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MONTHLY REVIEW OF B U S IN E S S C O N D IT IO N S ISAAC B. NEW TO N , Chairman of the Board and Federal Reserve Agent Federal Reserve Bank of San Francisco San Francisco, California, September 20,1929 Vol. X I I I No. 9 S U M M A R Y O F N A T IO N A L C O N D IT IO N S Prepared by the Federal Reserve Board Production in basic industries increased somewhat in August as compared with July, but the increase was less than is usual at this season. A s a result, the Federal Reserve Board’s index of industrial production, which makes allowance for seasonal changes, showed a de cline. W holesale prices declined slightly. Credit extended by member banks increased between the middle of August and the middle of Sep tember, reflecting chiefly a growth in commer cial loans. Production. During the month of August there was a reduction in the output of iron and steel and copper, and a slight decline in the production of automobiles. Meat packing estab lishments were also somewhat less active dur ing the month, while seasonal increases were reported in the production of textiles, shoes, coal, cement, flour, and sugar. Petroleum out put continued to expand. A slight increase in the number of workers employed in factories was accompanied by a substantial increase in payrolls. This increase was especially notable in industries manufacturing products for the autumn retail trade, such as clothing and fur niture. For the first two weeks of September reports indicate a further decline in steel operations ; a reduction in lumber output, resulting in part from the Labor Day holiday; and a continued PER CENT seasonal rise in coal production. In the con struction industry contracts awarded in August were 25 per cent less than in July, reflecting a sharp decline in the residential group, as well as in contracts for public works and utilities which were unusually large in July. As com pared with last year, contracts were five per cent lower in August, but in the first two weeks of September they were in approximately the same volume as in 1928. The September report of the Department of Agriculture indicates a corn crop of 2,456,000,000 bushels, which is 13 per cent less than in 1928 arid 11 per cent under the five-year aver age. The estimated wheat crop of 786,000,000 bushels is substantially below last year, but only slightly less than the five-year average. Cotton production, estimated on August 1 at 15.543.000 bales, is now expected to total 14.825.000 bales, or slightly more than last year. Distribution. Freight carloadings increased seasonally in August as a consequence of larger shipments of all classes of freight except grains, which moved in smaller volume than in July when shipments of wheat were unusually large. In comparison with 1928, total carloadings showed an increase of five per cent. Sales of department stores in leading cities were larger than in July and about five per cent above the total of August, 1928. PER ; CENT M 1 S C E L U \N E O U S / A 120k 'w/ . ~ w ----------- A r 7' 100 W¥ w5 Index number of production of manufactures and minerals, combined, adjusted lor seasonal variations (1923-1925 average = 100). Latest figure, August, 123. r ~ ..... TO T A L IQOR IN D U S T R IA L P R O D U C T IO N r» # ...w R A IL R O A D F R E I G H T -C A R L O A D I N G S C a rs o f revenue freight loaded as reported by the A m erican Railw ay A s so cia tio n . In d ex num bers adjusted for seasonal variations, (1923-1925 average — 100). Latest figures, A u gust, total 109, m iscellaneous, 113. Septem ber, 1929 M O N T H L Y REVIEW OF BUSINESS CONDITIONS 66 Prices. W holesale prices showed a slight downward movement in August, according to the index of the United States Bureau of Labor Statistics. This reflected chiefly declines in the prices of farm products, especially grains and flour, and livestock and meats. W oolens and worsteds also decreased in price, while silk and rayon materials were higher. There were declines in prices of iron and steel and M IL L IO N S O F B IL L IO N S DOLLARS 10 2000i-------------1-------------1---------- 1500 Security loans also increased, while investments continued to decline. During the first half of September the volume of reserve bank credit outstanding was about 120 million dollars larger than in the middle of the year. The increase was for the most part in the reserve banks’ acceptance holdings and reflected chiefly growth in the demand for cur rency, partly seasonal in character. Discounts OF TOTAL RESERVE B A N K C R E D IT D O LLARS ■ -j r ................... A l_ L O T H E R !1 L O A N JS 1 ................... l o a iNS ON S E C U R IT 1000 ,E S 500 IN V E S T M E N T S 1926 1925 1927 1926 1929 R E S E R V E B A N K C R E D IT M on th ly averages of daily figures fo r 12 F ederal R eserve Banks. Latest figures are averages o f first 22 days in Septem ber. automobiles, and further decreases in prices of petroleum and its products, especially gasoline. Coal prices advanced during the month. In the middle of September the prices of grains, beef, raw sugar, silk, and coal were higher than at the end of August, while prices of hogs, pork and cotton were somewhat lower. Bank Credit. Between the middle of August and the middle of September there was a fur ther rapid increase in loans for commercial and agricultural purposes at member banks in lead- 1927 1928 1929 M E M B E R B A N K C R E D IT M o n th ly averages o f w eek ly figures for reporting m em ber banks in leading cities. Latest figures are averages o f first three w eek s in Septem ber. for member banks, follow ing the increase over the holiday period early in September, declined at the time of the Treasury financial operations around the middle of the month, and on Sep tember 18 were at a lower level than at any time since last June. Open market rates on prime commercial paper increased from a range of 6-6% to a prevailing level of 6% during the first week in September, while acceptance rates remained unchanged. T W E L F T H F E D E R A L R E S E R V E D IS T R IC T C O N D IT IO N S The high level of business activity reached during July was generally maintained during August. The position of agriculture did not change materially during the month. Harvesting has proceeded rapidly under favorable weather con ditions, and relatively satisfactory prices are being received by growers for most farm prod ucts. A shortage of rainfall during the past spring and summer has harmed the District’s livestock ranges and has accelerated marketing of cattle and sheep. Retail sales in August exceeded those of July by a slightly smaller amount than usual, while wholesale trade increased more than seasonally during the month. Sales at both wholesale and retail were above the levels of August, 1928. Carloadings on the District’s railroads increased during August but were fewer in number than a year ago. The volume of waterborne trade passing to and from this District through the Panama Canal increased, largely as a result of increased eastbound shipments of refined petro leum products. Industrial production was at higher levels during August, 1929, than in either July, 1929, or August, 1928, and this sustained activity was reflected in a generally improved employment situation. Petroleum output in August exceeded that of July. Lumber production, as is custom ary during this month, increased substantially. There was little fundamental change in the banking situation during August and the first half of September, changes in member bank and Reserve Bank credit in use being largely seasonal in nature. Since April of this year member bank loans for commercial purposes have been higher than in any preceding similar period. They expanded seasonally during the past month to the highest figure of record. Security loans of these banks have also been higher this year than at any previous time and during early September they were not far below the record level reached in mid-summer. In creases in bills discounted and in holdings of purchased acceptances at the Reserve Bank have accompanied expansion in loans of mem ber banks. Septem ber, 1929 FEDERAL RESERVE AG EN T AT SAN FRANCISCO Agriculture The dry weather which has prevailed during much of the 1929 agricultural season, continued throughout August and early September. A l though this exceptional lack of rainfall has fa vored harvesting activities, it has had an adverse effect upon the growth of late maturing grain and field crops, the fall planting of wheat, and the growth of forage on winter livestock ranges. Crop production forecasts of the United States Department of Agriculture have gener ally been upheld by available estimates of har vest returns, which make it appear certain that the aggregate crop yield will be smaller than last year. Prices of many crops raised in the District have increased slightly during recent wfeeks, and farm products prices generally are at higher levels than one year ago. A m ong the grains, smaller crops of wheat and barley and a larger crop of oats are being har vested this year than in 1928. Smaller yields per acre as well as decreases in the acreage har vested have caused the decline in production of wheat and barley. G R A IN C R O P S -P R O D U C T IO N A N D A C R E A G E ,--------- A c r e a g e --------- > --------- P rodu ction--------- \ A v a ila b le H a rfo r H arvest vested F o re ca st 1928 July 1,1929 1928 Sept. 1,1929 W in t e r W h e a t 3,710 3,422 73,819 87,655 T w e lft h D is t r ic t . . 36,179 578,000 39,885 U n ite d S tates . 568,233 S p r in g W h e a t* 1,850 35,399 38,091 2,026 T w e lfth D is t r ic t . . 14,834 231,015 15,514 U n ite d States 164,461 B a rle y 41,629 46,413 1,320 1,410 T w e lft h D is t r ic t . . 12,539 U n ite d States 304,143 356,667 13,595 O a ts 867 914 T w e lfth D is t r ic t . . 36,842 35,480 U n ite d States . . . . 1,204,987 1,448,677 40,222 41,733 * O th e r than D u r u m w heat. S o u r c e : U n ite d S tates D e p a r tm e n t o f A g r ic u ltu r e . Marketing of wheat, as indicated by carlot receipts and export shipments at Pacific Coast terminals, has been more active this year than last. Carlot receipts of wheat at terminals in the Pacific Northwest during the 1929 crop sea son to September 10 were 11 per cent larger than during the same period in 1928. During July and August, 1929, wheat exports from Puget Sound and Columbia River ports totaled 4,607,285 bushels, as compared with 4,008,489 bushels exported during the same tw o months a year ago. Export movement of barley from San Francisco during July and August totaled 3,021,855 bushels. There were 4,013,242 bushels of barley exported during these same two months in 1928. During August there were few changes in the estimates of deciduous fruit production in the District. Marketing of most fresh deciduous fruits, excepting apples and grapes, has been completed, and yields have, in nearly all cases, been lower this year than last. A marked in crease in fresh fruit prices as compared with a year ago, however, has increased returns for this year’s short crops and has greatly benefited those individual producers who secured normal yields. 67 Marketing of California grapes increased in v ol ume during the month, but the season’s ship ments, up to September9, totaled only 7,226 car loads as compared with 13,039 carloads shipped during the corresponding period in 1928. Estimates of this year’s production of field crops, excepting beans and cotton, show reduced yields as compared with a year ago. F IE L D C R O P S — P R O D U C T IO N (in thousands) F orecast 1928 Sept. 1,1929 B e a n s— D r y ( b u .) 5,901 6,515 C a lifo rn ia , I d a h o . ........................... 16,630 U n ite d S tates C o t t o n (b a le s ) 321 A r iz o n a , C a lifo rn ia 14,478 U n it e d States H o p s ( lb s .) 32,742 C a lifo rn ia , O r e g o n , W a s h in g t o n 32,139 32,742 ........................... 32,139 U n ite d States P o t a t o e s ( b u .) 47,107 39,014 T w e lft h D is t r ic t . ........................... 464,483 .......................... 349,112 U n ite d S tates R ic e ( b u .) 8,073 4,788 C a lifo rn ia .............. ........................... 41,881 ........................... 35,285 U n ite d S tates S u g a r B e e ts ( t o n s ) 1,578 1,543 C a lifo rn ia , I d a h o , U t a h .............. 7,101 .......................... 7,865 U n ite d States T a m e H a y (to n s ) 14,568 13,876 T w e lft h D is t r ic t . ........................... 92,983 93,600 U n ite d S tates . . . . ........................... S ou rce : 1927 6,531 16,891 182 12,955 29,794 29,794 55,756 406,964 8,960 40,231 1,534 7,753 15,312 106,001 U n ite d S ta te s D e p a r tm e n t o f A g r ic u ltu r e . Citrus fruit crops in California are now in poorer condition than were the crops of one year ago. The reported condition of the 19291930 Navel orange crop was 58 per cent of nor mal on September 1, a figure well below that of most recent years. The condition of the forth com ing lemon crop was 62 per cent of normal on September 1 as compared wiith 86 per cent of normal a year ago. Shipments of the 1929 Valencia orange crop from California during the months of June, July, and August totaled 20,768 carloads, the heaviest shipments ever recorded for these three months. The movement of lemons from Cali fornia amounted to 5,843 carloads during the same period, a somewhat larger figure than the 5,140 carloads reported shipped during June, July, and August, 1928. Despite the large ship ments of oranges during August, average prices (f.o.b. California) increased 27 per cent during the month. The average price of lemons at Cali fornia shipping points increased 43 per cent during the month. The adverse effects of this year’s scant rain fall have been most obvious, perhaps, on the livestock ranges of the District. Recently there has been some improvement in range conditions in Arizona and Utah, as a result of seasonal rains, but in California and the Pacific North west a condition of semi-drought has persisted. Livestock, thus far, have been maintained in relatively good condition, but stock recently marketed have tended to be under-weight, a re flection of the continued scarcity of range feed. Early and generous rains are also needed on this District’s winter ranges if they are to supply an adequate amount of winter feed, a consideration of importance since the 1929 hay crop combined 68 S eptem ber, 1929 M O N T H L Y REVIEW OF BUSINESS CONDITIONS with the small carryover from the 1928 crop will furnish a smaller supply of supplementary feed than was available a year ago. The autumn movement of livestock from the District’s ranges to market and feed-lots is now under way. During August 505,038 head of sheep and 76,305 head of cattle and calves were received at the eight principal stockyards as compared with 439,732 head of sheep and 83,438 head of cattle and calves received at these mar kets in August, 1928. Industry Industry in the Tw elfth District continued active at high levels during August, 1929. Petro leum, lumber, and flour were produced in large volume. Stocks of these commodities increased substantially as compared with July and were larger than at the end of August, 1928. The mining industry, while operating at a slower pace than earlier in the year, retained a large number of workers on improvement and expan sion programs. Miscellaneous manufacturing industries, such as those engaged in making automobile tires, wearing apparel, airplanes, furniture, and motion pictures were active. E vi dence of a high rate of industrial output is also found in reports of full employment of labor in most parts of the District. The volume of build ing and construction in the District was less than a year ago, as was the number of live stock slaughtered. Production of petroleum in California during August was slightly in excess of the record established in July and, even though refineries were exceptionally active, stocks of crude oil increased sharply. Daily average output de creased during the last week of August as com pared with the earlier weeks of the month, largely because of a decline in production from the two deep zones at the Santa Fe Springs field, but increased again during the first week ( A ) Employment— t ---------C a liforn ia ----------<» Industries S to n e , C la y and f N o . of N o. N o . r - E m ployees of of A u g ., A u g ., Firm s 1929 1928 Firm s 147 . 665 166,900 161,995 (3.0) - O re g o n ............. N o. of E m ploy ees —\ A u g ., A u g ., 1929 1928 28,826 29,275 (-1 .5 ) 122 255 6,147 4 5,996 (2 .5 ) (-- 5 2 .2 ) 16,258 16,636 51 23,717 24,955 M a n u fa c tu r e s (2 .3 ) ( — 5.0) 2,356 1,930 10 1,941 1,883 . 15 T e x t ile s ( 2 2 .1 ) (3 .1 ) y 500 488 6,970 6,566 9* 49 (6 .2 ) (2 .5 ) F o o d , B e v e ra g e s 4,852 42 3,628 and T o b a c c o . . . 141 42,326 46,765 ( — 9 .5 ) (- —2 5 .2 ) W a t e r , L ig h t an d 3,914 4 4,076 P o w e r ............... ( — 4 .0 ) 78,872 69,617 298 ( 1 3 .3 ) 3,013 5,584 5,492 2,137 31 . 13 M is c e lla n e o u s (4 1 .0 ) (1 .7 ) ^ L a u n d e r in g o n ly , f l n c l u d e s th e f o llo w in g in d u s t r ie s ; m etals, m a c h in e r y a n d c o n v e y a n c e s ; leath er an d r u b b e r g o o d s ; c h e m ic a ls, o ils a n d p a in ts, p r in t in g and p a p e r g o o d s . . 41 I . 104 Figures in parentheses indicate percentage changes August, 1928. of September. California’s new natural gas con servation law did not becom e operative until August 31, and it may be some weeks, at least, before its effect upon the production of oil be comes apparent. M ost of the petroleum pro duced in California is refined in that state and exports of crude oil are, therefore, relatively much less important than are exports of refined oils. During the first eight months of 1929 crude oil exports from the Pacific Coast were but three per cent of crude oil production, while the ratios of exports to production of all refined oils and of gasoline alone were 31 and 47 per cent re spectively. The moderate curtailment in production of lumber during July proved to be a temporary movement and output increased more than sea sonally during August, reaching a level well above that of August, 1928. Both shipments and sales of lumber declined further during August and stocks at the end of the month were larger than at the end of July, 1929, or August, 1928. This Bank’s seasonally adjusted quarterly index of the value of building permits issued in twenty large cities of the District, declined dur ing the three months ending August 31 and was lower than for the same quarter a year ago. In partial contrast with this record, an index of the value of building permits issued in seventy smaller cities of the District advanced during August, 1929, and was higher than in July, 1929, or August, 1928. Total value of engineering and construction contracts awarded in the states of the District during August was smaller than a year ago, but their value, exclusive of commer cial and industrial buildings, was larger than in either the preceding month of this year or the corresponding month of last year. Although output of the D istrict’s copper mines showed a further slight decline during August, stocks of the metal increased. Demand for copper became more active during the month, however, and reached record levels in the week ending September 4. W hile output of (B ) Industry— Indexes of daily average production, adjusted for seasonal variations (1923-1925 daily average = 100) 1928 r~------ — 1929- ■ — June Aug. A u g . July M a n u fa c t u r e s : 120 105 107 , 132 F lo u r ......................................................... 88 81 89 , 84 S la u g h te r o f L i v e s t o c k ................... 106 110 103 110 L u m b e r ..................................................... 161 190 213 . 215 R e fin e d M in e ra l O ils * ..................... 121 90 96 , 100 C e m e n t ..................................................... 80 75 86 W o o l C o n s u m p tio n .......................... M in e r a ls : P e tr o le u m (C a lifo r n ia ) * ................. C o p p e r (U n it e d S t a t e s ) ! ............ L e a d (U n it e d S t a t e s ) ! ..................... S ilv e r (U n it e d S t a t e s ) ! ................. G e n e r a l: C a rlo a d in g s — In d u s tr ia l ................ V a lu e o f B u ild in g P e r m its ? T w e n t y L a r g e r C i t i e s ............... S e v e n ty S m a lle r C itie s ............ V a lu e o f E n g in e e r in g C o n tr a c ts A w arded? T o t a l ................................................ ______ E x c lu d in g B u ild in g s ............ 91 131 122 120 88 126 125 112 96 95 115 108 87 . 116 . 133 . 119 . 118 120 113 63 97 68 95 64 96 77 85 . 131 . 150 149 127 121 101 136 128 . . * N o t a d ju s te d f o r se a s o n a l v a r ia tio n . !P r e p a r e d b y F e d e ra l R e s e r v e B o a rd . J ln d e x e s are f o r th r e e m o n th s e n d in g o n th e m o n th in d ica te d . Septem ber, 1929 FEDERAL RESERVE AG EN T A T SAN FRANCISCO copper has been declining during the past few months, a number of the larger mines of the District have been expanding or improving their production facilities. This new construction has provided work for a part of the labor released as a result of reduced operating schedules. Reports from flour millers indicate that pro duction of flour increased more than seasonally during August, and was larger than a year ago. Export demand was light, but domestic demand was active and millers found it desirable to replenish their stocks both of flour and of mill ing wheat. Trade Trading activity increased by approximately the seasonal amount during August and was greater than a year ago. W aterborne inter coastal and foreign commerce was larger in volume than in the previous month or in the same month of 1928. Carloadings on the D is trict’s railroads increased more than seasonally, but were fewer in number than in August, 1928. Sales at wholesale were much larger than in July and increased moderately as compared with last year. The increase in retail sales dur ing August was not quite so large as is ordi narily recorded in that month. This Bank’s seasonally adjusted index of sales at retail declined during August but was above the figure for August, 1928. Total sales of 148 department, apparel, and furniture stores were two per cent larger than a year ago, the most important increases being recorded in Arizona and western W ashington. The record of collec tions compared favorably with that of a year a£ °* R ETAIL T R A D E —Twelfth District ,---------NET SALES*---------* Jan.lto Aug. 31,1929 Aug., 1929 compared compared with Jan.1 to with Aug. 31,1928 Aug., 1928 2.7 ( 67) 2.0 ( 70) D e p a r tm e n t S t o r e s f . . 2.1 ( 29) — 1.3 ( 31) 3.9 ( 47) 3.7 ( 43) F u rn itu r e S t o r e s .......... 2.8 (139) A ll S t o r e s ........................ 2.0 (148) STOCK* Aug., 1929 compared with Aug., 1928 — 2.2 ( 54) 2.1 ( 20) — 2.8 ( 26) — 1.9 (100) * P e r c e n t a g e in c re a se o r d e c r e a s e ( — ) . F ig u r e s in p a re n th e se s in d ic a te n u m b e r o f sto r e s r e p o r tin g , f l n c l u d e s d r y g o o d s stores. Total sales o f 241 wholesale firms increased more than seasonally during the month and were three per cent larger than during August, 1928. Six of the lines upon which this Bank receives data showed increases and four showed decreases over the year period. Sales of new automobiles in the District as evidenced by registrations of new passenger cars and trucks, declined more than seasonally during August but continued in relatively large volume. Total railroad carloadings in the District in creased somewhat more than is usual during August, but were smaller than in the same month a year ago. The increase as compared with last month was the result of large ship ments of logs in the lumbering areas, and of a heavier movement of grain. Loadings of fruit 69 were far below those of last year, a fact largely accounted for by the smaller crops being har vested this year. The seasonally adjusted index of merchandise and miscellaneous freight car loadings was lower than in August, 1928, but remained unchanged from July, 1929. The increase in the District’s intercoastal trade during August, as indicated by tonnage passing through the Panama Canal, was almost entirely due to heavier shipments of refined petroleum products to the Atlantic Coast. Eastbound shipments of lumber decreased substantially as compared with both July, 1929, and August, 1928, while the amount of general cargo shipped from Pacific to A t lantic Coast ports showted little change from the previous month and was less than a year ago. W estbound shipments were substantially larger than in August, 1928, but decreased as compared with July, 1929, chiefly because of the smaller shipments of iron and steel products in the later month. Foreign trade of the District during the first six months of 1929 was substantially larger in volume than during the first six months of 1928. The amount of both imports and exports in creased over the year period, with imports showing much the larger increase. Preliminary figures for July indicate a continuation of the trends established during the second quarter of the year, namely, a sharp increase in imports and a gradual decline in exports. Prices Changes in wholesale prices were not so marked during August as in June and July. A downward price tendency persisted throughout the month but the rate of decline was moderate. (C) Distribution and Trade— /-------------- 1929------------- ^ 1928 A ug. July June A ug. F o r e ig n T r a d e # /----------- In dex N um bers*------------ > T o t a l f ................... ............................................................... 134 131 Im p o r ts ! ............................................................ •• 118 98 E x p o r t s ................................................................. .. 145 148 I n te r co a s ta l T r a d e # T o ta l ............................................................ 100 93 89 88 W e s t b o u n d ................................................ 150 140 131 121 E a s tb o u n d ................................................ 86 81 77 79 C a rlo a d in g s ? T o ta l ............................................................ 117 116 118 120 M e rch a n d is e a n d M is c e l la n e o u s ... 115 115 116 122 W h o le s a le T r a d e 0 Sales ............................................................ R eta il T r a d e A u to m o b ile S a le s? T o ta l ........................................................ P a ss e n g e r C a r s .................................. C o m m e rcia l V e h ic le s ...................... D e p a rtm e n t S tore S a les? ....................................................... S to c k s § .................................................. 109 100 101 106 149 145 191 155 153 176 132 130 147 115 115 121 123 106 125 104 122 105 1210 107 t-----------A ctual Figures ------------- v S t o c k Turnover|| ............................. C o lle ctio n s !! R e g u la r ............................................. ______ I n s t a l l m e n t ....................................... .27 .23 .24 .26 45.1 15.7 45.5 15.1 48.8 13.4 44.5 16.9 * A d ju s t e d f o r s e a so n a l v a r ia tio n s, 1923-1925 a v e r a g e = 1 0 0 . f E x c lu d in g ra w silk. ? D a ily a v e ra g e . ° M o n t h ly to ta ls o f ten lin es c o m b in e d . § A t end o f m o n th . ||P r o p o r t io n o f a v e ra g e s to c k s s o ld d u r in g m o n th . flP er ce n t o f c o lle c t io n s d u r in g m o n th t o a m o u n t o u ts ta n d in g a t first o f m o n th . # I n d e x e s are fo r th re e m o n th s e n d in g o n m o n th in d ica te d . ^ R e vise d . 70 m onth ly r e v ie w OF During- the first week in September, most in dexes indicated a slight rise in the general price level. W holesale prices at the end of August were substantially above the average for June, 1929, although below1the levels of July of this year and of August, 1928. W heat prices at Pacific Coast grain ex changes declined during early August, but have been fairly steady since that time. An active demand for the moderate supply of hay avail able has brought about a substantial rise in the price of that commodity. Small reductions in livestock quotations have been reported during the past month and prices for hides, which had been advancing until the first week in Septem ber, have recently shown some weakness. Prices paid growers for deciduous fruits for canning purposes have continued well above those of last year and prices of dried fruits have had a further rise. Citrus fruit prices were higher in August than in July, quotations for both or anges and lemons showing considerable ad vances. During the past few months orange prices have been below those of 1928 but, in view of the large crop of small-sized fruit pro duced this year, they have not been unsatisfac tory. Increases in stocks of crude petroleum and of refined petroleum products have been accom panied by reduced prices for these commodities in other parts of the United States, but few im portant declines in oil or gasoline prices have taken place in California markets since early this year. Apparently effective control of cop per output has helped to maintain the price of (D) Bank Debits*— August, 1928 August, 1929 Arizona ..........$ P h o e n ix 39,565 $ 30,187 (— First Eight Months*— 1928 1929 $ 347,732 California 13,452 B a k ers field . . . 22,143 B e r k e l e y .......... 36,165 F r e s n o ............ 62,168 L on g B ea ch . . L o s A n g e l e s . . 1,235,288 241,130 O a k la n d .......... 33,958 P a sa d e n a . . . . 56,898 S a c r a m e n to . . 11,080 S an B e r n a rd in o 63,643 S an D ie g o . . . S a n F r a n c i s c o . 1,451,450 34,617 San J o s e . . . . 16,002 S a n ta B a rb a r a S tock ton .... 29,889 12,257 22,245 34,017 54,310 961,522 223,510 33,834 50,664 9,902 57,213 1,298,210 29,655 14,229 28,083 $ 272,596 112,302 169,990 254,892 513,404 9,773,478 1,932,799 334,829 408,072 91,480 521,499 10,972,800 234,977 135.314 227,884 112,202 175,051 262,372 437,045 8,436,008 1,970,876 326,780 390,440 85,576 506,011 12,289,604 222,874 111,178 234,858 Idaho ............... 16,532 15,871 119,297 116,861 ................. 13,213 11,150 101,780 76,492 E u g e n e ............ P o r t la n d .... 8,326 209,376 7,656 184,648 62,604 59,086 1,396,762 21,459 86,431 20,467 73,216 145,835 645,456 139,041 584,973 11,503 14,317 965 291,958 59,662 53,677 14,273 10,181 13,911 1,491 244,080 56,248 47,418 13,653 85.311 114,489 7,040 2,154,787 481,362 404,522 109,144 80,626 108,258 7,864 1,948,502 448,390 363,398 101,813 B o is e Nevada R en o Oregon 1,5 35 ,576 t Utah O g d e n ............... S a lt L a k e C ity Washington B e llin g h a m . . . E v e r e t t ............ R itz v ille ......... S e a ttle ............ S p o k a n e .......... T a com a .......... Y a k im a ............ ______ T o t a l ............ $4,149,140 $3,559,828 $ 3 1 ,9 9 8 ,6 5 5 t $31,265,537 * I n th o u sa n d s o f d o lla rs , f ln c l u d e s $7,584,000 at fo u r b a n k s n o t r e p o r t in g p r io r to w eek en d ed M a y 2, 1928. b u s in e s s S eptem ber, 1929 c o n d it io n s that metal at or slightly above 18 cents per pound (Connecticut Valley points). Prices for lumber produced in this District have not de clined appreciably during the past month. Credit Situation Although an adequate supply of credit has been continuously available to meet the early autumn needs of the District, there has been enough of strain in the situation to encourage caution in member banks’ use of funds and to keep interest rates above the level of recent years. During the five-week period from August 14 to September 18, there was little change in the credit situation. Notwithstanding a decline in their commercial deposits, reflecting large transfers of funds out of the District and an increased demand for currency within the District, banks met the local demand for credit by increasing their loan accounts. In this they were assisted by an increase in their Govern ment deposits (grow ing out of the September 16 Treasury financing), but they also increased their borrowings at the Federal Reserve Bank of San Francisco. R EPORTING M E M B ER B A N K S— Twelfth District (In millions of dollars) ' T o t a l L o a n s and I n v e s t m e n t s . . . T o t a l L o a n s ......................................... C o m m e r c ia l L o a n s .......................... L o a n s o n S e c u r i t i e s ........................ I n v e s tm e n ts ......................................... N e t D e m a n d D e p o s it s ................. T im e D e p o s it s .................................. B o r r o w in g s fro m F e d e ra l R e s e r v e — Condition------------- ----- \ Sept. 18, Sept.ll, Aug. 14, Sept.19, 1928 1929 1929 1929 1,962 1,373 946 427 589 774 955 1,945 1,364 943 421 581 783 964 1,940 1,352 934 418 588 781 960 1,874 1,247 881 366 627 800 932 74 70 54 82 Between mid-August and mid-September, total loans of city member banks increased 21 million dollars, 12 million dollars of the increase being in commercial loans and nine million dol lars in security loans. Despite relatively large purchases of the Government’s September 16 offering of Certificates of Indebtedness (the banks of the District were allotted 39 million dollars of this offerin g ), investments of report ing banks increased only one million dollars during the period under review, a rise of two million dollars in holdings of Government se curities offsetting a decline of one million dol lars in other security holdings. As a result of their purchases of Government paper, Govern ment deposits held by the reporting member banks increased from nothing on September 11 to 23 million dollars on September 18 (see page 72 of this R eview ). Net demand deposits of these banks declined seven million dollars and their time deposits declined five million dollars during the five weeks ending September 18. The amount of credit outstanding at the Federal Reserve Bank of San Francisco de clined slightly during August but increased sharply during the first three weeks of Sep tember. On September 18, total bill and Septem ber, 1929 FEDERAL RESERVE AG EN T AT SAN FRANCISCO security holdings of the Reserve Bank were 27 million dollars larger than on August 14 and 36 million dollars larger than on August 28. Rediscounts showed a net increase of 13 million dollars during the five-w'eek period and of 27 million dollars during the three-week period, increased borrowings of city member banks more than offsetting a decline in the amount of paper discounted for country members. There was little change in the Reserve Bank holdings of United States Government securities, but its purchases of acceptances (chiefly through the System Open Market Investment Committee in the New York market) increased by IS mil lion dollars. F ED ER AL RESERVE BANK OF SAN FRA NC ISCO (In millions of dollars) ------------- — ------- Condition Sept. 18, Sept. 11, Aug. 14, Sept. 19, 1928 1929 1929 1929 T o t a l B ills an d S e c u r i t i e s . . . . B ills B o u g h t .................................. U n ite d States S e c u r it ie s ............ T o t a l R e s e r v e s ............................. T o t a l D e p o s i t s ............................... F ed era l R e s e r v e N o te s in C ir c u la tio n .................................. R a tio o f P r im a r y R e se r v e s to C o m b in e d D e p o s it and N o te 119 81 25 13 265 184 112 76 22 14 281 187 92 68 10 13 285 182 181 184 174 72.6 75.6 79.9 * 142 87 36 19 339 192 171 65.8 During the first two weeks of September, there was a marked increase in the District's demand for currency, chiefly due to holiday requirements. A t the same time, banks were called upon to transfer a relatively large amount of funds to New York and to sustain losses to other reserve districts through check clearing transactions. In addition to increases in Gov ernment deposits and borrowings from the Re serve Bank, assistance in meeting this demand for funds was provided by the addition in this District of three and one-half million dollars to the country’s stock of monetary gold and by an excess of Treasury expenditures over collec tions within the District amounting to nine and one-half million dollars. Increases in Federal reserve note circula tion and losses of funds to other districts through the Federal Reserve System Gold Set tlement Fund have brought about a decline in the Federal Reserve Bank of San Francisco’s reserve ratio from 86.3 on July 17 to 72.6 on September 18. The relationship between such losses (or gains) of funds and the ratio of primary reserves to combined deposit and note liability of this Bank is shown in the chart at the foot of the page. Gains accruing to this Bank through the Gold Settlement Fund ordinarily cause an increase in its reserve ratio and, conversely, losses cause a decrease. In last month’s Review, the relationship existing be tween borrowings of city member banks and transfer of funds through the Gold Settlement Fund (adjusted for inter-reserve bank trans fers) was indicated. The relationship was in verse— as funds moved out of the District, banks increased their borrowings, and as funds moved into the District, borrowings were reduced. W hen member banks borrow for the purpose of transferring funds to other districts, they do not, as a rule, merely receive a deposit credit on the books of the Reserve Bank against which a 35 per cent reserve of gold or lawful money must be maintained. Instead they withdraw, in gold, the greater part of the amount borrowed, thus reducing the reserves of the Reserve Bank. This lowers the reserve ratio, since the pertinent lia bilities of the Reserve Bank (deposits and Fed eral reserve note circulation) are unchanged by the transaction. Similarly, when banks im port funds into this District there is not, ordi narily, a proportionate increase either in de posits at the Reserve Bank or in Federal reserve note circulation, and the reserve ratio rises. RESERVE RATIO A N D GOLD SETTLEM EN TS Changes (gains or loses) in the Federal Reserve Bank of San Francisco’ s holdings of gold in the Federal Reserve System’ s Gold Settlement Fund, compared with changes in the Bank’ s reserve ratio (weekly figures). 71 72 M O N T H L Y REVIEW OF BUSINESS CONDITIONS S o m e A sp e cts o f G o v e rn m e n t F in a n c in g a n d The United States Treasury recently invited subscriptions from banks and individuals to an issue of $500,000,000 of tax-exempt 4% per cent Certificates of Indebtedness, dated Septem ber 16, 1929, and maturing June 16, 1930. F ol lowing the usual procedure when such offer ings are made by the Treasury, the Federal reserve banks, as fiscal agents of the United States, were authorized to receive subscriptions to and to make allotments of this issue as directed by the Secretary of the Treasury. The Federal Reserve Bank, as Fiscal Agent of the United States, acts as an intermediary between the Treasury and subscribing banks and individuals (w ho usually subscribe through a bank) in placing Government securities, col lecting subscription payments, and disbursing the interest borne by the securities issued. W hen a bank subscribes to and receives an al lotment of an issue of Government securities, it pays for them with a deposit credit, on its books, in the name of the Federal Reserve Bank of San Francisco as fiscal agent of the United States. The subscribing bank does not have to maintain a reserve against this Govern ment deposit (the deposit is secured by placing approved collateral of like amount with the Reserve Bank) and, therefore, its subscription involves no immediate outlay of funds. In its simplest form, the transaction results in an increase in the deposits and in the Government security holdings of the subscribing bank, by the amount of its allotment. Study of the weekly condition reports of member banks in the Tw elfth District, however, reveals that, when the Treasury has borrowed funds in this way during recent years, reporting member bank investments in Government securities have increased only slightly, although their Government deposits have always increased by nearly the full amount of their subscription S eptem ber, 1929 th e C r e d it S it u a t io n allotments. This indicates that the banks quickly dispose of a large part of their allot ments, either to customers whose purchases they handle or in the open market. If these sales be made locally, the immediate effect on the District credit situation is a reduction in the volume of commercial deposits and a con sequent reduction of reserve requirements and release of relatively small amounts of reserve funds. W hen, however, securities are sold out side the District the local effect is considerably greater, because such sales are reflected in in ter-district settlements which make an equiva lent amount of reserve funds available to banks in the District. The deposit credits, by means of which the banks pay the Government for the securities allotted to them, are only gradually utilized by the Treasurer. A fter the allotment of securities has been completed, the Treasurer, through the Reserve Bank, makes a series of calls for actual payment, the amount and timing of these calls depending upon the financial needs of the G ov ernment. The payments are attended by imme diate changes in the condition statements of subscribing banks. Their Government deposits are reduced, of course, and as a result of their need for funds to make the payment demanded, there may be a reduction in their investment holdings or their loan accounts, their cash or reserve balances may be reduced, or they may increase their borrowings at the Reserve Bank or at other banks. The accompanying chart shows how the Gov ernment deposits of the District’s banks are rapidly built up at mid-March, June, Septem ber, and December, when most short term G ov ernment securities are issued, and how these deposits are gradually reduced as the Treasury calls for actual payment on security subscrip tions. G O V E R N M E N T D E P O S I T S - T w e l f t h D istrict A m ou n ts due the U nited States G o vern m en t’ s fiscal agency account from all d ep ository ban ks (w eek ly figu res).
@FedFRASER