30,782 3 Upper GuIr..... 14,175,850 472,529 101,299 7,129,300 237,643 48,878 " Lower Gulf...... 5 East Central .... 1,324,700 44,157 9,777 6 Northe"'t...... 12.340.400 411 ,346 84,891 Ea,t Texas. . . .. .. . 9,118,300 303,943 60,588 Other fie1d!..... 3,222,100 107,403 24,303 7b North CentraL..... . 2,252,100 75,070 13,895 70 West CentraL.. 2,173,150 72,438 22,553 8 West..... 27,728,050 924,269 363,231 9 North............ 4,694.400 156,480 16,385 10 Panhandle........... 2,142,900 91,430 -1,155 Total Texas. . . . .. . . . . .. . . . 80,072,000 2,669,097 694,2()4; New Mexico................ . 4,042,500 134,750 12,330 North Louisiana. .. .. ... . ..... 3,760,900 125,363 11,411 Total Eleventh District.... . 87,876,300 2,929,210 717,945 Outside Ele....enth District.... . 89,155,580 2,971,853 328,sro United States........... ... 177,031,880 5,901,063 1,046,795 SOURCE: Estimated from American Petroleum Institute weekly reports. 1,260 9,641 21,826 11,856 2,980 33,640 27,700 5,940 2,507 4,146 76,530 2,307 -570 166,123 I,OQ7 i6Hfl 39,183 205,174 During September, refinery activity as indicated by crude oil runs to refinery stills rose to 1,741,000 barrels daily in this District, or 53,000 barrels per day more than in August, as well as 13 6,000 barrels per day more than in September of last year. Refinery runs in the Nation averaged 6,004,000 barrels per day, representing an 81,000-barrel daily decrease from the record level of the previous month but amounting to 665,000 barrels daily more than in September 1949. During early October, refinery runs in the Nation slightly exceeded the August record on a daily average basis. Despite these high levels of refinery activity, stocks of crude oil in the Nation increased by 3,525,000 barrels during September, due to the record rate of crude production, but were still 16,669,000 barrels less than a year earlier. Following a 420,000-barrel decline during the first week of October, crude oil stocks were more than 10,000,000 barrels lower than at the first of the year but were 4,773,000 barrels above the year's low point reached 4 weeks earlier on September 9. Somewhat similarly, stocks of the four major refined products-gasoline, kerosene, gas and distillate fuel oil, and residual fuel oil-increased during September by 9,447,000 barrels but were still 31,245,000 barrels under the year-ago level. Stock accumulation has been retarded by the heavy demand, with the takings of these products by distributors aud consumers during September apparently running about II percent above a year ago. A gain of 893,000 barrels in stocks of residual fuel oil did little to overcome the lag in building up inventories of this product, which remain 25,625,000 barrels under the level of a year earlier. There has been relatively little change in residual stocks during the past 6 months, and in this case demand, being only about 6 percent higher than a year ago, does not account entirely for the lag in stock accumulation. Refinery yields of residual fuel oil have not been incre.tsed in accordance with the need to accumulate stocks but have remained at about the levels of the past 6 months, which approximate those of a year ago. The stock position of gas and distillate fuel oil is appreciably better than that of residual oil and showed further improvement with a gain of 7,555,000 barrels during September, with the result that such stocks were only 6,761,000 barrels below year-earlier levels. Kerosene stocks also rose during September, reaching a leve! above that of a year ago. These gains in s tocks of gas and distillate fuel oil and of kerosene were achieved, in part, by increasing refinery yields and were achieved despite increases in apparent demand over a year ago of about 27 percent and 20 percent, respectively. Accounting for a part of this increase in apparent demand has been the quite apreciable building up of inventories in the tanks of consumers and distributors, in contrast to the more hesitant accumulation of such inventories a year ago. Gasoline stocks declined seasonally by 1,480,000 barrels during September but were moderately above the year-earlier level. The apparent demand for gasoline has been declining seasonally but in September was about 8 percent higher than a year earlier. Refinery yields of gasoline have been reduced in line with the seasonal contraction of demand. The over-all stock position, considering crude oil and the four major refined products, showed a gain of nearly 13,000,000 barrels during September but remained 48 ,000,000 barrels lower than a year ago. The price positions of crude oil and of refined petroleum products continue very firm. Drilling activity as indicated by well completions appears to be continuing at close to a record rate. If steel items continue sufficiently available, new records for well completions seem likely for 1950 in both the District and the Nation. DOMESTIC CONSUMPTION AND STOCKS OF COTTON (Bales) September 1950Total cOIl8Umption: Texas milIa . .. . ... . United States mills . . D¥~x:,v~ilt:. ~~~~.~~~~~ .. United States mill, ..... United States sLocks-end of month: Consuming establishments ........... . Public storage and compre88e8 . ... . - Five weeki! ended September 30. t Four wct!ks ended August 26. n.a.-Not. available. r-Revised. SOURCE: United States Bureau of the Census. September 1949 n.a. 968,484 12,898 708,623r n.a. 39,530 32,959 1,237,815 4,890,637 n.D. 745,482r 6,134,OOOr AUl1:oot 19501 12,533 807,840 627 40,392 1,144,250 4,568,889 The consumption of cotton in United States mills during September declined to 39,530 bales per day, or 2 percent less than the high August rate but 20 percent above the yearago rate. The August-September total for cotton consumption was 30 percent more than during the corresponding initial 2-month period of the previous season. The high level of cotton consumption during August and September reflects the recent sharp rise in consumer demand for textiles, as well as present and prospective military requirements. This rise in demand has been reflected also in efforts to build up textile inventories.