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44 R-691 BO.AHD OF GOVFllJ\lOHS OF TilE FEDERAL RESERVE SYSTEM Statement for the Press For rr.dease in morning papers, Monday, August 19, 1940. Volume of industrial output The followLng summary of general business and financial conditions in the United States, based upon statistics for July and the first half of August, will appear in the September issue of t,he Federal Reserve Bulletin anci in the monthly reviews of the Federal Reserve Banks. WiiS steady during July and the first half of August, after a rapid expansion in May and June. ment continued to increase. Employ- Reflecting mainly awards for national de- fense projects, construction contracts rose to the highest level in ten years. Prices of basic cormnodi.ties declined somewhat further. Production In July the Board's revised index of industrial production stood at 121 per cent of the 1935-39 averag-e, according to :)reliminar.f data. This is the same as in June and 17 points above the level prevailing a year ago before the outbreak of war. In rnost lines activity was main- tained at the levels reached in June or increased .further. Steel production in JuLy was at about 85 per cent of capacity and in the fir.st half of August there was an increase to about 90 per cent. Production of pig iron and coke and output of nonferrous metals Nere also in large volume. In the machinery, shipbuilding, and aircraft industries, where new orders had been large during tht:: first half of the 45 R-691 -2- year and a considerable backlog of unfilled orders h3.d accumulated, activity was maintained at high levels in July, although ordinarily there are declines at this season. LUJTl]Jer production declined sharply early in July but has subsequently increased accompanying a considerable rise in new orders. In the automobile incl.ustry output declined sharply in <July and the first half of Auguct as plants were closed to prepare for the shi"ft to new model production. The decline was greater than at this season in other recent years, reflecting the fact that production had been at high levels during the first half of 1940 and large stocks had accumulated. These stocks were reduced considerably in July as production was curtailed and retail sales continued large. Textile pro(~uctioll increased considerably further in <July, re- flecting chiefly a marked rise in activity at woolen mills where output is still below the levels of a ~"ear textiles was maintained in July and ago. VJes Production of cotton and rayon in larger volume than last sum- mer, while activity at silk mills increased somewhat from the exceptionally low level reached in June. Shoe production increased seasonally, while output of manufactured foods, iYhich in June had been unusually large for that time of year, showed less than the customary increase in July. Coal production has risen further and shipments of iron ore down the Lakes have continued at near-capacity rates. Petroleum produc- tion has been curtailed sharply, however, reflecting partly a continued high level of stocks of petroleum products. 46 R-691 -3- Value of new construction work undertaken increased sharply in July, owing mainly to a further rise in p..;blic construction, and was at the highest level in the past decade, according to reports of the F. VV. Dodge Corporation and the Federal Reserve Banlc of San Francisco. Awards for both residential and nonresidential private building increased somewhat, although some decline is usual at this season. Increases were most pronounced .in the Atlantic, Gulf, and Pacific Coast States, reflecting awards of additional contracts for naval air station and shipyard construction. In the central portions of the country there were generally small increases, although in some areas awards w·ere lower. Distribution Distribution of commodities to consumers was sustained in July at about the levels prevailing in the first half of the year. Sales at department stores declined more than s easonal}.y, while sales at variety stores showed little ch::mge, although a decline is usual in July. Total freight-car loa.dings increased seasonally in July. Ship- ments of grain showed a considerable rise ru1d loadings of coal cmd coke continued to advance, while shipments of miscellaneous freight, which include most manufactured products, declined by soraer<hat more than the usual seasonal amount. ~odity Drices Prices of basic cormnodi ties declined somewhat further from the middle of July to the middle of August, with decreases chiefly in prices of comrnodities influenced by foreign supplies, such as lead, rubber, cocoa, .. ' R-691 and coffee. Prices of steel scrap and zinc, on the other hand, advanced somewhat in this period. Agriculture Prospects for most crops showed little change in July, according to the Department of Agric11lture. Production this year is expected to ap- proximate the 1929-38 average and, considering carryovers, supplies of most crops will be large. Conditions for wheat and oats improved during July, while the corn crop showed some deterioration. A cotton crop of 11,429,000 bales was indicated for this season as compared with 11,817,000 bales last season. Bank credit Total loans and investments at reporting member banks in 101 leading cities increased substantially during the five weeks ending August 14, owing rne.inly to purchases of direct and guaranteed securities newly issued by the United States Government. Sale of these securities caused a large increase in Treasury balances with the Federal Reserve Banks. As a result of this temporary developnl.ent, excess reserves declined LJ $450,000,000 in this period despite an increase of over $500,000,000 in monetary gold stock. Government securiti( market Prices of United States Gover~ment securities were relatively steady during July and the early part of August but declined slightly around the middle of August accompanying news of intensification of European warfare. The yield on the 1960-65 bonds increased to 2.39 per cent on August 14 compared with 2.34 per cent on July l and 2.26 per cent on April 2 at the year's peak in prices.
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