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Monthly Review Volume X X X JANUARY 1, 1948 Number 1 A Year of Decision By CHESTER C. DAVIS* President, The Federal Reserve Bank of St. I^ouis A s 1948 begins, w e find ourselves at an unusually im portant crossroad s in history. D ecision s m ade this year and the results o f these decisions are likely to exercise a m uch m ore p rofou n d effect upon future developm en ts in this nation and the w orld than ordinarily is true o f any one year. D u rin g 1947, the A m erican econ om y operated at a h igher level than in any previous peacetim e year, and in term s o f civilian em ploym en t, incom e flow , and output for civilian use the e con om y w as at the highest level in history. F ull em ploym en t held th rou gh ou t the year. T h e num ber o f A m ericans w ork in g in civilian jo b s averaged 58 m illion in 1947 as against 55 m illion in 1946 and 45 m illion in 1939. P ersonal incom e cam e close to $200 billion in 1947 as against $177 billion in 1946 and $73 billion in 1939. Industrial output was close to double the prew ar level and agricultural p rod u ction w as m ore than on e-third larger than prewar. T h e rest o f the w orld had a far less favorable year in 1947. H u n g er still holds m illions o f people in its grasp. T h e nations o f E u rop e and A sia are far from the recov ery level h oped for b y this time. In fact, in m any region s o f the w orld 1947 was a year o f econ om ic disaster. In this nation w e face m any troublesom e p rob lem s as the n ew year begins, and I look to 1948 both w ith h ope and m isgivin g. W e have the o p p o r tunity and the resp on sibility to solve the problem s. I f w e fail to grasp the op portu n ity and discharge the resp on sibility, the potential ill-results are frigh t ening. I f w e g o forw ard w ith purpose and under standing— if w e d o n ot underestim ate our problem s and the con sequen ces o f failure to resolve them and thus seek easy but inadequate solutions— w e can su cceed in m aintaining a high level o f dom estic p rosperity and w e can lead in the im provem ent o f b ad ly upset w orld con dition s. IN T E R N A T IO N A L A F F A IR S T h e year 1947 saw m any developm ents, both g o o d and bad, in the fields o f international relations and p olicy . O n the debit side o f the ledger w e must list the failure (at least relative to h opes) o f the U nited N ations to settle m any p ressin g problem s, the w id en in g o f the rift betw een the tw o great politicalsocia l-e co n o m ic system s, the break in the m ovem ent tow a rd e con om ic recov ery in E u rope and A sia, and the contin u ation or outbreak o f sporadic figh tin g in several areas o f the w orld . O n the credit side m ay be foun d the successfu l settlem ent o f som e issues b y U N and the v ery fact that U N still exists w ith its m achinery for discussion and adjustm ent o f problem s w ith ou t recou rse to war, the fu n ction in g o f the International B ank and Fund, progress to w ard m ultilateral trade arrangem ents, and very im portan tly, the further developm en t o f p ositive U nited States foreign p olicy. O b v io u sly p rogress tow a rd better international u n derstanding and relations in 1947 w as far less than h oped fo r at the b egin n in g o f the year. N o n e theless, the year did b rin g a better understanding o f T H E B U SIN E SS S IT U A T IO N the present p osition o f the U n ited States in the w orld o f tod ay, w h ile som e p rogress w as m ade in B rin gin g ou r e co n o m y in to b etter balance in It is foolish optim ism to v ie w the 1948 is a task that w ill take the b est efforts o f current international situation as g o o d , but it is business, individuals, and G overn m en t. A t the b e needless pessim ism to regard it as hopeless. The gin n in g o f 1947 I w rote in this R e v ie w that in the goal of w orld peace is m ore im portant to hum an business o u tlo o k the factors o f stren gth appeared w elfare than ever before. lim ited fields. It is w orth great and to ou tw eigh th ose o f w eakness, bu t that there w ere sustained effort. F a ilu re to m ake that effort, thus m any “ ifs” in the situation. C onsequ en tly, econ om ic w ritin g o ff the venture as hopeless, cou ld w ell have events o f 1947 w ou ld dem and close and con stan t ap disastrous con sequen ces. praisal. T h e p roblem o f foreign aid led all p u b lic ques tions durin g 1947. T h e severe w in ter o f 1946-47, follow ed b y the w idespread drouth o f last sum m er, resulted in m uch m ore serious crop deficiencies in In general, that statem ent also applies to the ou tlo o k fo r 1948. It is im portant, h ow ever, to recogn ize the v e ry different circu m stan ces o f tod ay as against on e yea r a go. T h e inflationary situation w as intensified in 1947, T h e lo n g spell and in January, 1948 the e co n o m y seem s to be o f cold w eather also curtailed industrial ou tp u t b y in greater m aladjustm ent than it w as in January, E u rope than had been anticipated. m aking it difficult to m ine and distribute coal w hile 1947. at the same tim e increasin g non-industrial dem and reason to h ope that w ith intelligen t action better balance cou ld be ach ieved in the e co n o m y during 1947. A d ju stm en ts seem ed necessary, but w ith m oderate restraints it seem ed that th ey cou ld take place and be but m ild ly deflationary. In the past year, e co n om ic unbalance w as aggravated. A n d o n ly to the v e ry op tim istic d o the inevitable future adjustm ents n o w appear “ m ild ” . R ath er th ey loom m ore and m ore om in ous as inflation m ounts. for it. T h ese tw o ou tstan d in g difficulties, plus a host o f others, rather effectiv ely halted the re covery program in E u rope, and intensified the econ om ic problem s o f the w h ole w orld. R eflectin g an increasin g understan din g o f ou r leading w orld p osition , the U nited States is at tem pting to help rebuild the various dem ocratic nations o f the w orld b y p ittin g our available re sources against their needs. T h e C on gress p rovid ed for so-called “ interim aid” late in D ecem ber, and is p roceedin g to con sider th ou gh tfu lly the lon ger range E uropean R eco v e ry P rogram . So m uch has been w ritten and spoken abou t our purposes and p olicies w ith regard to fore ig n aid that I do not intend to g o into the q uestion in detail here. T h ree points, h ow ever, m igh t w ell be stressed again. First, the volu m e o f U n ited States net exports under the full-scale p rogram su ggested by the A dm in istration p rob a b ly w ill be n o larger than it w as d urin g 1947, and certainly w ill be sm aller than the w ar and p ostw ar peak levels. S ec ond, it m ust be recogn ized nevertheless that foreign aid has had and w ill have a definite im pact on the U nited States econ om y . E ven th ou gh the m a jor force o f inflation is dom estic dem and, the net exp ort position o f this nation has con tribu ted and w ill continue to con tribu te to inflationary pressures here. T h ird , the p rogram w ill be on e that w e can afford fo r a lim ited tim e b oth in term s o f resources and in term s o f dollars. It w ill be exp en sive in both respects, but in v ie w o f the ob je ctiv e s and possible attainm ents, the expense seem s m erited. Page 2 A year a g o there seem ed to be substantial T h is is n ot to say that a severe crash is inevitable. W e still m ay be able to m oderate it. A n d even if it com es it w ill n ot necessarily o ccu r in 1948. T h ere are fe w co n v in cin g signs so far that the current b o o m is lo sin g strength. It b ecom es increasin gly im portant, then, that action to con tain further in flation be p rom pt and effective. I f ou r e con om y becom es m ore distorted d u rin g 1948 the corrective adjustm ents w ill be even m ore severe w h en the break finally com es. A n d it m ust be recogn ized that econ om ic m aladjustm ent can n ot con tin u e in definitely. T o ta l em p loym en t in the U n ited States hit the 60 m illion level at m id-sum m er w ith agricultural em p loym en t at its seasonal high. N onagricu ltu ral em p loym en t rose from 49 m illion in January to over 50 m illion late in the year. U n em ploym en t, never o v e r 2.6 m illion in 1947, w as w ell b e lo w 2 m illion in the fall. B y and large, labor-m an agem en t relations w ere g o o d in 1947. T h e num ber o f m an-days lost b y strikes w as far sm aller than in 1946. B ecause o f this fact and because the flow o f m aterials w as som ew h at sm oother, the n ation ’ s p rod u ctive indus try cou ld and did operate at an extrem ely high level th rou gh ou t the year. In term s o f the Federal R e serve index, industrial p roduction averaged 188 W ith the e co n o m y p rod u cin g virtually at its per cent o f the 1935-39 base period, in contrast present capacity, it w ill be a trem endous task to to an average level o f 170 for 1946. O utput at the close o f 1947, h ow ever, was n ot m uch higher than at the b egin n ing o f the year. In effect, this nation ’s industrial m achine attained capacity and operated p retty m uch at ceiling levels during the brin g up the level o f output in 1948. A t best in but to the extent that th ey can aid in increasing p ro entire year. and it is to be h oped that w orkers and m anagem ent T h e hard fact is, how ever, that the flow o f finished g o o d s was not sufficient, even w ith the industrial m achine at capacity. T h e dem ands o f business for new plant and equipm ent and for inven tories, of individuals fo r h ou sin g and all types o f consu m er g ood s and services, o f G overnm ent (F ed eral, state and lo ca l), and of foreign nations, in total w ere greater than supply. A n d w ith funds available to make dem and effective, prices w ere bid up and up. U ntil m idyear, it seem ed that the inflationary pressures cou ld be m oderated in 1947— there w ere scattered reports o f buyer resistance and deferred exp en ditu res; business dem ands began to taper off. T h en the attitude of consum ers shifted sharply and b u y in g resistance crum bled. A w ave o f optim ism spread over the business com m u nity and its demand increased. F oreig n b u y in g declined som ew hat but G overn m en t dem and stayed high. A s a result, prices rose rapidly. T h e w h o le sale price ind ex in January was 176 per cent o f the 1935-39 average. In D ecem ber, it hit 200. C onsum er prices in January w ere 153 per cent o f the 1935-39 average. In N ovem ber, the index was at 165. T h e danger o f rapidly rising prices has been pointed out b y m any people. B y them selves high prices are not dangerous, but rising prices tend to distort incom e distribution and there com es a tim e in the process w hen people w ith adequate in com es d o not w ish to absorb all o f the go o d s p ro duced, and those w h o w ant the g ood s are priced out o f the m arket because their incom es have not kept pace w ith prices. T h e price situation was dangerous a year a g o— it is m ore dangerous today. T h e ro o t cause o f inflation is foun d in the fact that the available su pply o f m on ey has outrun the available supply of g ood s. T o cure inflation, p ro d uction m ust be b rou gh t into balance with ef fective dem and, w hich means that ou tput m ust be increased or the su pply o f purch asin g p ow er re duced, or both. M erely to prevent further infla tion, a m uch m ore lim ited ob jectiv e, the supply o f m on ey m ust be prevented from rising further rela tive to the su pp ly o f g ood s. creases in capacity and in p rod u ctivity w ill be slow d uction th ey w ill p rove helpful. Certainly, there should be no deliberate interruptions to p roduction, can resolve any differences peaceably and not halt the flow o f good s. A n oth er ch eck on inflation w ou ld result from a reduction in dem and. B usiness should g o slo w in bid d in g fo r g o o d s for inven tory accum ulation and even for new plant and equipm ent. W e need addi tional plant capacity, but w hen g o o d s are w ith draw n from the m arket to build this capacity, unless other consum ers are w illin g to fo re g o those g ood s tem porarily, greater inflationary pressures result. T h u s it seem s best to m ove cautiously fo r new plant— increase it w here such increases can be achieved w ith the least ill-effects, but not so rapidly as to accelerate the current price rise, and finance it out o f current savings. Individual consum ers also should exercise restraint in b u y in g and should increase their savings. If consum ers w ill defer un necessary purchases and perm it industry to use cu r rent g o o d s to increase capacity, inflationary pres sures can be m oderated. G overnm ent expenditures also should be held to a m inim um . A s I m entioned earlier, the ou tlook for 1948 offers less en cou ragem ent than w as reasonably felt a year earlier, even th ou gh high level a ctivity seems indicated for the year as a w hole. T h e e co n o m y is not w ell adjusted and inflation w ill increase in in tensity if m ost v ig o ro u s efforts are not put forth to com ba t it. T h e keys to the situation a re: (1 ) re straint in spen d in g on the part o f business, indi viduals and G o v e rn m e n t; (2 ) h old in g p rodu ction at the highest level a ttain ab le; and (3 ) fiscal and m on etary action. I sin cerely h ope that in the main volu n tary re straint w ill p rove sufficient, even though G overn m ent action m ay be needed in som e areas. E xports m ust be con trolled both to protect the dom estic e co n o m y and to serve the areas where needs are greatest. L im ited p ow er to discou rage nonessential uses o f basic m aterials that are in short supply m ay becom e h ig h ly im portant. I f these lim ited authorities are n ot adequate, other involuntary restraints m ay have to be im posed. T h e trouble is, there w ill n ot be to o m uch tim e in w h ich to determ ine action. Page 3 T H E A G R IC U L T U R A L O U T L O O K It is to o early to ju d g e w hat w ill happen to farm produ ction in 1948. A s usual, w eather w ill be the m ajor determ ining factor. D em an d for the ou tput o f U nited States agriculture should be about as high as in 1947. F oreig n crop s m ay be better, but foreign demand w ill rem ain high. O ur shipm ents o f fo o d abroad this year have been far from the am ount that was needed and even if there is larger foreign p ro duction in 1948 there w ill be need fo r heavy exports from the U nited States. O n the d om estic side, co n tinued high incom e should m aintain dem and here. On balance then, if w e have a high level o f farm p ro duction in 1948, the su pp ly o f grains should be in som ew hat better balance w ith d em an d ; w ith p oor crops, upw ard pressure on farm prices w ill be in tensified. In either case, the price for livestock products is likely to con tin u e high. A gricu ltu re fared v ery w ell in 1947. T o ta l farm output w as close to the record level o f 1946, despite weather that w as n ot as favorable as in the past few years. In the a ggregate, farm prod u ction was m ore than one-third larger than prewar, w ith bum per crops o f w heat and rice and alm ost record harvests o f m any other farm p roducts. T h e m ajor exception to the gen erally g o o d p rod u ction record w as the corn crop, w h ich — alm ost a billion bushels short o f last yea r’s harvest— w as the sm allest o f the past decade. W ith the fourth largest annual farm prod u ction in our h istory m arketed at the highest average level o f farm prices on record , cash farm incom e cam e close to $30 billion in 1947, one-fifth higher than in 1946. N et farm in com e is estim ated at $18 billion, also a fifth larger than a year earlier. T h e h igh level o f farm prices in 1947 reflected substantial foreign dem and for p rod u cts o f A m erican farm s, superim posed u pon v ery large d om estic de mand. T h e alm ost disastrous crop season in E urope, cou pled w ith the short U nited States corn crop, focu sed very h eavy dem and upon the 1947 w heat harvest, and upon feed crop s in general. In turn, higher prices in these areas w ork ed th rou gh into higher prices in others. A s a result, the index o f prices received b y farm ers for all farm p rodu cts approached 290 per cent o f the 1910-14 base in the last quarter o f the year, about 10 per cent higher than in the com parable period in 1946, and triple the 1939 level. W ith the great need for fo o d all over the w orld , A m erican farm ers are b ein g asked to turn in another record -break in g crop this year. I am confident that th ey w ill respon d insofar as possible. I hope that the continued pressure fo r farm p rod u ction w ill be Page 4 m et w ith m inim um losses to soil p rod u ctivity. F or seven years w e have, in effect, m ined ou r farms. It has been necessary to d o so, but it is vital that at the sam e tim e w e d o everyth in g p ossible to maintain the land. T h is is n ot an easy task, but efforts to accom plish it w ill pay lon g -term dividends. In general, farm ers have used their excellen t in com es w isely d u rin g the w ar and p ostw ar years. T h e y have paid o ff debts and are in g o o d financial p osition. T h e y sh ould contin u e this practice, both as a curb against inflation and as a precautionary step fo r the future. A s a final w o rd on agriculture, I h ope that the prosperity o f farm ers does n ot evok e a m a jor m ove m ent back to the land. S o far, the agricultural popu lation loss has been a healthy d evelopm en t for the lon g-term e co n om ic future o f the farm ers. It has raised individual p rod u ctivity on the farm and per capita farm incom e. T h e lon g -ran ge m ovem ent in agriculture is tow a rd a sm aller farm labor force. If the m ovem en t b ack to the farm is kept w ithin reasonable bounds, as it has been, it w ill serve three p u rp o se s: (1 ) It w ill leave agriculture in better shape fo r the p robable decline in dem and som e tim e in the future w hen foreign needs taper off, (2 ) it w ill prevent additional pressure on the farm land market, and (3 ) it w ill keep the nonagricultural labor fo rce w h ere it is needed n ow . T H E P O S IT IO N O F T H E B A N K S Great responsibilities face the com m ercial banks o f this nation as 1948 opens. T h e decision s o f in dividual bankers can aid in m od eratin g the infla tionary u p sw in g or can add to its im pact. D u rin g 1947, the earning assets o f the com m ercial banks increased b y abou t $5 billion . L oa n s rose alm ost $8 billion, investm ents in n on -G overn m en t securities increased b y m ore than $1 billion, w hile h oldings o f G overn m en t securities declined about $4 billion . T h e increase in earning assets resulted in a deposit rise o f som e $4 billion. T h e d eposit in crease occu rred en tirely in balances o f businesses and in d ivid u als; G overn m en t deposits sh ow ed very little net change. T h e 1947 record o f ban k in g developm en ts was con siderably differen t from that o f 1946. In the earlier year the loan increase w as sm aller (abou t $5 b illio n ), w h ile the decline in h oldings o f G overn m ent securities w as m uch larger (ab ou t $16 b illion ) as the T reasu ry used its v ery large W a r L oa n bal ances accum ulated in the V ic to r y L o a n to redeem m aturing ob ligation s. In 1947, then, the m on ey su pp ly increased. It rose because the dem and fo r loans increased private credit m ore than T reasu ry redem ptions decreased public credit. T h e T rea su ry redeem ed such bankheld securities as it cou ld from its cash revenue surplus and net receipts from nonm arketable securi ties, but funds available for this purpose w ere far sm aller than in 1946. In con ju n ction w ith T reasu ry p o licy the Federal R eserve System m oved tow ard higher sh ort-term rates, in an attem pt to prevent further m onetization o f the public debt and to dis cou rage lending, b y m akin g bank reserves som e w hat less available and som ew h at m ore expensive. N evertheless, b o rro w in g increased. Som ew h at m ore than half *the increase in bank loans during 1947 w as in loans to business, som ew h at m ore than on e-fou rth was in loans on real estate, and the balance in con su m er loans. L oan s for the purpose o f purchasin g and ca rryin g securities declined in the year. T h e rise in business loans resulted from increased dem and for w ork in g capital stem m in g in turn from the high level o f business a ctivity and increased prices, from desires to add to inventories, and from desires to increase o r replace plant and equipm ent. C onsum er loans have risen w ith the increased avail ability o f durable con su m er g ood s and easing o f con su m er credit term s. R eal estate loans have ad vanced partly in line w ith new con struction, partly to finance existin g p rop erty b ou g h t at high current prices. It is im portant that several facts be noted in co n n ection w ith the expansion in bank lending. First, rising bank loans tend to increase the m on ey supply. S econd, w hen an increase in the m on ey su pply is not m atched b y an increase in the su pply o f g o o d s and services, the result (un less the additional su pp ly o f m on ey is held id le) is a b id d in g up o f prices. In other w ords, bank credit expan sion w ith ou t equal expansion o f p rod u ction tends to be inflationary. W ith an eco n o m y op era tin g at virtual capacity, as ours is, credit expansion alm ost certainly w ill be re flected in price rises. T h ird , this is true w h ether or not individual loans are sound, bankable loans. E ven if m on ey created b y a bank loan is used fo r a purpose w h ich con cu rrently increases the total produ ct, the funds thus created m ay be used m any tim es in subsequ en t transactions to bid up the prices o f g ood s w ith ou t increasin g produ ction . F ourth, it is p erfectly true that risin g prices are a cause o f risin g loan volu m e, but it is also true that rising loan volu m e, in a situation like the present, causes risin g prices. T h is is the old chicken and e g g question in a different version . Thu s the very responsibile position o f com m ercial ban k in g is m ade evident. In the interest o f stability the com m ercial ban k in g system should be m ost reluctant to expand credit further in 1948. T h e rccen t jo in t statem ent o f the bank supervisory agencies— the C om p troller’s office, the Federal R e serve, and the Federal D ep osit Insurance C orpora tion— stressed this point. O n ly b y fairly rigid re straint on the part o f individual banks can credit expansion be stopped w ith ou t extension o f existing con trols or im position o f new ones. I w ant to m ake p erfectly clear that no indictm ent o f individual banks is im plied in the above. Banks exist to serve their custom ers th rou gh m aking credit available fo r sound, p rod u ctive purposes. B ut w hile m ost individual bank loans are sound, in the sense that repaym ent seem s assured, taken altogether th ey increase the m on ey su pp ly and their recipients bid up prices. T h erefore, it b eh oov es the banks to appraise ve ry carefu lly the purposes o f b o rrow in g and, insofar as possible, to restrain lending. T reasu ry action, o f course, w ill attem pt to do w hat it can to reduce the m on ey supply and in flationary pressure b y p a yin g o ff debt held b y the banks. I f private b o rro w in g continues at its present rate, h ow ever, the p rosp ective T reasu ry surplus w ill fall short o f offse ttin g it. T h e Federal R eserve System also w ill continue to exercise what restrain ing effect is possible w ithin the effective limits o f its responsibilities in the G overn m en t security market. T o sum up, the banks sh ould attem pt to do their part to hold inflation in ch eck th rou gh restraint in bank lending. I f th ey do not, the inflationary situa tion w ill w orsen , the e co n o m y w ill be in greater m aladjustm ent, and the eventual consequences will be far m ore severe than if restraint w ere practiced. R E G IO N A L D E V E L O P M E N T I n oted in m y rep ort o f a year a go that the Federal R eserve B ank o f St. L ou is was interested in aidin g in p rom otion o f a program o f regional d evelop m en t fo r the E igh th Federal R eserve D is trict. T h is region is and has been a low -in com e section and w e need a better balanced e con om y in the region to build up its in com e level. D u rin g the past year, the St. L ou is Bank, in coop eration w ith state bankers’ associations and state co lleges o f agriculture, continued to stress th rou gh w idespread m eetings the desirability o f a better balanced agriculture in this district. I am gratified to learn that m ore and m ore district banks are ca rryin g on their o w n agricultural program s w ith the sam e end in view , and seeking to extend their facilities to p rom ote b etter balanced farm ing. Page 5 T h rou g h articles in this R ev iew and other media, w e also attem pted to focu s con tin u ed attention on the desirability o f a better all-around balance in the district econ om y . A s an exam ple, the D ecem ber issue carried a story o f the tim ber resources o f the region and their poten tiality as an increased incom e source. W e hope d urin g 1948 to point out in greater detail the possibilities o f increasin g our industrial ization th rou gh better use o f ou r forest resources. T h ese program s are, o f course, lon g range and should be so recogn ized . B u t insofar as they can be im plem ented in the com in g year, to aid in in creasing the reg ion ’s and the nation’s prod u ction w ith ou t increasin g prices, they w ill p rove helpful in the over-all situation that con fron ts us. In con clu sion , I w ant to repeat that 1948 w ill be a year in w h ich d evelopm en ts w ill affect the m ore distant future in con siderable degree. T h e re fore, I h ope that all o f us can w ork togeth er to devise sound, intelligent solu tion s to our problem s. O n ly th rou gh com bin ed effort and hard thinkin g can w e achieve the vita lly im portant goals w e have set fo r ourselves. Failure to attain them m ay b ring severe con sequen ces. Success w ill lead to a better organ ization o f the w orld for peace and prosperity. Survey of Current Conditions A t the close o f 1947 the national econ o m y was fu n ction in g at abou t the peak level o f the year. E m p loym en t in n onagricultural industries totaled 50.6 m illion in N ovem b er, a ccord in g to the Bureau o f the Census, w ith few er w orkers u n em ployed than at any oth er tim e in the year. Industrial p rod u c tion in the last quarter was at about the same level as in the first three m onths o f the year, due prim ar ily to an increase in p rod u ction o f durable good s late in 1947. T o ta l in com e paid to individuals in O ctober, on an annual basis, am ounted to m ore than $204 billion and in the first ten m onths averaged 12 per cent larger than in 1946. T h e w illin gn ess o f con su m ers to take g ood s, even at p reva ilin g prices, w as eviden ced b y the fact that the volu m e o f retail sales in the final m onths con tinu ed to total w ell ahead o f 1946 dollar volum e. M ost o f the increase, ob v iou sly , reflected higher prices. W h o le sa le prices early in D ecem ber averaged a pp rox im a tely 16 per cent higher than a year earlier. C on su m ers’ prices in O ctober, the latest m onth fo r w h ich data are available, w ere 7 per cent h igh er than in D ecem ber, 1946; en d-of-th e year data w hen published u n dou b tedly w ill indicate a larger spread. T h e persistent increase in prices in recent w eeks is realistic eviden ce that inflationary forces contin u e to dom inate the econ om y . In the six w eeks to m idD ecem ber the w eek ly average increase in w h o le sale prices w as a seventh larger than the average rise in the p reviou s 18 w eeks, and nearly tw ice as large as that o f the first half o f the year. T h is rapid rise in prices results from inflationary pressures b ein g generated in a n um ber o f sources. Page 6 O ne o f these, and one o f increasing im portance, is the sharp expansion in private credit. C om m ercial and industrial loans, as w ell as agricultural loans and b o rrow in gs on real estate, continued to increase in yplum e in D ecem ber. T o g e th e r w ith additional credit exten ded to consum ers, these b o rro w in g s co n stitute a significant sou rce o f dem and and play an im portant part in the b iddin g-up o f prices for good s. & EM PLOYM ENT B etw een O cto b e r and N ovem b er, nonagricultural em p loym en t in the nation increased to an all-tim e high, and in the district w as v e ry close to the w a r tim e peak. A s the result o f a seasonal decrease in agricultural em p loym en t, how ever, total e m p loy m ent durin g this p eriod declined. U n em ploym en t also declined since a num ber o f agricultural w orkers left the labor force. F o r the past year and a half, except fo r sligh t seasonal reversals, u n em ploym en t has decreased gradu ally but steadily, as has the average duration o f unem ploym en t. B etw een Septem ber and N ovem b er the m ajor district cities experien ced increases in em ploym ent, principally in the m anufacturing, trade and service industries. D u e to seasonal factors em p loym en t de creases are exp ected in January but b y M arch, a c co rd in g to em p loy ers’ estim ates, the num ber o f per sons w o rk in g is exp ected to regain the N ovem b er level. L a b o r su pp ly and dem and in district cities are fairly w ell balanced, alth ou gh in m any instances the m atch in g o f available w orkers and jo b op enin gs has been difficult. M em ph is and E vansville have b righ ter prospects fo r future em p loym en t increases, particularly in m anufacturing, than any o f the other m a jor district cities, a ccord in g to em p loy ers’ in tentions to hire. A rise o f m ore than 4,000 betw een Septem ber and N ovem b er in the num ber o f persons em p loyed in the St. L ou is area increased total n on agri cultural em p loym en t in the area to 686,000. T h is figure is o n ly 2,000 b e lo w the all-tim e peak o f July, 1943, and is 158,000 a bove the 1940 average. S ligh tly m ore than half o f the increase d u rin g the past tw o m onths occu rred in m an ufacturing w ith the fo o d in dustry a ccou n tin g fo r the m a jor p ortion o f the gain. Trade, service, and G overnm en t em p loym en t also rose. B y M arch, 1948, an increased em ploym en t o f several thousand in m an ufactu rin g is expected to result from gains in the textile and apparel, chem ical, leather p rodu cts, transportation equip m ent, and m achinery industries. E m p loym en t in all nonm an ufactu rin g industries, excep t G overnm ent and service, is expected to be less in M arch than in N ovem b er last year. B oth m an ufactu rin g and non m an ufactu rin g em ploym en t increased in L ou isv ille during N ovem b er w ith the largest gains in the distilling, tob a cco , and retail trade industries. A slight increase in em p lo y m ent is exp ected b y January as gains in to b a cco , furniture, fabricated m etals and non electrical m a ch in ery w ill offset the decline in trade em ploym ent. In E vansville, m an ufactu rin g em p loym en t rose al m ost 500 betw een Septem ber and N ov em b er and an additional 700 w ork ers w ill be needed b y em ployers b y M arch. E m p loym en t increased in L ittle R o ck in the period as the result o f gains in instrum ent and apparel m anufacturing, trade, and service. IN D U S T R Y O ver-all industrial a ctivity in the E ighth D istrict increased sligh tly in N ovem b er, after allow an ce is m ade for the shorter w ork m onth and fo r seasonal influences. E ven on an adjusted basis, h ow ever, gains o v e r O cto b e r w ere n ot large and appear to have been con cen trated in general m anufacturing industries, as indicated b y an increase in daily in dustrial p ow er con su m ption, and in the extractive industries. D a ily average con su m p tion o f electric p ow e r b y large industrial con sum ers in the m a jor district cities in N ovem b er w as 6 per cent h igher than in O cto b e r and 8 per cent a bove that o f N ovem b er, 1946. M od erately large gains w ere registered dur in g the m onth in M em phis, P in e B lu ff, L ittle R o ck , and L ou isv ille, w hile St. L ou is registered o n ly a 3 per cent increase and E vansville an 8 per cent de crease. T o ta l p ow er con su m ed b y industries in N o v em b er w as less than that in O cto b e r in all the m a jor district cities excep t M em phis and Pine B luff. M anufacturing— Seasonal factors and a shorter w ork m onth resulted in sm aller aggregate output in N ovem ber than in O ctober, even thou gh , on an adjusted basis, p rod u ction rose. A b so lu te increases w ere indicated in p rod u ction o f m etals and metal products and in m eat pack in g o p e ra tio n s; auto p ro duction, iron and steel prod u cts and stone, clay, and glass products sh ow ed sm all absolute declines, even though daily average ou tput w as h ig h e r; whereas production o f basic steel, lum ber, w hiskey, ch em icals, and rubber p rodu cts decreased both a bso lutely and on a daily average basis. A ctiv ity in the paper, m achinery, electrical p roducts, transporta tion equipm ent, and fo o d p rodu cts industries re mained about the same. Scheduled operation s o f the basic steel industry in the St. L ou is area in N ovem b er w ere at 64 per cent o f capacity, sligh tly less than the 67 per cent o f the previous m on th and abou t the same as in N ovem ber, 1946. Estim ated lum ber p rod u ction declined appreci ably (seasonally) in N ovem b er. A verage w eekly production o f southern pine operators in N ovem b er was 8 per cent less than in O ctob er, although som e what higher than in N ovem b er, 1946. R ep ortin g C O N S T R U C T IO N B U I L D I N G P E R M IT S (M on th o f N ovem ber) N ew Construction Repairs, etc. Cost Number Num ber Cost (C ost in 1947 1946 1946 1947 1946 1947 thousands) 1947 1946 $ 61 $ 30 63 44 61 54 $ 226 $ 153 Dvansville .... 62 34 183 97 63 570 295 Little R o ck ..... 90 78 27 45 50 221 2,065 883 Louisville ....... 201 102 75 148 957 110 494 2,247 Memphis ....... . 604 680 378 192 200 2,143 1,492 225 St. L ou is......... . 227 983 544 526 631 3,780 7,251 N ov. Totals.. 1,183 1,032 1,038 742 786 936 4,008 8,371 ‘ Oct. Totals..l,845 1,230 IN D U S T R Y CONSUMPTION OP ELECTRICITY N o v ., O ct., (K .W .H . N o. o f cus- 1947 1947 in thous.) tom ers* K .W .H . K .W .H . Evansville ..Z " 4 0 ' 7,726 9,451 L ittle R o ck ...... 35 4,557 4,632 Louisville ........ 80 54,131 55,237 Memphis .......... 31 5,504 5,381 Pine B luff........ 24 7,180 6,995 St. L ou is.......... 99 64,381 70,356 Totals ..........309 143,479 152,052 * Selected industrial custom ers. R — Revised. N o v ., 1946 K .W .H . 6,486 3,768 60,069 R 5,157 1,564 60,784 R 137,828 R N ov., 1947 com pared with O c t., *47 N o v ., *46 — 18% 4 - 19% — 2 4 -2 1 — 2 10 4* 2 4- 3 4-359 — 8 4- 6 — 6 4 -4 LOADS INTERCHANGED FOR 25 RAILROADS AT ST. LOUIS F irst N ine D ays N o v .,’ 47 O c t . ,’47 N o v ., *46 D ec., *47 D ec., *46 11 m os., *47 11 m os., *46 120,474 125,744 129,661 36,666 35,962 1,369,925 1,358,985 S ource: Term inal Railroad A ssociation o f St. Louis. CRUDE O IL PRODUCTION ( I n thousands o f bbls. ) N o v ., ’ 47O ct., *47 Arkansas ................. 84.5 83.2 Illinois .....................177.5 172.6 Indiana .............. . 17.9 17.1 Kentucky ............... 26.4 25.6 Total ...................306.3 ' 298.5 N o v ., ’46 78.6 205.8 19.2 30.0 333.* N ov. *47 com p, with O ct., ’ 47 N o v ., *46 4- 2% 4 - 8% 4- 3 — 14 4 -5 — 7 4“ 3 — 12 " I jT l — 8 Page 7 southern h ardw ood m ills operated at 85 per cent o f capacity in N ovem b er, or 10 per cent less than in O ctob er and 5 per cent b elow N ovem ber, 1946. In continuation o f the grain saving program , the end o f N ovem b er found on ly tw o distilleries in p rodu ction in K en tu cky, although during recent weeks b ottlin g operations have increased in order to keep up w ith dem and. W h isk ey produced in K en tu ck y in Septem ber totaled 6.6 m illion gallons, a 20 per cent increase over the previous month and nearly 90 per cent above production in Septem ber of the preceding year. E stim ated shoe p rod u ction in the district in O c to ber was 9.3 m illion pairs, a m illion pairs higher than in both Septem ber, 1947 ^nd O ctober, 1946. T h e rise from Septem ber to O ctober, 1947 was som e what better than seasonal. A verage m onthly p ro duction fo r the first ten m onths o f 1947 was 8.1 m illion pairs, com pared to a 7.6 m illion pair average for the sam e p eriod o f the previous year. M eat p ack in g operations in the St. Louis area in N ovem b er con tinu ed to increase because o f very heavy runs o f h ogs to m arket. In N ovem ber, a total o f 592,000 animals o f all types w ere slaughtered under Federal inspection in this area, com pared to 552,000 in the previou s m onth and 554,000 in N ovem ber, 1946. D a ily average h o g slaughter in N ovem b er w as about 37 per cent higher than in O ctober. T o ta l slaughter of cattle, calves and sheep, respectively, w as not so large in N ovem b er as in O ctob er, alth ough w hen adjusted to a daily average basis there w as little change in the month. Coal and Oil— P relim inary estimates o f coal p ro d uction in the E ighth D istrict indicate that output in N ovem b er was better than 12 m illion net tons, about 2 m illion tons m ore than in O ctober. In creases w ere indicated in all the p rod u cing states. E stim ated average daily p rodu ction o f crude oil in the district states in N ovem b er was slightly higher than in O ctober, but w as about 8 per cent b e lo w p rod u ction in N ovem b er, 1946. W H O L E S A L IN G Lines o f Comm odities N et Sales Data furnished by N ov., 1947 Bureau of Census com pared with N ov .,’ 46 U . S. Dept, of Comm erce* O c t.,’ 47 A utom otive Supplies ............. ..... — 17% — 8% D rugs and Chemicals ........... ..... — 18 — 6 D ry G oods ................................. — 25 Groceries ................................... — 14 — 1 H ardware ................................. ..... — 9 +31 Plum bing Supplies .................. — 8 T ob a cco and its products.... .... — 8 -f-27 M iscellaneous .......................... **T otal all lines........................ .... — 17 — 5 * Preliminary. **Includes certain items not listed above. Page 8 Stocks N ov. 30, 1947 compared with N ov. 30, 1946 ........% — 9 +11 +39 Z '* 6 +20 +12 C on stru ction — W ith cold er w eather setting in, con stru ction activity, as is usual, tapered o ff in the past fe w w eeks. B u ildin g perm its issued in the m a jor district cities in N ovem b er totaled $8.2 m il lion, abou t $1 m illion less than in the previous m onth. T h e value o f perm its d ropped in all district cities except St. L ou is. T h e decrease w as co n ce n trated in new residential con stru ction , w h ich de clined in total value in all m a jo r district cities. C on struction con tracts aw arded (w h ich co v e r all types o f con stru ction , and n ot m erely b u ild in g ) in the E ighth D istrict in O cto b e r totaled sligh tly m ore than $50 m illion, a 3 per cent decrease from the previou s m onth. TRADE T h e upw ard trend in E ighth D istrict retail dollar sales con tin u ed du rin g N ovem b er. O cto b e r had registered som e decline from the general upw ard m ovem ent but N ovem b er sales m oved b ack into line. In N ov em b er m any o f the retail lines w h ich report data to this bank registered sales gains over both the previou s m onth and com parable m onth last year. Several factors have con tribu ted to the con tin u in g high levels o f dollar sales, tw o o f the m ost im portant b ein g high current incom e and h igh prices. A t the retail level, con su m ers’ prices in O ctob er, the latest m onth fo r w h ich data are available, w ere 23 per cent a bove June, 1946, and 64 per cent above the 1935-39 average. C loth in g and h ousefurnishings prices had increased 20 per cent from June, 1946 and w ere 87 per cent over the 1935-39 average. C onsum er expenditures have been risin g m ore rapidly than con su m er incom e. T h u s personal in com e in the third quarter o f 1947 w as abou t on esixth greater than durin g the im m ediate period prior to the rem oval o f price con trols, w h ile co n sum er expenditures increased b y one-fifth. A sm aller p ortion o^ the con su m er's dollar, h ow ever, has been g o in g fo r the purchase o f nondurables because o f the pressure o f high er fo o d prices and because m ore durable g o o d s have b ecom e available. E xp erien ce o f E ighth D istrict apparel stores illustrates this situation. E ven th ou gh apparel store sales are higher, the percentage gain has been con siderab ly sm aller than fo r stores retailing m ore general lines o f m erchandise. A t rep ortin g E ighth D istrict departm ent stores, N ovem b er sales volu m e increased seasonally 17 per cent from O cto b e r and was 11 per cent o v e r N o v e m ber, 1946. S om e part o f the increase in N ovem b er sales m ay be attributed to the lon g er h oliday sh op p in g season this year. T rad ition ally, h olid ay sh op p in g has been con cen trated in the p eriod starting after T h a n k sg iv in g but this year sales prom otion s w ere in eviden ce early in N ovem ber. T h ere are reports that m any stores, in their cautious buyin g p o licy o f earlier in the year, failed to anticipate actual sales levels and have been handicapped som e what b y g ood s shortages. Inven tories o f rep ortin g departm ent stores at the end o f N ovem b er sh ow ed little change from either O ctob er 31, 1947 or N ovem b er 30, 1946. M any stores anticipated h old in g a m uch sm aller inven tory at the end o f 1947 than they held D ecem ber 31, 1946. T h e ratio o f outstanding orders to sales, how ever, w as about double that o f m id-sum m er w hen orders ou tstan din g am ounted to little m ore than one m on th ’s sales. B A N K IN G A N D F IN A N C E B ank earning assets continued to expand sharply in the fou r w eeks en ding D ecem ber 17. T h e rise in loans m uch m ore than offset the decline in investm ents. A t w eek ly rep ortin g banks in this district, total loans increased $45 m illion in the period to top the $1 billion mark, w hile total invest m ents d ropped $19 m illion, and a ggregated $1.2 billion. In the com parable period last year, loan expansion w as sm aller ($37 m illion ) w hile invest m ents declined con siderably m ore ($49 m illion ) so that total bank earning assets w ere decreased. T h e rise in loans from m id-N ov em ber to m idD ecem ber at the rep ortin g banks in volved increases o f $33 m illion in com m ercial, industrial and agri cultural loans, $2.4 m illion in real estate loans, and $8.4 m illion in “ oth er” loans, w h ich are m ainly con su m er loans. In the past fou r w eeks, the increase in con su m er loans has been marked. In n o oth er period o f equal length in 1947 w as the gain as large. In the com parable fou r w eeks last year, the increase in consum er loans w as $7.4 m illion. D u rin g the past few w eeks, T reasu ry redem p tion p o licy has aim ed at retiring securities held m ainly b y the Federal R eserve banks so that co m m ercial bank reserves w ou ld be reduced directly. In a ccom plish in g this purpose w eek ly offerin gs o f T reasu ry bills have been reduced and S ystem -held m aturing certificates retired. Funds have been obtained b y d ra w in g d ow n W a r L oa n balances held b y com m ercial banks. A t m id-D ecem ber, such balances w ere on ly about one-third as large as a m onth earlier. Such action, accom p a n yin g the general m ovem en t tow ard higher rates on sh ort term G overnm ent securities, has led to further pressure on yields on lon ger term G overnm ent securities. E ffects o f T reasury and System p o licy also have been reflected in w eakenin g o f prices o f TRADE DEPARTMENT STORES Stocks Stock ________ Net Sales_______ on Hand Turnover 11 mos/47 Nov. 30/47 to same comp. with Nov. 30, compared with Oct./47 Nov./46 period ’46 Nov. 30/46 1947 1946 3.81 4.27 Ft. Smith, Ark.....+ 8% + 1% — 10% — 12% 4.43 5.04 -0Little Rock, Ark....4-17 +10 4- 1 4.23 4.75 — 9 Quincy, 111............ 4-10 0 4- S 3.69 3.54 Evansville, Ind..... +25 4-17 4-31 + 1 5.35 4.45 Louisville, Ky.......+24 +16 41 0 4- 4 4.47 -03.75 St. Louis Area1....-)-19 +11 ■4 9 4.47 — 1 3.75 St. Louis, Mo— j-19 + 9 + 7 ......... ........ ........ +86 E. St. Louis, 111.4-15 + *5 4.97 3.72 + 20 Springfield, Mo.... + 4 4-10 4- 2 4.92 + 6 3.97 Memphis, Tenn....+10 4- 2 4-11 + 17 3.67 4.67 +12 *A11 other cities....+ 4 4- 6 + 3 4.69 3.91 8th F. R. District4-17 4 7 411 * El Dorado, Fayetteville, Pine Bluff, Ark.; Alton, Harrisburg, Jacksonville, Ml. Vernon, 111.; New Albany, Vincennes, Ind. ; Danville, Hopkinsville, Mayfield, Paducah, K y .; Chillicothe, M o.; and Jackson, 1 Includes St. Louis, Mo. , East St. Louis and Belleville, 111. Trading days: Nov., 1947— 24; Oct., 1947--27; Nov., 1946—25 Outstanding orders of reporting stores at the end of November, 1947, were 8 per cent less than on the corresponding date a year ago. Percentage of accounts and notes receivable outstanding November 1, 1947, collected during November, by cities: Excluding Instalment Instalment Accounts Accounts F ort Smith............% Little Rock.... 32 Louisville ...... 33 Memphis ...... 36 IN D E X E S OF 55% 63 58 49 DEPARTM ENT Excluding Instalment Instalment Accounts Accounts Q uincy .......... 36% St. L ouis............ 39 O ther cities.... 32 8th F .R . D ist. 37 STORE SALES AND 8th Federal Reserve D istrict N o v ., O ct., 1947 1947 Sales (daily average), U nadjusted2............ Sales (daily average), Seasonally adjusted2 Stocks, Unadjusted8 ........................................ Stocks, Seasonally adjusted8............................ * Daily A verage 1 93 5 -3 9 = 1 0 0 . 8 End o f M onth A verage 1 9 3 5 -3 9 = 1 0 0 . 428 339 310 290 6 8% 55 61 55 330 308 307 274 STOCKS Sept., 1947 N ov., 1946 340 337 273 246 371 294 293 274 S P E C IA L T Y STO R E S Stocks Stock _________ N et Sales on H and T urnover N ov., ’ 47 11 m os , ’47 N ov. 30,*47 Jan. 1, to com pared with to same com p, with N ov. 30, O c t.,’ 47 N o v ./4 6 period *46 N ov. 3 0 /4 6 1947 1946 M en’s Furnishings......+ 3 3 % +11% + 3% +15% 3.33 5.27 B oots and Shoes........— 9 + 9 + 7 + 6 4.29 6.42 Percentage o f accounts and notes receivable outstanding N ovem ber 1, 1947, collected during N ovem ber: M en’s Furnishings ............... 5 3% B oots and Shoes..................... 50% Trading d ays: N ovem ber, 1947— 2 4 ; O ctober, 1947— 2 7 ; N ovem ber, 1946— 25. R E T A IL F U R N IT U R E STO R ES N et Sales Inventories N o v ., 1947 N ov. 30, 1947 R atio of com pared with com pared with Collections O c t.*47 N o v /4 6 O ct. 3 1 /4 7 N ov. 3 0 /4 6 N o v /4 7 N o v /4 6 St. L ouis Area1....— 1% +25% + 3 % +27% 4 2% 43% St. Louis ......... .— 2 4 -22 4- 3 +27 42 42 A l t o n ................... * * * * * * Louisville Area2....+ 1 9 +62 + 2 + 6 24 31 Louisville .......... 4 -19 4-64 + 2 4 -4 23 30 Memphis .................+ 3 1 + 4 +14 +25 26 36 Little R ock .......... + 3 + 4 + 2 + 6 26 37 Springfield ............ - 0 4-12 * * * * 8th District Total8+ 5 +22 + 4 +17 33 39 * N ot shown separately due to insufficient coverage, but included in Eighth District totals. 1 Includes St. L ouis, M isso u ri; E ast St. L ouis and A lton , Illinois. 2 Includes Louisville, K e n tu ck y ; and N ew A lbany, Indiana. 8 In addition to above cities, includes stores in Blytheville, F ort Smith and Pine B luff, A rkansas; O w ensboro, K e n tu ck y; Greenville, Green wood, M ississippi; Springfield, M issou ri; and Evansville, Indiana. P E R C E N T A G E D IS T R IB U T IO N O F F U R N IT U R E SA LE S N ov., ’ 47 Cash Sales .................................. ..................... 17% Credit Sales ...................................................... 83 Total Sales .................................................... 100 O ct., ’ 47 19% 81 100 N ov., ’ 46 24% 76 100 Page 9 P R IC E S W H O L E S A L E P R I C E S I N U. corporate and m unicipal issues and in further advances in som e types o f n on -G overn m en t sh ort term rates, w h ich are clo se ly related to G ov ern m ent m arket rates. S. A . Bureau of L abor Statistics (1926 = 100) N o v .,’ 47 O ct.,’ 47 N o v .,’ 46 N o v .,’47 O ct.,’47 corap. with N ov.,’ 46 A ll Com m odities...... Farm Products.... Foods ..................... O ther ..................... 159.5 187.9 178.0 142.1 4- 0. 6% — 1.0 4 - 0.1 4- 1.5 4 -14 .2% 4-10.7 4- 7.6 4-17.7 158.5 189.7 177.8 140.0 R R E T A IL Bureau o f L abor Statistics O ct. 15 (1935-39 = 100) 1947 U .S . (51 cities).... 201.6 St. L ou is ............ .209.4 Little R o ck .......200.4 L ouisville .........196.2 Memphis .......... .223.6 139.7 169.8 165.4 120.7 FOOD Sept. 15 1947 P R IC E S O ct. 15 1946 203.5 215.9 201.3 198.2 220.5 O ct. 15, ’47 compared with Sept. 15, ’ 47 O ct. 15, ’ 46 — 1% — 3 — 1 — 1 4- 1 180.0 183.6 172.3 167.4 191.0 4 -12% 4-14 +16 4-17 4-17 B A N K IN G P R IN C IP A L A SSET S A N D L IA B IL IT IE S F E D E R A L R E S E R V E B A N K O F ST. L O U I S Change from Nov. 19, D ec. 17, Dec. 18, 1947 (I n thousands of dollars) 1947 1946 Industrial advances under Sec. 13b.. $ .......... 14,923 — Other advances and rediscounts.......... 345 — $15!l97 U . S. securities......................................... — 19,919 4- 76,931 ...$1,179,226 — $20,264 4 46 1 ,7 3 4 Total reserves ....................................... T otal deposits ....................................... F. R . notes in circulation................... ... 702,817 ... 1,145,064 Industrial commitments under Sec. >. 580 — 21,570 — 57,302 4 - 21,908 - 0- 4 - 16,298 4- 54,132 4- 22,895 — 3,685 P R IN C IP A L A SSET S A N D L IA B IL IT IE S W E E K L Y R E P O R T IN G M E M B E R B AN K S Change from (I n thousands of dollars) D ec. 17 Dec. 18, N ov. 19, 1946 1947 Assets *947 T otal loans and investments.................$2,217,146 4-$ 26,236 4-$ 84,685 (Com m ercial, industrial, and agri cultural loans, open market p aper).. 628,679 4- 33,262 4- 161,317 Loans to brokers and dealers in se curities .................................................... 6,590 4427 481 Other loans to purchase and carry se curities ...................................................... 44,998 ___ 64 ___ 31,314 Real estate loans......................................... 140,511 + 2,377 4- 27,377 Loans to banks........................................... 2,750 49 320 Other loans .................................................. 180,153 4. 8,365 4- 25,266 T otal loans .............................................. 1,003,681 4 - 44,687 4 - 182,718 Treasury bills ............................................. 22,084 43,907 5,056 4Certificates of indebtedness................... 87,458 27,536 43,782 Treasury notes ........................................... 118,223 4- 17,225 — 48,576 U . S. bonds including guaranteed ob li gations ...................................................... 839,074 ___ 11,080 ___ 10,911 Other securities ............ ............................ 146,626 — 2,116 41,329 Total investments ................... ............. 1,213,465 — 18,451 98,033 Cash assets .................. ............................... 836,735 4- 35,461 4- 72,604 Other assets ................................................ 25,025 1,150 4879 T otal assets ..............................................$3,078,906 4-$ 60,547 4-$158,168 Liabilities Dem and deposits— total ..........................$2,405,745 4-$ 63,260 4-$134,382 Individuals, partnerships, and co r porations ............................................. 1,545,664 4- 70,155 4 - 148,965 Interbank demand deposits................. 722,739 4- 19,215 4- 21,402 U . S. Governm ent deposits.............. 15,614 29,074 37,407 Other demand deposits....................... 121,728 42,965 41,422 Demand deposits— adjusted* ................. 1,401,988 4 - 41,427 4 - 107,066 Tim e deposits ............................................. 469,517 4,850 4 - 20,560 B orrow ings .................................................. 18,355 41,310 5,545 Other liabilities ......................................... 16,176 522 4 735 Total capital accounts.............................. 169,113 41,349 48,036 Total liabilities and capital accounts.... 3,078,906 4= 60,547 4- 158,168 * Other than interbank and Government deposits,less cash items on hand or in process o f collection. Page 10 A s a result o f these actions, banks have b ecom e m ore interested in h old in g bills, w hile uncertainty as to the future cou rse o f rates has led to less interest in other short issues and bonds. T h u s, w hen banks have funds available, th ey have tended to b uy bills and, w hen th ey need funds, to sell certificates, notes, and bonds. In vestm ent p o rt folios at the district’s w eek ly rep ortin g banks reflect these actions, m odified in part b y exchanges and cash redem ptions. B etw een N ovem b er 19 and D ecem ber 17, T reasu ry bill h oldings o f the rep ort in g banks increased $5 m illion, w hile certificate h oldings declined $28 m illion. T reasu ry bon d h oldings declined $11 m illion and note holdings increased $17 m illion. T h e changes in certificates and notes, particularly, reflected exch an ge transac tions in that the D ecem ber 1 m aturing certificates w ere exchanged into 13-m onth T reasu ry notes. Since bank earning assets have been expanding, deposits also have grow n , th ereby increasing the total m on ey supply. A t the w eek ly rep ortin g banks in this district, individual, partnership and corp ora tion dem and deposits rose $70 m illion betw een m idN ovem b er and m id-D ecem ber. U . S. G overnm ent deposits declined $29 m illion. T im e deposits decreased $5 m illion, reflecting m ainly the w ith drawal o f Christm as savings deposits. A G R IC U L T U R E B etter prospects for a w heat crop in the sou th w estern w inter w heat belt have high ligh ted the D ecem ber agricultural news. S even ty-five to 90 per cent o f the Kansas w heat crop had been seeded b y D ecem ber 1. A p p ro x im a te ly one-third o f the intended acreage in O klahom a and T ex as rem ained to be seeded after that date, but recent reports indi cate that m uch o f this acreage w as in b y D ecem ber 17. T h is area has received sufficient rain to germ inate w heat but little gro w th can take place before freezin g weather. W h e a t acreage seeded in M is souri is 30 per cent m ore than that harvested in 1947. In m ost other sections w in ter w heat is in g o o d to very g o o d con dition w ith som e b ein g pastured where the soil has dried sufficiently. A w heat crop o f 1.1 billion bushels is n ow possible on the basis o f an 839 m illion bushel w inter w heat crop and an average sprin g w heat crop, a cco rd in g to the first estim ates released b y the U S D A on the 1947-48 w heat situation. T h e final out-turn n o w depends on w eather con d ition s until next spring. T h e cotton crop estim ates, as o f D ecem ber 1, in creased the m onth earlier forecast by 189,000 bales. T h e crop is n ow exp ected to total 11,694,000 bales. P rosp ectiv e p rod u ction in C alifornia T ex a s a ccou n ted for m ost o f the increase. and C rop p rospects in district states declined 15,000 bales. R ealization o f the D ecem ber 1 estim ate w o u ld re sult in a 1947 p rod u ction abou t 3 m illion bales larger than last year, and about 700,000 bales sm aller than the 1936-45 average. T h e 1947 cotton acreage is b elow that harvested on the average in the years 1936 th rou gh 1945, but the yield per acre is 14.8 pounds above the ten-year average. Farm prices declined 1 per cent in the m onth ♦ en din g N ovem b er 15. T h is w as due prim arily to a seasonal decline in the price o f h ogs. In general, oth er prices held steadily or increased m oderately. A fter N ov em b er 15, farm prices again m oved up w ard. T h e ten-m arket average price o f cotton , for instance, on D ecem b er 12 was 36 cents a pound, 3 cents a bove the price a m onth earlier. P ork prices are exp ected to g o higher as h o g slau ghterin g de clines in the late w inter and spring. P rices o f cattle also are exp ected to con tinu e high since the num ber m arketed w ill be sm aller a n d dem and should contin u e to be high. A recent stu dy m ade b y the D epartm ent o f A g r i culture on the farm fam ily level o f liv in g in 1940 and 1945 sh ow s that the southern states had the low est level in the U nited States at both tim es, even th ou gh th ey show ed the greatest relative gains betw een 1940 and 1945. T h is study is based on such factors a s: (1 ) percentage o f farm dw ellin gs w ith e le ctricity ; (2 ) percentage o f farm dw ellin gs w ith te le p h o n e s ; (3 ) percentage o f farm s w ith auto- m o b ile s; and (4 ) the valu e o f produ cts sold o r traded. A m o n g E ighth D istrict states, M ississippi, Arkansas and T en n essee w ere low est in 1945 w ith index scores (U .S .= 1 0 0 ) o f 32, 37 and 50 respec tively ; h ow ever, these sam e states sh ow ed the greatest percentage increases in livin g level from 1940 to 1945. F A R M F A M IL Y L E V E L O F L IV IN G (1945 U .S. = 100) Index-V alue Increase 1940-45 1945 1940 (p er cent) 25 48 Arkansas ............................................... 37 Illinois ....................................................139 113 23 Indiana ..................................................134 111 23 Kentucky ............................................... 61 49 24 Mississippi ............................................. 32 22 45 Missouri .................................................. 93 78 19 Tennessee ............................................. 50 36 39 United States ....................................... 100 80 25 S ource: B .A .E ., Farm Operator L evel o f L ivin g Indexes for Counties of the United States, 1940 and 1945. T h e lack o f m od ern con ven ien ces in district farm s is highlighted further b y the fact that nearly on ehalf the farms in district states have no electricity. M ississippi, w ith tw o-th ird s o f its farm s un elec trified, ranks third a m on g all states in p rop ortion o f unelectrified farm s. F o u r o f the district states are am on g the ten states w ith highest percentage o f unelectrified farm s. In Indiana, and Illin ois, 15 and 25 per cent o f the farm s had no electric service as o f July 1, 1947. U N E L E C T R IF IE D F A R M S IN E IG H T H D IS T R IC T S T A T E S JU LY 1 , 1947 Farm s As Rank in U . S. in w ithout per cent proportion of electric o f all unelectrified service farms farms Mississippi ....................................... 176,788 67% 3 Tennessee ....................................... 139,728 60 5 Arkansas ......................................... 114,812 58 9 Kentucky ......................................... 134,067 56 10 Missouri ......................................... 123,443 51 14 Illinois ............................................. 51,224 25 27 Indiana ........................................... 25,662 15 36 District states ................................ 765,724 49 United States ................................ 2,284,528 39 S ource: U S D A Rural Electrification Administration. D E B IT S T O D E P O S IT A C C O U N T S ( I n thousands N ov., o f dollars) 1947 m D orado, A rk ....... $ 17,379 F ort Smith, A rk ....... 36,347 H elena, A rk .............. 10,917 Little R ock , A rk ..... 116,743 Pine B luff, A rk....... 27,231 Texarkana, A rk .-T ex . 10,927 A lton , 111.................... 21,994 E .S t.L .-N a t.S .Y .,Ill. 117,745 28,174 Q uincy, 111.................. Evansville, In d ......... 99,311 Louisville, K y ............ 466,843 O w ensboro, K y ....... 33,941 Paducah, K y .............. 14,420 Greenville, M iss....... 25,790 Cape Girardeau, M o. 14,131 H annibal, M o ............ 6,845 Jefferson C ity, M o... 31,781 St. Louis, M o ............ 1,356,306 Sedalia, M o ................ 9,129 Springfield, M o ....... 53,949 Jackson, T enn......... 19,716 M emphis, T enn........ . 610,614 T otals ................... $3,130,233 O ct., N ov., N ov., ’ 47 com p, with 1947 1946O ct., *47 N ov., ’ 46 $ 20,009 $ 15,857 — 13% +10% 40,548 33,946 — 10 + 7 13,149 8,310 — 17 +31 135,632 104,131 — 14 +12 39,368 25,966 — 31 + 5 11,814 9,071 — 8 +20 23,909 18,763 — 8 +17 135,144 98,397 — 13 +20 29,932 23,135 — 6 +22 111,864 84,283 — 11 +18 508,749 417,389 — 8 +12 30,262 23,389 +12 +45 15,024 12,121 — 4 4-19 31,589 15,218 — 18 +69 10,427 8,618 +36 4-64 7,808 6,936 — 12 — 1 52,408 32,770 — 39 — 3 1,516,453 1,242,753 — 11 + 9 10,130 8,955 — 10 + 2 62,926 54,005 — 14 -0 * 27,379 20,303 — 28 — 3 699,153 465,333 — 13 +31 $3,533,677 $2,729,649 — 11 “ +15 A G R IC U L T U R E C A S H F A R M IN C O M E O ct., ’47, com p, with 12 mo. total Oct. (In thousands O ct., Sept., O ct., of dollars) 1947 1947 1946 *46-*47 Arkansas ........$116,464 + 8 0 % + 9 % $ 509,990 Illinois ............ 227,157 + 1 2 5 + 9 1,823,280 Indiana .......... 132,402 + 52 +21 1,049,269 Kentucky ........ 42,140 -0 + 8 523,127 Mississippi ...... 122,261 + 92 +76 376,267 Missouri .......... 142,028, + 57 + 6 1,072,064 Tennessee ........ 71,771 + 56 +14 476,696 Totals ..........$854,223 + 73% + 1 7 % $5,830,693 to Sept. ’ 46-’ 47 com p, with ’ 45-’46 ’ 44-’ 45 +31% +60% +38 +58 +32 +54 +23 +25 +13 +15 +36 +52 +27 +38 +32% +48% R E C E IP T S A N D S H IP M E N T S A T N A T IO N A L S T O C K Y A R D S __________ Receipts_______________ Shipments________ N ov. N o v .,’ 47 com p, with N ov. N o v .,’ 47 com p, with 1947 O c t.,’47 N o v .,’46 1947 O c t.,*47 N o v .,’ 46 Cattle and calves.,149,324 — 30% — 12 % 50,609 — 45% — 36% H ogs ....................... 222,642 + 5 + 5 33,368 —21 — 31 Sheep ..................... 50,156 — 29 — 1 4,188 — 76 — 50 Horses ................... 1,325 + 9 — 61 1,325 + 9 — 61 Totals ................ 423,447 — 15% — 3 % 89,490 — 41% — 36% Page 11 National Summary of Business Conditions m i l BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM N D U S T R I A L P R O D U C T I O N expanded som e w hat further in N ovem ber. Departm ent store sales sh ow ed m ore than a seasonal increase in N ovem b er and the first half o f D ecem ber. W h o le sale com m od ity prices generally continued to advance. Industrial production— T h e B oard’s seasonally adjusted ind ex o f industrial production advanced 2 points in N ovem b er to 192 per cent o f the 1935-39 average, a new p ostw ar peak rate. O u tpu t o f durable g ood s expanded som ew hat further, reflectin g largely increases in activity in m ost m achinery, transportation equipm ent, and nonferrous m etal fabricatin g industries. Output o f steel in N ovem b er w as at a slightly low er rate than in O ctob er, but in the early part o f D ecem ber scheduled operations rose to new postw ar peaks. M otor truck assem blies w ere curtailed in N ovem ber and early D ecem ber, as a result o f m odel ch an geover a ctivity at plants of a m ajor producer, w hile output o f passenger cars increased. Output o f lum ber and oth er con struction materials was m aintained in large volu m e. M anufacture o f nondurable products continued to increase in N ovem b er, reflecting m ainly a further m arked rise in a ctivity at cotton textile mills and an expansion in the volu m e o f livestock slaughtered as a result o f reduced feed supplies and high prices fo r feeds. L iq u o r production , w hich increased sharply in O ctober, w as curtailed in N ovem ber in accordan ce w ith the Federal program to conserve grain. P rod u ction o f m inerals rose som ew hat further in N ovem ber, reflectin g further gains in output o f bitum inous coal as increased numbers o f freight cars becam e available. C on stru ction — V alu es o f m ost types o f con struc tion contract aw ards, a ccord in g to the F. W . D o d g e C orporation, sh ow ed seasonal declines in N ovem ber and w ere substantially larger than a year ago. T h e num ber o f d w ellin g units started during the m onth, as estim ated b y the D epartm ent o f Labor, d ecreased from 94,000 in O ctober to 82,000 in N o v e m b e r; com pletion s increased from 83,000 units to 86,000. D istribu tion — D epartm en t store sales show ed a sharp seasonal increase in N ovem ber and the B oard ’ s adju sted index rose to a new high of 300 per cent o f the 1935-39 average, as com pared w ith 275 in O cto b e r and 291 in Septem ber. V alue o f sales contin ued at a high level in the first half o f D ecem ber and was 8 per cent above the correspond- I Page 12 in g period in 1946. V a lu e o f departm ent store stocks has also increased in recent m onths and is a bove the corresp on d in g period o f a year ago. Shipm ents o f m ost classes o f railroad revenue freigh t w ere m aintained in large volu m e in N o v e m ber and the first half o f D ecem ber, after allow ance fo r usual seasonal declines at this tim e o f the year. Coal shipm ents con tin u ed to increase and w ere at the peak rate reached at the b egin n in g o f the year. Commodity prices— W h o le sa le co m m o d ity prices gen erally advanced further in N ov em b er and the early part o f D ecem ber. C rude petroleu m prices w ere increased sharply and advances w ere announced in refined petroleum produ cts, n ew s print, rayon , textile p roducts, shoes, and som e metal products. G overnm ent disposal prices for Japanese silk w ere reduced b y nearly one-half. P rices o f com m odities traded in the organ ized markets rose further in N ovem b er but sh ow ed little change in the first three w eeks o f D ecem ber. T h e con su m ers’ price index w as unchanged from Septem ber to O ctober. F o o d prices generally sh ow ed little change in N ov e m b e r and D ecem ber, w hile additional increases occu rred in retail prices o f other g o o d s and services. Bank credit— Loan s to businesses, consum ers, and real estate ow ners expanded further at banks in leading cities durin g N ovem b er and the first half of December. Demand deposits of individuals and businesses increased 800 m illion dollars at these banks, and cu rren cy in circu lation rose b y 400 m illion. In the fou r w eeks en ding D ecem ber 17, m em ber banks gained reserves as a result o f a continued inflow o f gold, T reasu ry transactions, and Federal R eserve purchases o f G overn m en t securities. T h ese sources o f reserves m ore than offset the seasonal grow th in currency. R eserve Bank holdings o f G overn m en t securities declined in the f o u r - w e e k p e r i o d , reflecting T reasu ry retirem ent o f bills and certificates. T h e System also sold substantial am ounts o f bills and certificates in the market, but purchased larger am ounts o f notes and bonds. Interest rates and b on d y ie ld s — P r i c e s o f T reasu ry bonds, w h ich declined sharply in O ctob er and N ovem ber, w ere held firm after the m iddle o f N ovem b er b y official support. P rices o f corporate bonds declined further. Y ie ld s on T reasu ry cer tificates rose and a new issue o f 1 % per cent on eyear certificates was offered in exch an ge fo r the issue m aturing January 1.
@FedFRASER