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BUSINESS CONDITIONS -Ul [KS^I S^JSS^SS^ «qg^ sgggg ss«o k'xvcec^ seSSS •SS3 Bswasss® _-^4*> .ssris'iiij: t. \>.\Vvi\\vdJ \\\vw vwvvv^J mm »i •^x<ivvvv^v «\V\' ««x%W».v»v»v.-< 1 ^W»xA\ ■• ■•■*.• inin t Wr. um-M SJ»V^T- ' I [SiyivtVviMBw 3 [XU s» 3^0 SSI mm SSSfSWl ^\v,v-.xU «W- IPS EMIT: lllS Volume 21, No. 9 OTM sas^sai sagas September 29,1938 Prepared by the Research and Statistics Department of the Federal Reserve Bank of Chicago Monthly Review of Business C onditions in the Seventh Federal Reserve District * DISTRICT SUMMARY UCH more definite and numerous indications of ex panding activity in Seventh district industry and trade have made their appearance. Nevertheless, with few excep tions, volumes continue to be much below those of a year ago, although the first evidences of a recession were manifesting themselves at that time. Among the noticeably favorable factors in the current situation is that employment and pay rolls are rising. The outlook is for abundant crops this year. M Industry Agricultural Products AT packing houses, creameries, and Wisconsin cheese fac tories, production was heavy during August. Sales tonnages of meat products and of butter increased over those of the preceding month and last August, but cheese distribu tion failed to hold up. On September 1, stocks of butter and of cheese were at record high levels, although purchases by Government agencies maintained butter prices. The move ment of grains at interior primary markets has been rel atively heavy. Feed crop prospects this year are above the 1927-36 average; the outlook for vegetables is excellent in this district. HE majority of important manufacturing industries in this district increased their output in August, consider Trade ably so in several instances. The automobile industry fur nished an exception to the upward trend, as manufacturers OST reporting wholesale trade groups had heavier sales in August than in July, and there were even a few closed their plants preparatory to the introduction of new gains recorded over last August. Department store trade in models. Steel mills of the Chicago area are gradually ex panding their operations, and August output from steel and the district expanded more than seasonally and totaled only malleable casting foundries and from stove and furnace fac 10 per cent below that of a year ago when, however, there tories rose sharply over the preceding month. There was a was one less trading day in the period; through the first decided increase in building construction during the month, half of September sales were running likewise 10 per cent according to data on contracts awarded, and the movement under those of last year. August sales in the retail shoe and of building materials consequently was accelerated. With furniture trades gained as is usual for the month but were orders booked increasing counterseasonally, August ship still well below the 1937 level. ments of district furniture manufacturers gained much more Credit than is usual for the period. New business of paper mills expanded further in August, and activity showed improve HERE was a moderate increase in reserve balances of ment in relation to a year ago. Seventh district member banks between August 17 and September 14, although in the following week a declining Reflecting the higher level of production, the aggregate number of workers employed in Seventh district industries trend was operative. Total loans and investments of weekly increased slightly in the current reporting period, despite reporting member banks rose somewhat in the four-week sharp curtailment at automobile factories, and payrolls ex period; demand deposits in these banks showed a rather panded noticeably. substantial increase. T M T Credit and Finance Member Bank Reserves Open Market Paper TATISTICS for August on bankers’ acceptances in the S Seventh district were rather unfavorable after showing some improvement in July. The three main indicators of ESERVE balances of Seventh district member banks increased 49 million dollars during the four-week activity in the field, new financing through bankers’ ac period ended September 14. The district gained 25 millionsceptances, liability for outstandings, and bank holdings of from the rest of the country through commercial and finan bills, all declined from the corresponding July figures, al cial transactions, and Treasury disbursements exceeded re though an increase is normally expected during August in ceipts by 29 millions. Partially counteracting these fac each case. All margins of decline from the 1937 figures tors was a 6 million dollar increase in currency circulation, widened over those prevailing in July, as was the case in reflecting the usual seasonal influences. comparisons with the 1928-37 averages where the percentage decreases approximated 80 per cent. New financing during Interest Rates the first fifteen days of September amounted to only three NTEREST rates charged by reporting banks in Chicago, fifths of the volume in the first half of August, according to both downtown and outlying, and by the large Detroit preliminary reports from the large Chicago banks, and to banks showed no appreciable changes between August 15 about two fifths of that in the corresponding period a and the middle of September. Recording the sixth successive year ago. Sales of commercial paper during August, reported by month-to-month increase, the average rate earned on total loans and discounts by the large downtown Chicago banks Middle Western dealers, declined less than seasonally from exceeded the corresponding July average by a small margin, July, while outstandings on August 31 rose more than is and was above that for August 1937. The average for sev usual over the end of July, the latter item recording the eral major banks in Detroit also ran above the July figure first increase in the monthly comparison since last Febru and, for the first time since this bank originally had com ary. Both sales and outstandings totaled much lower than parable figures last December, exceeded the year-ago a year ago and the corresponding 1928-37 averages. Never theless, the percentage declines were all smaller than in a average. R I similar comparison for July. Rates continued easy and the supply of paper restricted; demand from banks fell olf somewhat, especially from institutions in the larger cities. Commercial paper sales in September, up to the fifteenth of the month, were slightly above those in the first half of August, though aggregating moderately below the volume in the same period of 1937. Selected Seventh District Banking Data * * * FEDERAL RESERVE BANK OF CHICAGO, SELECTED ITEMS OF CONDITION (Amounts in millions) Securities Markets 1VFOST of the interest in the Middle Western bond market in August and early September centered around the new issue phase. New corporate issues in August were in the highest volume of any recent month and also well above the total for August 1937. Most of them, however, were refundings of the highest grade. One or two issues of slightly less conservative character were accorded a com paratively indifferent reception, indicating that the market has been making some very fine distinctions. Institutions continued as the largest buyers of bonds. Municipal emis sions remained in low volume, contrary to the corporate experience, which scarcity factor offers a possible explana tion of the price strength in this field, while some weak ness was noticed in corporate quotations, especially among the lower grades. The predominant factor in the market today seems to be the fact that most buyers of bonds are investing other people’s money and, through resultant cau tion as well as because of various legal restrictions, are unwilling to assume the risks inherent in purchases of any but the highest grades of securities. The $100,000,000 issue of 91-day Treasury bills dated September 21 sold at an average discount yielding .106 per cent, higher than has been the case for the past few months. Cash subscriptions to the new issues dated Sep tember 15, $400,000,000 of 2y2 per cent bonds and $300, 000,000 of 1 Yg per cent notes, ran far in excess of the allotment. The II4 per cent notes maturing December 15 were exchangeable for either of the new issues, but almost all exchanges were for the bonds. The Chicago Journal of Commerce average of 20 Chicago stocks established a new 1938 high of $46.16 on August 25, but fell off somewhat in September, standing at $42.19 on September 21. Agricultural Products Crop Conditions Sept. 14 1938 $ 280 0 0 279 2,078 1,311 53 961 Total bills and securities............................................. . Bills discounted............................................................ . Bills bought................................................................... . U. S. Government securities..................................... . Total reserves................................................................ . Member bank reserve deposits.................................. . All other deposits......................................................... . Federal Reserve notes in circulation........................ . Ratio of total reserves to deposit and Federal Reserve note liabilities combined___ . 89.3% Change from August 17 Sept. 15 1937 1938 $ 0 $ 0 0 0 0 0 0 —3 +302 +49 +312 —52 +3 +4 —14 —0.2* +1.5* •Number of Points. * * * CONDITION OF REPORTING MEMBER BANKS SEVENTH DISTRICT (Amounts in millions) Sept. 14 1938 $3,879 833 472 33 34 79 93 3 119 1.347 Assets Loans and investments—total..................................... Loans—total..................................................................... Commercial, industrial, and agricultural loans....... Open-market paper......................................................... Loans to brokers and dealers in securities................ Other loans for purchasing or carrying securities. . . Real estate loans............................................................ Loans to banks................................................................ Other loans....................................................................... U. S. Government direct obligations......................... Obligations fully guaranteed by U. S. Government...................................................... Other securities............................................................... Liabilities Demand deposits—adjusted*....................................... Time deposits.................................................................. Borrowings....................................................................... Change from August 17 Sept. 15 1938 1937 $-209 $+14 +3 —229 —2 —182 —1 —22 —26 +3 0 —16 0 +9 —1 —2 +4 +10 —5 —88 237 462 +13 +3 +49 +59 2,303 878 0 +74 +4 0 +33 +12 0 •The annual velocity of demand deposits (unadjusted) in the four weeks ended September 14 was 17.57 times, as compared with 17.51 times in the preceding four weeks and with 21.86 times in the corresponding period of 1937. VOLUME OF PAYMENT BY CHECK, SEVENTH DISTRICT (Amounts in millions) Chicago.................................................... Detroit..................................................... Milwaukee............................................... Indianapolis............................................. ....................... ....................... ....................... ....................... August 1938 $2,518 644 226 174 Per Cent of Increase or Decrease from July August 1938 1937 —2.2 —13.7 —0.9 —30.9 -4.7 —14.0 —10.6 —5.3 HE present outlook is for an abundance of low-priced Total four larger cities.......................... ....................... $3,562 —2.6 —17.1 659 —4.4 —14.2 grain and roughage this year in the Seventh Federal 37 smaller cities...................................... ....................... Reserve district to fatten the considerably increased supplyTotal 41 centers...................................... ....................... $4,221 —2.9 —16.6 of hogs and beef cattle over 1937 and to maintain a large volume of dairy products. Not only are feed crop pros • • • pects above the 1927-36 average production, but there is also a liberal carry-over of corn and oats from last season and an TRANSIT OPERATIONS OF THE FEDERAL RESERVE BANK almost unprecedented continuance of the luxurious pastur OF CHICAGO AND DETROIT BRANCH age through late summer into early autumn. With a promise (Exclusive of Treasury checks and of non-transit items drawn on own bank) of moderately high yields in the relatively large hybridAugust 1938 August 1937 acreage more than offsetting deterioration along the Mis Total country and city check clearings: Pieces.................................................... 11,051,878 10,490,616 souri River and in a few other dry areas, Seventh district Amount................................................. $1,843,045,564 $2,073,647,125 average clearings: corn prospects increased 23 million bushels during August Daily Total items cleared— and thereby more than counteracted some further loss in Pieces.................................................... 409,329 403,485 Amount................................................. $68,260,947 $79,755,659 oats. The progress and condition of corn showed consid Items drawn on Chicago— Pieces..................................................... 71,909 67,386 erable variation among fields and localities but averaged Amount................................................. $36,440,000 $41,665,000 fair to very good on September 20. On lowlands, there was Items drawn on Detroit— Pieces.................................................... 18,188 17,991 some damage to corn because of floods. More than three Amount................................................. $6,315,885 $8,911,533 T Page 2 * fourths of the corn was out of frost danger and most of the crop was expected to reach full maturity by early October. Rains and lack of sunshine in September tended to fill out ears on the latest varieties but to delay their maturity be yond the average frost date. Silo filling continued on Sep tember 20. Although there was some rotting on the heaviest soil, prospects for late potatoes were generally very good. The outlook for other vegetables was excellent. However, frost on September 19 killed tender garden truck in many areas and stopped corn growth in some localities. Plowing and preparation of seed beds for winter wheat had made rather slow progress because of excessive rainfall in many localities and the dry and cloddy condition of the soil in a few other areas. inaugurated its policy of export subsidies to alleviate heavy domestic supplies. United States visible stocks of wheat have continued to increase but are still below the 1928-37 average. Corn and Oats ECEIPTS and shipments of corn at interior primary - markets in the United States declined more than sea sonally in August and the first half of September but remained at relatively high levels. Corn exports continued in fair volume, though lower than in July. Prices held firm throughout most of the second half of August, reflect ing improved foreign demand and some crop deterioration in the western part of the corn belt. With a slackening in export sales and weakness in surrounding markets, prices Grain Marketing declined in the first few days of September, but by mid\Wieat September had advanced to month-earlier levels under the LTHOUGH the movement of wheat at interior primary influence of the firmer wheat market. Visible supplies L markets in the United States declined during August declined about one fourth from mid-August to September 17 from July, receipts were the largest for the month since and stood well below the ten-year average level for the 1930. In the first half of September reshipments held date. The August oats movement showed close to seasonal relatively heavy, but receipts fell off in volume. Activated increases but declined considerably in the first part of Sep by continued burdensome world supplies and severe com tember. Oats prices displayed an independent firmness. petition among exporting nations for world markets, to MOVEMENT OF GRAIN AT INTERIOR PRIMARY MARKETS IN THE ' UNITED STATES gether with a sharp break in the Winnipeg market, wheat (In thousands of bushels) price levels displayed a weakening tendency throughout most August August July August 1928-37 of August and the first part of September. The disturbing 1938 1938 1937 Av. European political news brought erratic price advances in Wheat: Receipts............................................................. 61,670 102,450 61,353 55,401 mid-September; on September 21 quotations for No. 2 hard Shipments.......................................................... 25,044 27,596 25,427 30,916 winter wheat in cash positions at Chicago stood at $.641/2 Corn: Receipts............................................................. 16,636 26,677 7,332 16,730 Shipments.......................................................... 17,694 24,870 4,559 9,983 and $.68, or about 2 to 4 cents higher than prices of two Oats: Receipts............................................................. 24,824 9,982 24,849 21,819 weeks earlier. In the latter part of August the Government R A Shipments.......................................................... CROP PRODUCTION Estimated by the United States Bureau of Agricultural Economics on the Basis of September 1 Condition (In thousands of bushels unless otherwise specified) Seventh District United States Forecast Final Average Forecast Average Final 1938 1937 1927-36 1938 1937 1927-36 Com................... 980,885 1,140,744 812,711 2,454,526 2,644,995 2,306,157 Oats................... 418,087 544,644 443,866 1,034,347 1,146.258 1.042.461 Winter Wheat... 69,796 78,012 54,715 688,458 685,102 546,396 Spring Wheat... 1,834 1,695 3,608 251,514 188,891 206,495 Barley............... 43.628(a) 42.767(a) 48.881(a) 250,360 219,635 234,895 Rye.................... 9.993(a) 13.632(a) 7.221(a) 52,500 49,449 36,454 Buckwheat....... 608(a) 616(a) 919(a) 7,194 6,777 8,569 Flaxseed............ 257(b) 198(b) 293(b) 7,992 13,751 6,974 Potatoes (white) 55,141 51,039 53,249 377,875 393,289 369,693 Potatoes (sweet) l,310(o) 1.280(c) 1.127(e) 80,055 75,393 70,274 Sugar Beets1__ 1.102(d) 549(d) 751(d) 10,823 8,749 8,383 Apples (total crop)............... 14.882(a) 30.403(a) 16.650(a) 132,231 210,673 150,728 3.193(e) Peaches............. 5.258(e) 3.312(e) 52,780 59,724 52,498 Pears.................. 2.400(e) 3.153(e) 1.771(e) 31,779 29,548 24,326 Grapes1.............. 30(a) 87(a) 77(a) 2,521 2,777 2,197 Beans (dry edible)2.......... 4,765(0 4,574(0 3,758(0 14,209 15,839 12,053 Onions*............... 2,709 (a) 2.333(a) 3.100(a) 14,606 14,778 13,638 Market1......... 198(a) 127(a) 138(a) 1,221 1,015 928 Tomatoes for Market........... 1.548(e) 1.348(e) 1.247(e) 25,529 21,593 18,173 Soybeans........... 34.904(e) 32.833(c) 13.564(c) 41.828(g) 38.128(g) 16.410(g) Tobacco5........... 35,052 26,635 33,665 1,470,224 1,553,405 1,325,243 All Tame Hay1. * 19,180 15,360 15,558 81,750 73,785 69,754 490(a) 504(a) 10,490 Wild Hay1......... 523(a) 9,302 9,979 Pecans5............... 133(h) 259(h) 152(h) 50,832(i) 76,893(0 61,274(0 ll*(j) Cranberries *... 84 j) 510) 530(k) 877(k) 562(k) Cotton5.............. 11,825 18,946 13,201 Canning Vegetables: Cabbage for Kraut1. 98(1) 55(1) 57(1) 239 153 155 Green Lima Beans1. 3(f) 2(0 2(0 25 23 14 Snap Beans1.. ......... 25(m) 20 (m) 15(m) 123 105 70 283(a) Sweet Corn1............. 366(a) 496(a) 794 592 979 523(e) 314(e) Tomatoes1.... ......... 320(e) 1,440 1,974 1,386 Hn thousands of tons, *In thousands of 100-lb. bags. 8In thousands of pounds. 4In thousands of barrels. 6In thousands of 500-lb. bales. (a)Five States including Seventh Federal Reserve district. (b)Iowa, Michigan, and Wisconsin. (c)Illinois, Indiana, and Iowa. (d)Michigan. (e)Illinois, Michigan, Indiana, and Iowa. (f)Michigan and Wisconsin. (g)Six States. (h)Illinois. (i)Twelve States. (j)Wisconsin. (k)Five States. (l)Wisconsin, Michigan, Indiana, and Illinois. (m)Indiana, Michigan, and Wisconsin. Movement of 10,711 7,254 8,497 8,192 Livestock ECEIPTS of livestock at public stock yards in the United States recorded sizable increases during August over the July movement, and those of hogs and lambs were slightly above August 1937. The movement to inspected slaughter followed roughly trends in receipts and, except for lambs, both receipts and inspected slaughter of live stock continued below the 1928-37 average for the month. Shipments of livestock to feed lots during August were well over those of July; however, these shipments totaled less than a year ago and for cattle below the 1933-37 average. R Meat Packing LTHOUGH there was a slight decline in the daily average ■ for August, production for the month as a whole at A LIVESTOCK SLAUGHTER (In thousands) Cattle Yards in Seventh District, August 1938............................................ Federally Inspected Slaughter, United States: August 1938............................................ July 1938................................................. August 1937............................................ August 1928-37 average........................ Hogs Sheep Calves .......... 202 443 293 59 ......... ......... ......... .......... 848 820 880 872 2,467 2.254 1,590 2,550 1,603 1,461 1,498 1,470 457 436 538 475 AVERAGE PRICES OF LIVESTOCK (Per hundred pounds at Chicago) Week Ended Months of Sept. 17 Aug. July 1938 1938 1938 Native Beef Steers (average)................ .......... $10.55 $10.35 $10.50 Fat Cows and Heifers............................. ......... 8.10 7.75 8.15 Calves......................................................... ......... 11.00 10.35 9.10 Hogs (bulk of sales)................................. ......... 8.35 7.80 8.60 Lambs........................................................ ......... 7.90 8.40 9.00 Aug. 1937 $14.00 9.00 10.00 11.85 10.75 inspected slaughtering establishments in the United States rose counterseasonally by 4 per cent over July; it was not only 23 per cent heavier than a year ago but within one per cent of the 1928-37 average for the month. Furthermore, the tonnage sold, totaling only 3 per cent under the ten-year aver age, was slightly above current production, 5 per cent larger than in July, and 8 per cent above last August. Payrolls at the close of the period showed respective gains of 3 and 2 per cent in employes and wage payments over a month earlier, but the number of hours worked decreased one per cent. The margin of decline in employment from a year ago was halved during the month; hours worked increased slightly over the 1937 period and wage payments decreased only one per cent. Inventories of packing-house commodities in the United States decreased moderately on September 1 from the beginning of August. Prices weakened markedly from July; total dollar sales billed to domestic and foreign cus tomers declined, therefore, 4 per cent in August from a month earlier and 2 per cent from the 1928-37 August average to a level 13 per cent under a year ago. cheese sales fell off 17 per cent from July, and totaled 14 per cent under last August and 5 per cent below the tenyear average for the period. United States stocks of cheese on September 1 were again at a record high; the volume of 150 million pounds was 37 millions greater than 1933-37 average supplies. As a consequence of this unfavorable statistical position, cheese prices continued weak during August and the first half of September. Industrial Employment Conditions OST reporting industry groups of the Seventh district increased employment and payroll volumes between July and August by appreciable amounts. All of the dur able goods groups, with the exception of vehicles, added workers and had heavier payrolls, the increases in the latter item ranging from 7 per cent for metals to 17 per cent for wood products. In the non-durable goods classification, there were no exceptions to the general expansion, wage pay ments rising by as much as 10 per cent in leather prod Foreign Trade ucts, 13 per cent in the rubber group, and 20 per cent HIPMENTS of packing-house products for export de in the textile industry. The loss within the vehicles group, creased somewhat further in August, principally owing however, though more moderate than in several earlier to a decline in lard forwardings to the United Kingdom. months this year, was sufficient to offset practically all of Following dragginess during most of August, British demand the employment gains contributed by the other manufac for United States lard became slightly more active when turing groups and a considerable portion of the rise in prices at Chicago reached a low level at the close of the payrolls. Non-manufacturing industries also maintained month. English trade in hams was slow during the entire their aggregate employment volume at about the level of a period. Cuban and Porto Rican business remained close to month earlier, while increasing wage payments, the gain in the July level, but there was some improvement in the the latter item being considerably smaller than that con demand from Czechoslovakia and South American republics. tributed by manufacturing groups. The construction in Prices in the United Kingdom and in most of continental dustry and coal mining registered sizable expansion during Europe remained under the Chicago parity; quotations else the current period, while public utilities showed a moderate where were close to the United States basis. Imports of increase and the merchandising group evidenced a slight animal products into the United States increased in August curtailment. The level of employment and payrolls in prac tically all groups, manufacturing and non-manufacturing, over July. remained substantially lower than last year—by 30 per cent Dairy Products in the aggregate number of workers employed and by 38 per ITH feed conditions continuing highly favorable and cent in the total amount of wage payments. milk production at record levels, manufacture of but ter and cheese remained relatively heavy during August. EMPLOYMENT AND EARNINGS—SEVENTH FEDERAL The butter make, as reported by Seventh district firms, was RESERVE DISTRICT 17 per cent larger than in August 1937, one per cent above Change from Week of August 15, 1938 the 1928-37 average for the month, and 7 per cent lower July 15, 1938 than in July. Distribution has been well maintained, August Report Wage Earn Wage Earn sales increasing 10 per cent over July and totaling one fourth ing Earn Industrial Group ings Earn ings Firms (000 greater than last year in the same month or the ten-year ers ers Omitted) August average. Butter production in the United States has No. No. $ % % also continued heavy, the August make declining less than Durable Goods: 1,797 Metals and Products1........... 319,294 8,058 + 0.6 + 6-7 seasonally from July and aggregating well over average 423 Vehicles................................... 164,110 5,208 - 8.1 — 2.1 levels. Bolstered by further heavy purchases by Govern Stone, Clay, and Glass....... 283 18,972 457 + 4.0 -f 9.0 Wood Products...................... 40,134 495 840 + 5.9 +17.1 ment agencies, the price of 92 score creamery butter at 2,998 542,510 14,563 Total........................................ - 1.7 + 4.0 Chicago held at 2514 cents throughout August and the first Non-Dubable Goods: three weeks of September. These purchases aggregated Textiles and Products.......... 397 61,423 1,166 - 6.2 +19.9 117,057 Food and Products............... 1,059 2,866 - 3.3 + 0.2 about 55 million pounds for the month ended September 21. Chemical Products............... 301 33,554 1,017 - 0.4 + 3.3 Leather Products.................. 175 25,205 532 - 4.9 +10.4 Holdings of butter in storage in the United States on Sep Rubber Products................... 35 14,341 370 10.1 +13.3 tember 1 reached a new all-time high of over 201 million Paper and Printing................ 736 71,536 2,001 - 0.7 + 0.7 Total........................................ 2,703 323,116 7,952 + 3.3 + 4.4 pounds; this included 68 million pounds of butter held by Total Mfg., 10 Groups.............. 8,701 865,626 22,515 + 0.1 + 4.1 Government agencies. Though declining seasonally 13 per cent from July, Merchandising*.......................... 5,512 127,957 2,841 - 0.5 — 0.5 Public Utilities.......................... 1,124 98,660 3,277 + 0.2 + 1.4 August production of American cheese in Wisconsin con Coal Mining................................ 34 5,110 116 - 0.4 + 9.2 760 12,054 349 + 7.3 + 6.5 tinued in heavy volume, totaling 22 per cent greater than Construction............................... a year ago and 15 per cent above the 1928-37 August Total Non-Mfg., 4 Groups....... 7,430 243,781 6,583 + 0.1 + 0.9 average. Distribution of the commodity from primary Total, 14 Groups........................ 13,131 1,109,407 29,098 + 0.1 + 3.4 markets in the State, however, failed to hold up; August lOther than Vehicles. ‘Illinois, Indiana, and Wisconsin. S W Page 4 M Manufacturing Iron and Steel Products NCREASED demand from the automotive industry and for construction materials, together with buying from miscellaneous sources, caused steel mill operations in the Chicago district to trend gradually upward from mid-August to mid-September. The rate of steel ingot output at the latter time averaged 42 per cent of capacity, or 6 points higher than four weeks earlier. No great volume of buying has developed, however, and the current rate of production is little better than half that prevailing a year ago when the downward trend in activity was beginning to manifest itself. A rather noticeable increase took place during August in pig iron production of the Illinois and Indiana district, but relatively it continued at a low level. Quota tions for scrap iron and steel at Chicago had not changed through mid-September. I * * * Output from steel and malleable casting foundries of the Seventh district expanded definitely in August. Shipments of steel castings gained 38 per cent in tonnage and 33 per cent in dollar value, while those of malleable castings in creased 25 and 23 per cent, respectively. Production of the former type of castings rose 48 per cent in tonnage volume and that of the latter type 33 per cent. Orders booked by malleable casting foundries continued to show an increase —12 per cent in tonnage and 8 per cent in dollars—but those received by steel casting foundries, following two months of expansion, recorded a decline amounting to 16 per cent in tons and to 21 per cent in value. Although per centage declines from a year ago remained very large, some reduction in their size was noted in all items for steel casting foundries and in shipments and production at malleable casting foundries. * * * Seasonal trends were operative during August in the stove and furnace industry of this district, as shipments, production, and new orders accepted by reporting manu facturers rose substantially over those of the preceding month. The increase in orders booked amounted to 34 per cent, that in shipments to 28 per cent, and in produc tion to 40 per cent. New business totaled slightly better than in the corresponding 1937 month, while shipments and production were less by 23 and 28 per cent, respectively. There was a moderate increase in inventories in the period, but they remained under those of a year ago. Automobile Production and Distribution AS manufacturers completed their 1938 model season, out put of automobiles was curtailed in August to the low point for the year and, because this point was not reached until September in 1937, amounted to less than one fourth the volume of last August. Production of passenger ve hicles numbered 58,624 in the current period, which is 45 per cent below July output and 81 per cent under that of a year ago, while the number of trucks produced aggregated 31,860, or 8 per cent below the volume of the preceding month and 62 per cent under August 1937. Although sales of new automobiles in this district were small in volume during August, dealers’ stocks were lowered sharply further in the period, and at the end of the month were only a little better than one fourth as large as on August 31 last year. Sales of used cars in August showed some falling-off, after having gained slightly in the three preceding months. The number of used cars in dealers’ hands had been reduced by the end of August to a level almost 30 per cent under that of a year ago. DISTRIBUTION OF AUTOMOBILES SEVENTH FEDERAL RESERVE DISTRICT August 1938 Per Cent Change from New Cars: Wholesale— Number Sold........................................ Value...................................... Retail— Number Sold......................................... On Hand End of Month— Number.............................................. Value....................................................... Used Cars: Number Sold......................................... Salable on Hand— Number................................................ Value....................................................... Companies July 1938 August 1937 —55.4 —55 6 —88.4 —86.8 15 15 —24.3 —56.2 —51.3 28 28 —42.1 —44.8 —72.2 —71.7 28 28 — 9.9 —29.1 28 —19.0 —17.2 —28.8 —28.8 28 28 Furniture ONSIDERABLE improvement was noted during August in the furniture industry of the Seventh district. New C orders booked by reporting manufacturers expanded 8 per cent further, contrary to trend for the period, were within 16 per cent of the volume received last August, and slightly exceeded the 1928-37 average for the month. Shipments, though 26 per cent smaller than a year ago, rose 45 per cent, or much more than seasonally, over July and were only 7 per cent lighter than in the ten-year August average. Despite the heavy increase in shipments, they were consid erably less than the volume of incoming orders, so that unfilled orders on hand at the end of August aggregated 12 per cent larger than at the close of the preceding month; their ratio to new business was 108 per cent, as against 128 per cent on August 31, 1937. Production schedules were raised 10 points during August to 63 per cent of capacity, this latter rate being about 20 points under that prevailing in the month last year. Paper and Pulp OME further increase in activity during August was indicated by reports of new orders booked by Seventh Sdistrict paper mills; and all comparisons with 1937 levels continued to become more favorable, largely because of de clining business among paper plants in August 1937. Little change was shown during August in tonnage production of either paper or pulp. PAPER AND PULP INDUSTRY SEVENTH DISTRICT August 1938 Per Cent of Increase or Decrease from July August Paper: 1938 1937 New orders booked (tons).................................................................... +9.9 +23.1 New orders booked (dollars)............................................................... +10.5 +5.8 Total shipments (tons)......................................................................... — 8.7 +1.9 Total shipments (dollars)................................................................... — 4.1 — 3.4 Total production (tons)....................................................................... — 0.4 +0.5 Stocks on hand at end of month (tons)........................................... + 6.3 +20.7 Pulp: Pulp produced (tons)............................................................................... +1.8 —10.0 Stock on hand at end of month (tons) ........................................... —11.8 +12.3 Petroleum Refining UNS of crude oil to stills during August in the Indiana, Illinois, and Kentucky area averaged a little better than the 450,000 barrels daily recorded for July, on a Bureau Mines basis, and totaled only slightly lower than in the corresponding period of 1937. The operating rate, after reaching 92 per cent of capacity in the week of August 13, had declined to 82 per cent by September 3, but recovered to 86 per cent in the week of September 10. Stocks of finished and unfinished gasoline in the area on September 3 showed a reduction of 10 per cent from four weeks previous. R The Building Industry fair during the month, and outstanding accounts of lumber dealers declined in ratio to total sales to a level lower than either a month or a year previous. While stocks of cement remained heavier than in 1937, those of lumber ofshowed some indication of a slight diminishing. Wholesale prices of building materials in general showed little change during the current period, continuing at a level approx imately 7 per cent lower than in the same period of 1937. LUMBER AND BUILDING MATERIALS TRADE August 1938 Per Cent Change from Class of Trade Number of Yards July 1938 August 1937 +15.4 +13.0 — 0.4 —26.6 —32.3 —33.5 Wholesale Lumber: Construction Retail Building Materials: was a definite expansion during August in the volume of contracts awarded in the Seventh district, not only for residential building but for all other types of con Accounts Outstanding1............................ struction. Residential building exceeded the corresponding 1937 volume for the second time this year and public works projects continued as previously on a considerably larger scale than last year. Non-residential building and utilities, Retail Trade................................................. on the other hand, while rising even more sharply over the ’End of Month. preceding month than did the other classifications, remained at a low level as compared with a year ago. here T 8 6 8 159 — 4.5 +22.9 77 +15.5 —10.6 90 + 5.4 +19.5 157 + 5.4 —10.9 Ratio of Accounts Outstanding1 to Total Dollar Sales during Month August 1938 July 1938 August 1937 143.3 234.0 166.1 273.3 158.2 250.1 Merchandising BUILDING CONTBACTS AWARDED* SEVENTH FEDERAL RESERVE DISTRICT Period August 1938..................................................................... Change from July 1938.............................................. Change from August 1937.......................................... First eight months of 1938........................................... Change from same period of 1937............................ •Data furnished by F. W. Dodge Corporation. Wholesale Trade Total Contracts Residential Contracts $49,792,000 +22.8% +11.5% $295,584,000 -17.4% $15,007,000 +10.0% +61.9% $82,951,000 -16.3 % Permits issued during August in 101 cities of the district gave indications of a well sustained volume of building activity, the estimated cost of the projects contemplated be ing practically as large as in July, which month, in turn, was slightly above June. The number of permits issued in August totaled 12 per cent more than in July, reflecting a lower average cost per unit. This trend towards lower-cost projects has been especially marked in the yearly com parison which for the current month showed an increase of 5 per cent in the number of permits issued, while the estimated cost was 22 per cent lower. The rising importance of residential building in the construction field accounts largely for these changes. Materials OST wholesale trade groups in the Seventh district reporting monthly figures to the United States Depart ment of Commerce had heavier sales in August than a month previous, the total for all such groups showing a gain of 5 per cent during the period. An exception to the upward trend was noted in groceries where sales recorded a decline of 6 per cent from July to August. In a few instances, among them groceries and tobacco and its products, small increases took place over the corresponding 1937 volumes. Although stocks on August 31 rose slightly in the aggregate over the end of July, they totaled about one fifth lighter than on the same date a year ago, decreases in the electrical goods and hardware groups being especially large. M WHOLESALE TRADE IN AUGUST 1938* Per Cent Change from Same Month Last Year Commodity Net Sales Stocks Accounts Outstanding Collections — 3.7 — 6.8 Groceries.......................... + 2.1 — 8.4 —25.5 Hardware........................ —20.8 —26.9 —15.4 + 6.3 — 6.5 — 7.0 — 0.7 Drugs................................ —30.1 —35.4 Electrical Goods........... —30.1 —22.4 — 3.8 Tobacco and Its Products — 4.2 — 4.8 + 3.4 Miscellaneous.................. —20.8 — 4.0 - 0 3 -16.7 •Data furnished by Bureau of Foreign and Domestic Commerce, United States Department of Commerce. HE increasing volume of building activity in this dis trict was reflected in a heavier demand for building materials during August than in the preceding month, sales in most lines rising by more than the customary per Retail Trade centage amounts. Lumber sales, which in general register EVENTH district department store sales expanded some little change at this time of the year at either wholesale or what better than seasonally in August over July, retail, expanded in both phases of distribution by 15 per cent, and board-foot sales at retail exceeded the level of increasing 18 per cent in the comparison. They were within a year ago for the first time so far in 1938. Cement ship 10 per cent of those in August 1937 when the dollar volume ments and brick deliveries, on the basis of returns received sold failed to gain as much as usual for the period and to date, somewhat more than recovered from the temporary when there was one less trading day in the month. Through setback of a month earlier, though remaining at a level the first half of September sales were running likewise 10 considerably under last year. Collections were reported as per cent behind those of the corresponding year-ago weeks. T S Page 6 A creased less than is usual—6 per cent—in August. This gain compares with one of 9 per cent in the 1928-37 average for August but with a slight decline in the month a year ago. The experience of dealers in the current period was con trary to that of department stores, as sales of shoes by the former fell off rather noticeably from the preceding month, while those by department stores rose sharply. In the comparison with last August, the dollar volume sold totaled 12 per cent smaller in the month this year. Although stocks rose 17 per cent during the current period, they aggregated 12 per cent lighter on August 31 than a year ago. DEPARTMENT STORE TRADE IN AUGUST 1938 Locality Per Cent Change August 1938 from August 1937 Net Sales Chicago..................... Detroit...................... Fort Wayne.............. Indianapolis............. Milwaukee................ Peoria........................ Other Cities*........... Stocks End of Month — 6.6 —22.8 —10.1 — 3.8 — 7.9 + 2.1 — 5.2 7th District.............. Per Cent Change First Eight Months 1938 from Same Period 1937 — 9.7 •Include Fort Wayne and Peoria. Ratio of August Collections to Accounts Outstanding End of July Net Sales 1938 1937 28.8 36.8 29.0 38.1 33.4 35.7 33.7 36.7 —ii.4 —12.6 —25.7 —12.2 — 8.8 —11.2 —10.4 —11.3 29.7 29.8 —15.7 —14.9 32.3 32.9 —15.0 —18.4 —22.0 —14.5 * As is customary, inventories rose somewhat between the close of July and August 31, but aggregated 16 per cent smaller on the latter date than last year at the same time. For the first month since March 1937, stock turnover in August was slightly greater than in the corresponding month a year earlier. * * * Following a greater than seasonal recession in July, sales of shoes by reporting dealers and department stores in * * As is usual in August, sales of furniture and housefurnishings by dealers and department stores totaled considerably heavier than in the preceding month, the increase amount ing to 24 per cent or to only slightly less than in the 1928-37 average for the period. The decrease in business from the volume of last August aggregated only 16 per cent, as against one of 26 per cent in the yearly comparison for July. The experience of dealers in the current month was somewhat more favorable than that of department stores. Stocks on hand at the end of August were fractionally less than a month earlier and remained one fifth smaller than at the same time last year. MONTHLY BUSINESS INDEXES COMPUTED BY FEDERAL RESERVE BANK OF CHICAGO Index numbers express a comparison of unit or dollar volume for the months indicated, using the monthly average for 1923-24-25 as a base. Where figures for latest month shown are partly estimated on basis of returns received to date, revisions will be given the following month. Data refer to the Seventh Federal Reserve district unless otherwise noted. No. of Aug. July June May March April Aug. July April March June May Firms 1938 1938 1938 1938 1938 1937 1937 1937 1938 1937 1937 1937 Meat Packing—(U. S.)— Sales (in dollars)................................................. .......... 45 85 88 86 87 82 83 98 98 99 99 95 95 Casting Foundries— Shipments: Steel—In Dollars............................................. ......... In Tons.................................................. .......... Malleable—In Dollars.................................... ........... In Tons......................................... ......... 12 12 21 21 32 25 35 41 25 19 28 33 29 20 32 38 27 19 34 40 27 18 34 41 42 34 37 45 115 107 71 85 111 107 65 80 125 122 89 109 109 108 80 102 119 123 85 112 124 136 88 122 Stoves and Furnaces— Shipments (in dollars)........................................ .......... 14 158 115 113 123 120 121 219 172 174 202 215 193 Furniture— Orders (in dollars)............................................... ......... Shipments (in dollars)........................................ ......... 33 33 70 62 65 43 46 44 51 46 47 54 56 68 82 85 95 68 68 75 80 80 82 92 96 101 Output of Butter by Creameries— Production............................................................. ......... Sales....................................................................... ......... 59 61 129 156 139 141 156 157 151 138 101 110 87 110 110 126 131 133 149 144 131 123 90 100 80 98 Retail Trade (Dept. Stores)— Net Sales (in dollars): Chicago.............................................................. Detroit............................................................... Indianapolis....................................................... Milwaukee......................................................... Other Cities...................................................... Seventh District—Unadjusted..................... Adjusted.......................... 29 6 4 5 40 84 84 70 69 84 74 72 71 87 57 61 70 66 57 59 83 83 83 91 83 74 82 84 79 80 95 82 77 80 79 82 94 100 98 82 87 82 86 87 97 95 79 86 95 75 87 86 80 75 78 96 66 84 75 77 65 71 98 97 111 104 98 86 99 101 95 118 110 102 91 100 99 93 117 101 104 86 97 98 100 113 116 105 90 102 104 Automobile Production—(U. S.)— Passenger Cars..................................................... Trucks.................................................................... 20 85 37 92 47 101 53 99 60 115 59 127 106 220 123 209 140 228 145 243 150 255 138 240 Building ConstructionContracts Awarded (in dollars): Residential........................................................ Total................................................................... 51 73 47 59 46 71 41 73 36 53 34 49 32 65 51 77 57 81 40 55 52 69 52 69 Pig Iron Production*— Illinois and Indiana............................................. 47 39 35 48 52 51 134 127 118 133 130 127 .......... ......... ......... ......... ......... ......... ......... •Average daily production. Pag* 7 National Summary of Business Conditions (By the Board of Governors of the Federal Reserve System) INDUSTRIAL PRODUCTION TNDUSTRIAL activity increased considerably in August and advanced further in September. Factory employment and payrolls also showed a substantial rise in August, and distribution of commodities to consumers increased seasonally. Production OLUME of industrial production showed a further considerable increase in August, and the Board’s seasonally adjusted index rose from 83 to 88 per cent of the 1923-1925 average. In manufacturing, increases in output were general ex cept in the automobile industry where there was a sharp seasonal decline as plants were closed for inventory taking and for preparations for the shift to new model production. At steel mills, where activity had risen considerably in July, there was a further advance in August and production was at an average rate of 42 per cent of capacity as compared with 35 per cent in the previous month. Output of lumber and plate glass also increased. In the textile industry the sharp advance that had been under way since early summer continued. Mill consumption of wool and cotton increased further, and deliveries of rayon were maintained at the high level reached in July. Shoe production showed a further increase and activity at meat-packing establishments showed less than the usual seasonal decline. Production of bitu minous coal and crude petroleum increased somewhat further. In the first three weeks of September steel ingot production continued to increase, while automobile production remained at the low level reached in August. Output of crude petroleum was reduced, as wells in Texas were closed on both Saturdays and Sundays, whereas in August only Sunday closings had been required. Value of construction contracts awarded in 37 Eastern States increased consider ably in August, according to figures of the F. W. Dodge Corporation. The increase was in publicly-financed projects and reflected partly the expansion of the Public Works Administration program and the award of the first contract for the slum clearance projects of the United States Housing Authority. Awards for private residential building continued at about the same rate as in July and were close to the level reached in the spring of 1937. Commercial building, which had increased in July owing to the award of a contract for a large office building, declined in August to about the level of other recent months. V Index of physical volume of production, adjusted for seasonal variation, 1923-1925 average = 100. By months, January 1934 to August 1938. CONSTRUCTION CONTRACTS AWARDED MILLIONS OF POLLARS millions or dollars TOTAL OTHER RESIDENTIAL Three-month moving averages of F. W. Dodge data for value of contracts awarded in 37 Eastern States, adjusted for seasonal variation. Latest figures based on data for July and August and esti mate for September. MONEY RATES IN NEW YORK CITY Employment ACTORY employment and payrolls showed a marked rise from the middle of July to the middle of August, while in nonmanufacturing industries employment showed little change. The number employed at factories producing durable goods increased for the first time since the summer of 1937 and in the nondurable goods industries, where employment had increased in July, there was a further rise. Most leading industries reported increases in the number of workers. F Distribution ISTRIBUTION of commodities to consumers increased seasonally from July to August. Department store sales showed about the usual rise and mail order sales increased, while variety store sales declined. In the first half of September sales at department stores increased more than seasonally. Freight-car loadings increased somewhat further in August, reflecting chiefly larger shipments of miscellaneous freight. D Commodity Prices TREASURY BILLS 1934 1935 1936 1937 1938 Discount rate of Federal Reserve Bank; weekly averages of daily yields on 3- to 5-year Treasury notes and on Treasury bonds callable after 8 years, and weekly average of daily dealers’ quotations on 90-day Treasury bills or rate on new bills offered in week. For weeks ending January 6, 1934, to September 17, 1938. MEMBER BANK RESERVES AND RELATED ITEMS BILUONS OF DOLLARS BILUONS OF DOLLARS | RICES of silk and rubber showed some advance from the middle of August to the third week of September and there were also increases at the end of the period in nonferrous metals. Wheat prices fluctuated considerably but showed little net change in this period. Prices of cotton and wool declined somewhat, and there were further decreases in prices of some finished industrial products. P Bank Credit HEAVY inflow of gold from abroad during the five weeks ending September 21 resulted in an increase of over $500,000,000 in the monetary gold stock. Mem ber bank reserves were increased by Treasury payments for gold acquired but were sharply reduced in the last week of the period by payments to the Treasury for cash purchases of new securities and quarterly income tax collections. As a consequence of these transactions, excess reserves, which had increased to $3,130, 000,000, were reduced to $2,740,000,000 on September 21. Total loans and investments of reporting member banks in leading cities in creased sharply during August and the first three weeks of September, reflecting chiefly an increase in holdings of United States Government obligations. Balances held in New York City for foreign banks showed a substantial increase. A ... Money Rates and Bond Yields Wednesday figures, January 3, 1934. to Septem ber 21, 1938. Page 8 HE average yield on long-term Treasury bonds increased in September from the low point reached at the end of August. The average rate on new issues of Treasury bills increased to 0.11 per cent, compared with 0.05 per cent. Yields on high-grade corporate bonds increased slightly. T DIRECTORS AND OFFICERS Federal Reserve Bank of Chicago DIRECTORS R. E. Wood, Chicago, 111................................... Deputy Chairman W. J. Cummings.................................. Chicago, 111. S. T. Crapo....................................... Detroit, Mich. E. R. Estberg..............................Waukesha, Wis. M. W. Babb...................................Milwaukee, Wis. F. D. Williams............................Iowa City, Iowa F. J. Lewis............................................Chicago, 111. N. H. Noyes............................................... .Indianapolis, Ind. MEMBER OF FEDERAL ADVISORY COUNCIL E. E. Brown................................................................. Chicago, 111. OFFICERS G. J. Schaller..................................................................President H. P. Preston.................................................First Vice President J. H. Dillard.............................................................................. VicePresident W. H. Snyder...................................... Vice President and Cashier C. S. Young................................................................................VicePresident C. B. Dunn............................................................................. GeneralCounsel W. C. Bachman.............Assistant Vice President 0. J. Netterstrom. .. .Assistant Vice President A. L. Olson..................... Assistant Vice President A. T. Sihler................... Assistant Vice President A. M. Black. . .Manager, Planning Department J. L. Sweet.............................................................. Manager, Research and Statistics Department J. J. Endres............................. F. Bateman................................................. AssistantCashier J. C. Callahan....................................... AssistantCashier N. B. Dawes..............................................AssistantCashier F. A. Lindsten......................................... AssistantCashier L. G. Meyer............................................. AssistantCashier F. L. Purrington...................................... AssistantCashier J. G. Roberts.............................................AssistantCashier C. M. Saltnes.......................................... AssistantCashier .................................... Auditor INDUSTRIAL ADVISORY COMMITTEE Max Epstein, Chicago, 111............................................... Chairman W. Harnischfeger..................... Milwaukee, Wis. G. B. Moxley.............................Indianapolis, Ind. R. R. Monroe.................................... Chicago, 111. G. W. Young....................................... Chicago, 111. DETROIT BRANCH DIRECTORS A. C. Marshall H. L. Pierson .. L. W. Watkins . . ........................Detroit, Mich. ....................... Detroit, Mich. J. E. Davidson.......................... J. M. Dodge.............................. ..................Manchester, Mich. W. S. McLucas....................... R. H. Buss..................................................................Detroit, Mich. H. J. Chalfont OFFICERS R. H. Buss......................................................... Managing Director .................................... Cashier H. L. Diehl............................. Bay City, Mich. . .Detroit, Mich. .. Detroit, Mich. Assistant Cashier SEVENTH FEDERAL I OVA RESERVE DISTRICT
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