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Volume X X X III SOURCES, USES, AND OWNERSHIP OF DISTRICT FUNDS IN 1950 A P R IL , 1951 Number 4 The 1951 Eighth District Deposit Survey showed an increase in deposit volume. The increase was concentrated in the larger banks of the metropolitan areas and in the hands of corporate business• Noncorporate business, however9 showed a decline in deposit holdings. Personal (including farmers9) deposits increased slightly in amount, but represented a smaller share of the total. The increase in deposits alone does not account fully for inflation in 1950; the more rapid use of the expanding money supply also was a major factor. The more rapid use of money is indicated by the greatly accelerated expenditure rate of earned and borrowed funds shown by (1 ) households, (2 ) corporate business, and (3 ) non-corporate business including farms. This accelerated spending resulted pri marily from the anticipated impact of the defense program. The 1951 Survey of Eighth District Deposit Own ership, recently completed by the Federal Reserve Bank of St. Louis with the cooperation of over 200 commercial banks, sheds additional light on the changing source, use and ownership of funds in this district. The customary report on deposit levels and patterns of ownership is presented here in the first section of this article. In the second part some rough and preliminary estimates of source and use of funds within the district are given. This study integrates the deposit data with a much broader picture of district moneyflows. In combination the two analyses point up the major factors in the in flationary pressure developed in 1950. T h e 1951 Eighth District Deposit Survey showed an increase in deposit volum e . Between year-end call dates, demand deposits of individuals, partnerships and corporations in the Eighth Federal Reserve District increased about $300 million, or 7 per cent.* The district gain was less than that for the nation. Deposits for all oper ating insured banks in the United States increased $7.8 billion, 9 per cent, in the year ending Decem ber 31, 1950. Comparison of changes in volume of deposits at member banks in each of the twelve Federal Reserve Districts (figures are not yet available for all banks by districts) shows the Eighth District to be among the four districts with the smallest percentages of deposit growth during 1950. TABLE I DEMAND DEPOSITS OF IN D IV ID U A LS, PARTNERSHIPS AND CORPORATIONS M em ber Banks by Federal Reserve Districts (D o llar Am ounts in M illions) December 30, 1950 December 31, 1949 I . Boston ........................... $ 4,057.3 I I . N ew Y o rk .................. 22,362.9 III. Philadelphia .............. 4,227.6 IV . Cleveland ................... 6,233.8 V . Richmond .................... 3,593.2 V I . Atlanta ......................... 3,544.0 V I I . Chicago ......................... 11,937.1 V I I I . St. Louis ....................... 3,080.0 I X . Minneapolis ............... 1,987.7 X . Kansas City ............... 4,015.2 X I . D allas ........ ................... 4,703.4 X I I . San Francisco ........... 8,917.3 Total, A ll Member B anks....$78,659.5 $ 3,678.9 20,789.7 3,809.4 5,544.9 3,280.7 3,179.6 10,724.5 2,837.5 1,861.9 3,697.5 4,141.3 8,042.7 $71,588.6 Change in Year Am ount Percent $ 378.4 1,573.2 418.2 688.9 312.5 364.4 1, 212 .6 242.5 125.8 317.7 562.1 874.6 $7,070.9 + 10% + 8 +11 +12 +10 +11 +11 + 9 + 7 + 9 +14 +11 + 10 % Districtwise, the expansion of deposits in 1950, while substantial, was surpassed in all of the war *T h e gain between survey dates, January 31, 1950 and January 31, 1951, was somewhat less, amounting to about $258 million or 6 per cent. The difference in deposit growth between years ending in D ecem ber and in January can be accounted for either by heavier out-district spending of district individuals and businesses (or a reduction in “ float” at district banks) in January, 1951 relative to a year ago, by bank credit contraction in January, 1951 at a faster rate than in January, 1950 (an alternative not borne out by member bank data presently avail able), by a greater shifting from individual, partnership and corporation accounts to Government owned deposits in January, 1951 as compared to January, 1950, or a combination of these possibilities. Reference to deposits throughout the report on survey results will pertain to demand deposits of individuals, partnerships, and corporations unless otherwise specifically noted. Page 42 years and in 1946. The significance of the 1950 gain lies mainly in the fact that it represented resumption in growth after two years of virtually unchanged deposit levels. T ABLE II PARTNERSHIP AND CORPORATION DEMAND DEPOSITS Eighth District, All Banks (Amounts in Millions of Dollars) IN D IV ID U A L , A m ount at Year-E nd 1950 1949 1948 1947 1946 1945 1944 1943 1942 1941 .................. 4557.9 .................................................... 4262.4 ....................................................4326.7 ..... ..................... .......... ..............4352.4 ...................................... ............. 4106.4 ....................................................3647.3 ................................................... 3089.0 ............................. ..................... 2588.8 .................................................... 2103.9 ...................................... ..............1513.3 Change from Preceding Year Am ount Per Cent + 2 9 5 .5 — 64.3 — 25.7 + 2 4 6 .0 + 4 5 9 .1 + 5 5 8 .3 + 5 0 0 .2 + 4 8 4 .9 + 5 9 0 .6 ................ + 6.9 — 1.5 — 0.6 + 6.0 + 1 2 .6 + 1 8 .1 + 1 9 .3 + 2 3 .0 + 3 9 .0 ......... The increase was concentrated in the larger hanks o f the metropolitan areas • . . The district growth in deposits occurred princi pally in the larger banks located in the metropolitan areas. Five metropolitan areas (designated I through V on the map) accounted for $225 million of the total gain, with percentage increases rang ing from 4 per cent at Evansville to 13 per cent at Louisville. In contrast, individual and business demand deposits in rural areas of the district increased just $70 million— some 3 per cent. One area reported a loss, one virtually no change, and the others, gains ranging from 1 to 6 per cent. • . • and in the hands o f corporate business . The most significant gain in deposit ownership in this district in 1950 occurred in the holdings of corporate business. Of the $258 million expansion in deposits between January 31, 1950 and the same date in 1951, business corporations in this district accounted for $221 million. Corporate ownership of deposits represented a larger share of each nonfinancial business classification in the survey year. The biggest gain was in the trade field where the share held by corporations rose from 37 per cent in the 1950 survey to 43 per cent in the 1951 survey. In all business classifications combined, the cor porate share rose from 60.5 to 65.4 per cent. Non-corporate business9 however, showed a decline in deposit holdings• In contrast with the sharp gain in corporate business deposits, non-corporate business deposit volume declined $25 million, 3 per cent. Non corporate business in the trade field showed the major decrease in deposits, $30 million. Non corporate financial concerns (other than insurance) showred only a moderate shrinkage in deposits. On the other hand, unincorporated businesses in the other fields increased their deposits slightly. DEPOSIT MOVEMENTS IN 19 5 0 DEMAND DEPOSITS OF INDIVIDUALS, PARTNERSHIPS AND CORPORATIONS. ALL BANKS IN EIGHTH FEDERAL RESERVE DISTRICT. BY AREAS NUMERALS INDICATE ARABIC NUMERALS PER CENT CHANGE DECEMBER 1949 1950 I II III IV V VI V II V III IX X XI X II X III T A B L E III D E M A N D D E P O S IT S O F IN D I V I D U A L S , P A R T N E R S H IP S A N D C O R P O R A T IO N S A L L B A N K S IN E IG H T H F E D E R A L R E S E R V E D IS T R IC T B Y A R E A S (D ollar Am ounts in M illions) D ec. 31, D ec. 31, Dec. 30, Dec. 31, D ec. 31, 1945 1948 1949 1950 1941 St. L ou is............................................. $1,181.4 $1,324.6 $ 558.2 $ 891.2 $1,138.3 Louisville........................................... 323.9 311.6 351.9 137.4 271.0 M em phis............................................. 295.6 258.8 89.4 194.0 264.8 Little R ock........................................ 74.6 84.8 95.7 30.5 88.0 Evansville........................................... 29.9 75.6 91.6 95.8 92.3 Change frotn 1949-50 Am ount Per Cent + 12% $ + 143.2 + 13 + 40.3 + 12 + 30.8 + 9 + 7.7 + 4 + 3.5 Total— Metropolitan Areas .... St. Louis O utlyin g......................... Louisville O utlyin g....................... N orth M issouri................................ O zark................................................... South Arkansas............................... D elta.................................................... East Mississippi-Tennessee....... K entucky-Indiana.......................... Total— Rural A reas...................... T o t a l— D is t r ic t ................................ 434.2 114.6 340.2 235.4 246.0 437.9 140.6 445.4 $ + 225.5 $+ 9.4 1.2 + + 20.7 + 12.4 + 12.7 + 22.7 — 0.3 — 8.8 + 2% + 1 + 6 + 6 + 5 + 5 - 0— 2 $2,429.3 $4 .326.7 $2,324.3 $4,262.4 $2,394.3 $4,557.9 $ + 70.0 $ + 295.5 + + 845.4 $1,506.4 $1,897.4 124.5 36.6 92.6 58.3 67.5 13.2.5 37.9 118.0 $ $ $ 667.9 $1,513.3 371.5 106.0 291.0 225.3 224.6 344.2 150.8 427.5 $2,140.9 $3,647.3 + 12% $1,938.1 $ 424.8 113.4 319.5 223.0 233.3 415.2 140.9 454.2 $2,163.6 434.2 121.7 324.5 227.1 247.0 440.5 157.6 476.7 $ $ $ 3% 7% Page 43 Personal (including farm ers9) deposits increased slightly in amount . . . Changes in farmers’ demand deposit volume were sharply different in amount and direction between banks and between areas. The over-all gain of $27 million was a net effect of opposite movements. In the two smallest size bank categories (under $5 million) farmers* deposits at the close of January, 1951 were over their January 31, 1950 level. (The bulk of farmers* deposits are held by banks in these size groups.) However, where comparisons be tween survey dates are possible for the same banks, within these two categories the level of farmers’ deposits declined in about as many instances as it increased. Likewise illustrating diversity in the movement of farmers’ deposits, where the aggre gate volume was up at the two smallest size bank groups, farmers’ deposits declined somewhat from their year-ago level in the size group of banks with $5-$10 million in deposits. Even in instances where similar agricultural conditions could be expected to exist, the changes during 1950 in farmers’ deposits were different. Other personal accounts increased $19 million between survey dates to a level of $1,508 million. Survey data, showing personal deposits separate from farmers’ only since January, 1946, record an increase in these personal deposits at each annual date, except that for 1949 when they were off $15 million, 1 per cent. . . • hut represented a smaller share o f the total. At the date of the 1951 deposit survey, farmers’ deposits had regained their January, 1949 level, but represented a slightly smaller share of total deposits, continuing the gradual downward trend in farmers’ share of the total evident since the peak of February, 1947 when farmers held 18 per cent of all deposits. Likewise, other personal deposits, despite an increase of $19 million to a new record level, repre sented a smaller share of total private demand deposits. The 1951 Ownership Survey indicated again the fact that personal deposits are more important to the small banks and business deposits to the large banks. In the smallest size bank group, personal and non-profit funds accounted for over 75 per cent of total private demand deposits, while business and trust funds accounted for less than one-quarter. In the largest size banks, business and trust funds accounted for over 75 per cent while personal and non-profit organization deposits represented less than one-quarter. Page 44 Finally, comparison of deposit ownership as of January 31, 1951 and January 31, 1946 (roughly contrasting current and end of the war levels) showed: (1) a growth of 20 per cent in total over the five years, (2) a growth of $520 million, about one-fourth, in deposit balances held by businesses (including farmers), (3) a growth of $210 million, about one-sixth, in personal deposit balances (other than farmers), (4) surprisingly little change in the pattern of ownership between the 1946 and 1951 surveys, considering the expansion in volume that had taken place. Slightly over one-third of deposits were in individual accounts at the time of the 1946 survey; about the same share remained with indi viduals five years later. Businesses in the aggre gate (including farming) held about 60 per cent of all deposits in 1946 and about 60 per cent in 1951. Together trust funds and non-profit organi zations held 5 per cent of the total in both years. Within the six business and farming categories the percentage shares varied somewhat. TABLE DEM AND IV D E P O S IT S E IG H T H D IS T R IC T Increase by Size of B ank* „ D ec. 30, (D ollar amounts in millions) 1950 1949 Under $1 million................ (651 banks) $ 418.8 $ l-$ 5 million ....................... (733 banks) 1757.7 $5-$10 million .....................( 65 banks) 520.8 $10 million and over.........( 37 banks) 1860.6 Total District ........................................... $4557.9 BANKS D ec. 31, P erC en t Change $ 407.1 ' + 2.9% 1694.6 + 3.7 495.9 + 5.0 1664.8 + 11.8 $4262.4 + 6 .9 % *Size of the reporting banks as of December, 1945 is used in grouping the banks according to volume of deposits in order to improve the comparisons of one year to the other, despite the fact that some shifting into different groups has taken place. The number of banks will vary slightly from the customary count of bank facilities because branch offices and the Arkansas exchange offices are included in the deposit survey tabulations. TABLE V CHANGE IN C O R P O R A T E B U S IN E S S D E P O S IT S B E T W E E N AN N U A L SU R VEY DATES (D ollar A m ounts in M illions) Am ount Per Cent January 1950-January 1951................................................ + 221.1 + 1 9 .3 January 1949-January 1950................................................ — 18.9 — 1.6 January 1948-January 1949................................................ + 58.-3 + 5.3 February 1947-January 1948............................................. + 60.6 + 5.8 + 110.0 + 11.8 January 1946-February 1947............................................. The significance of the changes in deposit owner ship during the survey year can best be indicated by bringing together the results of the survey and preliminary figures on the sources and uses of district funds in 1950. The increase in deposits alone does not account fully fo r inflation in 1 95 0 ; . . . Inflationary pressure, in evidence throughout 1950, especially in the latter half, is not fully explained by the increase in the money supply (of which deposit growth was the principal element). As a matter of fact, in both district and nation physical output rose somewhat more than did the money supply in 1950. During 1950, the district’s money supply, including all demand deposits (except interbank), time deposits, and currency ex p a n d e d r o u g h ly from $6.4 billion to $6.8 billion— about Sy2 per cent. This rate of increase approximated that for the nation as a whole. At the same time, output of goods and services in physical terms increased even more than the money supply. Nationally real output gained about 7 per cent, and the increase for the district was of about that magnitude. . . . the m ore rapid use o f the expanding money supply also was a major factor. Inflationary pressure also was due to the fact that owners of funds spent them at an accelerating rate. An indication of the more rapid use of money by all sectors of the district economy is the growth in “ income velocity” . Personal income received in the Eighth District in 1949 was about five times personal demand deposits; this “ income velocity” had risen to almost six times by the end of 1950. The increased rate of use also is shown by the sharp gain in the turnover of bank deposits. While dis trict demand deposits increased 6 per cent between deposit survey dates, debits to deposit accounts at 22 selected cities in the Eighth District in January, 1951 were more than 30 per cent ahead of a year earlier. The m ore rapid use o f m oney is indicated by the greatly accelerated expenditure rate o f earned and borrowed funds . . . These measures of faster spending in 1950, per taining to all parts of the district economy, do not provide information as to the specific sources of the inflationary pressure. A source and use of funds analysis can be helpful in this connection. This type of analysis attempts to measure, for the several important segments of the economy, not only current income but cash receipts from all sources. At the same time, it comprehends, on the O W N E R S H IP OF DEM AND D E P O S IT S OF expenditure side, not only spending for current operations but the use of money and credit for all purposes, including expenditures for investment and additions to liquid financial assets. The sources and uses are recorded mainly for transactions be tween major sectors of the e co n o m y , such as households, corporate business, and non-corporate business, including farms. In connection with a source and use of funds analysis, the deposit ownership survey provides information directly as to changes in one important component of the financial assets held by these three sectors of the district economy: households, corporate business, and non-corporate enterprises, including farms. Fairly accurate measurement of the change in this component is of considerable help in arriving at estimates of moneyflows. Indi rectly, the other side of deposit expansion—bank credit, principally loan expansion— also provides a strategic element (net borrowing) in the sources of funds for each of the major sectors of the district economy. In terms of a source and use of funds analysis, individuals and businesses receive funds from current productive incom e; from transfer pay ments, primarily for past consideration, such as interest on Government bonds, insurance benefits, veterans’ pensions; from liquidation of fixed assets, and from borrowing in anticipation of future in come. Whenever money thus received is used for repayment of debt or is held for the accumulation of cash and other liquid assets, total expenditures in the economy are not likely to expand. Yet whenever most of the money thus received is imme diately spent for consumption or for investment in real goods, money velocity will increase. T o under stand better the reasons for the accelerated use of money during the last year, therefore, sources and uses of funds for three major sectors of the district economy are shown in the Chart. TABLE VI IN D IV ID U A L S , P A R T N E R S H IP S A N D C O R P O R A T IO N S Jan. Jan. 31, 1949 Jan. 31, 1950 Tan. 31, 1946 Feb. 26, 1947 Jan. 31, 1948 A m t. Per Cent A m t. (D ollar Am ounts in M illions) A m t. !Per Cent A m t. Per Cent A m t. Per Cent A m t. Per Cent 2 7 .8 % $1143.4 2 7 .4 % $1364.5 Corporate Business................................. .....$ 928.7 2 5 .4 % $1035.5 2 5 .8 % $1104.0 2 6 .5 % $1162.3 17.8 720.6 Noncorporate Business........................ ...... 821.4 674.3 19.5 745.8 18.2 17.8 670.0 16.7 743.2 1889.2 45.2 2085.1 1983.7 47.3 43.6 1847.2 44.3 1705.5 42.5 39.4 1826.7 1763.9 42.1 1647.0 39.2 1643.2 39.4 1524.0 37.9 621.6 Manufacturing and M in in g ...... ...... 468.2 12.6 12.3 535.9 12.8 528.3 12.7 510.3 494.5 12.3 3.4 198.1 Public U tilities................................ 4.2 4.2 179.6 4.3 143.1 173.4 4.3 175.9 17.9 769.4 17.2 821.2 19.6 747.9 18.0 Trade................................................... 679.9 16.9 751.9 237.6 187.6 Other nonfinancial........................ , ... 5.1 4.9 227.2 5.4 227.7 5.5 176.2 4.4 205.1 4.4 4.9 219.8 5.2 5.8 258.4 Financial...................... .......................... 242.2 204.0 181.5 4.6 38.1 65.3 1.1 66.1 Insurance companies................... 1.3 58.0 1.4 53.7 1.6 47.5 1.2 121.9 3.3 3.6 161.8 3.8 176.1 4.2 193.1 A11 other financial......................... 134.0 3.4 150.3 48.8 1.3 1.3 1.2 55.0 54.8 Trust funds of banks.............................. 46.6 55.4 1.3 50.5 1.2 * * ** * * * 0.8 0.3 0.1 Foreign......................................................... 0.2 0.1 3.9 143.2 3.7 169.4 3.7 154.8 3.7 157.1 Nonprofit.................................................... 156.9 155.0 3.9 1879.7 51.2 50.7 1998.3 49.9 2132.8 2114.4 47.7 2105.1 52.4 2087.5 583.0 15.9 735.0 18.3 723.0 17.3 622.0 14.8 14.3 625.1 Farmers................................................... 598.5 35.3 1370.1 1507.7 O ther........................................................ ...... 1296.7 34.1 1391.4 33.4 1376.3 32.9 1489.0 35.6 T o ta l............................................... ..... $3675.5 10 0 .0 % $4014.3 100.0 % $4172.1 100.0 % $4191.6 100.0 % $4184.4 100.0 % $4442.6 Change in Ownership Jan.’ 50-Jan.’ 51 31, 1951 Per Cent Per Cent A m t. 3 0 .7 % $ + 221.1 + 1 9 % 16.2 — 25.2 — 3 46.9 + 195.9 + 10 41.1 + 179.7 + 11 + 93.3 + 18 14.0 + 55.0 + 38 4.5 17.3 + 21.5 + 3 + 9.9 + 4 5.3 + 16.2 + 7 5.8 — 0.8 — 1 1.5 + 17.0 + 10 4.3 + 4 . 5 + 9 1.3 * + 0.2 + 2 0 0 + 12.3 + 8 3.8 + 45.3 + 2 48.0 + 26.6 + 4 14.1 33.9 + 18.7 + 1 6% 1 00.0 % $ + 258.2 + . . . shown by ( 1 ) households9 . . . The chart shows the percentage distribution of total sources and uses of funds for district house holds in 1950. More than 80 per cent of these funds originated in current productive activity of household members who received income in the form of wages, investment returns, and pro prietors* withdrawals. Over 10 per cent was made available to consumers in the form of Government and private transfer payments, such as insurance benefits, veterans' pensions, and tax refunds. About 4 per cent was derived from the sale of fixed consumer assets, for example, houses and cars. (These two sources are grouped on the Chart as “ Transfer Receipts.,,) The remainder (divided into “ Long-term” and “ Short-term Liabilities” on the Chart) was the result of credit extension from banks and other lenders. Though the net in crease in consumer and mortgage loans extended by district banks directly to households amounted to less than 2 per cent of all household funds (approximately $170 million) in 1950, the item was of strategic importance in permitting household expenditures which otherwise might not have been made. It should be noted that total borrowing of households exceeded considerably the increase in liabilities shown on the Chart. The net increase shown there represents only the difference between total credit extended to households and repayments made in 1950. Three-fifths of total household funds were used for the purchase of nondurable consumption goods and services. Almost one-fourth went for “ invest ment” in fixed consumer assets— houses and other durables. Nine per cent was used for tax payments. Four per cent was spent for insurance premiums and private charities. (The latter two are combined into “ Transfer Payments” on the Chart.) The re mainder was available for liquid savings in the form of cash and securities. Thus, almost 98 per cent of all consumer funds actually was spent in 1950, a rate of use considerably higher than in most other years and particularly noteworthy in a year when consumers had more funds at their disposal than in any prior period. House holds held less than 3 per cent of all of their funds as liquid financial assets in 1950, con trasted with more than 6 per cent in 1941 at the start of W orld W ar II. . . . ( 2 ) corporate business9 . . . About one-third of all corporate funds available for capital expansion came from retained profits. Twenty per cent of the total represented reserves set up as depreciation and other retained charges. Page 46 The remainder represented borrowed funds and money owed to the Federal Government for income taxes. (These amounts are shown on the Chart as “ Long-term” and “ Short-term Liabilities.” ) Bor rowed funds came from credit extension by com mercial banks and other lenders. One-third of net borrowing was raised through trade payables, an other third in the securities market, and one-third through bank loans. While capital requirements of corporations in 1950 thus continued to be met largely from funds retained from current opera tions, principally retained earnings and depreciation allowances, which together accounted for more than half of total funds, the record expenditures for plant and equipment as well as for larger inventories were associated with expansion of borrowing. Bank credit for these purposes expanded by roughly $160 million in the district. Here again it should be noted that the net figures shown on the Chart un derstates the relative importance of borrowing as a source of funds to corporations. The accelerated use of corporate funds is again illustrated by the fact that, for the nation as a whole, total corporate funds to meet capital expend itures amounted to $38 billion in 1950, $8 billion above the previous high in 1947 and more than two and one-half times total uses in 1949. Then almost one-fourth of the much smaller total was held in liquid assets, contrasted with less than onefifth in 1950. . . . and ( 3 ) non-corporate business including farms . District farms received funds available for personal consumption or investment in the amount of $2.2 billion in 1950. Non-corporate trade and service establishments received another $1.8 billion, so that district non-corporate business funds, in cluding farms, approximated $4 billion. Seventythree per cent of these funds had as their source net income before taxes. Fifteen per cent repre sented depreciation and other retained charges against gross income. The remaining 12 per cent were again the result of credit extension from banks and other lenders. More than half of the total net increase in credit was supplied through trade sources and other nonbank lenders. The re mainder, about $140 million or 4 per cent of all non corporate business funds, was supplied by the bank ing system. As in the case of household funds, this item was of strategic importance in facilitating business expenditures which otherwise might not have been made. Again, funds supplied by the banking system would appear much larger on the Chart if stated in terms of total borrowing (as a SOURCES 8th AND USES OF FUNDS FEDERAL RESERVE DISTR IC T PERCENTAGE D ISTR IB U TIO N 1950 SOURCES USES H0USEH0LDS CO RPORATE N O N C O R PO R A TE B U S IN E S S BUSINESS INCLUDING FARMS U SES SO U RCES C U R R E N T IN C O M E H ouseh olds: Current Income includes all payments received for current productive activity, such as wages, invest m ent returns, and proprietors* withdrawals. B usiness: Current Incom e includes only retained profits after taxes. Proprietors’ withdrawals and dividend pay ments are shown in the household sector as current in come. C U R R E N T C O N S U M P T IO N H ouseh olds: Current Consumption includes all expendi tures for non-durable consumption goods and services. T R A N S F E R R E C E IP T S H ouseh olds: Transfer Receipts include all income pay ments received not for current productive activity but for other consideration, such as insurance benefits and vet erans* pensions. Transfer Receipts also include cash pay ments received from the sale of fixed consumer assets, such as homes and cars. TRANSFER H ou seh old s: government such as tax R E T A IN E D C H A R G E S B u siness: Retained Charges include all cash reserves for depreciation and other accrual items. F IX E D ASSETS H ouseh olds: Fixed Assets include all expenditures for durable consumer goods and home purchases. B usiness: Fixed A ssets include all expenditures for con struction and equipment. L O N G -T E R M L I A B I L I T I E S H ou seh olds: L o n g-T er m Liabilities pertain to the net increase in m ortgage credit for the purpose of homes. B usiness: L on g-T erm Liabilities pertain to the net in crease in long-term borrowing from all sources. N et new issues of stocks also are included here. IN V E N T O R IE S A N D R E C E IV A B L E S B usiness: Inventories and Receivables include all net additions to book inventories and receivables from busi ness consumers and government. S H O R T -T E R M L I A B I L I T I E S H ouseholds: Short-Term Liabilities pertain to the net in creases in consumer credit. B u siness: Short-Term Liabilities pertain to the net in crease in short-term borrowing from banks, trade pay ables, and Federal income tax liability. F IN A N C IA L A SSE T S Households and B u sin ess: Financial Assets include all net additions to the holdings of currency, deposits and secu rities. PAYM ENTS Transfer Payments include all payments to and business not made for consumption, payments and insurance premiums. The corporate business and noncorporate business bars are shown net o f dividend payments and proprietors’ withdrawals in the# uses side. A corre sponding deduction has been made in the current income component (sources side) of each of these sectors. This is done to avoid duplication in the sectors since dividend payments and proprietors’ withdrawals are part of current income of households. A s a result of showing the business sectors net, the proportion of net borrowing and financial assets to the net sources and uses is emphasized. I t should be noted that the percentages shown for net borrowing and financial assets for these two sectors are thus much larger than they would appear if measured against gross sources and uses. The chart shows the sources of funds for three sectors of the district economy in 1950 and how these sectors spent their funds. The white portion of each bar indicates the relative importance of financial sources and uses. Compared with previous years, corporate and noncorporate business increased the ratio of short-term liabilities to financial assets, illustrat ing the accelerated rate of spending borrowed funds. Households added, on balance, to their liquid savings but much less than usual and not enough to satisfy the growing demand of business for funds. The remainder came largely from the banking system and represented a net addition to the money supply. Page 47 source of funds) and repayments (as a use of funds). More than 70 per cent of all non-corporate busi ness funds were used for entrepreneurial withdraw als and, therefore, went into consumer expenditures. About 20 per cent was invested in fixed and work ing capital, financing sizable expenditures for con struction, equipment, and inventory accumulation. The remaining 8 per cent was held to increase cash and other liquid assets. Again the most note worthy fact is the small increase in cash holdings in spite of a large expansion in the total funds available. As pointed out before, deposits of non corporate business other than farmers actually declined in 1950, in the face of income larger than in any previous period. Thus, business proprietors spent their funds for consumption and investment purposes at a record rate, contributing to the accel erated use of the district money supply. This accelerated spending resulted primarily from the anticipated impact o f the defense program. The record expenditures, made possible by the combined effect of (1) increased money supply stemming from the expansion in bank loans, and (2) accelerated use of these funds by all sectors, of the economy, outran the ability of the country to produce more real goods and services on short notice. The factors behind the increased rate of use of Page 48 money were varied, but were all related to the an ticipated impact of the defense program. T o some degree they represented real attempts to hedge against inflation, to get out of money and into goods because of fear of higher prices. T o some degree they represented fear of future shortages, of les sened availability of goods rather than mere expec tation of higher prices. T o some degree increased velocity and greater use of liquid assets reflected the effects of the price rise rather than the cause of it: increased costs brought about some liquidation of assets to maintain living standards. Most im portant, business greatly accelerated its use of funds for capital expenditures in anticipation of growing demand for its products. Whatever the cause of the increased velocity, larger expenditures reflected a common expectation that the defense program would change the ratio of goods and money. While military demands would limit the supply of goods available for civilian consumption, defense expenditures— at least partly to be financed by borrowing — were expected to increase the money supply. It was the combination of an expanding money supply and its accelerated use, generated by the common expectation of a further growth in the money supply, that brought about increasing pres sure on prices. Wm. J. Abbott, Jr. Werner Hochwald Survey of Current Conditions The economic record of February and early March shows a slight easing from the pace of Janu ary. In the Eighth District and in the nation in dustrial production activity in February was about the same as in January. Construction activity was higher. In both district and nation consumer and business demand receded somewhat from the peak levels of January, although February buying was high by year-ago standards. Price rises continued but the pace of the advance was slowed. The leveling off of the immediate past weeks seems to have been more a minor muting of the boom’s tone rather than a decline in the strength of the beat. In part, the apparently more favor able military situation and the slightly less tense international situation were responsible for some relaxation of pressure. Also the stronger antiinflationary steps taken brought about some greater feeling of security. And the fact that the feared civilian shortages have not materialized in any appreciable degree caused scare-buying to moderate. Actually, as noted, despite the rail strike which carried over into February, other labor disputes, the very bad weather, and the increasing economic con trols, production in February was at about the same level as in January, and in early March activity seemed to have been stepped up somewhat. In this district industrial power consumption, on a daily PRICES W H O L E S A L E P R IC E S IN T H E U N IT E D S T A T E S Bureau of Labor Feb., 1951 Statistics compared with (1926=100) F e b .,’ 5 1 Jan .,’ 51 F e b .,’ 50 Jan .,’ 51 F e b .,’ 50 A ll Commodities.... Farm Products... Foods...................... O ther...................... 183.6 202 .6 187.7 171.8 180.1 194.0 182.3 170.2 152.7 159.1 156.8 145.9 + + + + 1.9 % 4.4 3.0 0.9 + 2 0 .2 % + 2 7 .3 + 1 9 .7 + 1 7 .8 C O N S U M E R P R IC E I N D E X * Bureau of Labor Feb. 15, 1951 Statistics Feb. 15, Jan. 15, Feb. 15, compared with ( 1 9 3 5 -3 9 = 1 0 0 ) 1951 1951 1950 Jan. 15,’ 51 Feb. 15,’ 50 United States........... 183.8 181.5 167.9** + 1. 3 % + 9.5 % *N ew series. **A11 indexes previously published for Jan.’ 5 0-D ec.’ 50 have been adjusted. R E T A IL F O O D * Bureau of Labor Statistics Feb. 15, Jan. 15, Feb. 15, (1935-39 = 100) 1951 1951 1950 U . S. (51 citie s)..... 226.0 2 21.6 194.8 St. Louis................ 240.8 234.3 202.9 Little R ock........... 226.5 224.1 194.5 Louisville.............. 215.6 211.6 183.1 M em phis............... 229.0 225.6 202.2 *A11 data are “ O ld Series.” Feb. 15, 1951 compared with Jan. 15,’ 51 Feb. 15,’ 50 + 2 .0 % + 1 6 .0 % + 2.8 + 1 8 .7 + 1.1 + 1 6 .5 + 1.9 + 1 7 .7 + 1.5 + 1 3 .3 average basis, in February was fractionally higher than in January. In the nation the Federal Reserve’s seasonally adjusted production index in February was 221 per cent of the 1935-39 average, the same as in January. Durables output increased, reflecting the resumption of near-capacity opera tions in the auto industry after the rail strike and advances in producers equipment manufacture. Steel production declined slightly in the nation in February but in March exceeded the record level of the month of January. Production of nondurable goods—other than wool textiles— continued in large volume. The total value of new construction put in place in February was nearly $2 billion for the nation— a new record high when seasonally adjusted. This was a figure higher than in any previous February and 22 per cent above February, 1950. Nearly all types of structures were being built in larger dollar volume than a year ago. The February level of retail sales was higher than that which prevailed a year ago, although somewhat lower than in January. Part of the large volume of current output appeared in growing inventories. Nationally the book value of total business in ventories was estimated at $63.1 billion at the end of January. In this district February sales also were good relative to a year earlier, but not as good as in January. Retailers’ inventories were sizable and the volume of orders outstanding was large. One line in homefurnishings— T V — was moving slowly as compared with the booming sales of last autumn. Prices continued to increase during February and early March. The index of wholesale prices of all W H O LE SA LIN G Line of Commodities Data furnished by Bureau of Census, U . S. D ept, of Commerce* Automotive Supplies .............................. Drugs and Chemicals.............................. D ry Goods .................................................... Groceries ......................................................... Hardware ....................................................... Tobacco and its Products....................... Miscellaneous ............................................... ** Total A ll Lines................................... N et Sales Stocks February, 1951 February 28, 1951 compared with compared with Jan.,’ 51 F e b .,’ 50 February 28, 1950 + + + + + + + 47% 8 34 19 49 5 39 + 33% — 8% — 16 — 9 — 12 — 1 — 12 — 7 + 3% - 0 — 8 + 1 + 3 — 3 — 1 — + 6% 1% * Preliminary. **Includes certain items not listed above. Page 49 commodities advanced from 180.9 for the week end ing January 30 to 183.5 two weeks later and then declined slightly during the last two weeks in Feb ruary. However, during March, moderate price advances were resumed. By the week ending March 20 the index was at an all-time high, 17 per cent above June, 1950 and about 20 per cent above the level of a year ago. In early March monetary policy became more strongly anti-inflationary. The T r e a s u r y an nounced a series of new 2^4 per cent investment bonds available in exchange for existing 2y2 per cent bonds of June and December, 1967-72. Govern ment security prices in general declined. EM PLOYM ENT The labor market, in both the Eighth District and the nation, remained relatively stable between mid-January and mid-February. Total employment edged downward as the result of small seasonal losses in agricultural employment, while nonagri cultural employment showed little change. The civilian labor force also was down slightly, as was unemployment. When this February is compared with February of last year, however, some significant develop ments appear. Nonagricultural employment was substantially higher in February, 1951, unemploy ment was cut almost in half, fewer persons were working short hours because of slack work, the pro portion of women in the labor force was higher, and the workweek in manufacturing industries was longer than last year. In the nation, almost 59 million civilian persons were employed in February, according to Census Bureau reports. This was almost 2 million more than a year ago, with men past draft age and women accounting for practically all of the gain. Unemployment averaged about 2.4 million in February— down slightly from January. Only about 4 per cent of the labor force were seeking jobs this February as compared with 8 per cent a year ago. None of the Eighth District areas were classi fied by the Department of Labor as having a tight or balanced labor supply in January. In November, two district areas (Little Rock and Evansville) had been so classified. These two areas plus Louis ville and St. Louis were rated as “ B” or slight labor surplus areas in January. Memphis was classed as a “ C” or moderate surplus area and Springfield, Missouri, was a “ D ” or substantial sur plus area. The Memphis and Springfield ratings were the same as a year ago. Louisville and St. Louis had Page 50 been classed as substantial and Little Rock and Evansville as moderate labor surplus areas in January, 1950. In the seven district states, unemployment (as measured by the volume of claims for unemploy ment compensation) was about the same in midFebruary as in mid-January. Small decreases in insured unemployment in Illinois, Missouri and Tennessee were offset by small increases in the other district states. Insured unemployment in February was less than half the year-ago volume, with all the district states sharing in the drop. INDUSTRY While most Eighth District industries operated at about the same level of activity in February as in January, there were significant exceptions. Total output for the month was not as large since Febru ary had fewer working days. And even on a daily average basis, several district industries that had been gaining rapidly failed to post increases in February, and some industries— hampered by weather, work stoppages or other difficulties— re ported decreased output. Still industry in the aggregate continued to operate at the high January level. Industrial con sumption of electrical power at leading district cities was slightly (0.3 per cent) above January on a daily average basis. On this basis, consumption of power was somewhat higher at all major cities except St. Louis. Compared with February, 1950, daily average consumption was up 11 per cent for all major district cities combined. The Terminal Railroad Association of St. Louis interchanged about 91,000 loads in February — 30,000 less than in January. The decrease was due IN DU STRY C O N S U M P T IO N O F E L E C T R IC IT Y Feb., Jan., F eb., February, 1951 1951 1951 1950 compared with K .W . H . K .W . H . K .W . H . Jan.,’ 51 F e b .,’ 50 ( K . W .H . in thous.) Evansville.......... kittle R ock....... Louisville........... M em phis............ Pine B lu ff.......... St. L ouis............ Totals............. 15,953 12,549 75,114 26,684 8,872 88,432 227,604 15,874 13,487 81,314 28,089 9,182 101,721^ 249,667 L O A D S IN T E R C H A N G E D F e b .,’ 51 Jan.,’ 51 F e b .,’ 50 12,465 11,683 68,853 27,676 6,157 78,486 205,320 + 0 .5 % — 7.0 — 7.6 — 5.0 — 3.4 — 13.1 — + 2 8 .0 % + 7.4 + 9.1 — 3.6 + 4 4 .1 + 1 2 .7 8.8 % 91,302 121,922 95,531 39,625 31,542 213,224 Source: Terminal Railroad Association of St. Louis. CRUDE (I n thousands o fb b ls .) Arkansas.................... Illinois........................ Indiana....................... K entucky.................. T otal....................... O IL + 1 0 .9 % F O R 25 R A I L R O A D S A T S T . L O U I S First Nine D ays M a r .,’ 51 M a r .,’ 50 2 m o s .’ 51 2 m o s .’ 50 P R O D U C T I O N -D A I L Y Feb., 1951 79.4 159.9 27.6 27.9 Jan., 1951 80.8 165.1 29.3 30.2 Feb., 1950 80.0 180.3 27.0 25.2 294.8 305.5 312.4 194,993 AVERAGE compared Jan.,’ 51 — 2% — 3 — 6 — 8 — 4% with F e b .,’ 50 — 1% — 11 + 2 +11 — 6% to the strike early in the month. Interchanges picked up early in March, and the 39,000 loads interchanged in the first nine days totaled well over the 31,000 in the same period of March, 1950 or the 33,000 of early January, 1951. The St. Louis basic steel industry operated at 87 per cent of capacity in February. This rate was in creased to 97 per cent of capacity for the first three weeks of March. Severe weather hampered lumbering operations in February and the index of production for south ern pine was 173 at the end of the month— the lowest figure since February, 1949. This was con siderably below the 204 of January and the 200 of February, 1950. Southern hardwood production was scheduled at 85 per cent of capacity in February, as compared with 89 per cent for January and 80 per cent for February, 1950. The decrease of 4 per cent from January was temporary, and producers boosted operations to 100 per cent of capacity during the first two weeks of March. Federally inspected slaughter of meat animals at St. Louis in February totaled about 307,000 head, down 38 per cent from the heavy slaughter (498,000 head) in January. Part of the decrease reflected the shorter month in February. This February's slaughter was the smallest for that month in six years, and was 11 per cent less than February, 1950. Eighth District slaughter, as a per cent of the U. S. total, was 5 per cent at the end of February— the lowest percentage recorded since February, 1947. Slaughter decreased between January and Febru ary for all kinds of livestock. H og slaughter de creased 37 per cent, cattle 30 per cent, calves 24 per cent and sheep 66 per cent. Forty-five Kentucky distilleries were in opera tion at the end of February— six less than at the end of January. Stocks of whiskey are large and warehouse space is scarce, although some addi tions to storage facilities have already been made. No alcohol was produced for the Government in February and no definite plans for such produc- tion are now being made since the Government is now obtaining alcohol from other sources. Coal and Oil Production Decreases Preliminary reports of district coal production for February show output of 8.6 million tons, 22 per cent less than in January. The shorter workmonth and weather were major factors in the de cline. All coal producing states of the district re ported decreases in February compared with Janu ary. The seasonally adjusted index of coal produc tion stood at 150 at the end of February compared with 197 a month earlier. The four oil producing states produced 4 per cent less crude oil (daily average basis) in Feb ruary than in January, and 6 per cent less than in February, 1950. Each state reported decreased out put, ranging from 2 per cent for Arkansas to 8 per cent in Kentucky. CONSTRUCTION Seasonally adjusted, the total value of new con struction put in place in the nation in February was greater than in January. Nearly $2 billion of new construction was put in place in February—22 per cent more than the February, 1950 total, according to the Departments of Commerce and Labor. Nearly all types of structures were being built in larger dollar volume than a year ago. Construction contracts awarded in the 37 states covered by the F. W . Dodge reports were higher in February than in January or in February a year ago. The gain over January was due primarily to a 26 per cent increase in residential awards. The gain over a year ago was due to a two-thirds in crease in nonresidential and a 50 per cent increase in residential awards. In the Eighth District, construction contracts awarded in February totaled $60.0 million as com pared with $51.7 million in January and $39.2 mil lion a year ago. Residential awards were 7 per cent higher than in January and 74 per cent higher than a year ago. Nonresidential awards were 24 CONSTRUCTION PRODUCTION IN DEXES F e b .,*51 150* C O A L P R O D U C T IO N IN D E X 19 3 5 -3 9 = 1 0 0 Unadjusted Adjusted F e b .,’ 50 F e b .,’ 51 Jan.,’ 51 Jan.,’ 51 197 R ' 51 132* 170 R S H O E P R O D U C T IO N IN D E X 1 9 3 5 -3 9 = 1 0 0 Unadjusted Adjusted D e c .,’ 50 N o v .,’ 50 D e c .,'49 D e c .,’ 50 N o v .,’ 50 153* 127 R ’ 154 156* 128 R ‘ R — Revised. *— Peliminary. B U IL D IN G P E R M IT S M onth of February F e b .,’ 50 45 D e c.,’ 49 158 (Cost in thousands) Evansville............ Little R ock.......... Louisville............. M em phis............... St. Louis............... . F e b .,*51 Totals... Jan.,’ 51 Totals... . N ew Construction Repairs, etc. Num ber N um ber Cost Cost 1951 1950 1951 1950 1951 1950 1951 1950 43 $ 58 $ 59 34 61 $ 69 $ 190 43 54 83 132 197 103 1,134 624 159 37 29 83 129 54 659 1,091 40 116 1,279 1,795 106 135 2,937 2,624 176 333 182 243 2,097 2,448 146 171 473 581 $ 637 $907 1,632 2,311 $ 6,896 $6,977 485 $1,534 2,404 1,661 $12,748 $5,885 613 480 $958 Page 51 TRADE D E P A R T M E N T STO R ES Stocks on Hand N et Sales Stock Turnover February, 1951 2 mos. ’ 51 Feb. 2 8 /5 1 to same comp, with compared with Jan .,’ 51 F e b .,’ 50 period ’ 50 Feb. 2 8 /5 0 + 10% + 22% +26% 8th F . R . District.. — 1 5 % Ft. Smith, A r k .1.... — 6 + 15 + 25 + 25 — 7 + 18 + 5 + 25 — 14 + 22 + 35 + 21 Q uincy, 111........... . — 8 + 36 + 24 + 21 — 12 + 12 + 23 + 17 — 19 + 31 + 11 + 21 — 19 + 31 + 10 + 20 — 11 + 29 + 2 + 20 — 10 Memphis, Tenn.. + 18 + 4 + 16 *A11 Other Cities — 13 + 15 + 36 + 21 Jan. 1, to Feb. 28, 1951 1950 .55 .54 .51 .55 .47 .58 .55 .54 .41 .62 .38 .57 .53 .56 .43 .44 .58 .59 .58 .43 .59 .36 * Fayetteville, Arkansas; Harrisburg, M t. Vernon, Illinois; Vincennes, Indiana; Danville, Hopkinsville, Mayfield, Paducah, K entucky; Chillicothe, M issou ri; Greenville, M ississippi; and Jackson, Tennessee. aIn order to permit publication of figures for this city, a special sample has been constructed which is not confined exclusively to department stores. Figures for any such nondepartment stores, however, are not used in computing the district percentage changes or in computing de partment store indexes. ..^Hcludes St. Louis, Clayton, Maplewood, M issouri; Alton and Belle ville, Illinois. Outstanding orders of reporting stores at the end of February, 1951, were 45 per cent greater than on the corresponding date a year ago. |*ercenta£ e a? counts and notes receivable outstanding February 1951, collected during February, by cities: Instalment Excl. Instal. Accounts Accounts Fort Sm ith............. % 44% Little R ock.... 15 47 Louisville......... 18 46 Memphis........... 19 38 IN D E X E S OF 1, Instalment Excl. Instal. Accounts Accounts Q uincy......... . 17% St. Louis............ 19 50 Other Cities.... 11 48 8 th F .R . Dist. 18 47 57% D E P A R T M E N T STORE SALES 8 th Federal Reserve District Feb., 1951 275 327 371 412 Stocks, unadjusted4 AND Jan., 1951 298 363 290 337 STO C K S D ec., 1950 540 353 320 381 Feb., 1950 252 300 289 321 3D aily average 1 9 3 5 -3 9 = 1 0 0 . 4End of M onth Average 1 9 3 5 -3 9 = 1 0 0 . S P E C IA L T Y STO R ES Stocks N et Sales on Hand February, 1951 2 mos. ’ 51 Feb. 2 8 /5 1 compared with to same comp, with Jan., ’ 51 F e b .,’ 50 period ’ 50 Feb. 28,’ 50 M en ’s Furnishings..— 2 4 % + 11% +24% +23% B oots and Shoes....— ■ 8 + 6 +12 +22 Stock Turnover Percentage of accounts and notes receivable outstanding February 1951, collected during February: M en ’s Furnishings..................... Trading d a ys: February, 1950— 24. 1, 43% Boots and Shoes....................... 4 6 % 1951— 2 4 ; January, 1951— 2 6 ; February, R E T A IL F U R N IT U R E STOR ES N et Sales Inventories Ratio of Feb. , 1951 Feb. 28 , 1951 L.Ollect’ ^n« compared with compared with J a n ./5 1 F eb.,’ 50 J a n .3 1 /5 1 Feb. 2 8 /5 0 F e b ./5 1 F e b .,’ : + 32% 1 9% 19% 8th D ist. T o t a l1.... — 5 % + 5% + 1% + 3 St. Louis Area2.... + 1 + 7 + 24 23 24 + 2 + 7 24 + 24 23 St. L ouis............ + 3 — 6 — 4 13 14 Louisville Area3... — 12 + 15 — 7 Louisville........... — 8 + 7 12 14 + 48 M em phis................, — 13 — 12 12 + 5 + 45 13 — 17 + 6 17 17 Little R ock............ — 14 + 36 + 7 Springfield............ . — 37 + 48 14 17 + 7 * * * * — 14 Fort Smith............. — 33 *N o t shown separately due to insufficient coverage, but included in Eighth District totals. 1 In addition to following cities, includes stores in Blytheville, and Pine B luff, Arkansas; Hopkinsville, Owensboro, K entucky; Greenwood, M ississippi; and Evansville, Indiana. 2Includes St. Louis, M issou ri; and A lton, Illinois. sIncludes Louisv'lle, K en tu cky; and N ew Albany, Indiana. PERCENTAGE D IS T R IB U T IO N O F F e b .,’ 51 Cash Sales ........................................... Credit Sales ........................................ Total Sales ...................................... Page 52 14% 86 1 0 0% F U R N IT U R E Jan.,’ 51 1 7% 83 100% SALES F eb.,’ 50 15% 85 1 00% per cent higher in February than in January, and were 40 per cent above last year. During the first two months of 1951, construc tion contracts in the St. Louis territory were con siderably higher than in 1950— in floor area and number of projects as well as dollar value. Prac tically all types of construction so far in 1951 have exceeded the 1950 level. The exceptions include social and recreational buildings, dormitories and two-family dwellings. More than 4,000 dwelling units have been provided for in the St. Louis ter ritory during the first two months of this year as compared with slightly less than 3,000 units in the same period of 1950. Practically all of this gain oc curred in apartment buildings. TRADE February sales of district retail lines reporting to this Bank dropped from their January levels but were generally larger than in February, 1950. Per centage gains from last year, however, were not as spectacular as in January. Adverse shopping weather early in the month apparently limited sales. As the weather moderated sales picked up. As in the previous month, consumer buying was strong in both the “ hard” and the “ soft” lines. Consumers have not been the only ones in the market to buy goods. Retailers’ inventories are heavy and some concern over them has developed. The volume of unfilled commitments also is caus ing concern. Shortages have failed to materialize as quickly as anticipated. Department Stores— Sales volume of reporting district stores was 15 per cent smaller than in Jan uary but was 10 per cent larger than during Feb ruary, 1950. Seasonal sales promotions in the month were responsible for much of the gain from last year. An early Easter this year prompted re tailers to start Easter promotions in the latter part of the month. Seasonally adjusted daily average sales were 327 per cent of the 1935-39 base period. In comparison they were 363 in January and 300 in February, 1950. Sales continued heavy through mid-March and gave indications of maintaining the cumulative gain of 22 per cent from 1950 for the month. Without exception sales volume in the major district cities was equal to or larger than last year. In Springfield, sales volume was about the same as last year. Elsewhere in the district, sales gains from last year ranged from 4 per cent in Memphis to a gain of 22 per cent in Quincy. The record of sales by departments in St. Louis department stores showed widespread consumer buying interest. Large percentage gains were scattered throughout the entire store. Basement store sales (up 10 per cent) increased more per centagewise than did the upstairs divisions where sales were 7 per cent larger than last year. In the downstairs division, men’s wear and homefurnishing sales totaled more than one-fifth larger than last year. In the comparable main store, men's wear sales were 14 per cent larger than last year. The upstairs homefurnishing sales volume in creased 10 per cent over those a year ago. Tele vision sales (5 per cent larger than last year) slowed appreciably but appliance sales (up 37 per cent) continued heavy. The largest percentage gain occurred in the main store furs department where sales were 87 per cent larger than last year. In the upstairs women's accessories and apparel divisions, sales gained 6 per cent — the same as for the comparable basement departments. AGRICULTURE (I n thousand:3 of dollars) Arkansas....... .... ... Indiana........... ... Kentucky....... ... Mississippi.... .... Missouri........ .... Tennessee...... ... Totals......... .... C A SH FA R M IN C O M E Tan.. 1951 *2 month total Jan. to Dec. compared with 1950 Jan., D e c., Jan., compared with 1951 1950 1950 1950 1949 1948 $ 36,261 — 3 4 % + 5 4 % $ 486,345 — 9 % — 15% 156,947 + 6 4* 4 — 1 — 8 1,720,080 77,796 — 6 + 1 5 — 2 — 10 940,791 95,182 — 12 — 16 514,236 — 4 — 13 36,892 — 19 +109 — 9 — 17 445,783 93,862 — 8 + 3 4 - 0— 8 1,009,281 47,699 — 17 + 3 420,360 — 3 — 16 $544,639 — 9 % + 1 1 % $5,536,876 — 3 % — 11% R E C E IP T S A N D S H IP M E N T S A T Receipts Cattle and calves. F eb., 1951 60,337 Totals........ ....... 324,474 N A T IO N A L February,’ 51 compared with Jan.,’ 51 F e b ./5 0 — 30% — 26 — 63 — 25% + 5 — 48 Feb., 1951 14,952 73,985 3,189 — 30% — 92,126 7% STOCK YA R D S Shipments February,’ 51 compared with Jan.,’ 51 F e b .,’ 50 — 38% — 42% — 25 — 6 — 61 — 19 — 30% — 15% Furniture Stores— Sales volume dropped 5 per cent from that in January and was slightly larger than last year. While instances of “ scarce" merchandise have developed, shortages have been confined to a few brand name items. Inventories, in terms of retail value, at the end of February were slightly larger than a month previous but were 32 per cent larger than on February 28, 1950. The retail value of inventories held by reporting district department stores on February 28 was 14 per cent larger than on January 31 and was 26 per cent larger than on February 28, 1950. The much earlier date of Easter in 1951 contributed to the general build-up of inventories. Inventories are now considered adequate in all departments. Feared shortages have failed to develop and some concern is reported over the large volume of unfilled orders outstanding. Some portion of the value of total orders outstanding is the result of higher prices and a continuing effort to maintain stock-sales ratios. At the end of February, orders outstanding were valued at 3 per cent less than a month earlier but were 45 per cent larger than on February 28, 1950. AGRICULTURE Prices received by farmers continued to rise dur ing the month ending February 15. While there were some exceptions (dairy products, eggs and cottonseed), prices of most agricultural products were higher, with increases in meat animal prices leading the parade. As a result, the index of prices received by farmers increased to 313 (1910-14=100) exceeding the previous record set in January, 1948. At this level, prices were nearly one-third higher than a year earlier. Prices paid by farmers increased also, but not as much as prices received. Thus, the parity ratio (ratio of prices received to prices paid) widened from 110 to 113 for the month ending February 15. A year earlier the parity ratio stood at 96. Although general agricultural prices were at a record high, most commodity prices with the ex ception of meat animals, cotton, cottonseed and Specialty Stores — St. Louis women's apparel store sales during February dropped 17 per cent below those in January but were 5 per cent larger than last year. The value of inventories on Feb ruary 28 was 17 per cent above that on January 31 and 5 per cent less than on February 28, 1950. District men’s wear store sales were about onefourth less than in January but were 11 per cent larger than in February, 1950. Inventories were 15 per cent larger on February 28 than a month earlier and almost one-fourth larger than a year ago. M O R E L IV E S T O C K A R E O N FA R M S T H A N A Y E A R E A R L IE R A ll cattle and calves (I n thousands) Arkansas............................................ Illinois................................................. Indiana................................................ Kentucky........................................... Mississippi........................................ Missouri............................................. Tennessee^.......................................... D ist. States....................................... United States................................... Number1 Per cent change from 1950 1,282 + 6% 3,317 + 5 1,848 + 5 1,721 + 7 1,791 + 7 3,356 + 8 1,550 + 6 14,865 + 6 84,179 + 5 liv e s t o c k on farms January 1, 1951. Source: U .S .D .A . Livestock on Farms January 1 1951 . M ilk cows Number1 Per cent change from 1950 435 972 721 640 554 994 640 4,956 24,579 — 2% — 2 — 1 + 1 + 2 + 2 - 0- 0- 0- H ogs Per cent change N umber1 from 1950 1,013 6,976 4,934 1,668 946 4,916 1,385 21,838 65,028 + 4% + 11 + 7 - 0— 2 + 11 — 1 + 8 + 7 Sheep and lambs Per cent change Number1 from 1950 60 + 10% 625 + 9 472 + 4 749 + 7 106 + 2 1,214 + 3 270 + 2 3,496 + 5 31,505 + 2 Page 53 soybeans were still below parity. However, im portant feed and food grains, dairy products and eggs all were approaching that level. Livestock numbers on farms at the beginning of 1951 were substantially higher than a year earlier. In the last year the number of all cattle and calves increased 6 per cent in district states compared with a 5 per cent increase nationally. This increase was largely in beef cattle. Dairy cattle numbers were unchanged both in the district and in the nation. The number of cattle in district states in creased most (relatively) in Missouri, Mississippi and Kentucky. H og numbers on farms were up sharply in Illinois and Missouri from a year earlier. Sheep numbers increased during 1950, the first increase in eight years. Producers of burley tobacco will be permitted to increase acreage by about 12 per cent compared with 1950. The production quota now has been set at 580 million pounds compared with a 542 million-pound quota announced during November for the 1951 crop. Flue-cured tobacco (not grown in district states) also had its quota increased sub stantially. The new quota will result in acreage al lotments about 14 per cent higher than in 1950. BANKING AND FINANCE Voluntary Credit Restraint Program—In order to further restrain inflationary pressure, the Board of Governors of the Federal Reserve System an nounced on March 13 a program for voluntary credit restraint. Section 708 of the Defense Production Act of 1950, and the Executive Order of the President No. 10161, authorize the Board of Governors to en- DEBITS TO DEPO SIT ACCOUNTS (I n thousands of dollars) February, 1951 compared with February, January, February, 1950 Jan.,’ 51 Feb.,’ 50 1951 1951 19,419 — 1 9% 28,530 $ + 20% $ 23,221 $ 47,443 + 20 33,343 — 16 39,875 + 21 7,062 9,812 5,840 — 28 112,130 — -14 + 14 128,236 149,021 + 14 34,899 22,540 — 27 25,683 8,980 — 22 + 23 14,128 11,024 + 19 20,304 — 20 24,108 29,957 + 19 106,312 142,171 89,488 — 25 + 15 29,866 35,910 25,934 — 17 140,752 104,892 — 13 + 16 122,014 461,755 — 17 + 20 552,293 667,543 37,219 50,406 32,592 — 26 + 14 12,866 — 4 + 33 17,112 17,800 31,127 18,975 — 38 + 2 19,403 14,658 9,805 — 24 + 14 11,178 7,456 — 15 10,088 + 15 8,544 63,608 42,097 — 23 + 16 48,800 1,318,815 — 21 1,589,078 2,009,686 + 20 9,112 — 13 + 16 12,141 10,586 56,376 70,255 46,310 — 20 + 22 16,078 — 21 + 13 18,160 23,041 818,656 495,882 — 32 554.417 + 12 E l Dorado, A r k ............... Fort Smith, A r k ............ H elena, A rk ...................... Irittle Rock, A r k ............ Pine B luff, A r k ............... Texarkana, A r k .* .......... A lton , 111........................... 1$. St. I*.-N at. S. Y ., 111.— Q uincy, 111...................... Evansville, In d ............... L,ouisville, K y ................. Owensboro, K y ............... Paducah, K y ................... Greenville, M iss.............. Cape Girardeau, M o ..... H annibal, M o .................. Jefferson City, M o ......... St. I^ouis, M o .................. Sedalia, M o ...................... Springfield, M o ............... Jackson, T enn................. Mem phis, Tenn............... Totals............................. $3,440,567 $4,421,632 $2,914,613 ■ 22 % + 18 % Total debits for * These figures are for Texarkana, Arkansas only, banks in Texarkana, Texas-Arkansas, including banks in the Eleventh District, amounted to $27,730. Page 54 courage financing institutions to enter into volun tary programs to restrain credit where such re straint will further the objectives of the Act. The Program for Voluntary Credit Restraint which was worked out by representatives of financing institu tions in consultation with the Board has as its major objective loan screening by all financing in stitutions in the United States to eliminate loans which are not necessary to finance the defense pro gram, and other essential purposes. A national committee, the Voluntary Credit Re straint Committee, has been created, the members appointed by the Board of Governors and rep resenting life insurance companies, investment bankers and commercial banks. This Committee will consider the functioning of the Program and advise the Board with respect thereto. The Com mittee will also appoint subcommittees throughout the United States to be available for consultation with individual financing institutions and to as sist them in determining the application of the Program with respect to specific loans. Participation in the Program is entirely volun tary, but the Board has expressed the hope that all financing institutions would cooperate. The Pro gram was issued after consultation with the At torney General and the Chairman of the Federal Trade Commission. Under the law, actions of fi nancing institutions in accordance with the Pro gram are exempt from the prohibitions of the anti trust laws and the Federal Trade Commission Act. Increase in Interest Rates — On March 3, the Treasury announced that it planned a new issue of non-marketable 2y. per cent long-term bonds to be offered in exchange for outstanding 2y* per cent Treasury bonds of June and December 1967-72. Terms of the new bonds were announced by the Treasury on March 8. Following this announce ment, Government bond prices declined. The long est-term bank-restricted issue fell in price to a level just above par. Most other Government issues sold at lower levels. On March 13, the Government bond market slumped a second time and prices of bank-restricted issues, including the long-term “ Victories,” fell below par. The bank-eligible is sues, likewise, declined in price. One effect of the decline in prices of government securities in mid-March was to increase yields on these securities approximately % of 1 per cent. Some issues changed more, some less, in yield (Treasury bills changed very little). Interest rates in general tended upward. Rates on bankers’ ac ceptances advanced % of 1 per cent. Rates on com mercial paper likewise firmed. Yields on highest grade corporate bonds rose so that the corporate- Government bond spread remained the same as in February and March. In addition, the increase in yield on Government bonds was reflected in the yield on municipal bonds and high-grade preferred stocks. BUSINESS AND AGRICULTURAL LOANS 8 th W E E K L Y REPO RTING 1949 -1951 M EM BER BANKS M ILLIO NS o r DOLLARS MILLIONS OF DOLLARS Banking Nationally — Nationally, in February and early March commercial loan expansion con tinued. W eekly reports from member banks in leading cities showed that commercial and indus trial loans jumped $836 million in the six week pe riod to an all-time high of $19 billion. Expansion in these loans is unusual at this time. In the same period of 1948, 1949 and 1950, for example, com mercial and industrial loans declined nearly $150 million on the average. 800 800 1951 700 700 / $ A i 1949 600 600 iS District Banking Developments — In February, district member banks reduced their loan volume, but less than the average amount for the preceding three years. The slight decline of $4 million for all district member banks was the net result of a de cline at the larger city banks ($13 million) and a gain at smaller, primarily rural banks ($9 million). The smaller bank loan expansion compared with an average growth of only $1 million in February, 1948-50. — '.,^ J 9 5 0 r 500 E IG H T H ^ j 500 K. * 400 Q u arter Q u arter The loan decline at the larger banks was due to a shrinkage in loans to other banks which had in creased sharply (about $20 million) in January — presumably as part of the banks’ adjustment to re serve requirement increases effective January 11 through February 1. Real estate loans at the larger banks showed a gain of $1 million in February com- M EMBER DISTRICT Quarter — .... :‘r r .....i f Quarter 400 pared with more than twice that amount in Feb ruary, 1950. Consumer loans were off but some what less than the preceding three-year average. Commercial loans at the larger banks remained virtually unchanged in February compared with an average drop of $14 million in the corresponding period in 1948-50. D IS T R IC T B A N K ASSETS B Y SELECTED A N D L IA B IL IT IE S GROUPS A ll Member ( I n Millions of Dollars) $4,049 1,867 1,820 362 1,341 677 664 49 $— 41 — 4 — 27 — 10 — 6 — 7 + 1 — 1 $ + 126 + 361 — 242 + 7 +164 + 100 + 64 + 8 $2,390 1,279 936 175 844 443 401 32 $— 42 — 13 — 19 — 10 + 3 — 15 + 18 + 2 $ + 88 + 288 — 200 —0— + 141 + 71 + 70 4* 5 $1,659 588 884 187 497 234 263 17 $+ + — $5,439 6* 1 J*. 00 Feb., 1951 A ssets 1. Loans and Investm ents......................... a. Loans........................................................ b. U .S . Government Obligations..... c. Other Securities.................................. 2 . Reserves and Other Cash Balances.. a. Reserves with the F .R . bank......... b. Other Cash Balances3...................... . 3. Other A sse ts............................................... Large City Banks1 Smaller Banks2 Change fro m : Change fro m : Change fr o m : Jan., 1951 Feb., 1950 Jan., 1951 Jan., 1951 Feb., 1950 F eb., 1950 to to to to to to Feb., 1951, Feb., 1951 Feb., 1951 Feb., 1951 Feb., 1951 Feb., 1951 Feb., 1951 Feb., 1951 $ + 298 $3,266 $— 37 $ + 234 $2,173 $— $4,064 665 3,399 974 65 336 $— — + + — + 39 52 13 1 12 2 $+253 — 5 + 258 — 5 + 33 + 17 $2,523 629 1,894 490 59 194 $— 25 — 49 + 24 - 0~ — 12 —0— $ + 194 — 4 + 198 — 2 + 33 + 9 $1,541 36 1,505 484 6 142 $— — — + $5,439 $— 48 $ + 298 $3,266 $— $ + 234 $2,173 $— 1 9 8 - 0— 9 + 8 — 17 — 3 11 $+ + — + + + — + 38 73 42 7 23 29 6 3 $+ 64 Liabilities and Capital Gross Dem and D eposits..................... a. Deposits of B anks........................... b. Other Demand Deposits.............. Tim e Deposits......................................... Borrowings and Other Liabilities.. Total Capital Accounts....................... 9. Total Liabilities and Capital Accounts.. 37 14 3 11 1 - 0+ 2 11 $ + 59 — 1 + 60 — 3 - 0+ 8 $+ 64 1 Includes 15 St. Louis, 6 Louisville, 3 Memphis, 3 Evansville, 4 Little Rock and 4 East St. Louis-N ational Stock Yards, Illinois, banks. 2 Includes all other Eighth District member banks. Some of these banks are located in smaller urban centers, but the majority are rural area banks. 8 Includes vault cash, balances with other banks in the United States, and cash items reported in process of collection. Page 55 In February, investments of district member banks declined $37 m illion: $29 million at the city banks and $8 million at the smaller banks as a group. Deposits were off slightly in total amount for the month. Demand deposits due to banks were drawn down fairly sharply while other demand deposits increased moderately at the larger banks. Time de posits expanded at the country banks. At mid-March, reports from weekly reporting member banks in the district indicated that the February trends had continued. Commercial loans were down in volume although the decline was less than in the corresponding weeks of the three pre ceding years. The contraseasonal strength in de mand appeared at all reporting centers except Page 56 Memphis. Real estate loans for the 34 reporting banks were up for the two-week period to midMarch, loans to banks and “ other” (largely con sumer credit) loans were off. Debits to Deposit Accounts— The dollar volume of checks cashed in February declined more than usual from the January level. Debits to deposit ac counts at the 22 selected cities in the Eighth Dis trict were $3.4 billion in February, 18 per cent above February, 1950. By comparison, January debits were 32 per cent larger than in January, 1950. Nationally, the picture was similar to that in the district. Debits at leading cities in the country in February were only 18 per cent above the compar able month a year ago, as compared to a 30 per cent gain in January.
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