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September 1955

Volume X X X V II

Number 9

A Decade of District Income Growth


respond to the dominant forces of national growth which have char­
acterized the postwar period. As growth implies change, local
economic activity must adapt itself to continuous shifts in consumer
demand, in government expenditures, and in business investment.
District areas have shown wide diversity, therefore, in their
income variability and rate of growth, reflecting differences in their
resource endowment—
illustrated by coal, gypsum, forest land—
mtterns of production.

fe d e ra l

H e se w e


&fpSt. Louis
District Member Bank Earnings—p. 109

Survey of Current Conditions—p, 110

In our fast moving national economy all areas respond
to the dominant forces of national growth which have
characterized the postwar period.
T jH E TEN YEARS which have passed since
World War II are good evidence of the remarkable
flexibility and vitality of the American economy. In
these years the economy not only grew at a rapid
rate but surmounted major problems of adjustment
to changes in our national defense requirements.
Among file major events, or economic mileposts, of
these years was the reconversion from war to peace,
when an abrupt cut in government demand was more
than offset by an upsurge in private expenditures.
Several million returned servicemen found civilian
jobs and the first new automobiles off the assembly
lines attracted crowds of spectators wherever they
appeared. Then came the first postwar recession of
1949, followed by the Korean emergency with a tre­
mendous increase in the output of both military and
consumer goods. Late in 1953 began another reces­
sion which appears in retrospect as one of the mild­
est in United States history.
This year, at mid-summer, the total flow of goods
and services making up the gross national product
moved at an annual rate of $385 billion, 65 per cent
higher than in 1947, which might be considered the
first "normal” postwar year. Even after adjustments
for price changes which have occurred since that
time, the increase in the real flow of goods and serv­
ices still amounts to nearly 40 per cent, an impres­
sive achievement for so short a time
As growth implies change, local economic activity must
adapt itself to continuous shifts . . .
These changes in the national economy, its growth
as well as the many shifts in its component industries,
have had differing impacts from time to time upon
the various major sections of the country and upon
the many individual communities within each major
region This article is primarily concerned with the
implications of the postwar decade for the economy
of the Eighth Federal Reserve District and its several
As national income grows, the effective demand
for most goods and services produced in any local in­
come area tends to grow also. Yet the vast variety
of products made by the American economy will not
benefit equally from this growth. Consumers will
spend their larger incomes not only for more, but
also for new and different goods produced by new
and often more efficient methods of production. These
Page 102

continuous shifts in consumer demand and produc­
tion techniques will affect various industries to differ­
ent extents, and as these industries differ in their
relative importance for local areas, the impacts of
national economic growth on individual segments of
the economy vary. The participation of each local
area in the phenomenal upsurge which has charac­
terized the postwar decade has thus depended part­
ly on its ability to use local resources and skills for
the many new products and techniques developed
during this period.
This Bank has estimated the volume and sources
of income payments to residents in 99 income areas
of the Eighth Federal Reserve District for the last
eight years. These estimates show the many differ­
ent ways in which district communities have adjusted
themselves to the challenge of national growth. They
also indicate the wide diversity among local areas in
the variability of their incomes from year to year as
well as in their long-range growth patterns.
The major national influences upon incomes in dis­
trict areas in the postwar decade may be grouped
under changes in consumer demand, government
expenditures, and business investment. The responses
of the district areas to these influences have been
partly determined by differences in their resource
endowments, proximity to markets, labor force char­
acteristics, and historical patterns of production.
. . . in consumer demand, . . .
Personal consumption expenditures in the nation
increased from $165 billion in 1947 to an annual rate
of $250 billion in mid-summer 1955, an increase of
just over 50 per cent. Part of the increase is account­
ed for, of course, by higher prices; yet even after
price adjustments American consumers enjoyed an in­
crease of 30 per cent in their aggregate “real” con­
One reason for this advance is the larger number
of consumers. Among the most striking and unex­
pected developments of the last decade has been
the sharp and sustained rise in the birth rate, adding
25 million citizens to the United States population,
more than in any previous period of equal length.
Yet the population growth of the last decade from 140
million in 1945 to 165 million in 1955, has brought
with it not only an increase in the total demand
for consumer goods, but also a tremendous shift in
the composition of goods bought. There are today
more old people and many more youngsters demand­
ing goods and sendees appropriate to these age

1 9 4 7 = 100


_____________________ I
_____________________ 1
_____________________ I

10 0

10 5


Moreover, population growth is distributed quite
unevenly among the different communities of the
nation as migration, too, has been of unprecedented
magnitude since the war. The historical trend to
move away from farms and rural communities to
metropolitan areas, and the more recent tendency to
move away from the centers of the large cities to
the urban fringe, both have been accelerated over
the last decade. As a result, while some rural areas
have just maintained or even lost population, many
urban centers producing for national markets have
also added substantially to their local markets with
expanding populations. New workers attracted by
growing industry, no matter what facilities they leave
behind them, need new housing, schools for their
children, stores for their shopping, and a host of
other new consumer services.

associated with the shift toward suburban living
that has characterized the postwar period. Other
durable goods purchases have fluctuated more wide­
ly and reflect some of the technological revolutions
which have occurred in the last decade. Thus, the
production of radio sets has been cut in half, while
that of television sets has increased more than four­
fold since 1947. Where replacement demand has
been less buoyant than in the automobile industry,
the very durability of some goods has caused more
notable fluctuations in their demand, as with ranges
and refrigerators whose output in 1954 was below
that in 1947. 1 1 5

Consumer Demand

1 9 4 7 = 100





10 0

Other expenditure shifts reflect the general tend­
ency of consumers, as their incomes increase, to
spend a smaller proportion on traditional necessities
and a larger share on “luxuries” which tend to be­
come ‘ necessities” with a higher standard of living.
A general upgrading has thus occurred in most of the
major expenditure items. Among foods the tendency
to consume more red meat and poultry accounts for
the favorable income showing of many areas turn­
ing to livestock and broiler production.

15 0

2 0 0

Industrial Production

1 9 4 7 = 100



Still another shift in expenditures reflects the great
gains in productivity which have permitted more
leisure time despite rapidly increasing production.
Today, a larger share of the consumers dollar is
going into recreational and tourist expenditures. More
than half the states rate the tourist trade one of
their three largest sources of income.
Finally, there has been the tremendous growth
in automobile and home purchases, a development
facilitated by consumer and mortgage credit. Both,
automobile and home ownership, have been closely

i________________________________i________________________________ i




. . . in government expenditures, . . .
Government purchases of goods and services have
advanced from $29 billion in 1947 to $77 billion in
1954, some 175 per cent In real terms this would
be about a 120 per cent increase. The growth in
government demand combines a steady advance in
the expenditures of state and local units with a more
erratic rate of Federal spending for national security.
State and local government expenditures increased
from $10 billion in 1946 to an annual rate of $20
billion by mid-summer 1955, in response to the pres­
sures for more roads, schools, and hospitals to make
up for war deficiencies and to keep up with popula­
tion growth. The demands appear to be greatest
where economic activity has encouraged in-migration of new workers.
Federal expenditures for national security have
varied with the fortunes of the cold war, moving
from a low of $13 billion in 1947 to a high of $51
billion in 1953, and dropping back to $40 billion by
the end of 1954. It is the variability in Federal out­
lays that has caused some of the postwar fluctua­
tions in aggregate economic activity. In addition to
the major change in aggregate levels of national se­
curity expenditures that occurred over the last dec­
ade, far reaching shifts in the nature of military con­
struction and procurement programs have frequent­
ly influenced the demands made in specific communites and income areas, producing dramatic, though
sometimes only temporary, growth of incomes in
some areas.

. . . and in business investment.
Expenditures for private domestic investment
moved from $30 billion in 1947 to an annual rate of
$60 billion by mid-1955. As in the case of the ex­
panded governmental expenditures, the doubling of
business investment over the past eight years often
combined diverse movements in different types of
capital expenditures. Spending for inventories has
gone through several cycles in the postwar period,
reflecting expected shortages of supply at times as
well as shifts in business expectations about the fu­
ture course of consumer and government demand.
Major liquidation of inventories occurred in 1949
and again in 1954. It was the inventory liquidation
of early 1954, accentuated in turn by the downward
trend in national security expenditures, that account­
ed for most of the recent recession. Currently, busi­
ness investment in inventories is again increasing.
Page 104

Expenditures for business equipment have shown
a more stable growth rate. Postwar variations in this
category primarily reflect differences in the growth
expectations of specific industries rather than major
over-all shifts. Thus, railroad equipment purchases,
though substantial in the aggregate, have fluctuated
widely with traffic demands and amounted in 1954
to less than a third of their 1947 rate. There has
been steady growth in many other capital goods in­
dustries, however. Electrical machinery, for example,
had by late 1954 more than doubled its 1947 produc­
The broad postwar upsurge in economic activity
also encouraged the construction of new business
plants, which doubled from $5 billion in 1947 to an
annual rate of $10 billion in mid-1955. Additional
trade and service facilities have gone up throughout
the nation, yet often have followed rather than led
local income trends. Of more basic importance for
area economic development are new “export” facili­
ties to tap the national market, whether they serve
consumers or producers, such as new tourist accom­
modations or industrial plants.

District areas have shown wide diversity, therefore, in
their income variability . . .
Postwar gains in income and product attest to
the American ingenuity in meeting rapid increases
in consumer and government demand through con­
stant improvements in finished goods as well as in
the methods of producing these goods. These tech­
nical innovations, together with the changes in final
demand, have led to a continual shifting, however,
in the relative importance of different industries in
the aggregate national economy. And as each com­
munity has its own structure of industry, the impact
of national growth and production changes on in­
dividual areas has been diverse.
The map indicates the extent to which income pay­
ments in district areas have shown annual variation
beyond the national average. It is to be expected
that income payments in the geographically smaller
district areas would fluctuate more than the national
aggregate merely on the grounds that in the nation­
al economy many regional variations would tend to
cancel out. The important fact is not that district
area income payments vary more, but why and to
what extent they do so. Clearly, the smaller the
number of industries paying income in a community,
the larger is the possibility that change in any one
industrial activity will dominate total area income
payments. Some local industries, such as farming or
tourist services, may be greatly influenced by the



Variability of Area Income in the Postwar
National income fluctuates from year to year
due to cyclical variations and growth trends. Area
income follows and often exceeds these fluctuations,
depending upon the cyclical sensitivity of key in­
dustries in the area.
Income payments have fluctuated most widely
in areas with major defense activities, as in the
lower Ohio Valley. Evansville, Indiana, shows
the highest income variability among district metro­
politan areas, indicating its importance as a center
of durable goods production.
Large construction projects have contributed
to income variations in Paducah, Kentucky, and
Mountain Home, Arkansas. Railroad shop employ­
ment and lead mining have fluctuated in the DeSoto, Missouri, area.
The Ozark counties surrounding Springfield, Mis­
souri, have suffered in recent drouth years. Vari­
ations in cotton production and prices are reflected
in the Mississippi Delta.

weather: many district farm communities had wide
fluctuations of output and incomes in recent years
because of the drouth. Some industries are subject
to more frequent shifts in the demand for their serv­
ices: district communities geared to the national se­
curity program experienced income fluctuations due
to shifts in the demand for military procurement
items. Some local activities are by their very nature
temporary and unstable: a large construction project
for hydroelectric development will increase area in­
come, yet is not likely to maintain local income pay­
ments of the same magnitude once the project has
been completed.

Thus, differences among communities in per capi­
ta income growth are smaller than those in total
income growth. This tendency toward equalization
of local per capita income as a result of the free
migration between labor markets is characteristic
not only of movements within the district but also
of the relation between district and national in­
come. While district total income has remained
about 5 per cent of national income, its per capita
income has grown from 72 per cent to 76 per cent
of the national averaged

Per Capita Income

. . . and rate of growth, . . .

While income payments for the district as a whole
advanced 45 per cent over the postwar period, the
growth of individual district areas ranged from 8 to
88 per cent. At the lower end of the scale, area in­
come hardly kept up with the postwar rise in the
general price level. At the upper end, the estimates
indicate a spectacular growth within a brief time
span. In either case, there is a close relationship be­
tween the movements of income and the movements
of people. Where total income growth is lagging,
people move to employment opportunities elsewhere,
though such adjustment may be painful and slow.
Where income is growing rapidly, new workers are
attracted who in turn add to local income payments.

Page 105

Differences in the rate of total income growth
are again, as in the case of income variability, in­
fluenced by community size. The smaller the area,
the larger the influence of any one industry, not only
on income stability but also on income growth.
Thus, small areas are bound to show wider varia­
tion in relative growth rates than the larger metro­
politan centers. Moreover, the same change in ab­
solute terms means relatively more to the small
community than to a larger region. Relative in­
come growth therefore stands for different develop­
ments in the town where a new plant may double
the community payroll and in the metropolis where
a new industry may add little, percentagewise, to
total income payments. As district income areas
vary widely in their size, differences in their growth
rates should, therefore, be interpreted with care.

. . . reflecting differences in their resource
The responses of local economic activity to the
shifting national markets are influenced by a number
of factors such as resource endowment, proximity
to markets, characteristics of the labor force—all of
which in turn determine the historical pattern of
production. Natural resources influence both the
type of activity and the returns expected from a
particular resource use. A soil just right for tobac­
co, for example, will tend to be used for that pur­
pose. Mineral wealth, productive forest stands,
scenic attractions and so on suggest the principal
manner in which an area s resources might be used.

. . . illustrated by coal, . . .
The economies of some district areas have been
based upon a particular resource for which national
demand is declining. In such areas the problems of
adjustment to technological change may be diffi­
cult. Coal, long the main product of many areas in
southern Illinois, has been the major source of
energy for the industrial development of the West­
ern world and still provided about 40 per cent of
United States energy requirements in 1950. Yet,
postwar advances in the efficiency of coal use, com­
petitive inroads of other fuels, and resumption of
coal mining in other countries after the war, have
reduced the world demand for coal mined in the
United States since 1947 by almost one-third. One
major technological shift, the “dieselization” of the
railroads, accounted for a considerable part of the
decline in domestic demand.
In the West Frankfort-Harrisburg-Marion area, the
number of miners employed fell 25 per cent between
Page 106

1947 and 1953, partly as the result of a decline in out­
put and partly as the result of efforts to reduce oper­
ating costs in the mines by substitution of machinery
for manpower where possible. The relative decline in
employment in terms of manhours was even greater
than the decline in number of miners because the
workweek was also reduced. Unemployment in the
area ranged as high as a fifth of the labor force in
early 1954.
One adjustment underway has already been men­
tioned: the effort to increase mine efficiency. Increase
in efficiency enables the areas mines to maintain a
higher level of production than they could if they did
not change their techniques. Another type of adjust­
ment that has been taking place is a basic change in
the occupational pattern of former mining communi­
ties. Manufacturing employment in the area more
than doubled from 1947 to 1953. In fact, the number
of new manufacturing jobs in the area exceeded the
decline in mining employment over the period. How­
ever, there was not a simple transfer of former miners
to new manufacturing employment. The new jobs
were filled largely by women and new entrants into
the labor force at somewhat lower rates of pay than
skilled miners received. Consequently, local unem­
ployment sometimes increased despite the remark­
able growth in manufacturing.
In the course of the adjustments total income pay­
ments in the area have not declined, although they
have grown more slowly than for the district as a
whole. A generation ago, the area received more than
two per cent of total district income. By 1954, this
share had fallen to less than 1.4 per cent. In the
future the area may benefit from an increase in the
demand for coal used in electric power production
and other industrial uses for this basic area resource.
Whatever the future may hold in the way of im­
proving demand for the area’s coal production, the
local economy has had a long, difficult period of ad­
justment to the shifting national demand.

. . . gypsum, . . .
The impact of an increase in the national demand
for a local resource can be illustrated in Martin
County, Indiana, where development of gypsum de­
posits is underway. The deposits were discovered in
1951, and the investment of several million dollars in
mine shafts and processing plants was begun in 1954.
The postwar building boom made an extensive and
costly search for new sources of this important build­
ing material worthwhile, and the Martin County gyp­
sum became, for the first time, an economic resource.

The location of these deposits near the national center
of population has made them especially valuable.
Direct effects of the gypsum development are an
increase in local land values and the employment of
area residents in the new plants. Through the local
spending of resulting royalty and wage payments, the
incomes of people employed in local service and trade
will also be favorably affected by these changes in
the national demand for gypsum.
An income area where per capita income has been
far below the district average in the past, then will
benefit greatly from a resource endowment that fits
well into the postwar growth of the national market.
. . . forest land— . . .

Still another adjustment of local resources to chang­
ing national markets is illustrated by the Crossett
income area, which includes Ashley, Bradley, Cal­
houn, Clark, Cleveland, Dallas, Drew, and Grant
Counties in Arkansas. The primary local resource is
forest land which covers 76 per cent of the area whose
main product for many years was lumber.
In the postwar period the national use of lumber
has increased relatively little, despite the high rates
of construction and manufacturing activity throughout
the period. Other materials have increasingly entered
into competition with lumber for markets, pressing
lumber manufacturers to seek more efficient use of
timber and labor in order to keep their costs down.
From March 1948 to March 1955 lumber manufac­
turing employment in the Crossett income area de­
clined about 23 per cent as the result of changes in
output and techniques. However, other manufactur­
ing employment increased substantially in the same
period, almost offsetting the decline in lumber manu­
facturing jobs. The main sources of new manufac­
turing employment in the area are two industries
whose growth rates in recent years have been well
above the national average for all manufacturing—
paper and aluminum. Since both of these industries
pay much higher wages than does the lumber indus­
try, the increases in wage income from paper products
and aluminum in the area have more than offset the
loss of wage income from lumber manufacturing.
The paper mills at Crossett and Cullendale (just
outside the Crossett income area) which draw pulpwood from the forests of the area, produce kraft
paper. Demand for kraft paper has risen at an ex­
tremely rapid rate in the postwar period largely as
the result of growth in the use of paper and paper­
board shipping containers. A new mill under con­

struction at Crossett will produce bleached paper­
board for food packaging, another use which has
shown remarkable growth in the postwar years. Pulpwood production of the area nearly doubled from
1947 to 1954.
The pulp and paper industry has by no means sup­
planted the lumber industry in the area; more than
65 per cent of all manufacturing employment in the
area is still in lumber manufacturing. The two indus­
tries complement each other, as the forests can pro­
duce pulp wood and sawtimber simultaneously. Neith­
er has the joint use of timber for lumber and paper
impaired the basic forest resources. On the contrary,
the forest resources are actually being improved. A
major part of the Crossett area is reported by the
United States Forest Service to be one of the few
large areas in the country to show a substantial in­
crease in pine volume since the middle 1930,s. In
effect, the area has been able to take advantage of
the growing market for paper products without aban­
doning the lumber markets which for long were the
main source of area income.
The aluminum reduction plant near Arkadelphia,
in the same income area, went into production in
early 1954. It is part of a growing bauxite-aluminaaluminum-aluminum products complex in Arkansas
and illustrates very well not only the relationships be­
tween a small area and national markets but also re­
lationships among small areas within a particular
region, in this case the State of Arkansas. It draws
power from a state-wide network and alumina from
the Benton-Bauxite area, which in turn draws lime­
stone from the Batesville area in the northern part of
the state. It supplies aluminum to users within the
state as well as to national markets.
The Crossett income area has thus successfully over­
come the threat of a relative decline in national lum­
ber demand and can look ahead to a new period of
local income growth.
. . . and historical patterns of production.

In all these cases, resources have become econom­
ically useful through the skills of the local labor force
and the capital invested in facilities to mine the min­
erals and to process the trees. In addition, there must
be a host of other services to maintain the local labor
force as well as to transport the fruits of their work to
national markets. It is the complex of all these inter­
dependent factors, the skills of the labor force, the
proximity to national markets, the capital facilities
already available for local production and consump­
tion, that will condition the historical pattern of pro­
duction in each area.
Page 107

In the vast free trade market of the national econ­
omy, much local activity is therefore geared to “ex­
port” local products whose production in turn de­
pends on a wide variety of local “imports” from other
parts of the country. There are, of course, many
activities that produce goods to be bought and sold
primarily within each local area. Retail trade and
personal service, home construction, small manufac­
turing and repair shops are found everywhere to serve
the needs of the local population. Even in the trade
and service industries, however, “exports” may be im­
portant. Shoppers for fashion goods turn to the met­
ropolitan centers whose department and specialty
stores serve a large “hinterland.” Many financial serv­
ices are offered by banks in the reserve cities. Tour­
ist services are concentrated in convention centers and
areas offering scenic attractions. Educational and
related services are a main source of income in col­
lege towns. Government services dominate the state
Area industrial specialization is most pronounced
in the fields of agriculture, mining and manufactur­
ing. These are the local industries that typically
“export” their products to the rest of the country and
are of key importance as a source of income payments
to local residents who in turn spend part of their
income for local consumption of “imports.” The great
majority of district income areas have retained farm­
ing as their main “export” industry which explains the
continuing importance of agriculture for the welfare
of most district residents in spite of the fact that now
fewer people are directly employed by this industry
due to the rapid strides in farm productivity. There
is, of course, considerable area specialization within
agriculture. Thus, cotton still accounts for half of
all income payments in the Mississippi Delta, and
poultry raising contributes nearly 20 per cent of total
income in the Fayetteville area of Arkansas.
The extent to which a district income area relies
on “export” industries as a source of income can be

measured roughly by the ratio of local employment in
specific industries to total local population, as “ export”
industries will usually employ a larger proportion of
persons than the population of that area would seem
to require. St. Louis, for example, produces almost
the entire district output of the aircraft industry,
though it has only 12 per cent of the district popula­
tion. Or, the West Frankfort area in southern Illinois
produces almost 40 per cent of the district coal out­
put, though it has only 1.5 per cent of the district
population. Again, El Dorado, Arkansas, produces
more than 20 per cent of district oil with only 1 per
cent of the district population.
In each area the major “export” industries will
determine the local pattern of production. Where
this local industrial structure favors industries with a
growing national demand, the area will find it easy
to adapt its resources to national growth. Where, on
the other hand, area income has been built on “export”
industries whose national market is shrinking, the
historical pattern of production may become a burden
rather than an asset. Further income growth will
then depend on the willingness of area residents to
“write off” part of their job investments of the past
and to undertake the sometimes painful move toward
industries which offer new opportunities to serve the
national market.
Not every area can enjoy total income growth far
above the national average. As the nation grows,
labor mobility among areas as well as among indus­
tries is an essential requirement for the productivity
growth which has characterized the American econ­
omy. Local income areas, therefore, will and should
continue to show variations in total income growth.
However, the residents of each area can add to and
participate in the benefits of a rising standard of living
by serving the expanding national market and thus
improving their per capita income.
W erner H o c h w a ld

A. Ja m e s M eigs

Revised Indexes of Department Store Sales and Stocks
Indexes of department store sales and stocks published by this Bank have been revised,
following a review of the factors used in adjusting for seasonal variation. This review is part
of a program for periodic examination of seasonal patterns in department store trade. In
addition, indexes for the district and some of the metropolitan areas were revised as a result
of expansion of the reporting samples. Revised indexes are available on request to the Research
Department, Federal Reserve Bank of St. Louis, St. Louis 2, Missouri.

Page 108

Di stri ct M e m b e r Bank Earnings

l ET PROFITS AFTER TAXES of Eighth District
member banks in the first six months of 1955 dropped
$4 million or nearly 20 per cent from the level in the
first half of 1954. This drop reflected primarily mod­
erate net losses and charge-offs in contrast to substan­
tial net profits on security sales in the like period a
year ago. Net operating earnings reached a new high
of $37 million in the first six months of 1955, exceed­
ing by $1.4 million the previous first half year peak
attained in 1953. The increase in net operating earn­
ings resulted from a faster growth of operating earn­
ings than expenses. Taxes on net income declined by
$1 million. Capital structures were strengthened and
record first half cash dividends paid out.


Total operating earnings climbed to $91 million in
the first half of 1955, compared with $85 million in
the first six months of 1954. The increase in earnings
was largely the result of an expansion in earning
assets, which reflected both a growth in bank resour­
ces (matched by an increase in deposits and capital)
and somewhat smaller cash holdings. Average rates
of return on earning assets remained virtually the
same as a year ago. Over half the dollar growth re­
sulted from increased interest and discounts on loans.
In addition, preliminary data indicate that banks re­
ceived larger earnings from Government securities,
municipal obligations and service charges on deposit

(In millions ef dollars)

Expenses of operating district member banks con­
tinued to climb. In the aggregate these expenses
amounted to $54 million in the first half of 1955, com­
pared with $50 million in the corresponding period a
year ago. Preliminary reports indicate that both out­
lays for wages and salaries and interest payments on
savings accounts continued to rise. As a result of the
$6 million increase in earnings and a $4 million rise in
expenses, net operating earnings were up $2 million.
However, the growth in operating earnings was
more than offset by net losses and charge-offs of $2
million this year in contrast to net profits and recover­
ies of nearly $5 million a year ago. Thus, net profits
before taxes of $35 million in the first half of this year
were $5 million lower than in the comparable period
of 1954. After taxes on income, profits amounted to
$17.4 million or $4 million less than in the first half of
Stockholders received $7.6 million in cash divi­
dends, the largest amount ever paid in the first half
and only moderately less than the record $7.8 million
paid in the second half of 1954. In addition, these
banks retained nearly $10 million to strengthen their
capital structures. Largely as a result of the retention
of these profits, member banks as a group added to
their capital structures at a rate exceeding the growth
in their total assets, risk assets or deposits.
N o r m a n N. B owsher

(In per cent)
First Six Months

First Six Months





Interest and Discounts on Loaus . .
. . .4 7 .1
Interest on U. S. G ov ’t, Securities. .
____ 20.0
All Other Operating Earnings..............
. 14.7







Net Profits (after taxes) to Capital Accounts. . . . 4.5
Cash Dividends to Capital A ccou n ts...................




Total Operating Earnings............
Total Operating Expenses




Net Operating Earnings ..............
Net Losses and C harge-offs...................
Net Profits Before T a xes................ .
Taxes on Net In com e...............................


Net Profits A fter T a xes.....................
Dividends D ecla red .................
p— prrummary


. 33.6
. . 15.7
. 6.3









Net Profits (after taxes) to Total A ssets.............. . 0.30
Expenses to Total Earnings.................................... 56.3




Net Losses and Charge-offs to Total Earnings.
Incom e Taxes to Total E arnings..........................






Net Profits to Total E a r n in g s ...............................





Interest on Government Securities........................




Earnings on Loans








Capital Accounts to Risk Assets............................. . 15.8



Capital Accounts to Total Assets.............................
Capital Accounts to T o t a l D eposits........................




Time Deposits to Total Deposits.............................




p— preliminary

Page 109


l _

B USINESS ACTIVITY in the Eighth District during August advanced slightly from its July level
after allowance for seasonal factors. Industrial out­
put was at a high rate and the principal labor markets
of the district continued to improve. The rise in
business activity was reflected in a strong demand
for credit, and interest rates rose further. H ow ­
ever, consumer spending slowed, and construction
contracts awarded declined. Growing conditions
continued generally favorable, but price and income
developments were adverse for district farmers.

Industrial output was at a high rate . . .
Industrial output in the Eighth District in August
continued at a very high level, after allowance for
seasonal changes. Several strikes curtailed produc­
tion, but other reductions were seasonal, reflecting
vacations and model changeovers at automobile
plants. Steel ingot production in the St. Louis area
rose slightly to 100 per cent of rated capacity for
the month. Shoe output in district plants was main­
tained at a higher level than customary for August.
And lumber mills stepped up production in early
August. In all three of these lines, steel, shoes and
lumber, order backlogs were substantial, according
to trade reports. Livestock slaughter in the St. Louis
area was greater in early August, than in early July.
Crude oil output of district producers in early
August declined slightly from the 385,000 barrel daily
average production mark of July. In July, coal pro­
duction in the district was down slightly, though
still 18 per cent better than in July, 1954.
Electric power use at selected manufacturing firms
during July soared 25 per cent higher than a year
ago and 10 per cent higher than in June, on a daily
average basis. Nondurable goods industries showed
more gains than durable industries. Of the 14 indus­
tries represented in the sample, all of the 7 nondurable
goods industries increased use of power in July over
that of both a month and a year earlier. Among the
7 durable goods industries, two, fabricated metals
and electrical machinery, used less electric power
than in June, although all used more kilowatts than
a year earlier.
. . . and the principal labor markets continued
to improve .
The faster tempo of business activity was reflected
in the continued improvement in the principal labor
Page 110





I T l O



markets of the district. At mid-August, the number
of claims for unemployment insurance in St. Louis,
Louisville and Memphis were less than a month
earlier. In Evansville, claims rose somewhat, prim­
arily reflecting seasonal layoffs, but the increase was
substantially less than in the same period last year.
In July employment in nonagricultural establish­
ments in the St. Louis metropolitan area rose 12,000
from May and was 15,000 larger than a year earlier.
Part of the improvement from May reflected the
fewer number of persons involved in labor disputes,
but the July figure was reduced by the number of
workers on unpaid vacation and who are not counted
as employed.
In Louisville, non-agricultural em­
ployment dropped by nearly 3,000 from June to July
as a result of vacations and labor management dis­
putes. In Memphis and Little Rock, employment in­
creased slightly, largely as a result of increased con­
struction activity.

Demands for credit were strong and interest
rates rose further.
The demand for loans at district weekly reporting
banks continued strong during the five weeks ended
August 24. Most of the loan expansion was to busi­
nesses and consumers. Businesses added over $13
million, or roughly twice the average increase for the
corresponding weeks in the previous four years. Most
business groups increased their indebtednes. Com­
modity dealers, however, were an exception, making
sizable net repayments, primarily at banks in St.
Louis and Memphis. "Other” loans (largely con­
sumer) were up $8 million, the sharpest increase for
any like period since 1950. Volume outstanding on
August 24 was $443 million or 21 per cent larger
than a year ago; in the previous twelve months the
increase was only 3 per cent. Loans on real estate
and securities were up moderately. An offsetting
factor in the loan expansion was a sizable redemption
of CCC certificates.
During the five weeks ended August 24, indications
are that the pressure for funds increased at district
weekly reporting banks. Reserves with the Federal
Reserve and other cash balances declined, and bor­
rowings, on a daily average basis, rose. Effective
August 8, and August 30, the Federal Reserve Bank
of St. Louis raised its discount rate in two steps from

1 per cent to 25* per cent. Federal funds and other
interbank lending became more expensive. Also, dis­
trict weekly reporting banks reduced their holdings
of most types of securities. With the recent decline
in prices of intermediate-term bonds and longer-term
notes, it is likely that some sales were made at prices
below cost. Deposits, both demand and time, de­
clined during the four weeks.
Interest rates generally rose further in July and Au­
gust, reflecting the increased demand for funds, some
decline in the rate of saving and the relatively tight
reserve positions of banks. Average rate on new
Treasury bills rose from 1.40 per cent on the issue
dated June 30 to 2.09 per cent on the issue dated
September 1. On the Government 2/fs of June 195962 the yield increased from 2.67 per cent on June 30
to 2.85 per cent on August 30. Over the same period
rates on prime business loans rose
of 1 per cent,
rates on bankers acceptances advanced %of 1 per cent,
and rates on commercial paper increased
of 1 per
cent. In capital issues, such as long-term Govern­
ment, corporate and municipal securities and mort­
gages, values have been drifting lower reflecting the
increase in market yields.

However, consumer spending slowed, . . .
Consumer spending at district department stores
during the first three weeks of August declined
somewhat from the high rate of July, after allow­
ance for seasonal factors. Still, the rate of spend­
ing remained about 9 per cent larger than a year
earlier and slightly above the rate for the first half
of 1955 after seasonal adjustment. Sales of house­
hold durable goods, which advanced sharply in July
over a year earlier, continued strong in the first part
of August.
Sales of automobiles apparently slowed in the first
10 days of August, if district trends followed those
in the nation.
While the early returns on August retail sales in­
dicated some slackening from the rate in July, total
retail sales in the nation and district department
store sales in July were at record rates after allow­
ance for seasonal factors. Furniture store sales in
the district were also strong in July—10 per cent
larger than a year earlier.
. . . and construction contracts awarded declined.
Construction activity in the district was at a high
level in August, reflecting the large volume of con­
tracts awarded so far this year. Contracts awarded
in the first seven months of 1955 totalled $789 mil­
lion, up 20 per cent from the same months last year.
Recently, however, the seasonally adjusted rate of

contract awards has declined. Most of this reduction
reflects a sharp drop in the rate of residential con­
tracts awarded. This pattern continued for the first
half of August when residential contracts awarded
in the St. Louis territory of the F. W. Dodge Cor­
poration, which contains most, but not all of the
Eighth District, were substantially below the same
period a year earlier. The decline probably reflects
in part the reduced availability of mortgage credit
in recent months. On July 30, terms were tightened
on Federally guaranteed and insured mortgages by
an increase in down payments and shortening of

While growing conditions continued generally
favorable, price and income developments were
adverse for district farmers.
District farm production conditions were generally
favorable during August. At major weather reporting
stations in or near the Eighth District, moisture condi­
tions including rainfall plus soil moisture averaged
about normal. Relatively moderate temperatures and
favorable subsoil moisture conditions limited harm­
ful effects from less than normal precipitation in a
few areas.
August crop growing conditions were a continua­
tion of generally favorable temperatures and rainfall
during the present season. Based primarily on Au­
gust 1 estimates of the U. S. Department of Agri­
culture, production of major crops in district states
is expected to average 10 per cent higher than in
1954. In addition, the production of livestock com­
modities may average 4 per cent above last year,
largely reflecting increased pork output.
Hay and feed grains harvested this summer and
fall will be fed to livestock which will be sold largely
in 1956. Thus, increased crop production during 1955
may contribute only moderately to cash farm receipts
during the remainder of this year. Farm income over
the rest of the year will be adversely affected by
acreage cutbacks for cotton, tobacco, wheat, and
rice, which have been replaced largely by less profit­
able crops, and lower prices for farm products. Dur­
ing the first six months of 1955 Eighth District cash
farm receipts were 7 per cent below the comparable
1954 period.
District farm commodity prices remained relatively
stable, in the aggregate, during August. However,
prices received on August 26 averaged 6 per cent
below a year earlier, reflecting primarily sharp drops
in hog, soybean and com prices. And prospects for
the remainder of the year, when farm product sales
are heavily concentrated, suggest that average prices
received for district products will continue below
year-earlier levels.
Page 111







Industrial Use o f Electric Power (thousands o f K W H per working day, selected
industrial firms in 6 district citie s).......................................................................................
Steel Ingot Rate, St. Louis area (operating rate, per cent o f ca p a city )......................
Coal Production Index— 8th Dist. (Seasonally adjusted, 1 93 5 -1 93 9 = 1 0 0 ) ............
Crude Oil Production— 8th Dist. (D aily average in thousands o f b b ls .).................
Freight Interchanges at RRs— St. Louis. (Thousands o f cars— 25 railroads—
Terminal R. R. A ssn .)...............................................................................................................
Livestock Slaughter— St. Louis area. (Thousands o f head— w eekly a vera ge)..........
Lum ber Production— S. Pine (Average w eekly production— thousands o f bd. ft.). .
Lum ber Production— S. H ardwoods. (Operating rate, per cent o f ca p a city )............

July 1955
com pared with
June 1955 July 1954


+ 10 %
— 4
+ 1

145 p




+ 1
— 4
— 5
— 9


— 11
+ 8
— 6

Percentage change figures for the steel ingot rate, Southern hardw ood rate, and the coal production index, show
the relative per cent change in production, not the drop in index points or in percents o f capacity,
p Preliminary.

Six Largest Centers:
East St. Louis—
National Stock Yards,


1 ...............................


Other Reporting Centers
A lton, 111..........................
Cape Girardeau, M o ..
El D orado, Ark............
Fort Smith, Ark...........
Greenville, Miss............
H annibal, M o................
Helena, A rk...................
Jackson, Tenn................
Jefferson City, M o. . .
Ow ensboro, Ky..............
Paducah, Ky..................
Pine Bluff, Ark..............
Quincy, 111.....................
Sedalia, M o...................
Springfield, M o .............
Texarkana, Ark............

(In thousands
o f dollars)


Percentage Change
Jan. thru June
June ’ 55
com pared with
June,54 1954

Arkansas. . . $ 21

Evansville, In d ..............
Little R ock, Ark...........
Louisville, Ky................
Memphis, Tenn............
St. Louis, M o............
Total— Six Largest




4 2.5


+ 2
+ 5
+ 4
+ 7
+ 8





— 14%
— 1
— 5
+ 7
+ 2
- 0— 6
— 7
+ 17
— 6
— 6
— 4
— 14
— 1
— 3
— 2



— 15%
— 1
— 7



— 10
+ 9
+ 4
+ 19
+ 9
+ 15

Total— Other
Centers ................... ,


5 29.3





Total— 22 Centers






IN D E X O F BANK DE B ITS— 22 Centers
Seasonally Adjusted (1 9 4 7 -1 94 9 = 100)
l Debits to dem and deposit accounts o f individuals,
partnerships and corporations and states and political

Indiana. . . .
Kentucky. . .
Mississippi. .
Missouri. . . .
Tennessee. .

78,263 —

7 States. . . .
8th District.

12 %






+ 5%
— 13
— 9
— 7
— 5
— 8
— 5

T o t a l............
A U O th e r . .

— 10
— 11



— 12

2 15.6


215 .6 p
288.3 p
181.8 p

Seasonally adjusted
T o t a l............
181.6 p
R esidential.
246.4 p
A U O t h e r ...
151.5 p


* Based on three-m onth m oving average
(centered on m id-m onth) o f value o f awards, as
reported b y F. W. D od g e Corporation.

State data from U SD A preliminary
estimates unless otherwise indicated.

p Preliminary

A ll M em ber Banks
Change from
July 27
June 29

W eekly Reporting Banks
Change from
July 20
Aug. 17, 1955

(In Millions o f Dollars)
Loans* ................................................
Business and Agricultural . . . .
Security .........................................
Real Estate ..................................
Other (largely consumer) . . . .
U. S. Government Securities . . .
Other Securities .............................
Loans to B a n k s ...............................
Cash Assets .......................................
Other Assets ....................................
T otal Assets ...............................






$ + 41







_ ± !i



+ 24

$ + 95

Liabilities and Capital
$— 4
$ 669
$ 643
Dem and Deposits o f Banks . . . .
$+ 8
— 26
Other Dem and Deposits ..............
+ 57
— 2
Tim e Deposits ...............................
— 1
— 15
+ 28
Borrowings and Other Liabilities
Total Capital A c c o u n t s .................
+ 4
+ 3
$— 43
$ + 95
Total Liabilities and Capital
1 For w eekly reporting banks, loans are adjusted to exclude loans to banks; the total is reported
net; breakdowns are reported gross. F or all m ember banks loans are reported net and include loans
to banks; breakdown o f these loans is not available.

Percentage o f Accounts
and Notes Receivable
Outstanding July 1, ’ 55,
collected during July.
A ccounts

Net Sales
7 mos. ’55
July, 1955
to same
com pared with
period *54
July, *54
June, ’ 55
8th F.R. District T otal. .
+ 9%
+ 5
— 7%
— 4
Fort Smith Area, Ark.1 .
+ 9
+ 1?
— 2
Little R ock Area, A rk.. .
+ 2
— 7
+ 2
Quincy, 111.........................
+ 5
+ 16
Evansville Area, I n d .. . .
+ 6
+ t
Louisville Area, Ky., Ind.
+ !0
± i
— 5
Paducah, Ky.....................
+ 2
— 11
St. Louis Area, M o., 111.
+ 9
+ 6
+ 33
+ 37
— 3
Springfield Area, M o .. . .
— 4
Memphis Area, T e n n .. .
+ 6
+ 1
— 1
+ 12
All Other Cities 2 ............
+ 5
1 In order to permit publication o f figures for this city (or area), a special sample has been con ­
structed which is not confined exclusively to department stores. Figures for any such nondepartment
stores, how ever, are not used in com puting the district percentage changes or in com puting depart­
ment store indexes.
2 Fayetteville, Pine Bluff, Arkansas; Harrisburg, Mt. Vernon, Illinois; Vincennes, Indiana; D an­
ville, H opkinsville, Mayfield, O w ensboro, Kentucky; Chillicothe, Missouri; Greenville, Mississippi;
and Jackson, Tennessee.
Stocks, seasonally adjusted 5 .......................................................
. n.a.
3 Revised
4 D aily average 1947-49 = 100
5 End o f M onth average 1947-49 = 100



July, 1955— 2 5; June, 1955— 26; July, 1954— 26.

O U T STA N D IN G ORDERS o f reporting stores
than on the corresponding date a year ago.
Federal Reserve Bank of St. Louis

(1 9 4 7 -1 9 4 9 = 100)
June 1955 M ay 1955 June 1954

— 9
— 6
— 14
— 30
— 9


Trading days:


July, 1955
com pared with

at the end o f July, 1955, were 19 per cent larger



Net Sales
July, 1955
July, 1955
com pared with
com pared with
June, *55 July, ’ 54 June, ’ 55 July, ’ 54

8 th Dist. T o ta l* . . .— 3°y
St. Louis Area. . . .— 5
L ouisville A rea. . .— 4
M emphis A rea. . . + 3 6
Little R ock A rea. — 34
Springfield Area. .— 12

+ 10% — 3 %
— 4
+ 11
+ 12
+ -0I




+ 6%
+ 2
+ 14



* Not shown separately due to insufficient coverage,
but included in Eighth District totals.

1 In addition to follow ing cities, includes stores in
Blytheville, Fort Smith, Pine Bluff, Arkansas; Owens­
boro, Kentucky, and Greenw ood, Mississippi.
N O T E :- -Figures shown
to revision.

are preliminary and subject

Cash Sales .................
Credit Sales ...............
T otal Sales ............

July, *55


June, ’55


July, ’ 54