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^ * ?*■? * /. ■■ s SS & r -■ $< November 1956 Volume X X X V I I I Number 11 nk Debits and Economic Activity R A -^ A N K DEBITS have been used as an index of economic activity, and changes in debits have a high degree of correlation with changes in total production. Figures on debits have pronounced seasonal patterns which vary from city to city. -A > » In recent years the volume of debits, as well as other business indicators, has been increasing faster for some sections of the country than for others. Within the Eighth District Louisville and Little Rock and a number of other cities have experienced a large expansion in debits, whereas there has been only a slight growth in Pine Bluff, Arkansas and a d e clin e in P a du ca h , Kentucky. Comparison of debits figures also gives some indication of the relative impact of business fluctuations on various communities. Although the district as a whole has shown about average stability, some cities have had large cyclical fluctuations in debits, including Evansville, Indiana, Alton, Illinois and Owensboro, Kentucky. F ed eral It'es^jp-ve B a n k \ - St. Louis Survey of Current Conditions—p. 134 Bank Debits and Economic Activity Bank debits have been used as an index of economic activity, . . . UBSTANTIAL FLOWS of money are a neces sary attribute of a complex economy. Virtually all sales of goods and services are facilitated by a trans fer of money from the buyer to the seller. As busi ness activity expands the volume of spending in creases; contraction of economic activity is nearly always accompanied by a reduction in the flow of funds. Thus, an increase in monetary payments usually indicates a rise in total business transactions and vice versa. Since almost all money payments (in dollar amount) are made by check, a relatively easy way to meter the bulk of the money flow is to record the amount of checks as they are charged (debited, to use the common accounting term) against makers’ deposit balances. “Debits to deposit accounts” is thus just another name for the dollar volume of checks and other charges against deposit balances in commercial banks. Figures on debits have been frequently used as an indicator of business activity.1 The popularity of i George Garvy of the Federal Reserve Bank of New York has published a detailed study of debits statistics, entitled The Development of Bank Debits and Clearings and their use in Economic Analysis, Board of Governors of the Federal Reserve System, Washington, D. C., 1952 (copies are available from the Board). Debits figures include bank debits to deposit accounts except interbank accounts for the period 1919 to 1953. In March 1953 the monthly series was revised to increase its statistical usefulness and reduce the reporting bur den on banks. The revised series (which was carried back to 1943 for dis trict data and 1952 for most cities) covers debits to demand deposit accounts except interbank and United States Government. Debits to Government balances were eliminated because charges to these accounts frequently bear little direct relationship to the economic activity in the month to which they refer, since they result from the movement o f funds from commercial banks to Reserve Banks. Dropping time and savings accounts had little effect on debits totals since these accounts are generally inactive. It did, however, improve the turnover of deposits comparisons between centers for which time deposits represented different proportions of total deposits. Page 126 debits as an index of economic activity is largely at tributable to their prompt availability, continuity over a relatively long period of time and applicability to a great many individual cities. Debits to deposit accounts during a month are usually ready for analysis within a few days after the end of the month, perhaps more quickly than any other important economic time series of national scope. At the same time the fact that debits data are available for many years permits both business cycle and trend analysis. The Federal Reserve System has collected monthly data for 141 cities beginning in 1919, and interbank clearings figures are obtainable for a large number of these centers for some years before this. Most important for those engaged in regional or local research is the availability of debits statistics on a uniform basis for numerous individual cities. Over the years there have been additions in the number of communities covered until at the pres ent time the System is collecting debits figures for 344 separate centers in the country. Debits to bank deposits directly measure the value of all transactions (except the comparatively small dollar amount that is affected by cash or barter). Thus, debits figures include payments for raw materials and intermediate products as well as final goods and serv ices and in addition payments for transfers of title to existing property. In short, debits figures come fairly close to measuring the dollar volume of total economic activity, rather than some aspect of it such as retail sales, production or payrolls. In 1955, for example, the value of all checks cashed (and other debits), that is total transactions, was approximately $3,000 billion. By comparison total production of final goods and services (gross national product) amounted to about $400 billion. Increases in debits indicate that the total volume of transactions is rising, or stated another way that the flow of money through the nation or community is expanding. The growth may reflect increased phys ical production, a greater turnover of stocks, bonds, and real estate, or merely a rise in the price level. Nevertheless, since our economy is an exchange economy, it is helpful to know whether the total CHANGES IN BANK DEBITS NEARLY PARALLEL CHANGES IN PRODUCTION* 1947-49=100 volume of all transactions is rising or falling. . . . and changes in debits have a high degree of correlation with changes in total production. In addition to their value in measuring aggregate economic activitv, ✓7 debits data have other uses. Changes in debits have closely paralleled changes in gross national product. As production has expanded, the dollar volume of checks written has increased in about the same proportion. The accompanying chart portrays the similarity between annual changes in debits outside New York City and changes in total production of goods and services (gross national product). Over the entire tures associated with financial dealings. period since 1929 and in most of the individual years, the rates of growth in the two series have been about and individuals have reportedly moved funds from one bank to another more frequently in the past few the same, and the two series exhibit many of the same years as a part of an effort to make more efficient fluctuations. use of cash assets. Businesses Transfers of real estate, securities and certain other existing property have been sizable. During W orld War II the close relationship be tween movements in gross national product and debits was disturbed by several factors. Currency and coin were used to a much greater extent than before (as indicated by a sharp jump in the amount of cash out side banks from under $10 billion at the end of 1941 to over $26 billion on December 31, 1945). Govern ment controls on the flow of many materials and the emergence of the Government as the principal cus tomer (taking about half of all goods and services produced) resulted in the elimination of many dealers and intermediaries. Thus, debits during the war period probably fell below the level they would have attained if a production of identical size had been forthcoming under peacetime conditions. In 1929 and 1930 the gap between the volume of checks written and production amount of speculation. reflected a large Again in the years since Large repayments associated with the high levels of debt outstanding have probably accelerated the use of money. Furthermore, an increase in interest rates has coaxed some previously idle funds into use, add ing to the velocity of circulation. However it should be pointed out that movements in debits, because they measure total transactions, will seldom correlate perfectly with fluctuations in the production of goods and services. Mergers or consolidations of companies that formerly conducted business transactions with each other can cause debits to contract without any change in the volume of out put. In fact, any change in the number of inter mediaries between the producer of raw materials and the consumer causes debits to fluctuate in a way not necessarily related to production or income. Another limitation of debits as a guide to output is 1953 debits have expanded at a somewhat more rapid that not all payments are made by check. rate than gross national product. increase in debits than in output has been the con purchases and some larger transfers of funds are made by currency or coin. It is estimated that in the ag sequence of the relatively greater volume of expendi- gregate roughly 10 per cent of the total volume of A part of the larger Most small Page 127 transactions are conducted with cash and about 90 per cent by check. A shift in the ratio of check transactions to total cash transactions causes a change in the volume of debits without a corresponding move ment in economic activity. Moreover debits, like many other business indica tors, reflect changes in the price level. Since the value of the dollar has declined during the postwar period, debits have risen more rapidly than physical produc tion. Perhaps the most serious shortcoming of debits as a barometer of production is that they include many transactions which involve merely a shift of funds or a transfer of title to existing property. For ex ample, increased activity in the, stock and bond mar kets or a more frequent transfer in ownership of existing real estate causes the volume of payments to expand without a proportionate increase in produc tion or national income. These so-called “financial” transactions are especially heavy in New York City and, as a result, debits for that center are normally analyzed separately from those for the rest of the country. However, the limitations of using changes in debits as a guide to changes in total production are not seri ous as evidenced by the roughly parallel behavior of the two series. As production and income have ex panded, the dollar volume of checks cashed has in creased and at nearly the same rate. This is not too surprising since most of the shortcomings have affect ed only a small portion of total check payments. Increases or decreases in the number of transactions between the raw material stage and sale for final consumption usually take place only slowly and are frequently offsetting. Rapid shifts between checks, currency, coin and barter as a means of payment are unusual. Even the most serious limitation, that financial and speculative transactions are included in the debits figures, does not destroy the utility of the series since these “fluff” transactions are usually re lated to swings in general business conditions. Comparison of annual changes in bank debits, production of goods and services and certain other indices of business activity is instructive. Changes in employment, wholesale prices, department store sales, industrial production and construction contract awards tend to move in the same direction as total production of goods and services. However the cor Page 128 relation of each of these series to gross national prod uct has been lower since 1929 than the correlation of debits to gross national product. The principal value of movements in debits as an indicator of fluctuations in total production of goods and services is not at the national level since gross national product figures, which directly estimate pro duction, are available for the country. The main con tribution of debits is that they are currently available for numerous smaller areas for which there are no gross product data (or other similar indicators). For these smaller regions debits figures can be extremely helpful in giving a fairly accurate and current indica tion of the trend of production.2 Figures on debits have pronounced seasonal patterns . . . Within each calendar year bank debits show char acteristic fluctuations in response to repetitive fea tures of climate, custom and calendar. Heavy Christ mas and Easter shopping, the summer vacation lull and the seasonal variation of farm activity cause debits to vary. Debits are also influenced by heavy quar terly tax, dividend and interest payments, by with drawals on specific dates to avoid certain local taxes on deposits and even by the varying number of busi ness days in the month as well as other factors that are not immediately related to current production. Thus, to appraise the longer term significance of monthly changes in the volume of debits it is neces sary to adjust the data for these seasonal movements. For most cities in the nation debits are much smaller in February than during January, falling to a low of about 80 to 90 per cent of a "normal” month; during March they are much heavier again, rising to above the average monthly rate for the year. The amount of checks presented for payment then de clines in April and again in May. In June the volume of debits is relatively high, but during the remainder of the summer debits at most cities are comparatively moderate. In the fall activity picks up, is interrupted by some slackening in November, and reaches a peak at most centers during December. An example of a typical seasonal pattern is the debits for all reporting Eighth District banks in the accompanying chart. 2 Back data on debits for each of the 22 reporting centers in the Eighth Federal Reserve District can be supplied upon request to the Research De partment, Federal Reserve Bank of St. Louis, St. Louis 2, Missouri. . . . which vary from city to city. The above pattern varies from area to area and between cities within the same area. Banks in the Minneapolis Federal Reserve District, for example, have a bulge in activity during August and September which accompanies the heavy movement of wheat from the farms during the late summer. Debits for the Chicago District have been exceptionally large in the month of March, reportedly because of substantial withdrawals to avoid local taxes on deposit balances. Seasonal swmgs in debits have been comparatively wide in the Philadelphia and Dallas Districts in recent years, but they have been relatively mild in the Atlanta, Kansas City and San Francisco Districts. Debits at Eighth District banks have had a slightly more pronounced seasonal fluctuation than those for the country as a whole, but within the district the seasonal pattern of debits varies greatly from city to city. For banks in Jefferson City, Missouri, it is vir tually impossible to compute meaningful seasonal adjustment factors since sizable irregular movements blur the pattern, owing in large part to withdrawals of state funds. Accounts in Louisville banks have become more active in August of recent years, re portedly as customers move funds out of these banks in order to minimize local taxes on deposits. Banks located in the Cotton Belt of the district experience an extremely pronounced seasonal fluctua tion in the activity of their depositors’ balances. Ex amples are banks in and around Greenville, MissisSEASONAL DEBITS PATTERNS ARE MORE PRONOUNCED IN SOME AREAS THAN OTHERS Per cent of average month 1401---------- ----------- sippi, Helena and Pine Bluff, Arkansas, and Jackson and Memphis, Tennessee. The flow of checks drawn on a bank tends to be more even over the year in areas where commerce and industry is more heterogeneous. Thus, most of the larger district cities, except Memphis, have a less pronounced seasonal pattern than some of the smaller cities. Sedalia, Missouri, a railroad and an industrial center, has had the most even debits pattern in recent years of any of the 22 district cities reporting debits. Also it might be noted that the Missouri State Fair, which is held in Sedalia, tends to bolster activity dur ing the late summer when check volume is otherwise low. Fort Smith, Arkansas, a trade center with a larger than average proportion of workers engaged in manu facturing and transportation, likewise has had mild seasonal fluctuations in the volume of checks cashed. Another such city is Quincy, Illinois, where a large proportion of workers are engaged in various types of manufacturing, but where a sizable number are em ployed in trade, transportation and other services. Also banks in Paducah, Kentucky, Hannibal and Springfield, Missouri, and Texarkana, Arkansas, have had comparatively moderate seasonal fluctuations in debits activity, reflecting both diversification and the large amount of nonseasonal activity located in these communities.3 In recent years the volume of debits, as well as other business indicators, has been increasing faster for some sections of the country than for others. Analysis of the seasonally adjusted debits figures clearly indicate that the volume of checks presented for payment has been expanding more rapidly in some areas than in others. In areas where debits have been expanding the most rapidly other guides of business activity also indicate a sharp rate of growth. In sec tions where debits have been increasing at a relatively slow rate the rise in business activity, as measured in other ways, has been moderate. EIGHTH DISTRICT 'GREENVILLE For example, in the Dallas District, which includes Texas and parts of Arizona, New Mexico, Oklahoma and Louisana, the volume of debits has been rising the most sharply of any Federal Reserve District, jumping from $25.5 billion during 1945 to $83.9 billion during 1955, an increase of 229 per cent. By compari son debits nationally (excluding New York City) rose 3 See "Arkadelphia to Zeigler” in the Monthly Review of the Federal Reserve Bank of St. Louis for July 1953, which contains a study of the place of cities and towns in the Eighth District. Page 129 136 per cent. Other indicators of business activity within the Dallas area also reflect a vigorous growth. Department store sales increased 109 per cent from 1945 to 1955, while nationally they advanced 64 per cent. Personal income in the Dallas district states rose 94 per cent in the decade as against a gain of 84 per cent for the entire country. Certain other meas ures such as population growth, number of gainfully employed, loan behavior and deposit gains have been increasing faster in the Dallas region than in the rest of the nation. Debits figures also indicate that the San Francisco District, comprising the western quarter of the nation, and the Atlanta District, covering the southeast, have had a more pronounced growth in business activity since 1945 than the country as a whole. Other gauges of economic growth suggest that these areas have been expanding rapidly. Conversely, the volume of checks received for payment in the Boston, Minne apolis and St. Louis districts has risen at a rate some what less than the national average. Certain other business measures show a similar growth pattern for these areas. W it bin the Eighth District, Louisville and Little Rock and a number of other cities have experienced a large expansion in debits, .. . For the Eighth District as a whole the growth in debits from 1945 to 1955 approximated (although lag ging slightly) the national rate of expansion, rising 125 per cent compared with 136 per cent for the country. Income payments to individuals within the district have nearly paralleled the national growth, and most other widely used measures of economic activity have indicated that business activity within the district has advanced about as rapidly as in the rest of the coun try during the postwar period. Within the district the 22 cities for which debits data are available have experienced different rates of increase in debits and business activity, reflecting such influences as re source endowment, consumer tastes, proximity to mar kets, labor skills, capital facilities and managerial ability. The dollar amount of checks drawn on banks in Louisville, Kentucky, and Little Rock, Arkansas, has been rising sharply in the period since early 1952. Again, data on income payments to individuals, de partment store sales, loan behavior and deposit growth indicate that income and production in these areas have been rising faster than for the district as a whole. Page 130 The remarkable progress achieved in the Louisville area has resulted from a substantial industrial and commercial expansion in recent years. Existing firms have increased their facilities and new concerns have been attracted to the community. This area claims the Eighth District's largest single plant expansion (measured by employment) in recent years in Gen eral Electric Company's Appliance Park. Growth in the Little Rock area reflects some increase in indus trial activity and the construction by the Air Force of a major base north of the city. The increase in debits also has been sizable in recent years in Springfield, Missouri, where a large amount of industrial expansion has been taking place. According to the Census of Manufacturing, industrial employment in the metropolitan area rose at nearly twice the state rate from 1947 to 1954. Several firms shared in the gains, the largest being a paper products concern, completed during 1952, which now employs about 1500 persons. Primarily because of greater in dustrial activity, the estimated population of the Springfield metropolitan area rose at roughly double the district rate from 1950 to 1955. Three other district cities that have had a notable growth in debits activity are Sedalia and Cape Girar deau, Missouri and Jackson, Tennessee. At banks in Sedalia, Missouri, the expansion in debits since 1951 paralleled growth in the banks’ service area. From 1950 to 1955 the population of Pettis County, in TRENDS IN DEBITS VARY FROM CITY TO CITY, ILLUSTRATED BY LOUISVILLE, PINE BLUFF AND PADUCAH 1952-54=100 which Sedalia is located, expanded at a rate estimated at more than double the rate for the Eighth District. In addition to a high and rising level of business activ ity, the growth has been aided by the reactivation of an Air Force base near the city. The volume of checks presented at banks in Jackson, Tennessee has also increased more rapidly than the district average since 1951. Reportedly the gain reflects a broad in dustrial growth. At Cape Girardeau, Missouri, debits activity, which had been increasing at about the aver age rate for the district, rose abruptly on a seasonally adjusted basis from May through August of this year. The larger volume is believed to have resulted from a high level of construction activity including the building of a cement plant, a shoe factory and a hos pital and additions to the riverfront levee and South east Missouri State College. Since early 1952 debits to bank deposits at Jeffer son City, Missouri have risen at virtually double the rate for all reporting banks in the district. Although commerce and industry have been expanding in the city, the bulk of the increase in money payments has been the result of greater activity in state and other public funds. Paducah, Kentucky has actually suffered a down ward adjustment in debits since early 1953. This city expanded vigorously in the early ’fifties largely as the result of the construction of an atomic energy plant and related facilities. The major factor in the decline in debits since early 1953 has been the com pletion of these projects and the resulting decline in construction activity and outflow of workers. At the peak in 1953 about 25,000 were employed on the atomic project, perhaps half of them itinerant work ers who have closed their accounts in local banks and returned home or moved to other areas in search of jobs. Despite the contraction in debits since the completion of construction, the flow of debits through Paducah banks is much larger now than it was be fore the construction commenced. Again, as in the case of Pine Bluff, growth of industrial activity, such as the new chemical plants at nearby Calvert City, is expected to increase the volume of local business. . . . tvbereas there has been only slight growth in Pine Bluff, Arkansas and a decline in Paducah, Kentucky. By contrast the volume of checks drawn on banks in Pine Bluff, Arkansas has been nearly stable in re cent years except for seasonal variation. The city is heavily dependent on cotton and rice growing in the surrounding territory which has shown little, if any, expansion. Employment at the Pine Bluff Arsenal was reduced after the Korean War, and other indus trial expansion was moderate between 1951 and 1955. However, recent movements of paper and pulp plants into the area have sharply increased this community’s industrial activity and debits. Comparison of debits figures also gives some indication of the relative impact of business fluctuations on various communities. Combined debits figures for the nation have evi denced the cyclical fluctuations in the economy. Dur ing the 1949 recession the volume of debits was less than in 1948, and in the 1954 recession the rate of growth in the series was slowed considerably. How ever, debits in some sections of the country were only slightly affected by these periods of adjustment, while in other areas debits contracted quite markedly. The diverse movements reflect the fact that business ad justments bear more heavily on some industries and areas than on others. As production and incomes within an area are depressed, individuals and busi nesses located there tend to write a smaller volume of checks than do persons in areas where production and income flows are nearer peak levels. Page 131 Banks in the Chicago and Cleveland Districts had greater declines in debits during 1949 than did banks in the rest of the nation, and in 1954 debits con tracted again in these districts in contrast to a mod erate gain for the remainder of the country. The greater amplitude of the cycle in these areas prob ably reflects the high concentration of steel, automo bile, machine tool and other durable goods indus tries within these regions. On the other hand, the 1949 and 1954 recessions affected debits modestly in banks located in regions where there was a wide . . . some cities have had large cyclical fluctuations in debits, including Evansville, Indiana, Alton, Illinois and Owensboro, Kentucky. diversification of activity. Sharp declines in debits during late 1953 and early 1954 indicate that activity in Texarkana and Helena, Arkansas, also were affected adversely in that period of adjustment. At Texarkana the decline in activity was in part due to substantial cutbacks in personnel at the Red River Arsenal and the Lone Star Ordinance Plant. In Helena a shutdown in an auto parts plant plus a poor cotton crop accounted for the bulk of the contraction. Other reporting centers in the district having a larger than average decrease in debits from mid-1953 to mid-1954 include St. Louis, Hannibal and Cape Girardeau, Missouri. In St. Louis most of the con traction probably resulted from cutbacks in defense plants. By contrast, the amplitude of recent cycles has been moderate at Quincy, Illinois, Greenville, Mississippi, Little Rock and El Dorado, Arkansas and Sedalia and Springfield, Missouri. Although the district as a whole has shown about average stability, . . . Debits figures indicate that business activity in the Eighth District was affected in roughly the same pro portion as the nation in recent recessions. On the one hand, the district has a relatively large amount of agriculture, which is usually more affected by reces sions than industry generally. Under depressed con ditions agricultural output continues at a constant level but the demand for farm produce contracts, putting pressure on agricultural prices and thus farm income. Also the district has some durable goods in dustry, which is characteristically unstable. On the other hand, district agriculture is highly diversified. Major products include cotton, corn, soy beans, wheat, tobacco, rice and livestock. In addi tion the district contains a wide assortment of com mercial firms and nondurable manufacturing con cerns. Concentration in business activities, if indeed any exists, is in the processing and distributing of food and other agricultural products, relatively stable types of activity. Page 132 Nevertheless, within the district some communi ties were highly sensitive to fluctuations in business activity. Three of the most sensitive have been Evans ville, Indiana, Alton, Illinois and Owensboro, Ken tucky, and debits data from these cities reflect wide fluctuations in basic productive activity. All three are predominantly manufacturing cities with strong emphasis on durable goods. SOME CITIES HAVE GREATER CYCLICAL FLUCTUATIONS IN DEBITS THAN DO OTHERS AS SHOWN BY QUINCY AND EVANSVILLE 1952-54=100 EIGHTH DISTRICT CITIES FOR WHICH DEBITS DATA ARE AVAILABLE MONTHLY Quine; Hannibal • « Sedalia •Alton • St. Louis •)#East St.Louis Jefferson City •Springfield Cape • Girardeau E «f) Louisville #Owensboro #Paducah •Jacks • Fort Smith Little Rock • Pine Bluff ; . •Memphis Helena^ Texarkana ^Greenville •El Dorado Because changes in the volume of bank debits (seasonally adjusted) have a close relationship to changes in income and product, debits are a sensi tive, overall gauge of economic movements. Despite the previously acknowledged shortcomings of such data, they have the undeniable advantages of prompt availability and applicability to many smaller com munities. There is some reason to believe that debits have been neglected as a tool of analysis which, together with other information of a local nature, can inform the thinking of decision-makers. These figures should enable businessmen, particularly bankers, to assess the local impact of business fluctuations and to judge current rates of business growth in the com munity. There is presently no other indicator avail able for so many individual cities which can so well serve small-area needs. N o r m a n N . B ow sher Page 133 OF CURRENT CONDITIONS T h e PACE OF BUSINESS in October in the Eighth Federal Reserve District declined slightly from the fast tempo reached in September. Indus trial activity increased. Some other economic indi cators, however, showed less favorable trends. Con struction contracts awarded continued to decline on a seasonally adjusted basis. Department store sales in September and the first three weeks of October increased less than usual for that time of year. Dis trict unemployment trends were also generally un favorable. Reflecting the less than seasonal buildup in activity, loans at district weekly reporting banks rose more slowly than in the same period of recent years. The average level of wholesale prices de clined slightly from mid-September to October 23, reflecting primarily lower prices of farm products. District farm income in the first eight months of the year was greater than in the same period last year. Condition of pastures and prospects for small grains improved during the last week of October. Industry Movements in district industrial production indi cators in recent weeks were mixed. Buildup of 1957 automobile output was slowed by production dif ficulties, and livestock slaughter declined from a high September rate. There were layoffs at farm machinery and ordnance plants. On the other hand, the steel mills in the St. Louis area began crowding capacity after slipping slowly since March, the shoe industry showed unexpected strength, and coal min ing, tobacco and food processing began seasonal upturns. St. Louis area steel mills, which operated at an average of 88 per cent of capacity in September, hit the 100 per cent level in early October but declined in the latter part of the month. Coal output probably strengthened slightly in October. Crude oil output maintained its lead over a year ago. Output of 1957 model automobiles gained slowly during October as producers battled unexpected pro duction delays. However, October production of new cars in the nation was about a fifth below pre dicted output of 511,000. While auto producers bent Page 134 their efforts toward buildup, farm equipment plants were furloughing workers to reduce inventories. On the other hand partial recovery marked the me chanical refrigerator industry as workers were recalled and a plant changeover progressed at Evansville. Early October operating rates at southern pine lumber mills maintained September rates and were above year ago rates. Hardwood operating rates slipped progressively to 94 per cent of capacity in mid-October, ordinarily a period of strong seasonal upturn. Livestock slaughter in the St. Louis area in Octo ber dropped from September s high rate. For the week ending October 13 slaughter fell below the comparable year-ago period for the first time in more than a year, largely as a result of a decrease in hog marketings. The strength of shoe production in August reassured observers who had feared weakness from carryover of spring inventories on retailers’ shelves. The daily rate of shoe production in the nation, and probably in the district, rose from August to September. Construction Construction contracts awarded in the Eighth Fed eral Reserve District in September were substantially less than a year earlier. On a seasonally adjusted basis, the value of construction contracts awarded continued to decline, as all major types of construc tion awards decreased. Contracts were awarded at a slightly slower pace in the first 22 days of October in the St. Louis territory of F. W. Dodge Corporation, which includes most but not all of the Eighth Dis trict, than in September 1956 and at about the same rate as in October 1955. In the first nine months of the year taken together, however, contracts were 4 per cent larger than in the corresponding period of 1955. The increase reflected the rise in nonresidential building, public works and utilities. Residential contracts were 5 per cent less in value and 15 per cent less in number of units. Trade Despite the record amount of personal income, consumer spending in the United States declined from August to September, after allowance for sea sonal factors, and apparently continued downward in the first part of October. Total sales of retail stores, seasonally adjusted, declined in September from the record level in August to about the same amount as a year earlier. Lower sales of durable goods stores were primarily responsible for the decline from August. Sales of nondurable goods stores as a group were virtually unchanged. Reports from district department and furniture stores showed much the same pattern from August to September. The seasonally adjusted index of de partment store sales for September declined slightly from August and furniture stores sold substantially less than a month and year earlier. Sales of home furnishings at district department stores in Septem ber, on a daily average basis, were about unchanged from a year earlier in contrast to a gain of about 5 per cent for all other departments. In the first three weeks of October department store sales in the nation and district were down a little from September on a seasonally adjusted basis. New car sales also continued to decline in the first 10 days of October, reflecting the diminishing inventory of 1956 models in dealers’ hands. kvi v Reflecting the high level of business activity, nation wide employment in October remained close to the September level after seasonal adjustment, and was 1.0 million higher than a year earlier. Unemployment declined to 1.9 million, and was slightly less than a year earlier. In manufacturing, the average work week rose slightly and earnings reached a new high in September. In the district’s larger metropolitan areas, employ ment trends were mixed. The number of nonfarm jobs in the St. Louis metropolitan area at mid-September was slightly less than at mid-July and a year earlier. The reduction centered primarily in manu facturing, trade and construction, offset in part by increases in service and government. In Evansville employment also continued to decline from August to September, and remained less than a year earlier. In October, however, employment was expected to expand as manufacturing establishments recalled workers. In Louisville, Memphis, and Little Rock employment increased slightly from August to Sep tember and was larger than a year earlier. Insured unemployment in Louisville and Memphis in the four weeks ended October 27 rose more than in the same period last year. In Evansville the num ber of insured unemployed decreased less than last year. On the other hand, unemployment in St. Louis declined more than in the same weeks last year. In all four cities, the number of insured unemployed was larger than a year earlier. inmkhi n Loans at district weekly reporting banks rose $22 million during the four weeks ended October 17, somewhat less than usual for this period. The growth in loans was occasioned by a less than seasonal in crease in outstanding advances to businesses offset in part by a contraction in real estate and “other,” mainly consumer, loans. In the business sector, the expan sion centered in increased credit extended to proces sors and distributors of agricultural products. These banks were able to build up their cash assets for the second straight month as a result of a continued net inflow of deposits. 1 cu lt u re Moisture conditions on most district farms improved substantially during the last week in October as a result of fairly general rainfall. Sufficient moisture was received in most areas to germinate fall planted crops and improve winter pasture prospects. Soil moisture reserves however remain low for district farm needs. Fall harvesting over most of the district is approxi mately two weeks ahead of schedule, reflecting early maturity of crops. Drouth conditions made for a favorable harvesting situation. District farm cash receipts for the first eight months of 1956 were 11 per cent above those of the same period last year. Farmers’ cash receipts from marketing in the nation totaled $17.1 billion for the first eight months of the year, 2 per cent more than in the same period last year. Receipts from both crops and livestock products were up slightly. The gain in income this year over last came from a greater volume of marketings which offset lower prices. In the first nine months of 1956, prices received by farmers averaged 2 per cent less than a year earlier. Nationally, the index of prices received declined approximately 1 per cent in the month ending Octo ber 15 but remained about 2 per cent higher than a year earlier. The parity ratio remained at 82, the same level of the previous month. Most district farm commodity prices declined slight ly in the four-week period ending October 26. Eggs and hogs showed greatest weakness, with prices mov ing downward 6 and 8 per cent, respectively. Most prices remained, however, above 1955 levels for the same date. Page 135 VARIOUS INDICATORS OF INDUSTRIAL ACTIVITY Industrial Use of Electric Power (Thousands of KWH per working day, selected industrial firms in 6 district cities)............................................................................... Steel Ingot Rate, St. Louis area (Operating rate, per cent of capacity)........................ Coal Production Index— Sth Dist. (Seasonally adjusted, 1 9 4 7 -4 9 = 1 0 0 ).................... Crude Oil Production— 8th Dist. (Daily average in thousands of bbls.) Freight Interchanges at St. Louis. (Thousands of cars— 25 railroads— Terminal R. R. A ssn .)........................................................................................................................ Livestock Slaughter— St. Louis area. (Thousands of head— weekly average) Lumber Production— S. Pine (Average weekly production— thousands of bd. ft.). . Lumber Production— S. Hardwoods. (Operating rate, per cent of capacity)........... IQeco-’id Sept. 1956* compared with Aug. 1956 Sept. 195^ Sept. 1956 n.a. 88 87 p 392.9 n.a. — 4 — 10 + 2 n.a. — 9 + 9 + 1 101.0 121.8 210.0 98 — 6 + 18 — 5 + 15 + 5 -0- -0+ 2 * 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 drop in index points or in percents of capacity. p Preliminary, n.a. Not available. t # lC ',*9 BANK DEBITS1 Six Largest Centers: East St. Louis— National Stock Yards, 111 . . $ 139.3 Evansville, Ind. 153.1 Little Rock, Ark. 186.2 Louisville, Ky. . 800.4 Memphis, Tenn. 785.2 St. Louis, M o .. 2,185.9 Total— Six Largest Centers ................. $4,250.1 Other Reporting Centers: Alton, 111....................... $ Cape Girardeau, M o .. El Dorado, Ark.......... Fort Smith, Ark.......... Greenville, Miss.......... Hannibal, Mo. ........... Helena, Ark................. Jackson, T e n n ............ Jefferson City, Mo. . . Owensboro, Ky............ Paducah, Ky. ............. Pine Bluff, Ark............ Quincy, 111................... Sedalia, M o................. Springfield, Mo............ Texarkana, Ark. . . 36.1 17.4 29.1 53.8 31.4 10.3 12.3 29.1 94.5 45.1 25.8 47.4 37.2 14.9 89.0 21.3 Total— Other Centers ................. .$ 594.7 Total— 22 Centers $4,844.8 Sept. 1956 compared with Aug. Sept. 1956 1955 — — — — — — 3% 16 4 14 1 6 1a i '° 5 + _ + - 0- 2 5 2 — 7% — 1% — 12% — 5 - 0— 3 + 15 — 3 + 49 + 6 + 22 - 0— 4 + 35 — 2 — 4 — 3 — 3 — 11% + 12 — 6 - 0— 4 __ 2 + 3 + 11 + 24 — 3 — 1 + 2 — 1 —■ 5 + 3 + 3 + + 4% — 6% 3% -0 -°7 i INDEX OF BANK DEBITS— 22 Centers Seasonally Adjusted (1947-1949 = 100) 1956 1955 Sept. Aug. Sept. 155.5 171.5 156.2 1 Debits to demand deposit accounts of individuals, partnerships and corporations and states and political subdivisions. Percentage Change Jan. thru Aug. Aug.’56 1956 (In thousands Aug. from compared with of dollars) 1956 Aug.’ 55-R 1955-R 1954-R Arkansas . . $ 24,644 + 16% + 37% + 2 0 % Illinois........ 145,954 + 5 + 9 — 1 Indiana. . . . 85,346 + 2 — 3 — 8 Kentucky . 31,014 + 20 — 11 — 17 Mississippi. . 30,314 + 22 + 30 + 22 Missouri . . 77,983 + 8 + 3 — 9 Tennessee. . 27,434 — 1 + 13 + 10 — 2 7 States.. . 422,689 + 8 + 7 177,524 8th District - 0+ 11 + 11 Source: State data from USDA preliminary estimates unless otherwise indicated. R— Revised years 1955 and 1954. Net Sales Sept., 1956 INDEX OF CONSTRUCTION CONTRACTS AWARDED EIGHTH FEDERAL RESERVE DISTRICT* (1947-1949= 100) Aug. 1956 July 1956 Aug. 1955 Unadjusted Total........... Residential All Other . 212.6 p 223.6 p 207.5 p 247.5 257.9 242.7 236.0 252.0 228.5 Seasonally adjusted T otal........... 174.3 p Residential. 186.3 p AllOther . 168.7 p 192.7 220.4 179.8 193.5 210.0 185.8 * Based on three-month moving average (centered on mid-month) of value of awards, as reported by F. W. Dodge Corporation. p Preliminary ASSETS AND LIABILITIES OF EIGHTH DISTRICT MEMBER BANKS (In Millions of Dollars) Weekly Reporting Banks Assets Oct. 17, 1956 Business and A gricultural........... Security .......................................... Real Estate ................................... Other (largely consumer) ........... U. S. Government Securities ......... Other Securities ............................... Loans to Banks ................................. Cash Assets ........................................ Other Assets ..................................... Total Assets ................................. $1,636 856 61 275 468 873 221 46 1,033 47 $3,856 All Member Banks Change from Sept. 19, 1956 $ + 22 + 29 - 0^ — 6 — 1 + 16 — 4 + 13 + 111 + 1 $ + 159 Change from Aug. 29, 1956 Sept. 26, 1956 $+ $2,595 1,835 491 9 — 13 + 7 1,495 71 $6,487 + 139 -0 $ + 142 Liabilities and Capital Demand Deposits of Banks ........... $ 824 $ + 115 $ 778 $+88 Other Demand Deposits ................. 3,869 2,084 + 28 + 54 Time Deposits ............................ 1,256 579 + 4 + 1 Borrowings and Other Liabilities . . 89 + 10 97 — 4 Total Capital Accounts .................... 487 280 + 2 + 3 $6,487 $ + 142 Total Liabilities and Capital $3,856 $ + 159 i For weekly reporting banks, loans are adjusted to exclude loans to banks; the total is reported net; breakdowns are reported gross. For all member banks, loans are reported net and include loans to banks; breakdown of these loans is cot available. DEPARTMENT STORES Percentage of Accounts Stocks- and Notes Receivable Stocks Sales Outstanding Sept. 1, ’56, on Hand Ratio collected during Sept. Sept. 30 ’56 Jan. 1 to Excl. comp, with Sept. Sept. Instal. Instalmen Sept. 30 ’55 1956 1955 Accounts Accounts 8tli F.R. District Total . . 2.96 44 15 + 6% 3.06 3% -0+ 6% 4 3.01 3.07 Fort Smith Area, A rk .l. . 3 39 8 + 6 3.10 3.00 12 7 39 Little Rock Area, Ark.. . . ± i + 11 3.98 6 3.55 + 15 Quincy, 111......................... — 1 2.43 2.64 + 8 Evansville Area, Ind. . . . . — 1 + 3 2.60 + 16 3.01 41 18 + 5 Louisville Area, Ky., In d .. -03.00 2.60 + 17 - 8 Paducah, Ky...................... +21 3.00 — 1 2.99 16 53 1 + St. Louis Area, Mo., 111. + 1 + 14 3.16 2.97 + 7 + 5 Springfield Area, Mo........ — I 3.32 3.09 13 30 + 18 +10 + e Memphis Area, Tenn.. . . — 5 + 10 3.39 3.45 + 11 + 12 All Other Cities-............. + 2 city sample has , been con1 In order to permit p UUi*.---- — — -<=- -- (or - area) , a special -r structcd 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 depart ment store indexes. - Fayetteville, Pine Bluff, Arkansas; Harrisburg, Mt. Vernon, Illinois; Vincennes, Indiana; Dan ville, Hopkinsville, Mayfield, Owensboro, Kentucky; Chillicothe, Missouri; Greenville, Mississippi; and Jackson, Tennessee. Outstanding orders of reporting stores at the end of September, 1956, were 6 per cent lower than on the corresponding date a year ago. tJ — INDEXES OF SALES AND STOCKS— 8TH DISTRICT Sept. 1956 130 127 145 134 Aug. 1956 118 R 129 136 136 July 1956 104 135 128 139 Sept. 1955 122 119 133 124 R Sales (daily average), unadjusted3 ............. Sales (daily average), seasonally adjusted3 . Stocks, unadjusted4 ................................... Stocks, seasonally adjusted4........................ 3 Daily average 19 47-4 9= 100 4 End of Month average 1 9 47-4 9= 100 R Revised Trading days: September, 1950— 24; August, 1956— 27; September, 1955— 25. O CASH FARM INCOME Sept. 1956 (In millions) RETAIL FURNITURE STORES Net Sales Inventories Sept., 1956 Sept., 1956 compared with compared with Aug.’56 Sept.’ 55 Aug.’56 Sept.’ 55 8th Dist. Total* . . — 18% St. Louis Area . . — 15 Louisville Area. . .— 25 Memphis Area. . ,. — 39 Little Rock Area. — 8 Springfield Area. . — 19 — — — — + + 4% 4 12 15 1 7 + 14% + 20 + 7 * + 17 + 4 + 6% + 6 + 12 + 12 + 3 * Not shown separately due to insufficient coverage, but included in Eighth District totals. 1 In addition to the following cities, shown separately in the table, the totr.1 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. PERCENTAGE DISTRIBUTION OF FURNITURE SALES Cash Sales ............... Credit Sales ............. Total Sales ........... Sept. *56 14^ 86 100r Aug. *56 14% 86 100 ? Sept. ’55 14 °j 86 100 %
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