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THE 1957-1958 RECESSION:
RECENT OR CURRENT?
Recent Economic Developments
p. 94
Federal Reserve Policy and the
Financial Markets during the Past Year
p . 99
This issue released
on August 14th
Federal Reserve Bank
o f St. L ou is
411 LOCUST STREET • ST. LOUIS, MISSOURI
THE 1957-1958 RECESSION:
RECENT OR CURRENT?
T
he
BUSINESS C LIM A TE has improved within recent weeks. Measures of
industrial production, construction activity, employment, and personal income
reveal the improvement. But whether or not these measures indicate the end
of the recession remains to be seen. A t any rate some recovery in activity has
definitely occurred, as related in the first section of this article.
Financial developments and Federal Reserve actions through the past year
are discussed in the second section.
Recent Economic Developments
_/\.VAILABLE FA C TS indicate quite clearly an im-
ment accompanying the recession took place in manu
provement in economic conditions beginning in April
facturing and mining. Production of mines and man
and continuing through June. The more fragmentary
ufacturing plants rose from a low of 126 per cent of
information available for the period since the middle
the 1947-49 average in April to 128 per cent in May
of the year appears to indicate that the improvement
and to 130 in June. As can be seen from the accom
has continued up to the present.
panying chart, a wide variety of industries partici
In the recession which becam e apparent last fall,
pated in the gains. The increases in output were of
employment and production declined through the
particular importance in the machinery, transporta
winter and early spring. Subsequently, in late spring
tion equipment, metal fabricating, and primary metals
and during the summer, most measures of economic
groups.
activity have shown improvement.
Industrial pro
duction increased in May and June and probably con
tinued to rise through July, after allowance for the
usual reductions in output resulting from summer
vacations.
Nonagricultural employment, s e a s o n a lly
adjusted, rose in June and July also.
The increases in
employment, unemployment compensation, and social
security benefits, and the highest farm income rate
since 1953 combined to return total personal income
in the nation in June very nearly to the peak reached
in August of last year.
Activity in many industries dipped in early July,
as a result of the Fourth of July holiday and vacation
shutdowns, and has picked up again subsequently.
Steel production in the nation increased from 51 per
cent of rated capacity in the first week of July to 58
per cent in the final week and was scheduled for 60
per cent in the first week of August. At St. Louis area
steel plants, mid-August output was scheduled at
about the early July rate of 74 per cent of capacity,
however.
National production of paperboard, crude
oil, and coal also picked up by early August.
Auto
Production H as Risen
production, to the contrary, dipped at the end of July
The rise of industrial production is of special inter
est because the greater part of the decline in employ
and is expected to be much lower in August because
Page 94
of model changeovers.
1947 -4 9 *1 0 0
145
Industrial Production
by
Components
• *>
(Seasonally Adjusted)
Source:
Board of Governors of the Federal Reserve System.
135
9
125
135
m.
Total
125
i 15
Prim ary Metals
Public and R esiden tial Construction Strong
105
Construction activity has been rising as increases
in public construction and residential building more
than offset a decline in private nonresidential con
struction. The value of construction put in place rose
in July to a new record for the month, according to
preliminary estimates. The total value for the first
seven months of the year was slightly greater than the
amount registered in the same period of last year.
Public construction in the first seven months was five
per cent greater than a year earlier while private con
struction was slightly smaller.
95
85
m
^Clay, Glass and Lumber
Products
Continuation of the growth in construction activity
is indicated by construction contract awards and new
housing starts, which have risen sharply since the
beginning of this year. Construction contract awards
reported by the F. W. Dodge Corporation for the
nation in May and June were 9 per cent greater than
in the same two months of 1957. Contracts awarded
in the Eighth District in May and June were 20 per
cent greater than a year earlier. Heavy construction
contract awards r e c o r d e d by E n g in eerin g N ew sR ec o rd , which include only large projects, have also
risen sharply this year. The total value of such con
tracts awarded in 32 weeks ending in early August
was 8 per cent larger than the volume awarded in the
same period last year. The volume of such contracts
for public work was 15 per cent larger than a year ago.
Private housing starts rose between May and June
for the third consecutive month, reaching a seasonally
adjusted annual rate of nearly 1.1 million units, the
highest rate since early 1956. Increased availability
of mortgage credit in recent months has had a favor
able influence on building activity. The decline in
bond yields which occurred last fall made the yields
obtainable on mortgages, particularly government un
derwritten mortgages, considerably more attractive to
lenders than they were in the spring and summer of
1957. Furthermore, the flow of savings going into
financial institutions has been large.
'A
S
0
1957
N D
MAM
1958
Page 95
Total Nonagricultural
and M anufacturing Employment
in M ajor District Cities
Source:
State Employment Security Divisions and U nited States Bureau
of Labor Statistics.
Employment Has Improved
The acceleration of industrial production and con
struction activity has resulted in considerable im
provement in employment conditions. Total nonfarm
employment, after declining since July of last year,
rose about 230,000 between mid-April and mid-June,
after allowance for seasonal changes. Nearly half of
the increase occurred in contract construction and the
rest of the gain was in trade, government, and serv
ices.
(See chart.)
According to preliminary esti
mates, employment in nonagricultural establishments
increased another 130,000 from mid-June to mid-July,
after seasonal adjustment. Manufacturing employ
ment, which had increased slightly from May to June
after declining for seventeen months, continued to
show improvement in both durable and nondurable
plants between June and July.
Unemployment Has Declined
Unemployment rose from the middle of May to
mid-July by nearly 400,000 to 5.3 million. Seasonally
adjusted unemployment was 7.3 per cent of the
civilian labor force in July, as compared to a high of
7.5 per cent in April. The rise in number of unem
ployed reflected the usual addition of students and
graduates to the labor force. Hiring of young sum
mer workers has been slower than in other recent
years, and heavy rains apparently restricted some farm
work and other outdoor activity in mid-July.
1957
Page 96
1958
W hile substantial employment gains have occurred
in recent months, the situation still compares unfav
orably with that of a year ago. The estimated num
ber of unemployed, 5.3 million, was a little over two
million above the level in July of last year. The num
ber of people drawing unemployment compensation,
not including those whose benefits had been exhaust
ed, was running a bit more than double its year-ago
rate through July. The number exhausting unem
ployment benefits increased from some 237,000 in
May to about 260,000 in June. (T h e Temporary Un
employment Compensation programs were just getting
under way in the latter part of Ju n e .)
Nonagricultural Employment
Millions of Persons
5 5 .0 p
by
Industry Division
Total
5 0 .0 *
(Seasonally Adjusted)
Source:
United States Bureau of Labor Statistics.
Seasonal adjust
ments made by Division of Research and Statistics, Board of
Governors of the Federa! Reserve System,
Workweek Has Lengthened
Average weekly hours worked in manufacturing in
creased sharply from May to June and the lengthen
ing of the workweek occurred in virtually all major
industry groups. The average number of hours worked
per week in June was 39.2 as compared with a low of
38.3 in April and the 1957 high of 40=0 last June.
Average weekly earnings in manufacturing at $83.10
in June were higher than a year ago since an increase
in average hourly earnings more than offset the short
ening of the workweek.
8.0
Personal Income Has Expanded
The rises in employment and hours worked con
tributed to an expansion of personal income in May
and June and probably in July as well, although esti
mates are not yet available for that month. In June
total personal income was at a seasonally adjusted
annual rate of $352 billion, almost back to the peak
level of last August.
Between August of last year and February 1958,
personal income declined $5.7 billion, as declines of
$7.7 billion in labor income and of $1.4 billion in in
comes of business proprietors were partially offset by
increases in unemployment compensation and social
security benefits, and by a rise of nearly $1 billion in
incomes of farm proprietors. Other sources of income,
including dividends, interest, and rents, remained vir
tually unchanged over the period. Between February
and April, labor income declined an additional $1.3
billion but this decline was more than offset by con
tinuing increases in farm income and transfer pay
ments (principally unemployment compensation, vet
erans' benefits and social security benefits) so that
total income began to grow again. Labor income
turned up after April, rising $3.3 billion between April
and June. Further improvement in employment and
a salary increase for employees of the Federal Gov
ernment probably pushed total personal income to a
new high in July.
::l
Public Utilities
251
Finance, Insurance
and Real Estate
2.2 *
2 .3 1
Federal Government
2.0 *
3 .3 f
3 .0*
Page 97
GNP also Up
Gross national product, the total value of goods and
services produced by the economy, rose slightly in the
second quarter of this year, according to preliminary
estimates. The slight rise followed substantial declines
in the two previous quarters and brought total gross
national product to a seasonally adjusted annual rate
of $428 billion, up $2 billion from the first quarter
but $17.6 billion, or 4 per cent, below the rate achieved
in the third quarter of 1957.
Liquidation of business inventories, which accountted for about two-thirds of the reduction in gross
national product between third-quarter 1957 and firstquarter 1958, was slightly less rapid during the second
quarter than in the first. During June manufacturers'
inventories declined at about the same rate as in ear
lier months, but wholesalers’ inventories remained
unchanged in the month and the inventories of re
tailers increased slightly, the first increase since last
December.
Final purchases by consumers and government ex
panded moderately between the first and second quar
ters. Increases in consumer expenditures for services
and nondurable goods more than offset a further
decline in buying of durable goods. Business pur
chases of producers’ durable equipment declined
again between the first and second quarters but the
decline was at a smaller rate than at any time since
the middle of 1957.
Prices Have Advanced
In June and July wholesale prices rose slightly as
an advance in prices of industrial commodities offset
a decline in prices of farm products. Prices of in
dustrial commodities had edged down gradually b e
tween January and May, but the upturn of industrial
production after April, some slowing in the rate of
inventory liquidation, and proposals for governmental
support of nonferrous metal prices induced some
stiengthening of demands for a variety of basic m a
terials. Prices of scrap metals, copper, tin, rubber,
wool textiles, hides, plywood, and fuel oil have in
creased in recent weeks. The Middle East crisis
brought about some additional firmness in commodity
prices, particularly in the futures markets. At the
end of July and in early August major producers of
steel and aluminum announced increases in their
price schedules.
The consumer price index continued a gradual ad
vance through June, rising from 120.2 per cent of the
Page 98
1947-49 average in June of 1957 to 123.7 per cent in
June of this year. A rise in prices of transportation,
reflecting automobile increases last fall, and a sharp
rise of food prices after the turn of the year, account
for much of the year-to-year gain in the index. Rents
and the prices of other services continued their steady
growth of the past several years. Apparel prices were
unchanged over the year.
Farm Income Up
Farmers received substantially higher incomes in
the first half of 1958 than in the first half of 1957.
Cash receipts from farm marketings nationally were
11 per cent higher than a year earlier. In the Eighth
District, preliminary estimates of cash farm receipts
in the first five months of this year were 4 per cent
higher than receipts in the same months of 1957. R e
ceipts were greater this year in Illinois, Missouri,
Arkansas, and Mississippi, but lower in Tennessee and
Kentucky. In the nation, receipts from sales of live
stock were up 12 per cent from a year ago in the first
half of the year and crop receipts were up about 2
per cent. Prices of all farm products averaged about 8
per cent higher than in first-half 1957. Price gains
from a year ago were especially large for cattle, hogs,
and eggs.
Record Crop Prospects
Crop production in 1958 in the nation is likely to
set a new record, although the total acreage planted
is quite small when compared with that of earlier
years. Total acreage harvested may slightly exceed
that of 1957, which was the smallest in forty years.
Yields per acre are expected to be greater than last
year’s record high, continuing an upward movement
in yields which has been proceeding without an in
terruption since 1951.
Crop conditions are generally good throughout the
Eighth District. Although cotton stands are spotty in
some areas and the crop is somewhat later than nor
mal, moisture has been adequate and weevils have
been less prevalent than in other recent years. Corn
and soybean crops in Illinois and Missouri are slightly
later than normal but are in good condition. W inter
wheat production in these two states is estimated to be
substantially above last year’s level and above the
1947-1956 average. The indicated Kentucky tobacco
crop is about equal to that of last year, although
acreage is slightly smaller.
Federal Reserve Policy and the
Financial Markets during the Past Year
I n R E SPO N SE TO TH E CHANGE in the economic
environment which became apparent to observers in
the fall of last year, the Federal Reserve System took
several steps to alter its credit policy. From a position
of restraint in a period of active inflationary pressures,
the System undertook to cushion the decline and facil
itate a recovery by employing the traditional tools of
monetary policy to expand the money supply and
encourage the flow of credit.
requirements on demand deposits were reduced in
successive % per cent steps in February. March, and
April. By the end of April reserve requirements had
been reduced 2 percentage points in the case of cen
tral reserve city banks, 1% points at reserve city banks,
and 1 percentage point for country banks. These re
ductions had the effect of freeing approximately $1.5
billion of reserves, which could result in an expansion
of loans or investments or in larger free reserves.
Federal Reserve Action in the Fall of 1957
The System contributed to still further ease through
an open market policy which absorbed somewhat less
than the usual inflow of reserves early in the year and
allowed bank reserves to expand gradually thereafter.
The early part of the year is a period in which the
Federal Reserve typically attempts to offset, via open
market operations, various seasonal factors which tend
to supplement bank reserves, such as the post-holiday
return of currency to the banks. During the first
quarter of 1958, however, the System substantially
reduced the magnitude of its compensating operations
when compared to year-earlier figures. Thus, the Sys
tem's government security holdings, including those
under repurchase agreements, which had declined
about $1,750 million in the first quarter of 1957 were
reduced only about $600 million in the first quarter
of 1958. Member bank free reserves reached a level
of approximately $500 million in March.
From October through the year end, member bank
reserve positions were improved by the net effect of
market forces and Federal Reserve action. In Novem
ber the Federal Reserve Banks reduced the discount
rate % per cent from 3/2 to 3 per cent. Open market
purchases were used during the period. Member
banks moved from a net borrowed reserve position of
$344 million in October to one of net free reserves
totaling $9 million by January 1, 1958.1
The substantial reserves provided by the System
together with a marked decline in loan demand occa
sioned by the reduced level of output, inventories, and
income enabled banks to improve their liquidity posi
tions. They did so by repaying indebtedness, accumu
lating excess reserves and adding to their holdings of
government securities.
Early 1958
As the recession continued during early 1958, the
Federal Reserve took further action to ease credit
conditions. On January 16, 1958, the proportion of the
current market value that could be lent against securi
ties under Regulations T and U was raised from 30
per cent to 50 per cent. Reserve Bank discount rates
were reduced by Mper cent in January and per cent
in March, bringing the level to 2/i per cent. Reserve
1 “Net borrowed reserves” are member bank borrowings from Fed
eral Reserve Banks less excess reserves,
“Net free reserves” are the
amount of excess reserves less member bank borrowings.
Spring and Summer 1958
The discount rate was reduced by Y% per cent to
l/i per cent in April, the third reduction since Novem
ber. The System was very active in the open market
during the four-month period, April-July, 1958, pur
chasing approximately $1.5 billion of securities and
bringing its total holdings to $24.5 billion. Part of
the System action was to offset an unusually heavy
outflow of gold which began in February. In the
April-July period, U. S. gold holdings were reduced
by $1.2 billion. Free reserves of member banks on a
Page 99
Record of Federal Reserve Monetary Actions
and Member Bank Reserves and Borrowings
November, 1957— August, 1958
Discount Rates (Federal Reserve Bank of N e w York)
In effect November 1, 1957:
November
January
March
April
15,
24,
7,
18,
1957
1958
1958
1958
3y2 per cent.
Reduced
Reduced
Reduced
Reduced
In effect August 8, 1958:
y2
%
*/2
y2
Old Rate
in Per Cent
percentage
percentage
percentage
percentage
point:
point:
point:
point:
3y2
...............................
...............................
............................. .
............................. .
New Rate
in Per Cent
3
23/4
3
2V4
2%
2Y4
l 3/4
1% per cent.
Reserve Requirem ents
Percentage Required
Net Demand Deposits
Country
Reserve City
Central Reserve
Banks
Banks
City Banks
In effect November 1, 1957:.
February 27, 1958...............
March
1, 1958...............
March
20, 1958...............
April
1, 1958...............
April
17, 1958...............
April
24, 1958...............
. ..............
.................
20
i9 y 2
18
i7 y 2
.................
19
17
.................
.................
18y2
18
16y2
18
i6 y 2
12
Time Deposits
All Member Banks
5
11%
11
In effect August 8, 1958:........ .............
11
5
M a rgin Requirements on Stock Purchases
In effect November 1, 1957: 70 per cent
January 16, 1958 Lowered 20 percentage points:
August
5, 1958 Raised
20 percentage points:
In effect August 8, 1958:
Old Level
New Level
50 per cent
70 per cent
70 per cent
Total U. S. Governm ent Securities Held by System O pen M ark e t Account
Period Covered
— Bought Outright and Held Under Repurchase Agreement—
1957......................................................................... (Averages of daily figures by months in millions of dollars)
23,348
October...............................................................
November........................................................... ...........................................................23,417
December....................................................................................................................... 23,982
1958
January............................................................. ........................................................... 23,608
February........................ .................................... ............................................................23,378
M arch.............................................................................................................................. 23,486
A p ril................................................................................................................................ 23,649
M a y...................................................................... ........................................................... 23,939
June...................................................................... .......................................................... 24,749
July (P)............................................................................................................................ 25,218
M em b er Bank Total Reserves, Required Reserves and Borrow ings
Period Covered
1957
October.....................................
November.................................
December.................................
1958
January..................................... ..................
February...................................
M arch......................................... ....................
A p ril........................................... ....................
M a y ............................................
June (P).....................................
July (P ).................................... ....................
(Averages of daily figures by months in millions of dollars)
Net Free { + ) or
Excess
Total
Required
Net Borrowed (— )
Reserves
Reserves
Reserves
Borrowings
Reserves
18,573
467
811
— 344
512
804
18,447
— 293
18,843
577
710
— 133
19,296
18,730
18,394
18,609
18,723
18,434
18,097
17,772
17,557
17,983
17,960
573
567
633
623
666
617
649
451
242
138
130
119
142
110
+ 122
+324
+495
+493
+547
+475
+539
P— Preliminary.
daily average basis hovered about a $500 million
average level in the April-July period.
On August 5 the Board of Governors reduced the
proportion of the current market value that can be
lent against securities as collateral from 50 per cent
to 30 per cent. The action reversed last January’s
increase and was taken to prevent the excessive use
of credit for purchasing or carrying securities. Stock
Page 100
market credit increased from $3.6 billion in January
to $4.2 billion at the end of June, the latest date for
which data are available, and the bank loan portion
which is more currently available fluctuated around
the high June level in the five weeks to July 30. The
effect of the credit expansion thus far in 1958 has
been to offset the decline that took place in the sec
ond half of 1957 and to push the total volume of
stock market credit to new high levels.
The Behavior of Interest Rates
The development of easier monetary conditions
and a marked decline in anticipations regarding the
course of business were both reflected in a fall in
interest rates during the latter part of 1957. The yield
on government securities in all maturities declined
precipitously. The rate of return on long-term gov
ernment bonds dropped from 3% per cent in midOctober to 3/4 per cent by the end of the year. The
yield on intermediate maturities fell even further,
from 4 per cent to 3 per cent, while the market yields
on Treasury bills dropped by % a percentage point to
just over 3 per cent.
Interest rates on government securities, which had
been falling in all maturities during the latter part of
1957, began to manifest varying patterns of behavior
in the first quarter of 1958. In early January the yield
on long-term government bonds was about 3J£ per cent
and that on Treasury bills 2%per cent. The bill rate
dropped by the end of March to slightly over 1 per
cent while the return on long-term securities remained
virtually unchanged, despite the further easing of the
member banks’ reserve positions. Intermediate ma
turity yields, like those on bills, continued to fall dur
ing the first quarter of the year.
During April the bill rate firmed somewhat while
the yield on long-term issues resumed a downward
drift. In May there was downward pressure on all
government rates and they reached their low points
by the end of the month. The average market yield
on bills for the last week of May was 0.58 per cent,
intermediates were yielding 2.20 per cent and the
long-term bonds 3.13 per cent. At this time the interest
spread between the shortest and longest term govern
ment issues was the widest since the early 1930,s.
The beginning of June marked a turning point in
the course of interest rates. The incipient signs of an
upturn in economic activity, the prospects of large
government deficits in the next fiscal year, and the
threat of renewed inflation they were thought to sig
nify created an increasing reluctance to hold fixedinterest-bearing obligations at prevailing yields. Con
sequently, government security prices began to fall;
that is, yields began to rise. By early August the aver
age return on long-terms had recovered more than
half of its recession decline. Yields on intermediate
securities had risen about % a percentage point, re
tracing just over a quarter of their fall. The market
yield on the longest bill also had climbed approxi
mately % a percentage point, regaining only a small
fraction of its October-May drop.
Yields on United States Government Securities
Per Cent Per Annum
1957
1958
Page 101
Yields on other securities have behaved in roughly
the same pattern as those on Federal issues but with
some variations in timing and amplitude. State and
local government bond yields reached their high
points in August of 1957, a little before the peak on
bonds of the United States Treasury. Their decline
to the spring low was also slightly greater than the
decline on Treasury bond yields. Yields on corpo
rates peaked later than those of State and local gov
ernment bonds or United States Government bonds
and declined less thereafter.
Average yields on State
and local and corporate bonds have strengthened con
siderably since earlier in the year and in July were
nearly to the levels of last December.
The strengthening of long-term rates in the nonFederal sectors since the beginning of the year re
sulted in part from the heavy volume of long-term
state, municipal and corporate securities offered in the
capital markets. Borrowers who had temporarily
shelved their investment plans during the period of
tight money and higher interest rates, came to the
market as borrowing costs declined. In the first three
months of 1958 a total of $5.4 billion of such newmoney securities were issued, an amount somewhat
above year-earlier figures.
operation which totaled $16.8 billion, the amount of
the refunded issues, the Treasury replaced five dif
ferent maturing and called securities with three new
issues ranging in maturity from 1 year to 32 years.
The results of the refunding were extremely favor
able. The overall attrition, that is, the volume of out
standing maturing and called securities whose owners
elect to take cash rather than the new issues offered
by the Treasury, amounted to only $1.4 billion which
was about 8 per cent (approximately 13 per cent of
the publicly held issues).
In its second debt operation in the same month, the
Treasury sold to investors for cash $1.5 billion of an
8-year 4-month, 3 per cent bond.
After being out of the market for a little over a
month, the Treasury conducted a cash offering in
April.
The April issue, a 4-year 10-month note,
totaled almost $4.0 billion. Early in June the market
paid $1.1 billion in cash for a 27-year bond with a
coupon yield of 3/4 per cent.
In the June exchange the Treasury offered two
securities, a 6-year 8-month, 2% per cent bond and an
11-month l/i per cent certificate of indebtedness to
holders of maturing 2% per cent notes, 2% bonds and
The demand for new long-term capital continued
heavy through the second quarter and into the third
quarter of 1958. Long-term corporate and state and
local government security offerings totaled over $6.4
billion for the period from April through July, approx
imately the same volume floated in a comparable
period of 1957. Thus, for the first seven months of
a called issue of 2% bonds. In the aggregate the ma
turing issues totaled approximately $9.6 billion of
which some $470 million was held by the Federal
Reserve and the Treasury Investment Accounts.
Again, the issue was highly successful. Total attri
tion amounted to only $356 million, slightly less than
1958, corporate and state
and municipal government
Treasury Financing January 1— August 1, 1958
issues amounted to $11.8
(Dollar amounts in millions)
b ill io n , c o m p a r e d w ith
$11.7 billion in the corre
Date of
Financing
sponding 1957 period.
2 /1 4 /5 8
Character of the operation
Refunding: Exchange of 5 issues ($16,785):
U. S. Treasury Financing
Meanwhile the Treasury
also contributed to the de
mand for long-term funds
the other for cash.
Page 102
2y2 % Certificates
2 /1 4 /5 9
3,854
3% Bonds
2 /1 5 /6 4
1,727
3V2 % Bonds
2 /1 5 /9 0
(Attrition, $1,433)
1,484
4 /1 5 /5 8
New Issue
3,971
2% %
Notes
6 / 3/5 8
New Issue
1,133
3% %
Bonds
6 /1 5 /5 8
Refunding: Exchange of 3 issues ($9,555):
1,815
7,384
1 % % Certificates
2 % % Bond
5 /1 5 /5 9
2 /1 5 /6 5
1% %
8 / 1/59
3% Bonds
8 /1 5 /6 6
2 /1 5 /6 3
5 /1 5 /8 5
(Attrition, $356)
7 /2 1 /5 8
Refunding: Exchange of 3 issues ($16,263):
13,500
Certificates
(Attrition, $2,800)
(See
In the exchange
Maturity
$ 9,770
New Issue
ing two offerings in F e b
tab le.)
Type of Security
issued
2 /2 8 /5 8
in the first quarter by mak
ruary, one a refunding and
Amount
Issued
8 /6 /5 8
New Issue
3,500
l T/2 % Tax Anticipation
Certificates
3 /2 4 /5 9
4 per cent of the publicly held issues. Approximately
$7.4 billion of the intermediate-term, 2% per cent
bond and $1.8 billion of the VA per cent certificate
were issued in the exchange.
The July Refunding
On July 17, 1958, the Treasury announced the terms
of a new $16.3 billion exchange offering. A 12-month
certificate of indebtedness yielding 1% per cent and
dated August 1 was to be made available to holders
of three outstanding issues: the $11.5 billion of cer
tificates due to mature on August 1 and two series
of bonds totaling $4.8 billion which were called last
May for redemption in September.
The increasing evidence of an improvement in
business conditions and a growing concern over fur
ther inflation had led to som e sellin g off of d eb t
obligations. Government security prices consequently
had been falling for almost two months and in the
period from May 29 to July 17 had dropped in price
approximately 1/2 points in the intermediate maturity
range and better than 4 points in the longest bond
(yields, of course, had risen).
In an effort to shore up the market, the Treasury
announced on July 9 that it had undertaken to repur
chase almost $590 million of the recently issued 2% per
cent bonds which had been a vehicle for substantial
speculative activity. A few days later additional
impetus was given to the prospect of a return of
inflationary pressures by developments in the Middle
East which promised, at best, to accelerate govern
ment spending and, at worst, to precipitate armed
conflict.
As the government securities market continued to
sag, it was announced on July 18 that, "In view of
conditions in the United States Government securi
ties market the Federal Open Market Committee has
instructed the Manager of the Open Market Account
to purchase Government securities in addition to
short-term Government securities.” In the period July
18-24 the System purchased almost $1.3 billion gov
ernment securities other than bills.
Of this total,
approximately $1.2 billion was in the 15b per cent
certificates of indebtedness on a "when issued” basis.
Under the circumstances the attrition was heavy in
the publicly held securities exchanged for the new
l/s per cent certificates.
Holders of approximately
$2.8 billion of the maturing securities elected to take
cash rather than accept the refunding terms offered.
To fill the gap the Treasury offered on July 29 a short
term tax anticipation certificate bearing a VA per cent
rate in the amount of $3.5 billion. The issue was over
subscribed although by a less substantial margin than
is usually the case.
In sum, Treasury operations so far in 1958 have
added to the demand for funds, particularly in the
intermediate- and long-term areas.
Over the first six
months for which official data are available, the Treas
ury’s n et cash borrowing in marketable securities came
to about $2 billion, reflecting the net of sizable in
creases in bonds outstanding only partially offset by
substantial reductions in outstanding bills, certificates
and notes.
The result of offering heavily in the bond
sector has been to lengthen the average maturity of
outstanding Treasury debt.
Page 103
VARIOUS INDICATORS OF INDUSTRIAL ACTIVITY
June 1958*
June
Compared with
1958
May 1958
June 1957
Steel Ingot Rate, St. Louis area (Operating rate, per cent of capacity)..............................
91
+14%
+ 28%
Coal Production Index— 8th Dist. (Seasonally adjusted, 1 9 4 7 -4 9 — 1 0 0 ).........................
93 .3 p
+12
— 3
Crude Oil Production— 8th Dist. (Daily average in thousands of bbls.)............................
375.7
+ 1
+ 6
Freight Interchanges RRs— St. Louis (Thousands of cars— 25 railroads— Termi
nal R. R. A s s n .)..................................................................................................................................
83.9
— 5
— 14
Livestock Slaughter— St. Louis area (Thousands of head— weekly average)...............
85.1
-— 3
— 19
Lumber Production— S. Pine (Average weekly production— thousands of bd. f t.). . .
2 2 2 .6
+ 4
+ 7
82
+14
+14
Lumber Production— S. Hardwoods (Operating rate, per cent of capacity)...............
.
.
/)M*ajUAtM4r
f
*Dtitwct
S e c o n d
* Percentage change is shown in each case. Figures for the steel ingot rate, Southern hardwood rate and the coal
production index show the relative percentage change in production, not the change in index points or in percents of
capacity.
P— Preliminary.
,
^
BANK DEBITS1
1958
millions)
June 1958
compared with
May
June
1958
1957
Six Largest Centers:
East St. Louis—
National Stock Yards,
111..................................... $ 156.6
Evansville, Ind............
170.4
Little Rock, Ark..........
204.5
Louisville, Ky.................
851.3
764.3
Memphis, Tenn............
St. Louis, Mo................. 2 ,4 2 5 .6
+
+
—
—
9%
4
4
9
+13%
— 6
Total-—Six Largest
Centers...................... $4 ,5 7 2 .7
+
3%
+
+
4%
+ 12 %
— 1
+ 1
+ 1
+ 3
+ 8
7
5
4%
Other Reporting Centers:
Alton, 111.......................... $
44.5
Cape Girardeau, M o.. .
16.4
El Dorado, Ark..............
30.4
Fort Smith, Ark............. ....... 58.1
Greenville, Miss............
27.2
Hannibal, Mo......................... 12.0
Helena, Ark................... ......... 8.5
ackson, Tenn........................26.9
efferson City, M o.. . . .
86.4
Owensboro, Ky.............. ........ 49.1
Paducah, K y.................. ........ 2 9.6
Pine Bluff, Ark.............. .........39.9
Quincy, 111.............................44.8
Sedalia, M o............................ 17.2
102.5
Springfield, Mo..............
Texarkana, Ark..............
2 2.0
t i1
—
- 0-
+
J
Total— Other
Centers...................... $
07
±29
+X
±1
— 4
+ 2
+ 11
6 15.5
Total— 22 Centers. . . $5,188.2
+
— 4
*1
— 5
+ 18
± 343
— 5
— 3
+ 5
EIGHTH DISTRICT WEEKLY REPORTING MEMBER BANKS
(In millions of dollars)
Principal Changes
Change
in Commercial and Industrial Loans2
from
Net Change During
July 23, June 18,
5 Weeks Ended
Assets
1958
1958
Business of Borrower
July 2 3 t 1958
$1,554 $—
—35
Manufacturing and Mining:
— 11
751
Business and Agricultural. ..
Food, liquor and tobacco............... $ + 2
Security.......................................
— 19
88
Textiles, apparel and leather. . . .
+ 3
Real E state...............................
271
— 2
Metals and metal products.............
—0 — 3
Other (largely consumer) . ..
471
Petroleum, coal,
1,071
U.S. Gov’t. Securities.............
+ 41
chemicals and rubber.................. — 3
_ 8
251
Other Securities.........................
Other..................................................... — 3
— i
Loans to Banks.........................
27
Cash Assets.................................
896
— 55
Trade Concerns:
44
Other Assets.................................
+ 1
Wholesale. . . .
Total Assets......................
$3,843 $— 57
R etail...............
Liabilities and Capital
Commodity dealers.............
Demand Deposits of Banks
. $ 717 $— 5
Sales finance companies. . .
Other Demand Deposits..........
2,070
Public Utilities (including
— 57
Time Deposits...........................
transportation)..................
670
+ 9
Borrowings and Other L iab ..
Construction. .......................
78
— 5
Total Capital Accounts..........
All
Other..............................
308
+ 1
Total Liab. and C apital.
$3,843 $— 57
T otal..................................................$— 15
1 Loans are adjusted to exclude loans to banks; the total is reported net; breakdowns are reported
gross.
2 Changes in business loans by industry classification from a sample of banks holding roughly 90%
of the total commercial and industrial loans outstanding at Eighth District weekly reporting member
banks.
+ 11
+ 16
+ 4
8%
4%
+
2%
+ 4%
INDEX OF BANK DEBITS— 22 Centers
Seasonally Adjusted (1 9 4 7 -1 9 4 9 = 1 0 0 )
1958
May
June
169.8 173.2“
1 Debits to demand deposit accounts of individuals,
partnerships and corporations and states and political
subdivisions.
CASH FARM INCOME
Percentage Change
Jan. thru May
May *58
1958
from
May '57
1958
1957
of dollars)
1956
Arkansas. . . . $ 29,004 - 10 % + 9% — 15%
-O - + 12
1 73,980 b 15
9 2 ,292 -2 7
+ 12
Indiana..........
+ 6
_ 4
30,665 - 5
Kentucky. . . .
— 10
29,718 b31
+ 12
Mississippi. . .
— 15
7 9 ,2 6 3 b 6
+ 7
+ 11
31,774 b 6
+ 2
Tennessee. . .
— 4
7 States.......... 4 6 6 ,6 9 6 b 15
+ 3
+ 5
8th District1 . . 186,515 b l l
— 1
+ 4
Source: State data from USDA preliminary es
timates unless otherwise indicated.
i Estimates for Eighth District revised based on
1954 Census of Agriculture.
8th F.R. District Total
Little Rock Area, Ark. . .
uincy, 111.............................
vansville Area, Ind...........
Louisville Area, Ky., Ind.
Louisville (City)............
Paducah, Ky...........................
g
St. Louis (City) .
Springfield Area, Mo.
Mo .
Memphis Area, Tenn.
All Other Cities2 .
— 13%
— 24
— 28
—
4
— 10
— 17
— 16
— 15
— 10
— 11
— 12
— 18
— 7
— 4%
— 7
— 4
— 2
— 20
„ 6
— 8
+ 10
— 2
— 4
— 2
— 6
— 9
— 4%
— 5
- 0- 0— 20
— 5
— 7
+ 4
— 2
— 5
— 5
— 7
— 10
Instl.
Accounts
16%
? _____ _
19
Excluding
Instalment
Accounts
50 %
34
26
June
1958
T otal................. $ 1 7 4 ,3 8 7
Residential. . . 57 ,5 2 6
Nonresidential 4 7 ,3 0 3
Public Works
and Utilities 6 9 ,5 5 8
May
1958
June
1957
$1 9 0 ,1 3 8
70,711
62 ,7 7 7
$111 ,8 1 8
45 ,2 9 5
4 4 ,0 2 6
5 6 ,6 5 0
22,321
* Based upon reports by F . W . Dodge Corpo
ration.
124
..1 3 3
May
1958
Apr.
1958
June
1957
137
136
140
140
123
130
149
141
129
139
141
151
Stocks, seasonally adjusted4..................
n.a. Not available.
3 Daily average 1 947-49 = 100
* End of Month average 1 947-49 = 100
Trading days: June, 1958— 25 ; May, 1958— 2 6 ; June, 1957— 25.
45
16
SisiO :
59
12
“ 33
1 In order to permit publication of figures for this city (or area), 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 department store indexes.
2 Fayetteville, Pine Bluff, Arkansas; Harrisburg, Mt. Vernon, Illinois; Vincennes,
Indiana; Danville, Hopkinsville, Mayfield, Owensboro, Kentucky; Chillicothe, Mis
souri; Greenville, Mississippi; and Jackson, Tennessee.
Outstanding orders of reporting stores at the end of June, 1958, were one per
Digitized forcent
FRASER
higher than on the corresponding date a year ago.
(Value of contracts in thousands of dollars)
June
1958
Percentage of Accounts
and Notes Receivable
Outstanding May 31, ’58,
collected during June.
6 mos. ’58
June, 1958
compared with
to same
May, *58 June, *57 period ’57
IN EIGHTH FEDERAL RESERVE DISTRICT *
INDEXES OF SALES AND STOCKS— 8TH DISTRICT
DEPARTMENT STORES
Net Sales
CONSTRUCTION CONTRACTS AWARDED
RETAIL FURNITURE STORES
8th Dist. Total*
St. Louis A rea. . .
Louisville Area. .
Memphis Area. . .
Little Rock Area.
Springfield Area.
Net Sale’*
June, 1958
compared with
June, 57
May, 58
— 10%
— 7%
_ e
— 5
— 17
— 10
+ 16
+ 5
— 12
— 4
— 27
— 13
i In addition to the following cities, shown separately in the table, the total
includes stores in Blytheville, Fort Smith, Pine Bluff, Arkansas; Owensboro,
Kentucky; Greenwood, Mississippi; Evansville, Indiana; and Cape Girardeau,
Missouri.
Note: Figures shown are preliminary and subject to revision.
@FedFRASER