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R-770 3 4 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM STATEMENT FOR THE PRESS For release in morning papers, Friday, January 17, 194-1 The following summary of general business and financial conditions in the United States, based upon statistics for December and the first half of January, will appear in the February issue of the Federal Reserve Bulletin and in the monthly reviews of the Federal Reserve Banks. Industrial activity continued at a high rate in December and the first half of January and distribution of commodites to consumers was maintained in large volume. There was some increase in wholesale commodity prices. Production Volume of industrial production showed little change from November to December, although usually there is a decline at this season, and consequently the Board's adjusted index rose further by four points to 136 per cent of the 1935-39 average. Steel ingot production was sustained at about 96 per cent of capacity. New orders for steel continued large, according to trade reports, and were equal to or slightly greater than productionJ consequently the volume of unfilled orders remained at about the peak level reached in November. In the first half of January steel output increased to around 98 per cent of capacity. Activity in the machinery, aircraft, and shipbuilding industries continued to increase sharply and working forces were expanded further. In these lines and in some others, such as wool textiles, unfilled orders are exceptionally large, owing in the main to the defense program. Automobile production declined somevrhat more than seasonally in December following an unusually large volume of output in November and October. Retail sales of new cars during the last quarter of 194-0 were about one-fourth greater than in the corresponding period last year and used oar sales also were large. In the nonferrous metals industries activity increased further in December and output of lumber and cement showed less thah the usual seasonal decline. Textile production, which in November had exceeded the previous record levels reached a year ago, continued at this high rate in December, not showing the usual seasonal decrease. At cotton and rayon mills, ac- tivity increased somewhat farther and at wool textile mills output was sustained at peak rates. In tne shoe industry, where output had been in reduced volume during the first ten months of the year, there was less than the usual seasonal decline in November and December and, on a seasonally adjusted basis, production was close to earlier peak levels. At mines bituminous coal production declined less than seasonally and anthracite production increased. Output of crude petroleum showed a reduction in December owing mainly to the fact that wells in Texas were closed for ten days as compared with nine days in November. Output of metals continued in large volume. Value of construction contract awards, as reported by the F. W. Dodge Corporation, increased contraseasonally in December, reflecting further sharp increases in awards for defense construction and private -3- nonresidential building. R-770 Contracts for private residential building declined ty somewhat less than the usual seasonal amount. Distribution Distribution of commodities to consumers increased more than seasonally in December. Department and variety store sales showed the customary sharp expansion during the Christmas season and sales at mail order houses rose more than is usual at this time of year. Freight-car loadings showed a seasonal decline from November to December. Shipments of forest products and miscellaneous freight de creased less than seasonally, while ore loadings, which had been unusually large in November, declined sharply. Wholesale commodity prices Basic commodity prices generally increased from the middle of December to the Kiddle of January, following little change during the preceding four weeks. Currently these prices are substantially above the level prevailing last summer. Increases in the past month were most marked for foodstuffs, especially hogs, pork, lard, and cottonseed oil, but there were advances also in a number of industrial materials, particularly pig iron, cotton, cotton goods, paint materials, and hides Steel scrap prices, after increasing during most of the period, subsequently declined and lumber prices also decreased somewhat from the sharply advanced peak reached in November. Bank credit Total loans and investments at reporting member banks in 101 leading cities continued to increase substantially during the six weeks -4- R-770 ending January 8, reflecting principally increases in holdings of United States Government obligations at New York City banks. Commercial loans rose somewhat further while loans to New York security brokers and dealers, which had increased in December, subsequently declined somewhat. Excess reserves, after declining during the first half of December, have since increased to about $6,900,000,0001 The increase reflected reductions in Treasury deposits with the Reserve Banks, a continued inflow of gold, and since Christmas a seasonal return flow of currency from circulation. United States Government security prices Prices of United States Government securities reacted somewhat after reaching record high levels early in December. Bonds of 1960-65 showed on January 3 a net decline of about 2 3/8 points from the all-time peak of December 10 but subsequently fluctuated somewhat above this level. The yield on this issue, which was 2.03 per cent at the peak in prices, was 2.16 per cent on January 14..
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