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p. 106

The Business and Financial Situation
Production and Employment Changes in
the Eighth Federal Reserve District

p. I l l

Selected Foreign Developments

p. 113

Farm Financial Structure

p. 114

!

This issue released
on September 12th

Federal Reserve Bank




o f St. Louis

411 LOCUST STREET • ST. LOUIS, MISSOURI

The Business and Financial Situation
Most Recent Economic Developments
D u r i n g RECENT WEEKS, measures of economic activity have on the whole indicated continua­
tion of the improving trend which has prevailed since
April. Industrial production in July was running at a
rate of 133 per cent of the 1947-1949 average, after
seasonal adjustment, up 7 points from the April rate.
Production of durable goods increased by 10 points
between April and July while nondurable goods out­
put rose 5 points. Sales and new orders of manufac­
turers rose in July. Weekly data on production of
steel, electric power, paperboard, petroleum, and
some building materials indicate that industrial pro­
duction rose further in August. Auto production,
however, was at a low level in August because of
model changeovers.
The upsurge of construction activity also continued
through July and August. Total outlays for new con­
struction in August were at a seasonally adjusted
annual rate of $49.4 billion, up $2.3 billion from the
May rate. Both public and private expenditures for
construction have risen since May, with residential
building accounting for much of the growth in private
outlays.
WHOLESALE PRICES
1 9 4 7 -4 9 = 1 0 0

Per Cent

In July the dollar volume of construction contract
awards reported by F. W. Dodge Corporation was 24
per cent greater than in July 1957, indicating contin­
ued support for construction activity in the near
future. Contracts for residential building were 21 per
cent greater than a year earlier and contracts for pub­
lic works and utilities construction were up nearly 50
per cent from a year ago. Contract awards for com­
mercial buildings and manufacturing buildings were
smaller than in July 1957 by 5 and 9 per cent, respec­
tively. Contracts for all other major types of construc­
tion exceeded their 1957 levels, both in July and in the
totals for the first seven months of the year.
All of these measures suggest that the economy has
experienced a substantial revival. Total gross national
product, which had fallen about $20 billion in season­
ally adjusted annual rate between the third quarter of
1957 and the first quarter of 1958, rose $3.2 billion in
the second quarter of this year to a seasonally adjusted
annual rate of $429 billion. July and August produc­
tion data indicate that gross national product in the
current quarter will show a further increase.
By July, total nonagricultural employment, season­
ally adjusted, had increased about 375,000 from the
April level but was still 2 million less than it was a
year earlier as gains in output have
been made possible thus far mainly
through lengthening of the workweek
and by advances in output per manhour. Unemployment at 5.3 million
was slightly higher in July than in
April, because employment growth had
been insufficient to absorb all of the
growth in the labor force over the pe­
riod.
Unemployment compensation con­
tinued to decline in August. However,
there was a rise in claims in the tempo­
rary unemployment compensation pro­
gram, as workers exhausted their bene­
fits under the regular programs. Auto
workers laid off for model changeovers
filed for com pen sation during the
month.

Source:

Bureau of Labor Statistics.

Page 100




Wholesale prices in primary markets
declined slightly during August, re­
flecting lower prices for some farm

products, processed foods, and some industrial mate­
rials. The wholesale price index for the week ended
September 2 was at 118.7 per cent of the 1947-49 aver­
age, as compared to 119.3 per cent in mid-July and
118.4 per cent for the month of August 1957.

Financial Unrest o f the Summer
Since June the desirable increase of industrial pro­
duction, construction, and other economic measures
has been accompanied by a great deal of public dis­
cussion of the possibility of rapid and extended in­
creases in prices.
The inflationary sentiment of this past summer
seems to have prevailed primarily in financial circles
rather than among businesses or consumers. Manu­
facturers and retailers have permitted their inven­
tories to continue to decline and there has been no
rush of consumers to build up their stocks of goods.
In the financial field, on the other hand, stock prices
have risen at an accelerated pace, while prices of
bonds have fallen as interest rates have risen.
But quite aside from anticipation of inordinate price
rises it is possible to explain the summer’s events in
the financial markets merely by anticipation of re­
covery and high prod u ction . Anticipations of the
future might simply have regained the position of a
year earlier, thereby justifying whatever stock prices
and interest rates were appropriate at that earlier
time.
The inflationary sentiment during the past summer
has not been manifested in any striking
increase in prices of goods and serv­
ices. Nor has the behavior of the price
indices been such as to explain the
development of such sentiment. The
index of wholesale prices which stood
at 119.5 in May was 119.2 in July. In
late August the weekly wholesale price
index was at about the June level and
was virtually unchanged from a year
ago. During the period from April to
July the consumer price index rose at
a rate of about 1/3 per cent a year. This
increase, while not desirable, was at a
lower rate than a year earlier.

may be thought that the prevalence and growth of
this sentiment merely suffered a pause during the busi­
ness decline of August 1957-April 1958. Such a cumu­
lative growth of a public opinion that long-run price
rises are in the cards may be based upon the fact that
prices of goods and services have on the whole risen
since 1939, the beginning of the war, since 1946, the
end of war, and even since 1953, the end of the Korean
boom.
Renewed discussion of inflation has been based
partly on anticipation of a Federal deficit of some $10
or $12 billion during fiscal 1959. However, it is not
certain that so large a deficit will develop. Control
by the administration may keep expenditures below
those anticipated. A rapid improvement in business
activity with its accompanying increase in tax receipts
might limit total demand sufficiently to prevent rapid
increases in prices.
If a very substantial deficit is incurred, it may be
that its financing can be carried on in such a way that
it would not be inflationary. If a deficit can be financed
out of saving, it need not create an excessive total de­
mand and need not be inflationary. If the Treasury
finances itself with suitable securities at appropriate
interest rates, and if the central bank follows appro­
priate policies, a deficit may be financed out of saving
and there may be little inflationary pressure from this
source.
Some belief in the probability of continuous or
repetitive price increases may arise from the assump­
tion that there will be administered rises in prices of
goods and services and that wages will rise more
CONSUMER PRICES
1 9 4 7 -4 9 = 1 0 0

Reasons fo r Inflation Fears
Such rise of inflationary sentiment as
occurred during the summer may be
due simply to the same causes that
brought about this sentiment over the
past several years. From this view it




Latasf Figur* Plotted m
r
Source:

Bureau of Labor Statistics.

Page 107

rapidly than justified by productivity increases. While
this may happen, it is not certain. Price and wage
increases of the past 10 years which have appeared to
be administered and negotiated may actually have
been made possible in considerable measure by excess­
ive monetary demand. It is true that, having become
accustomed to price and wage increases when they
were validated by excessive monetary demand, admin­
istrators and negotiators of prices and wages may be
inclined to expect such increases even when mone­
tary demand is not excessive. On the other hand, the
possibility should not be ruled out that these admin­
istrators and negotiators will fairly readily adapt
themselves to that limitation of monetary demand
which is consistent with stable prices.
Another possibility is that an increase in prices may
occur with respect to some goods and services, with
increases offset by declines in the prices of others.
Such a situation existed in the period 1952 through
1955 when both wholesale prices and consumer prices
were on the whole remarkably stable. During that
particular period, prices of farm products and proc­
essed foods declined markedly while the prices of
other commodities and services drifted upward. Dur­
ing the forthcoming period, the increased efficiencies
of agriculture may again manifest themselves in lower
prices and the recent revisions in farm price support
legislation may also result in price declines. Recent
increases in efficiency and large additions to capacity
in other industries may have similar effects on certain
other prices.

History o f Prices
If an idea is prevalent that, in the future, sustained
prosperity and high production are likely to be ac­
companied by chronic and very substantial price
increases, a brief examination of some earlier periods
of our history may help to give some perspective to
thought on the subject.
There have been sustained periods of economic
prosperity in the United States when the level of
prices has not increased. After an abrupt rise during
the War of 1812, wholesale prices fell by 1820 to a
level not more than three-quarters of the prewar aver­
age. During the subsequent forty years, a period of
great economic growth in the country, prices on the
whole drifted downward and in 1860 were lower than
in 1820, 1830, and 1840. After the Civil War inflation,
prices declined quite steadily for nearly 30 years. The
period of price decline from the Civil War to about
1896 was also one of great economic growth. At the
beginning of World War I wholesale prices, despite
an increase since 1896, were about at the same level
as in 1820,1830, and 1880. (See chart on page opposite)
Page 108




Since 1896 prices for the period as a whole ha1
risen greatly and this experience has sometimes bee
used as a basis for inferring the probability or inev
tability of further and chronic inflation. However,
is useful to look at the causes of price rises in
various parts of this period. The greatest price rises
have been associated with two world wars which in
turn were characterized by large p u b lic deficits
financed by the creation of credit. From 1920 to 1930,
a period of growth and prosperity, wholesale prices
were steady or drifted downward. From late 1952 to
mid-1956 wholesale and consumer prices were stable,
while for the period as a whole economic growth and
prosperity prevailed.
So far as the periods of increasing prices in the
past twelve years are concerned, it is not possible to
discuss here in detail their causes and their implica­
tions for the future. However, we may briefly recall
that the inflation of 1946-1948 was in considerable
measure a manifestation of the suppressed inflation
of the preceding war period, in which an unusual de­
gree of financial liquidity was built up. Furthermore
in that period the central bank was committed to a
policy of maintaining a fixed pattern of low interest
rates on Government securities. Such a policy inhib­
ited the central bank from limiting the creation of
new demand deposits and from counteracting an in­
creased rate of deposit turnover. The 1950-51 infla­
tion was associated with the Korean War and also
occurred when central bank policy was inhibited
from adequately restricting bank reserves.
From late 1951 to late 1955 the general level of
prices in the country was reasonably stable. This
reassuring period included the prosperous years of
1952 and 1953, the recession of 1954, and the recovery
of 1955.
These brief historical allusions do not prove that
general increases in prices will not occur in the future.
But they do raise some question as to whether his­
torical experience provides any presumption of the
inevitability of a long-run trend of generally increas­
ing prices.
We find then that 1956-1958 is the one historical
period when a substantial protracted price rise has
occurred while we have had a central bank exercising
its powers with reasonable freedom. If the historical
evidence of a tendency toward a chronic price rise
trend comes down in large measure to these three
years, this three-year experience does not necessarily
establish a continuing trend. There is no certainty
that the course of the future may not be more like
the period of price stability of 1952-1955 than like
the period of 1956-58 when prices rose about 3 per
cent a year, if sound fiscal and monetary policies
prevail.

WHOLESALE PRICES, 1800-1958*
1 9 4 7 -4 9 = 1 0 0

Per Cent

Per Cent

* 1958 plotted on basis o f first 7 m onths average.
Source:

Bureau o f Labor Statistics.

Public Liquidity
In order to see where the economic system stands in
relation to the economic future, it is worthwhile to
recall what has happened to some aspects of our
finances during the past year.
Total demand deposits adjusted and currency
amounted to $137.6 billion in the latter part of July,
the latest figure available, compared with $136.0 bil­
lion a year earlier. This circulating medium of the
country was thus well maintained during the 1957-58
recession. This was accomplished by a policy of mon­
etary ease on the part of the central bank in the face
of the growth of time deposits, and the consequent
need for reserves in connection with them, an outflow
of $1.4 billion of gold, and a reduced demand for
loans. The central bank has been able to foster main­
tenance of the supply of money by reductions of the
required reserve ratios against deposits and by in­
creasing its holdings of Government securities. At the
>eginning of June of this year the Federal Reserve




banks owned about $24.2 billion of Government secu­
rities compared with $23.0 billion 12 months earlier.
While demand deposits and currency in circulation
have changed little over the past year, other liquid
assets held by the public have risen substantially.
Time and savings deposits in commercial and savings
banks and accounts in savings and loan associations
and savings bonds rose from about $167 billion a year
ago to an estimated $182 billion at the end of June
1958. ( See table) This substantial $15 billion increase
Selected Liquid Assets
(In billion s o f d o lla rs )

Assets

June 30,
1958

Time Deposits at Commercial B anks... 62.0
Time Deposits at Mutual Savings Banks 33.0
Savings and Loan Shares........................ 45.1*
Savings Bonds, E and H .......................... 42.1
Total............................................... 182.2

December 31,
1957

June 30,
1957

56.4
31.7
42.0
41*6

54.4
30.9
40.0
4*1 *5

171.7

166.8

* Estimated.
Sources:
Federal Reserve Bulletin and M onthly Releases from
Assistant Secretary, Treasury Department.

the Fiscal

Pag© 109

of these funds has been viewed by some as a poten­
tially inflationary influence. As always is the case, the
holders of such assets have the power to turn them
into money and use them to add to total demand. But
it is not evident that the 6 per cent increase in these
liquid assets in the first six months of the year pro­
vided a basis for expecting great inflation. Some part
of the public stocks of liquid assets is always a poten­
tial stimulative force. Whether they have particularly
strong potentialities at the present time is not certain.
Individual holders of liquid assets have the power
to turn them into demand deposits as they wish. But
as a body they can do so only insofar as increased
bank reserves come into existence. The possibility of
the public undertaking to spend its liquid assets is
always one of the forces which will determine how
easy or strict the central bank must be. If the public
undertakes to change its time and savings deposits
into demand deposits, the banks will have to try to
acquire more reserves and will be affected by the
reserve policy of the central bank. If holders of mutual
savings bank deposits or of savings and loan associa­
tion accounts try to spend their funds, the same forces
will be brought into play.
Some stimulative or inflationary potential may be
found in the field of consumer instalment credit. Con­
sumer instalment debt amounted to $33 billion at the
end of July, about the same as a year earlier. The rate
of repayments was also about the same. The amount
of debt outstanding and the monthly payments are
slightly less in relation to disposable income than a
year ago, about the same as in 1956 and a little greater
than in 1955. As incomes increase it is quite likely
that instalment debt outstanding will increase. But
there appears to be little room for expansion to play
such a dynamic role as in the period 1946-56 when
the rate of monthly payments increased from 4 per
cent to 13 per cent of disposable income.

Federal Reserve Action
During the period of recession of production and of
employment last fall and winter, the Federal Reserve
took major steps conducive to reversal of that move­
ment. Those were the steps that appeared to be ap­
propriate to that period of declining activity, a period
when the problem appeared to be to stop the reces­
sion. Now it appears that the immediate problem is
not to stem further recession but to foster continuance
of the recovery which has recently been taking place.
It may be that the monetary position which was ap­
propriate to encourage the turn from recession to

Page 110




recovery was somewhat different from that which is
now appropriate to the period of early recovery.
A tightening of credit has occurred during the past
three months, as evidenced by increased interest rates.
The demand and supply for long-term funds would
seem to bear about the same relation to each other as
in 1957 during the boom. The yield on long-term U. S.
Government bonds at about 3.70 per cent in early Sep­
tember compares with about 3.50 per cent in early
August, and 3.15 per cent in early June, and is higher
than at any time during the past decade except for a
few months in 1957. The supply of short-term funds
is apparently more restricted relative to demand than
a few months ago but not so limited as a year ago.
The market yield on Treasury bills at 2.35 per cent in
early September compares with 1.20 in early August
and .70 in early June. These yields, while not as high
as in 1957, are as high as at their peak in 1953.
The Federal Reserve System has taken some tenta­
tive steps in recent weeks to limit credit availability.
Margin requirements were raised on August 5 from
50 per cent to 70 per cent. The Board of Governors
approved increases in discount rates from 1% to 2 per
cent at several Federal Reserve Banks as follows:
Date Effective
August 15
August 22
August 26
August 29
September 5
September 5

District
San Francisco
Dallas
Atlanta
Kansas City
Chicago
Minneapolis

The net result of borrowings from the Federal Re­
serve, and Federal Reserve purchase and sales of
securities, gave $128 million of free reserves in early
September compared with about $500 million in the
period from early March through July of this year.
This reduction in free reserves is generally interpreted
as indicative of a more restrictive open market policy
of the Federal Reserve. Reserve percentages required
remain 18 per cent at Central Reserve City Banks, 16%
per cent at Reserve City Banks, 12 per cent at Country
Banks for net demand deposits, and 5 per cent on time
deposits at all Member Banks. These are the lowest
rates since the 1930’s. Federal Reserve holdings of
Government securities amounted to $25.4 billion on
September 3 as compared to $24.2 on June 1. The
most recent figure on excess reserves is $589 million,
as compared with $414 million a year ago while bor­
rowings from the Federal Reserve are $461 million,
compared with $826 million a year ago. The $128
million of free reserves compares with $412 million
of net borrowings a year earlier.

Production and Employment Changes in the
Eighth Federal Reserve District
T h e e c o n o m y o f t h e e ig h t h d is t r ic t
has behaved much like that of the nation over the past
year. Production and employment declined sharply
in the district's metropolitan areas through last fall
and winter, and unemployment rose. Signs of revival
began to appear in early spring but employment in all
of the five largest urban areas except Little Rock was
still well below year-earlier levels in July. Construc­
tion contract awards during the first half of this year
indicate that the district is participating in the national
upsurge in construction. District farm income was
higher in the first half of this year than in the same
months of 1957, as was true for the nation. Crop pros­
pects are good.

Industrial Production
The 1957-1958 recession affected most sharply the
manufacturers of durable goods and suppliers of min­
erals and transportation, both in district and nation.
Thus, district production of machinery, automobiles,
household appliances, lumber, coal, lead, zinc, alum­
inum, and steel fell substantially as the nation’s busi­
nesses and consumers reduced their spending for dur­
able goods and as inventories were liquidated. Rail
freight interchanges at St. Louis, one of the principal
rail centers of the country, were running about 15 per
cent lower in early 1958 than in the same months of
last year.
District lumber production reached a low point in
February. Southern pine output declined about 5 per
cent between August 1957 and February of this year.
By August of this year it had risen to a level 6 per
cent above August of last year. Hardwood output,
which was more seriously affected by the slowing of
construction activity last year than pine, declined
nearly 20 per cent between last August and this Feb­
ruary and has in recent weeks returned to its year-ago
level.
Coal production in the district fell about 40 per
cent between last August and April of this year. With
the national expansion of industrial production, dis­
trict coal output rebounded by July to its August
1957 rate. In July and August of last year district
crude oil production was reduced by a strike at refin­
eries which take a considerable portion of district




output. Production recovered in September and
reached a record December high. In the first 7 months
of this year daily average production was sustained at
a rate 1 per cent below the district record set in firsthalf 1957.
St. Louis area steel production has made a sharp
recovery since April. The average weekly output in
ingot tons during April was 20 per cent below the
August 1957 rate, a decline about a third as deep as
the drop in national output in the same period. Au­
gust output in the St. Louis area was up 40 per cent
from April and was 9 per cent larger than in the
same month a year ago. An increase in aluminum
production in Arkansas was announced in early Sep­
tember. On the other hand, lead production in the
Missouri Lead Belt was curtailed further in August.

Construction
The Eighth District is apparently having an even
greater increase in construction activity from a year
ago than is the rest of the country. The total value of
construction contracts reported by F. W. Dodge Cor­
poration for the Eighth District was 9 per cent greater
in the first half of this year than in first-half 1957. The
total reported for the country as a whole in the first
six months of this year was slightly smaller than the
amount for the first half of last year.
The district increase over a year earlier in value of
contracts is remarkable in view of the fact that awards
in the first half of 1957 included very large contracts
for housing at military bases in the district. Contracts
for military and other public housing in first-half 1957
amounted to about $70 million in the district, or
nearly a quarter of all residential contracts in the
period. In first-half 1958 on the other hand, the vol­
ume of contracts for public housing was much small­
er, causing total residential contracts to be 9 per cent
smaller than a year earlier. The value of contracts for
privately financed housing in the district, however,
exceeded the 1957 first-half amount by 5 per cent, a
much larger increase in private residential contracts
than was reported for the nation in the same period.
The district value of contracts for all other construc­
tion was more than 20 per cent greater in the first six
months of this year than in the first half of 1957, as
compared to a slight decline in the national total.
Page 111

Employment
Total nonfarm employment in the
five largest district m etropolitan
areas combined fell by 67,500, or 5
per cent, between August of 1957
and February of this year, a period
in which national nonagricultural
employment also declined by 5 per
cent. (See chart) About two-thirds
of the decline of employment, in the
district areas was in manufacturing.
Employment in contract construc­
tion fell considerably more than is
usual for the winter months, partly
because of unusually severe weather
which interrupted work in progress
and delayed starts on other projects.

NONAGRICULTURAL EMPLOYMENT
IN FIVE EIGHTH DISTRICT METROPOLITAN AREAS'
Thousands of Persons

I3 5 0 r-

Total

I2 0 0 1

400|
All Other

350
325

Wholesale and Retail Trade

Despite some im provem ent in
business activity, total employment
275
in the district metropolitan areas in
i 25
July was still 5 per cent below the
Transportation ond Public Utilities
peak of last August, and manufac­
turing employment was 9 per cent
I 10
lower than in August. Unemploy­
ment this July was estimated to be
more than 8 per cent of the labor
force in all of these major centers
except Little Rock where it was 5
per cent of the labor force. More
than half of the reduction in manu­
facturing employment in the district
metropolitan areas between last Au­
gust and this July occurred in two
industrial groups, non-electrical ma­
1957
1958
chinery and transportation equip­
* St. Louis, Louisville, Memphis, Evansville, and Little Rock.
ment because of cuts in production
Source: State Employment Securities Divisions.
Note: Plotted on semi-log scale so that equal vertical distances represent equal percentage changes.
of automobiles, household applian­
ces, and railroad equipment. These
two industrial groups are of particular importance to
Farm Income and Production
St. Louis, Louisville, and Evansville.
The district received support from improved farm
Employment has been increasing since January in
income in the first half of 1958 as did the nation. How­
Little Rock and since May in St. Louis. Reports of
ever, a large part of the gain in national farm income
p ro d u ctio n increases and recalls at manufacturing
this year has resulted from higher livestock prices, but
livestock sales are not as important a source of farm
plants suggest that the declines in the other areas may
income in this district as in the country as a whole.
be over, after allowance for the shutdowns at auto
assembly plants for model changeovers in August and
The cotton crop, which normally provides about a
early September.
quarter of Eighth District cash farm receipts, was
(Continued on page 115)
Page 112




Selected Foreign Developments
A y e a r AGO when this country was at the end of
a boom and on the eve of a recession most other
major countries of the free world had also been ex­
periencing prosperity. Since that time most of them
have either leveled off in activity or have, like the
United States, experienced some recession.
Major developments in Canada during the past year
have been similar to those in the United States. The
downturn in economic activity evidently preceded
that of the United States, with seasonally adjusted un­
employment figures beginning to climb as early as
June 1957. Total industrial production showed a
slight decline in March 1957, but the major decline
began in August. From June 1957 until December
1957 unemployment increased from 3.9 to 6.5 per cent
of the total labor force, while comparable figures for
the United States showed a rise from 4.2 to 5 per cent.
However, the Canadian labor force increased much
more rapidly than the labor force in this country. In­
dustrial production declined 4.3 per cent in Canada
between June and December compared with 5.5 per
cent in the United States.
Recovery started earlier in Canada than in the
United States. As far as industrial production and
labor income are concerned, December 1957 marked
the trough of the recession there. Unemployment as a
percentage of the labor force seasonally adjusted, how­
ever, remained above the 6.5 per cent December level
throughout the second quarter of 1958.
Canadian wholesale prices fell about 2 per cent
in the three months following August 1957, and then
increased about 1 per cent and maintained a vir­
tually constant level during the first half of 1958.
Retail prices showed a small decline of approximate­
ly 0.2 per cent during November and December, and
then rose about 1.5 per cent during the first six
months of this year. Major increases were in the
food and shelter sectors.
In the United Kingdom industrial production
reached a seasonally adjusted high in June 1957. A
gradual downturn became apparent in the second
half of the year, and continued throughout the first
six months of 1958. A recession of business as a
whole cannot be said to have occurred, however; total
unemployment continues to be low, amounting to
only 2 per cent of the labor force in June of this
year, as compared to an average of 1.4 per cent for




1957. The levels of activity in the different economic
sectors show wide divergences, with mining, textiles,
and private building among the industries which seem
to have experienced the most significant decreases in
output. Unemployment figures vary widely in the
different regions of the country, having reached the
highest levels in the mining districts of Wales, in
Scotland, and in the textile region of Northwest Eng­
land. On the other hand, output in the metal and
metal-using industries has continued to increase, with
consequent below-average levels of unemployment in
the Midlands and other regions known for their engi­
neering industries.
Prices in the United Kingdom showed a continued
increase throughout most of 1957. Wholesale prices
rose by approximately 2.7 per cent during 1957, about
two-thirds or 1.8 per cent occurring in the last six
months of that year. The cost of living rose about 3.5
per cent in 1957. During 1958 prices seem to have
stabilized; wholesale prices in June of this year were
roughly of the same magnitude as in January, while
the cost of living increased by less than 1 per cent
during the first half of this year.
German industrial production, seasonally adjusted,
leveled off after February 1957 until the end of the
third quarter when there was a renewed expansion to
a new level in the first quarter of 1958. Some weak­
ness developed in April and May, but production
moved back up nearly to the peak level in the first
quarter. Employment increased from 18.9 million in
June 1957 to 19.2 million a year later. In July 1958
the unemployed were 2 per cent of the total employed
and unemployed wage and salary earners, essentially
unchanged from a year earlier. Retail prices rose
about 2 per cent and wholesale prices were up slightly
during the past year.
Economic activity in Japan during the last year
has shown a decrease in the rapid rate of growth
which characterized the country’s economy until the
summer months of 1957. Seasonally unadjusted indus­
trial production which rose by about 19 per cent dur­
ing the first quarter last year began to level off after
that, and showed a gradual decline toward the end
of 1957. Compared to 1956 levels, however, economic
activity remained high. Industrial production in De­
cember 1957 was 2.3 per cent higher than in De­
cember 1956, and during the first half of 1958 showed
(Continued on page 115)
Page 113

Farm Financial Structure
This article is based on the fourteenth annual report on the Balance
Sheet of Agriculture which will be published as an Agricultural Bulletin
by the Department of Agriculture.
E q u it ie s IN FARMING reached a new peak of
$167 billion on January 1, 1958, according to the
United States Department of Agriculture. Farm assets
rose in value by about $10 billion in 1957. Farm debt
also rose again but the increase was only about $700
million.

capital investment per farm. Nationally, over 40 per
cent of the farm real estate transfers during the year
ending March 1958 were for farm enlargement pur­
poses as compared with 38 per cent for the previous
year. This source of demand has no doubt been a
major influence in pushing farm real estate values
higher. The number of farms in 1957 was down
approximately 2 per cent from the previous year,
value of assets per farm rose from about $35,0(
1957 to about $38,000 in 1958, an increase of 9 per

The balance sheet of agriculture continues to reflect
pervasive changes of the industry in the direction of
larger farm operating units, fewer farmers, and larger

C OM PARATIVE BALANCE

SHEET OF AGRICULTURE

UNITED STATES, J A N U A R Y 1, 1 9 4 0 , 1 9 5 7 , A N D 1 9 5 8
(ir

billions

of

do lia rs )

Net change
(Per cent)
Item

1940

19571

1958

33.6

109.5

116.3

+

245.7

+

5.1
3.1
2.7
4.3

11.1
17.2
8.3
12.4

14.2
17.6
7.6
12.8

+
+
+
+

175.9
473.9
185.9
198.5

+ 2 7 .2
+ 2.1
— 8.6
+ 2.5

3.2
.2
__ .8

9.3
5.1
3.5

9.4
5.1
3.7

53.0

176.4

186.7

6.6

9.9

10.5

.4
1.5
1.5

1.6
4.5
3.5

1.2
5.0
3.5

+
+
+

175.5
232.0
133.3

— 22.2
+ 11.7
0.0

10.0

19.5

20.2

+

101.6

+

43.0

156.9

166.5

+

286.2

+

5.9

53.0

176.4

186.7

+

251.3

+

5.7

1940-58

1957-58

Assets
Physical assets:
Real estate.......................................................
Non-real estate:
Livestock.......................................................
Machinery and Motor vehicles.................
Crops stored on and off farms3...............
Household furnishings and equipment4.
Financial assets:
Deposits and currency....................................
United States savings bonds.......................
Investments in cooperatives..........................
Total0

6.2

190.7
+
+ 1,932.9
341.1
+

+

0.7
0.0
5.4

+

251.3

+

5.7

+

59.6

+

6.1

+

Claims
Liabilities:
Real estate debt................................
Non-real estate debt to:
Commodity Credit Corporation6.
Other reporting institutions7. . .
Nonreporting creditors8 ...........

Proprietors' equities.
Total5.

1 Revised.
2 Com puted from unrounded data.
3 Includes all crops held on farms fo r whatever purpose and crops held o ff farms as security for C om m odity Credit Corporation loans.
1958 totaled $700 m illion .
4 Estimated valuation fo r 1940, plus purchases minus depreciation since then.

4.0

The latter on January 1,

5 T otal o f rounded data.
6 A lth ou gh these are nonrecourse loans, they are included as liabilities because borrowers must either repay in cash or deliver the com m odities on w hich they
were based. T he values 9f the underlying com modities are included am ong the assets; hence, the loans must be included as liabilities to avoid overstating the
amount o f proprietors’ equities.
7 Loans o f all operating banks, the production credit associations, and the Farmers H om e Adm inistration, and discounts o f the Federal Intermediate Credit
Banks for agricultural credit corporations and livestock loan com panies.
8 Loans and credits extended by dealers, merchants, finance companies, individuals, and others. Estimates based on fragmentary data.

Page 114




Nearly $7 billion of the $10 billion increase in farm
assets was in the form of higher farm real estate
values.1 The total value of farm real estate (land plus
buildings) was estimated as $116.3 billion. This was
$100.39 per acre, a new record, and 6 per cent higher
than a year earlier. Farm buildings valued at $26.9
billion, constituted a slightly higher proportion of the
total farm real estate value than in the previous year.
The farm inventory of livestock and poultry on Jan­
uary 1, 1958 was valued at $14.2 billion, 27 per cent
higher than a year earlier. Most of the increase
occurred in the value of cattle; up $2.6 billion despite
a slight decline in numbers. The 94 million cattle on
January 1, 1958 were valued at $120.00 per head com­
pared to $91.60 per head for the 95 million on Jan­
uary 1, 1957. The value of hogs, sheep, chickens, and
turkeys on farms was also greater on January 1, 1958
than a year earlier.
Increases in the value of machinery, household fur­
nishings, and financial assets were offset by a decline
in the value of crop inventories. The value of crop
inventories was down about 9 per cent, reflecting sub­
stantially lower prices. Farmer investments in co­
operatives, and deposits and currency were up slightly.
Savings bond holdings were unchanged.
Total farm debt increased about $700 million with
most of the gain in farm real estate debt. Farm debt
secured by mortgages rose for the twelfth consecutive
year in 1957 to an estimated $10.5 billion on January
1, 1958. The increase for the year was about $600
million compared with $840 million for 1956. Nonreal estate farm debt increased only slightly during
the year and amounted to about $9.7 billion on Jan­
uary 1, 1958. The sharp drop in loans made or guar­
anteed by the Commodity Credit Corporation was
more than offset by increased loans by other agencies
sponsored by the Federal Government and banks.

CHANGES IN THE EIGHTH DISTRICT
(Continued from page 112)

unusually small last year because of weather damage,
so cash receipts from sale of cotton early this year
were smaller than normal. Nevertheless, in the first
six months of this year district cash receipts from farm
marketings were up 4 per cent from first-half 1957.
Each of the district states showed some gain except
Kentucky, where reduced m arketings of the 1957
tobacco crop substantially affected the total. The
national gain in cash receipts was 11 per cent in the
same period.
District livestock production was down substan­
tially in the first half of 1958 compared to the first
half of last year. In the major district slaughtering
centers the number of cattle slaughtered was down 15
per cent, the number of hogs was down 15 per cent,
and sheep declined 19 per cent. For the nation, the
number of cattle slaughtered was down approximately
12 per cent, hogs were down about 5 per cent, and
the slaughter rate for lambs was somewhat less than
that of a year ago.
August 1 estimates of corn production in the district
states are up slightly from the very good crop of 1957.
Soybean production is expected to be up substantially
and cotton production is expected to be somewhat
higher. Latest official estimates of the Kentucky
tobacco crop indicate that it may be down about 2 per
cent from the relatively small 1957 crop.
PRODUCTION ESTIMATES FOR MAJOR CROPS
IN THE EIGHTH DISTRICT STATES— 1958
COMPARED WITH 1957 PRODUCTION
Soybeans
(million bu.)
1957
1958
production est.
Arkansas . . . .. 32.5
.. 126.8
. . . 53.0
..
2.7
Mississippi ..
11.7
Tennessee

.. ..

1 Farm real estate values estimated as of March 1, 1958.

4.2

. . 266.1

42.9
140.0
55.0
2.9
14.8
37.5
5.1
298.2

Corn
(million bu.)
1957
1958
production est.

Cotton
(thousand bales)
1957
production

1958
est.

13.9
529.7
262.6
64.7
37.6
151.1
45.2

13.9
550.8
262.6
65.0
43.3
140.5
52.1

981

1,040

1,081
179
415

1,040
285
405

1,104.8

1,128.2

2,656

2,770

SELECTED FOREIGN DEVELOPMENTS
(Continued from page 113)

little change. The total number of unemployed
dropped during 1957 by about 130 thousand. Un­
employment remained relatively low throughout the
first six months of 1958, and was comparable to the
1957 level.
Wholesale prices in Japan in 1957 showed a gen­
erally downward trend. The wholesale price level in
December was the lowest since August 1956, and ap­




proximately 3 per cent below the December 1956
index. Consumer prices, however, continued to rise
throughout the first 10 months of 1957, although at a
modest rate. The general consumer index increased
by approximately 3.3 per cent during 1957, although
a rather sharp drop was experienced during Novem­
ber and December. Wholesale prices continued to
decline throughout the first six months of 1958, while
the cost of living remained more or less stable.
Page 115

VARIOUS INDICATORS OF INDUSTRIAL ACTIVITY
Steel Ingot Rate, St. Louis area (Operating rate, per cent of capacity)..........................
Coal Production Index— 8th Dist. (Seasonally adjusted, 19 47 -4 9 = 1 0 0 )......................
Crude Oil Production— 8th Dist. (Daily average in thousands of bbls.)........................
Freight Interchanges RRs— St. Louis (Thousands of cars— 25 railroads— Termi­
nal 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).............

*Dtitnic£
TZecond

July
1958
81
68.3 p
374.7
82.0
74.2
212.4
77

July 1958*
compared with
June 1958
July 1957
— 11%
-0 -%
— 27
— 10
—
0—
+21
—
—
—
—

2
13
5
6

— 18
-— 25
+ 5
+ 4

* Percentage change is shown in each case. Figures for the steel ingot rate, Southern hardwood rate and the coal
production index show the relative percentage change in production, not the change in index points or in percents of
capacity.

p— Preliminary.

BANK DEBITS1
July
1958
(In
millions)

July 1958
compared with
June
July
1958
1957

Six Largest Centers:
East St. L o u is National Stock Yards,
11
1................................ $ 151.8
189.5
Evansville, Ind..........
218.3
Little Rock, Ark........
877.1
Louisville, Ky..............
727.4
Memphis, Tenn..........
2,394.9
St. Louis, Mo..............
Total— Six Largest
Centers................... $4,559.0
Other Reporting Centers:

— 3%
+ 11
+ 7
+ 3
— 5
— 1
-o -%

—
—
+
—
—
—

2%
4
3
6
5
6

— 6%
- 0- %
— 3
_ 2
+ 4
+ 2
+ 7
— 11
+ 5
+ 21
+ 2
+ 72
— 1
— 1
+ 8
+ 4
+ 8

Alton, 111
....................... $ 40.8
17.8
Cape Girardeau, Mo.
32.1
El Dorado, Ark............
62.5
Fort Smith, Ark............
28.1
Greenville, Miss..........
13.1
Hannibal, Mo...............
8.3
Helena, Ark................
26.5
Jackson, Tenn..............
135.9
Jefferson City, Mo. . . .
48.0
Owensboro, Ky............
32.2
Paducah, Ky.................
42.7
Pine Bluff, Ark............
44.3
Quincy, 1 ...................
11
17.9
Sedalia, M o..................
106.4
Springfield, Mo............
24.4
Texarkana, Ark............

— 8%
+ 9
+ 6
+ 8
+ 3
+ 9
— 3
— 2
+ 57
— 2
— 2
+ 7
— 1
+ 4
+ 4
+ U

Total— Other
Centers................... $ 681.0

+ 10%

+

+

— 4%

$5,240.0

1%

6%

INDEX OF BANK DEBITS— 22 Centers
Seasonally Adjusted (1947-1949=100)
1958
1957
July
June
July
l m 6 16^9 R
18616
R— Revised
1 Debits to demand deposit accounts of individuals,
partnerships and corporations and states and political
subdivisions.
2 Percentage comparison to a year ago not strictly
comparable due to an increase in the number of re­
porting banks.

EIGHTH DISTRICT WEEKLY REPORTING MEMBER BANKS
(In millions of dollars)
Principal Changes
Change
in Commercial and Industrial Loans2
from
Net Change During
Aug. 20, July 23,
4 Weeks Ended
Assets
1958
1958
Business of Borrower
Aug. 20, 1958
Loans1....................................... $1,584 $ + 30
Manufacturing and Mining:
774
+ 23
Business and Agricultural. .
Food, liquor and tobacco.............$ 4 “ 2
Security................................
87
— 1
Textiles, apparel and leather. . . .
-|- 1
270
Real Estate..........................
— 1
Metals and metal products...........
— 1
Other (largely consumer). .
480
+ 9
Petroleum, coal,
1,090
+ 19
U.S. Gov’t. Securities.........
chemicals and rubber...............
—
0—
246
Other Securities....................
— 5
Other..............................................
— 2
16
— 11
Loans to Banks...................
Cash Assets............................
895
— 1
Trade Concerns:
— 3
41
Other Assets..........................
Wholesale. . . .
+ 4
$3,872 $ + 29
Retail.............
-0Liabilities and Capital
Commodity dealers............................ + 1 4
Demand Deposits of Banks . $ 742 $ + 25
+ 4
Sales finance companies...................
Other Demand Deposits. . . .
2,086
+ 16
Public Utilities (including
Time Deposits........................
670
- 0transportation)..............................
— 1
Borrowings and Other L iab..
65
Construction.......................................
—
0—
— 13
Total Capital Accounts.........
309
All Other............................................
+ 6
+ 1
Total Liab. and Capital.
3,872 $ + 29
Total........................................... $ + 27
1 Loans are adjusted to exclude loans to banks; the total is reported net; breakdowns are reported
gross.
2 Changes in business loans by industry classification from a sample of banks holding roughly 90%
of the total commercial and industrial loans outstanding at Eighth District weekly reporting member
banks.

CASH FARM INCOME
Percentage Change
Jan. thru June
June'58
1958
(In thousands
June
from
compared with
of dollars)
1958 June’57 p 1957p 1956
Arkansas.........$ 29,992 + 1®% + 8 % — 15%
Illinois............. 152,745 + 2 9 l
+ 4
+ 14
Indiana...........
74,914 + 1 7
+ 12
+ 7
___ 7 ___^
Kentucky.........
30,568 + 17
Mississippi. . . . 28,806 + 6 — 11
+11
85,410 + 5 !
Missouri.........
+ 9
+ 7
_ 3
Tennessee . . .
28,192 + 9 (
+ 3
7 States......... 430,627 + 1 5
+ 5
+ 6
8th District1 . 184,042 + 9
-.
- 0+ 4
Source:
State data from USDA estimates.
Eighth District share based on 1954 Census of
Agriculture.

CONSTRUCTION CONTRACTS AWARDED
IN EIGHTH FEDERAL RESERVE DISTRICT *
(Value of contracts in thousands of dollars)
June
1958
Total...............$174,387
Residential. . . 57,526
Nonresidential 47,303
Public Works
and Utilities 69,558

May
1958

June
1957

$190,138
70,711
62,777

$111,818
45,295
44,026

56,650

22,321

* Based upon reports by F. W. Dodge Corpo­
ration.

DEPARTMENT STORES
Percentage of Accounts
and Notes Receivable
Outstanding June 30, ’ 58,
collected during July.

Net Sales
July, 1958
7 mos. ’58
compared with
to same
July,*58 July,’57 period ’57
8th F.R. District Total
Quincy, 111
.........................
Evansville Area, Ind..........
Louisville Area, Ky., Ind.
Louisville (City)...........
Paducah, Ky.......................
St. Louis Area, Mo., 1 1
1.
St. Louis (City) ..........
Springfield Area, Mo.........
Memphis Area, Tenn. . . .
All Other Cities2...........

—
+
+
—
_
—
+
—
—
—
—
+
—

4%
2
10
8
4
1
1
8
12
10
2
18
4

_o~%
— 4
+ 2
— 1
— 10
— 1
— 3
+ 7
- 0_ 2
— 7
+ 6
— 9

— 4%
— 5
- 0- 0— 19
— 4
_ 6
+ 4
— 2
— 5
— 5
— 5
— 10

Instl.
Accounts

Excluding
Instalment
Accounts

16%

52%
40
29

16

40

16

62

12

37

1 In order to permit publication of figures for this city (or area), a special sample
has been constructed which is not confined exclusively to department stores. Figures
for any such nondepartment stores, however, are not used in computing the district
percentage changes or in computing department store indexes.
2 Fayetteville, Pine Bluff, Arkansas; Harrisburg, Mt. Vernon, Illinois; Vincennes,
Indiana; Danville, Hopkinsville, Mayfield, Owensboro, Kentucky; Chillicothe, Mis­
souri; Greenville, Mississippi; and Jackson, Tennessee.
Outstanding orders of reporting stores at the end of July, 1958, were five per cent
lower than on the corresponding date a year ago.




INDEXES OF SALES AND STOCKS— 8TH DISTRICT
July
1958
114
Sales (daily average), seasonally adjusted3. . .139
n.a.

June
1958
124
133
138
149

May
1958
137
136
140
140

July
1957
114
139
142
153

n.a. Not available.
3 Daily average 19 47-49= 100
4 End of Month average 1947-49= 100
Trading days: July, 1958— 26; June, 1958— 25; July, 1957— 26.
RETAIL FURNITURE STORES
Net Sales
July, 1958
*
compared with
June, ’58
July, *57
8th Dist. Total1 .................................................................
+9%
— 6%
St. Louis Area...................................................................
+14
— 7
Louisville Area......................................... ........................
— 7
-— 8
Memphis Area...................................................................
+ 7
+13
Little Rock Area.................................................................
-— 2
— 8
Springfield Area.................................................................
+14
— 7
1 In addition to the following cities, shown separately in the table, the total
includes stores in Blytheville, Fort Smith, Pine Bluff, Arkansas; Owensboro,
Kentucky; Greenwood, Mississippi; Evansville, Indiana; and Cape Girardeau,
Missouri.
Note: Figures shown are preliminary and subject to revision.