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SINESS CONDITIONS library 11 Jl IMI Mh\> S3 S«o !®SS m%s 1 jsyfisstx®SS3I KSE«BMS(e «w*gsi8"S< ; - •7 ■ ' ~~- .5 !• ■ mz7*jSg-35 %.ss? Sill man mm HiPPf Irn^si; «MAkh\A»Ktm\uVsnmtd Awxm^ l»Wv [Us 3 5.2:1 ■WJI*a!lg!l-«EJ>faaWiJ^LM>iJ. ■--.... V saaanai :<s&T& ™'m ■:r4isl ms&, ■ •> : . ■m w««\V> wKSy£wjw§^ < ' --V mm v; \\\ -.- - >8W3 «<wi\x\xSi5i ■ 1 x «T*.E "\wvav\« BBS mm .'•cl JtVxv»vv>xvi J '• *-'vw. , L~—- w noanannB s«sas*e . s<i.A\v^\xVi»AvV»\ s vm j«B«i8BS3K 3 □□ 1 i I'SC',-' ■«- • ■ 'iNV ;.: ( f \>vvvv\ VsWO £j»v\«^»a^vr iMm’i ^aawasawi mm1 ■ .Is SSgasasiBBlgRl Volume 22 ' • V' 'i -^v-.3,v2I AUGUST, 1939 Number 8 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 "DUSINESS in the Seventh Federal Reserve district has -■J slowed down somewhat in accordance with the usual expectation at this season of the year. Two major industries, however, steel and construction, have shown increased ac tivity, and business generally has continued relatively good in comparison with year-earlier levels. July declines of 31^ and 6 per cent in aggregate employment and payrolls, re spectively, were due largely to recessions in the automobile industry. The agricultural outlook has improved, insofar as crop production is concerned, with major crops making relatively better progress on August 1 in the Seventh dis trict than in the country as a whole. Industry—Sustained business from miscellaneous sources enabled steel mills in the Chicago area to operate at 56 per cent of capacity through late July and early August and to raise the rate to 58 per cent in the middle of the latter month, although it had declined again to 561^ per cent by the third week of August. Automobile production by midAugust had about reached the seasonal low point of the year; several producers at that time were assembling 1940 models in preparation for this year’s earlier showings. New business booked during July by malleable casting foundries of the district rose slightly above the preceding month’s level, but that of steel casting foundries dropped off con siderably in the aggregate; output declined sharply. Follow ing the furniture mart showings in June, incoming orders of district furniture manufacturers decreased 30 per cent during July, and activity at paper mills in this area like wise receded. Construction contracts awarded in the Seventh district during July established a nine-year high for the month, totaling 35 per cent in excess of the same 1938 period; residential contracts were 43 per cent larger in this PER CENT OF CAPACITY RATE PER CENT OF CAPACITY OF STEEL INGOT PRODUCTION 1938 By weeks. Source: Iron Age. Manufacturing Steel and Steel Products—Steel mills in the Chicago area, after operating at 56 per cent of capacity for three successive weeks, raised the rate to 58 per cent in midAugust, or to a level equaling the previous 1939 high in early March. In the third week of August, the rate had again declined to 56^4 per cent. A continued steady inflow of business from miscellaneous sources of demand has been principally responsible for maintaining the level of pro duction. Releases from the automobile industry have been somewhat heavier of late but have not as yet attained the comparison. Industrial payrolls in the Seventh district, in fluenced by lower levels in the automotive group, declined by 6 per cent from June to July, while the volume of em ployment decreased 3y2 per cent. Both declines were some what greater than seasonal. Bituminous coal mined in Illi nois and Indiana rose during July sharply above the pre ceding month’s levels. Agriculture—Improved crop conditions in the Seventh district caused an upward revision in production estimates for the major crops as of August 1, the estimated rise in the corn crop amounting to 50 million bushels. Forecasts for United States corn production, however, have been lowered, as dry weather in the Western corn belt had ad verse effects on the crop. Wheat prospects were somewhat better than a month previous, although the crop will be considerably lower than last year. Grain prices recorded weakness throughout most of July but were firmer during the first three weeks of August. Corn apparently has not been moving in any appreciable volume to interior primary markets from the heavy farm stocks. Production of packing house commodities in the United States declined 5 per cent in July from June, but remained above a year ago and the 1929-38 average. Production of creamery butter in the Seventh district declined less than seasonally during July, while for Wisconsin cheese the decrease was of greater than usual proportions. Trade—July department store sales in the Seventh district were about one third or somewhat more than seasonally less than in the preceding month, and the margin of gain over a year ago narrowed rather sharply. However, some improvement was noted in the year-to-year comparison dur ing the first three weeks of August. Retail distribution of shoes by dealers and department stores recorded the usual substantial decline during July, as did that of furniture. Wholesale distribution in the district followed the same seasonally downward trend noted in the retail field. Retail stocks remained under last year’s levels, while wholesale inventories increased slightly in the aggregate over a year earlier. Finance—Seventh district member bank reserves reached record high levels during the four weeks ended August 16, although excess reserves were somewhat below the $600 million peak reached last summer. Loans and demand de posits of weekly reporting member banks declined between July 19 and August 16, the decrease in the former being due largely to recalls of corn loans by the Commodity Credit Corporation. Bond prices were generally soft from the latter part of July to August 18. Preliminary data for the June 30 call report show that loans, investments, and total deposits of all Seventh district member banks increased during the first half of the year. volume anticipated. Business from the construction industry has been fair; buying by the railroads remains light. The Navy Department has placed orders in this district for plates and bars, and a sizable order for sheets to be used in con struction of Government-owned corn cribs also has been booked. There has been considerable further strengthening in prices of finished steel products, and quotations for scrap iron and steel have been firm. # * * A slight expansion in incoming orders during July was reported by Seventh district malleable casting foundries, of new cars in the hands of Seventh district dealers declined 40 per cent in July to a level only 15 per cent higher than on July 31, 1938. Used-car inventories, diminishing about 15 per cent during the month, continued lower than a year ago by a small percentage. Furniture—Although Seventh district furniture manufac turers reported a decline during July of 30 per cent from STEEL AND MALLEABLE CASTINGS SEVENTH DISTRICT the volume of business booked during June, the comparison July 1939 Per Cent Change is not so adverse as might appear, inasmuch as the June from total had been augmented by orders placed at furniture July June 1938 1939 Steel Castings: marts held during that month. Despite the resulting large +32.9 —37.3 Orders booked (tons)... volume of unfilled orders on hand at the end of June, output +25.1 —22.4 Orders booked (dollars) +77.0 —18.0 Shipments (tons)........... in July was held at close to the level of the preceding +61.5 —20.4 Shipments (dollars)....... +81.7 —19.8 Production (tons)........... month, so that the ratio of unfilled orders to new business Malleable Castings: rose sharply during the current period from 106 to 163 per +32.3 + 3.3 Orders booked (tons)... cent. Shipments continued to run well ahead of last year, +23.4 + 5.6 Orders booked (dollars) +38.4 —23.3 Shipments (tons)........... although a slight decline was apparent in the July-June +29.1 —23.9 Shipments (dollars)....... —17.9 +48.9 comparison. Production (tons)........... ♦ * * Paper and Pulp—Production activity in the paper indus New orders received at Seventh district reporting stove try of the Seventh district declined about 7 per cent in July and furnace factories increased fractionally during July, from the month-earlier level. As shipments receded less while shipments from these plants recorded a sharp decline sharply than did production, a noticeable reduction in paper of 27 per cent, in accordance with seasonal trend, and pro inventories occurred during the month. Pulp production duction fell off by 6 per cent. Inventories showed some rise likewise declined, but continued well ahead of the 1938 level. in this comparison and likewise exceeded slightly the July PAPER AND PULP INDUSTRY 31, 1938 level. Incoming business was about 20 per cent SEVENTH DISTRICT July 1939 heavier in the current month than a year ago, and produc Per Cent Change June July tion in July ran nearly 30 per cent higher. Shipments, how 1938 1939 Paper: ever, for the first time this year dropped a little below the + 3.5 Orders booked (tons)............... + 3.9 — 2.7 — 2.3 Orders booked (dollars).......... 1938 volume. - 0.8 +12.1 Shipments (tons)....................... but new business of steel foundries dropped off sharply. Output from both types of foundries slackened considerably. Bookings of malleable castings exceeded production and shipments, while new orders for steel castings totaled much less than either. Activity in general continued substantially above last year’s depressed levels. Automobiles—Activity in this key Seventh district in Shipments (dollars).................. Production (tons)...................... Stocks at end of month (tons) Pulp: Production (tons)...................... Stock at end of month (tons). — 3.0 — 6.6 —16.8 + 8.1 + 4.1 — 9.8 dustry by mid-August had just about reached the seasonal +11.2 — 9.6 low point for the year. During July, passenger automobiles + 1.5 —21.6 numbering 142,346 were manufactured in the United States, or 42 per cent less than in the preceding month though one Building third more than the 106,841 vehicles produced in the cor Construction contracts awarded during July in the Seventh responding year-ago month. This same trend was evident in output of trucks, with 43,919 produced during July as district were in the highest volume of any corresponding month for the past nine years. An increase over June was against 34,602 in the same 1938 month. contrary to normal expectation at this season. Largely in Preparations for the changeover to 1940 models to be strumental in this latter rise was the volume of contracts shown one month earlier this year than usual, were absorb awarded for public utility projects, which aggregated more ing the attention of the industry in mid-August, and several than three times as large as in June, with a heavy propor producers already were assembling new models at that time. tion of the total representing public financing. Residential Not much is publicly known regarding pricing policies and contracts likewise showed a counterseasonal gain of 2 million new mechanical features of the 1940 models. A few lines dollars, or 11 per cent, over the June figure. This type of have announced moderate price reductions, influenced to construction continues far ahead of the year-ago level, al some extent by last spring’s concessions in steel prices. New though the favorable margin of gain has been diminishing, constructional features appear to include a trend toward due rather to a rising trend last year than to any marked somewhat more powerful motors with larger wheel bases leveling-off in 1939 volumes. Residential contracts in July for several makes of automobiles. Certain lines are reported amounted to 36 per cent of total construction awards, as as planning two different body styles, one not greatly differ against 34 per cent in the same month last year. In the nonent from the 1939 models, and the other an advanced stream residential field, contracts for stores, offices, and factories lined body. Also in prospect for many makes of automobiles showed a slight increase, offset, however, by a smaller is a new factory-sealed headlight unit. More universal amount of awards for schools and public buildings. All adoption of gear-shifts on the steering post likewise appears categories were substantially above a year ago with the excep to be in prospect. tion of public works. Total public financing, however, was Sales of new automobiles by Seventh district dealers fol BUILDING CONTRACTS AWARDED* lowed a seasonally declining trend during July, retail dis SEVENTH FEDERAL RESERVE DISTRICT tribution of new and used cars each totaling almost 20 per Residential Total cent less than in June. The number of new cars moving Contracts Contracts Period through wholesale channels in July showed a 45 per cent $54,900,000 $19,516,000 1939........................................................................... decline from the preceding month. The general volume of July +11.4% +15.4% Change from June 1939............................................... +43.0% +35.4% Change from July 1938............................................... distribution continued well above 1938, with the possible First $117,006,000 $324,618,000 seven months of 1939........................................... +72.2% +32.1% Change from same period 1938................................ exception of used-car sales where the margin of gain nar *Data furnished by F. W. Dodge Corporation. rowed from 25 per cent in June to 5 per cent in July. Stocks Page 2 as heavy during the current month as in July 1938, due to increases in the utility field. Privately-financed projects totaled about two thirds again as high as in July last year. The aggregate estimated cost of proposed construction in the Seventh district, as reflected by permits issued in 100 cities, was slightly higher in the July-June comparison, al though the number of such permits declined. As compared with a year ago, respective increases of 30 and 18 per cent were recorded in July. Demand for building materials in the Seventh district was somewhat slower during July than a month previous. Composite prices, however, have held firm; in early August they exceeded the 1938 level for the first time in several months, largely owing to a declining trend a year ago. Fol lowing a larger than usual expansion during June, sales of lumber at wholesale declined in July to a greater than seasonal extent. Retail distribution of lumber, brick, and cement also receded in July from the preceding month. Demand continued decidedly heavier than in 1938, with July sales of lumber at wholesale exceeding the comparable 1938 month by one third; the margin of increase in retail lumber sales was 23 per cent. Corresponding gains in retail sales of brick and cement amounted to 35 and 20 per cent, respectively. Fuel Industries Petroleum Refining—Overshadowing all other recent developments in the petroleum industry has been the shut down in mid-August of practically all producing wells in the Southwestern fields in an effort to reduce unwieldy in ventories of crude oil. This action, generally reflected in firmer wholesale prices for refined gasoline and other pe troleum products, came after several months of rather heavy refining operations. Crude runs to stills in the United States had been expanding since February, while gasoline produc tion had likewise shown a generally steady rate of increase. By late August the wave of shut-downs had not as yet spread to the Middle Western fields. Crude runs to stills in the Indiana, Illinois, and Kentucky refining area were slightly lower in July than a month previous, but remained above 1938, the increase in this latter comparison being about 18 per cent. Coal Mining—Bituminous coal mining in Illinois and Indiana increased sharply in July, following a counterseasonal decline in the preceding month. The rate of in crease over June was noticeably higher than for the country as a whole. Production in the current month for these two Midwestern States again was slightly under the 1938 level, having fallen in June below last year’s volume for the first time in 1939. The proportion of the national bituminous coal output mined in Illinois and Indiana was somewhat lower in July than in the same 1938 month. Industrial Employment Partly owing to strike interferences in the automobile industry, total employment and payrolls in the Seventh district declined during July to a greater extent than usual for this period. The manufacturing classification is so heavily weighted by the automotive and the iron and steel industries, that a rising trend in both volume of employ ment and wage payments on the part of the non-durable manufacturing groups was insufficient to offset the decline in the durable goods classification. Total non-manufacturing, influenced to some extent by a seasonal decline in mer chandising activity, showed a small decrease in employment volume and only a minor rise in wage payments; the coal mining industry and the construction group reported siz able increases in both items. Current payroll volumes in the district continued well above last year’s low level, increases amounting to 13 per cent in the number of workers and 22 per cent in wage payments. Although last year at this time there was still a downward trend, the margin of gain for July 1939 over 1938 was slightly smaller than that shown in June. MANUFACTURING JAN. FEB MAR. APR. MAY JUNE PAYROLLS JULY AUG, SEPT. OCT. NOV. DEC Index of manufacturing payrolls in Seventh district industries, 1923-1925 average Merchandising Department Store Trade—Seventh district department stores report July sales as being off approximately one third from those of a month previous, or by a somewhat greater than seasonal percentage. The July total was 5 per cent higher than in the same 1938 month—a considerable reduc tion in the margin of gain which had prevailed in the two preceding months. The best relative showing continued to be made by Detroit stores, although their percentage of increase over 1938 likewise was considerably reduced. Sales of larger stores in the district during the three weeks ended August 19 ran 7 per cent ahead of the comparable year-ago period; those in Detroit and Indianapolis recorded gains of better than the average, whereas sales in Chicago and Milwaukee EMPLOYMENT AND EARNINOS-SEVENTH FEDERAL RESERVE DISTRICT* Week of July 15, 1939 Change from June 15, 1939 Report ing Firms Wage Earn ers No. No. Earn ings (000 Omitted) $ 1,781 379 290 471 2,921 373,440 249,533 24,393 43,885 691,251 10,211 7,765 574 896 19,446 Textiles and Products.......... Food and Products............... Chemical Products........ Leather Products................... Rubber Products................... Paper and Printing................ 402 1,024 298 173 36 739 2,672 65,023 110,335 35,228 26,760 17,844 75,825 1,201 2,850 1,079 564 507 2,168 8,369 Total Mfg., 10 Groups.............. 5,593 1,022,266 27,815 — 4.1 — 7.4 Merchandising................... Public Utilities.......................... Coal Mining.............................. Construction............................ 5,534 1,158 83 793 135,209 101,061 13,451 12,266 3,365 261 387 + 0.7 + 5.1 + 9.0 + 0.7 +12.1 *'+10.3 Industrial Group Wage Earn ers Earn ings % % — 0.8 —16.8 + 1.5 + 3.4 — 7.0 — 3.9 —19.7 — 6.4 + 0.9 —10.8 + + + -t+ + + + + — + + + + Durable Goods: Metals and Products!........... Vehicles.......................... Stone, Clay, and Glass........ Wood Products..................... Total....................................... Non-D^bable Goods: 0.2 3.7 0.2 2.2 2.4 3.9 2.5 1.0 1.6 0.7 1.4 8.0 2.3 1.7 Total Non-Mfg., 4 Groups....... 7,568 261,987 7,052 — 0.4 + 0.6 Total, 14 Groups........................ 13,161 1,284,253 34,867 — 3.4 — 5.9 lOther than vehicles. •Data furnished by State agencies of Illinois, Indiana, Michigan and Wisconsin. Page 3 showed margins of increase somewhat smaller than the gain of 7 per cent for the district as a whole. Department store inventories declined during July, as is customary at this time of the year. These stocks at the end of July were 3 per cent lighter than a year previous. inventories, contrary to the retail trend, increased slightly during July and continued for the second successive month above the year-earlier levels. WHOLESALE TRADE IN JULY 1939* Per Cent Change from Same Month Last Year DEPARTMENT STORE TRADE IN JULY 1939 Per Cent Change First Seven Months 1939 from Same Period 1938 Per Cent Change July 1939 from July 1938 Locality Net Sales Chicago.................... Detroit..................... Fort Wayne............. Indianapolis............. Milwaukee................ Peoria........................ Other Cities*........... + 2.2 -1-11.9 + 1.8 + 6.8 — 0.3 — 1.8 + 7.6 Stocks End of Month Commodity Ratio of July Collections to Accounts Outstanding End of June Net Sales 1939 1938 + 2.2 +13.8 + 3.3 + 8.0 + 3.7 — 0.4 +10.4 45.1 43.7 43.9 38.9 35.9 36.8 34.9 35.4 32.3 30.0 + 6.0 S 40.7 38.4 —6.3 —0 2 —1.8 +1.4 + 0.2 —3.1 + 4.9 7th District............. "■Include Fort Wayne and Peoria. Retail Shoes—July sales of shoes at retail were in little better than half the June volume, a normal seasonal trend. Distribution of footwear by department stores during the current month was only one per cent lower than in July 1938, but that by shoe dealers declined 6 per cent; total sales were 4 per cent under the year-ago level. Retail dis tribution of shoes during the first seven months of the year was 3 per cent greater than in the same 1938 period. Inven tories of shoes, which declined somewhat during July, stood at slightly under the level of July 31, 1938; stocks have been running below the year-earlier volumes since March. Retail Furniture—In accordance with the generally de clining trend in Seventh district retail distribution, that of furniture and housefurnishings fell off by 18 per cent in July from June. Business continued favorable when com pared with a year ago, the increase over last July amounting to 9 per cent. Dealer sales were 15 per cent above the 1938 month, whereas the margin of gain for department stores was only 7 per cent. Inventories, declining slightly during July, continued as in June 2 per cent under the year-ago level. ■K- * * SALES OP INDEPENDENT RETAIL STORES (As reported by the Department of Commerce) Apparel Group.............................................. ........... Drug Stores.................................................. ......... Food Group.................................................. ......... Furniture and Appliances........................... ........... Hardware Stores......................................... ........... Lumber and Building Materials............. ........... Motor Vehicle Dealers.............................. ........... Total All Groups......................................... ........... Per Cent Change July 1939 from July 1938 Indiana Iowa Wisconsin — 2.7 + 6.8 — 2.3 + 4.3 + 2.8 + 3.3 — 3.2 — 3.1 — 2.6 +22.4 + 7.3 + 4.1 + 7.5 + 2.0 + 4.2 +13.8 + 2.9 +12.4 +11.7 +39.3 +47.4 + 2.7 + 1.0 + 10.2 Illinois —0.5 +3.9 — 3.4 +21.4 +4.5 +14.9 +21.5 +6.5 Wholesale Trade—As was the case in the retail field, July wholesale distribution by trade groups in the Seventh district reporting to the United States Department of Com merce declined seasonally from a month earlier. Sales of tobacco, drugs, and meats showed percentage recessions less than the average for all groups, while sales of electrical goods, hardware, paper, and miscellaneous commodities decreased by more than the 10 per cent aggregate decline. The recession in the grocery trade equaled that in the total. Comparisons with July 1938 were adverse in several of the reporting classifications, and the total for all lines showed an increase of only one per cent, as against a favorable spread of 9 per cent in June when all groups but groceries reported increases over the same 1938 month. Wholesale Pago 4 Groceries......................... Hardware........................ Drugs & Drug Sundries. Electrical Goods............ Meats & Meat Products. Paper & Its Products... Tobacco & Its Products. Miscellaneous.................. •Data furnished by merce. Net Sales Stocks Accounts Outstanding Collections — 4.0 — 0.8 — 3.9 — 1.9 +12.3 + 5.7 + 8.0 + 2.4 — 1.1 + 4.6 + 2.6 + 1.5 +41.8 +30.1 +19.4 +35.5 — 3.0 — 8.0 —14.1 +21.2 +17.1 +16.3 — 0.1 + 8.5 + 7.2 — 0.4 —16.1 + 5.2 +13.3 — 1.7 + 5.7 +10.0 Bureau of the Census, United States Department of Com Agriculture Crop Conditions—On the whole, crops in the Seventh district showed improvement during July and early August, with the result that production estimates for the major crops, made on the basis of August 1 condition by the Bureau of Agricultural Economics, were raised above those of a month earlier. The district forecast for the corn crop was increased 50 million bushels from July 1 to August 1. Estimates for the 1939 corn crop of the entire country have been revised downward, however, by about 110 million bushels, as continued dryness over most of the Western corn belt has further adversely affected prospects. Never theless, production of this major feed crop, though probably smaller than last year, will be above the average for the past ten years. Corn yields this year are being further augmented, especially in Illinois and Iowa, by an extensive acreage of hybrid corn. Prospects are for a Seventh district wheat crop well below that of 1938, but due in part to relatively more favorable weather conditions in this area, the reduction will not be of such large pro portions as for the country as a whole. Threshings were mostly completed by mid-August in this district and showed somewhat wider variations in quality of the wheat than had been anticipated; yields on the whole exceeded earlier ex pectations. Rye and barley yields have been fair to good. Oats, on the contrary, are turning out rather poorly. Autumn fruit crops are expected in most cases to show yields well above those of last year. Pastures have been considerably PERCENTAGE CHANGES IN SALES OF SELECTED DEPARTMENTS OF SEVENTH DISTRICT DEPARTMENT STORES First half of 1939 compared with same period of 1938 SILVERWARE AND JEWELRY. TOILET GOODS AND DRUGS SMALL LEATHER GOODS MENS AND SOYS’ WEAR. WOMENS REAOY-TO-WEAR. INFANTS’WEAR LINGERIE WOMENS HOSIERY ....... WOMENS GLOVES MILLINERY......... NECKWEAR AND SCARFS PIECE GOODS revived by heavy rains over most of this area during the first half of August. The district potato crop is generally disappointing. Indications are for a record crop of soy beans, abetted by a secular increase in American cultivation of the Chinese bean. CROP PRODUCTION Estimated by the United States Bureau of Agricultural Economics on the Basis of August 1 Condition (In thousands of bushels, unless otherwise specified) Seventh District United States Forecast Final Average Forecast Final Average 1939 1938 1928-37 1939 1938 1928-37 Corn....................... 1,050,414 1,038,749 847,142 2,459,888 2,542,238 2,309,674 Oats....................... 350,956 430,768 454,618 898,026 1,053,839 1,049,300 Total Wheat......... 58,381 69,581 59,767 731,432 930,801 752,952 Barley................... 44,943a 46,964a 48,128a 257,008 252,139 233,021 Rye........................ 8,122a 9,942a 7,866a 40,834 55,039 36,330 Potatoes (white).. 46,858 53,457 53,056 356,834 371,617 372,258 Sugar Beets1......... 994b 1,005b 736b 10,317 11,614 8,486 Commercial Apples 14,620a 8,050a 10,297a 102,630 82,395 96,469 Peaches................. 5,221c 3,055c 3,646c 61,164 51,945 54,151 Beans (dry edible) 2 3,508d 4,575d 3,885d 12,252 15,268 12,638 All Tame Hay1... 17,014 18,379 15,201 73,301 80,299 68,765 1— In thousands of tons. 2— In thousands of 100-lb. bags. a—Five States including Seventh Federal Reserve district, b—Michigan, c—Michi gan, Illinois, Indiana, and Iowa, d—Michigan and Wisconsin. Grain Marketing — Grain prices in general declined through most of July and then recovered a part of their losses late in the month and during the first three weeks of August. The downward trend in wheat quotations was halted primarily by reduced yield prospects in Canada where moisture deficiency and continued hot weather have had adverse effects on the spring wheat crop. United States prospects have improved slightly over this period, but not to an extent sufficient to counteract the effect of Canadian developments. July receipts of wheat at interior primary markets rose above the June total, but increased less than is seasonally expected over this period when much of the winter wheat usually comes into storage. This was due in large measure to the exceptionally early Southwestern har vest, which resulted in large quantities of grain being re ceived in June that usually do not appear before July and, consequently, augmenting the total for the former month. Corn prices reached a six-year low in late July, appar ently reflecting uncertainty as to the quantity of free corn that will be available this fall; they strengthened later on news of deterioration in the Western corn-growing areas, previously mentioned, which more than offset improved prospects in the Central corn belt. Along with wheat, corn prices showed firmness around the middle of August on news of political uncertainties abroad. Farm marketings continued small, as rural holders apparently failed to share the concern held by the trade over possible distribution of heavy farm stocks. There was a reduced movement of corn LIVESTOCK SLAUGHTER (In thousands) iards in Seventh District, July 1939............................................. . July 1938................................................... . Federally Inspected Slaughter, United States: July 1939............................................. June 1939...................................... July 1938............................................... July 1929-38 average.................................... Lambs and Cattle 185 170 437 374 211 192 62 56 782 778 820 797 2,778 3,185 2,254 2,789 1,399 1,401 1.461 1,398 417 448 436 454 AVERAGE PRICES OF LIVESTOCK (Per hundred pounds at Chicago) Native Beef Steers (average)....................... Fat Cows and Heifers................................. Calves.................................. Hogs (bulk of sales)................................ Lambs............................................... Week Ended Months of August 19, July June July 1939 1939 1939 1938 $ 9.10 :$ 9.30 $ 9.30 $10.50 7.25 7.75 7.80 8.15 9.00 9.50 9.15 9 10 5.25 6.00 6.35 8.60 8.55 9.30 9.60 8.85 during July, whereas increasing quantities are usually passing through the principal markets in the period. With some strength shown on the principal foreign grain ex changes during early August, domestic prices were then close to a profitable export basis. The July decline in prices of oats apparently represented a reaction in sympathy with the two major grains, as pros pects for the oats crop have been continually poor and visible supplies subnormal. Prices, subsequently, moved more in line with the trend expected from the statistical position of the grain and had recovered most of the earlier month’s losses by August 22. MOVEMENT OF GRAIN AT INTERIOR PRIMARY MARKETS IN THE UNITED STATES (In thousands of bushels) „ Wheat: Receipts............................................................. Shipments.......................................................... Corn: Receipts............................................................. Shipments.......................................................... Oats: Receipts................................................................. Shipments............................................................. July 1939 June 1939 July 1938 July 1929-38 Avg. 98,196 30,474 45,925 14,830 102,843 27,711 76,184 30,177 11,749 13,500 17,432 17,462 26,936 25,004 19,620 12,972 4,577 5,266 10,070 7,390 9,135 5,296 7,059 4,745 Livestock and Meat Packing—The number of cattle, calves, and lambs received at public stockyards in the United States during July rose more than is usual above the June totals. Receipts of hogs, however, showed a seasonal decline of 7 per cent. Slaughter of these animals under Federal inspection failed to keep pace with the increased receipts, although in the case of hogs, slaughter followed in close accord therewith. About 16 per cent more cattle were reported on feed in the corn belt on August 1 than a year ago. Shipments of cattle, lambs, and calves to feed lots were heavier in July than in June. Prices of meat animals were generally soft through July and the first three weeks of August, particularly those of heavy-weight hogs. The latter decline has been attributed partially to low prices of lard. Sales of packing-house commodities in the United States were in larger volume than production during July, effecting a 7 per cent reduction in inventories over the month. The downward trend in both production and sales evidenced a month earlier prevailed through July, and preliminary figures for the first two weeks of August indicate that the decline continued. August 1 stocks, on the basis of July distribution, were equivalent to sales for only about 2% weeks, which is almost one week less than the average for the last ten years. However, stocks of lard continued heavy, and this product has recently been put on the surplus com modities list by the United States Department of Agricul ture. Sales and production both continued above last year, as partially reflected in gains of 10 per cent each in number of employees and in wage payments of the industry at the end of July compared with a year ago. Quotations for a few pork products, veal, and mutton strengthened somewhat in July, but prices of most animal products continued weak. MEAT PACKING—UNITED STATES Per Cent Change in July 1939 from June July July 1939 1938 1929-38 Avg. Tonnage produced........................................................... —4.6 +10,3 +2 8 Tonnage sold.................................................................... — 1,1 +10.9 +57 Dollar sales................................................................ —0.3 —06 +5 4 Inventories........................................................................ — 6.7 +16.3 —18 2 Dairy Products—July butter make of selected Seventh district creameries declined 6 per cent from June, or less than is usual over this period, and was 2 per cent less than Page 5 in the comparable 1938 month; production has been run ning slightly under the heavy 1938 levels since early spring. District sales during July decreased 6 per cent from the preceding month but were 2 per cent larger than in July 1938. The butter estimate for the entire country showed somewhat more unfavorable trends than in this area, pro duction declining in close to seasonal proportions from June and continuing somewhat below last year’s level. A heavy flow of milk continued in the dairy areas of the nation, and was reported on August 1 to be only slightly below the 1938 record level for the date. Pastures in the Seventh dis trict remained in fairly good condition for the season, although heat has caused some damage to grazing areas in the important Southern Wisconsin territory. United States cold-storage holdings of butter continued on August 1 well above the average of the past five years; but the excess was roughly equal to the holdings of the Dairy Products Market ing Association and of governmental agencies, which amounted to about one fifth of total inventories. Butter stocks increased slightly over July 1, but to a noticeably less than seasonal extent, with the result that the total on August 1 was below the year-ago level for the first time in eighteen months. Wholesale prices for 92-score butter at Chicago were relatively stable during most of July, and with the inauguration of a butter-buying program late in that month by the D.P.M.A., quotations held quite steady through the first three weeks of August. This level, however, was about 2 cents lower than the 25y2 cents per pound at which prices were stabilized last summer. With milk flow somewhat reduced because of the dry weather in Wisconsin cheese-producing areas and with some diversion to other milk channels, production of Wisconsin cheese in July fell off 18 per cent from June, or to an extent somewhat greater than seasonal, and totaled about 6 per cent below the year-ago level. Nevertheless, the manufacture of American cheese for some time has been in a volume greater than the average of the previous ten years. Cheese inventories on August 1 were considerably higher than a month earlier, but on a seasonally adjusted basis, the rise was minor. Stocks of this commodity have been in much better statistical position than those of butter. Cheese prices showed moderate firmness during July and the first three weeks of August, influenced by a generally similar trend in butter quotations and by lower cheese production. Credit and Finance Condition of Member Banks—Total loans, investments, and deposits of Seventh district member banks all stood at higher levels on June 30 than six months previously. De posits of Chicago banks had decreased rather sharply around the March 29 call report date in connection with the April 1 Illinois personal property tax, and this decline was sufficient to more than counteract the rising trend for other member banks in the district. However, an expansion during the ensuing three months, augmented by a return of funds to Chicago after the tax date, had increased the district volume by June 30 to approximately 6,497 millions, or 261 millions higher than on December 31. Loans of banks in Chicago and other large cities of the district rose only slightly during the first half of the year, but those of country banks in creased 46 million dollars, or 11 per cent, in this period. The effect of the latter group on the district figures was comparatively minor, however, as loans of all member banks increased by only 5 per cent, an absolute increase of 64 million dollars. The net rise in investments of 90 mil lions between December 31, 1938, and June 30, 1939, was effected principally by the larger metropolitan institutions; practically no net change was shown in security holdings of country banks during the first six months of the year. The increase developed largely during the second quarter of the year, as security portfolios of Chicago banks and those of the country institutions declined slightly up to March 29. BILLIONS OF OOLLARS BILLIONS OF OOLLARS ALL MEMBER BANKS SEVENTH DISTRICT MONTHLY BUSINESS INDEXES Data refer to Seventh district and are not adjusted for seasonal variation unless other July 1939 wise indicated. 1923-1925 average = 100 Manufacturing Industries: Pig iron Production: Automobile Production—(U. S.): Casting Foundries Shipments: Stoves and Furnaces: Furniture Manufacturing: Building Contracts Awarded: Meat Packing— (U. S.): Department Store Net Sales: Adjusted......................... Pag© 6 77 74 June 1939 May 1939 July 1938 June 1938 May 1938 81 80 80 77 67 59 69 61 72 63 80 76 61 39 35 48 49 117 84 167 81 158 37 92 47 101 53 99 39 32 36 46 47 38 48 60 41 32 46 57 25 19 28 33 29 20 32 38 27 19 34 40 111 151 150 113 114 123 59 55 86 56 66 59 65 43 46 44 51 46 67 80 60 70 72 76 47 59 46 71 41 73 87 91 88 91 92 88 95 95 89 79 82 88 83 85 86 81 85 87 58 65 73 65 58 61 86 89 94 97 86 80 89 91 84 98 107 88 88 89 88 57 61 70 66 57 59 83 83 83 91 83 74 82 84 79 80 95 82 77 80 79 NVESTMENTS Selected items of condition by call dates from March 27, 1929, through June 30, 1939. Member Bank Reserves—As the influence of the two factors which generally have the greatest effect on Seventh district member bank reserves tended toward an increase, an expansion of $101 million in such balances took place between July 19 and August 16. Interdistrict gains in com mercial and financial funds amounted to 74 millions, while Treasury operations added another 52 millions. Sales of Treasury securities were practically offset by redemptions, but check payments, augmented through recalls of corn loans by the Commodity Credit Corporation, ran in large enough volume to effect a $52 million excess of Treasury disbursements over receipts for the period. Partially counter acting the effect on reserves of the above-mentioned factors were an unusually large increase in currency circulation, 18 million dollars, and net transfers of some 8 millions from reserve balances to other credit categories, leaving a net gain of over 100 millions in member bank reserve balances. With this large rise in total reserves, a corresponding in crease was shown in estimated excess reserves; the latter total was raised to a level of nearly $550 million, or slightly above that which prevailed through most of the spring. In contrast to excess reserves for the country as a whole, which are sharply above the 1938 level, the Seventh district figure has not as yet surpassed the high point of about 600 millions established last summer. MILLIONS OF DOLLARS ESTIMATED EXCESS RESERVES OF MEMBER BANKS Selected Seventh District Banking Data * * * FEDERAL RESERVE BANK OF CHICAGO, SELECTED ITEMS OF CONDITION (Amounts in thousands) August 16, 1939 $263,094 282 69 36,336 127,363 98,664 262,363 2,348,517 1,404,281 160,440 1,012,134 Total bills and securities................................ Bills discounted...................................... ... ’. Bills bought........................................... U. S. Treasury bills........................................ U. 8. Treasury notes....................................... U. S. Treasury bonds..................................... Total 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 liability combined Change from July 19, August 17, 1939 1938 $—9,449 $—16,453 —9 +82 —1 +2 —9,894 —31,492 +309 —2,720 +240 +17,744 —9,345 —16,468 +123,899 +267,986 +101,434 +142,504 +67 +55,621 +14,564 +55,350 91.1% +0.7* +1.6* •Number of Points. ♦ * * CONDITION OF REPORTING MEMBER BANKS SEVENTH DISTRICT (Amounts in millions.) Assets 1938 1939 jess reserves of all member banks in Chicago and in the Seventh i, January 6, 1937, through August 16, 1939. 1 Estimated district; by we Securities Markets—New long-term corporate bond issues during July failed to total as high as in the preceding month, but with this exception were in the largest monthly volume of the current year. Municipal financing in recent weeks has been light. The large bulk of corporate issues continues to be for refunding purposes. On the whole, these latter have been well received, but increasing price con sciousness on the part of institutional investors has been reported. The chief market for new bond issues continues, however, to be found among institutional buyers. Banks have been less active in the bond market than a month or so previously and, while no further declines in the investment activity of individuals has been noted of late, this group continues to be a very minor factor in the market. Bond prices were a little unsteady between July 15 and midAugust, a situation generally attributed to uneasiness about the foreign situation. High-grade corporate prices have been soft since early July, while medium grades rose with the stock market through most of that month and then declined moderately during the first half of August. This recent drop has not been nearly so sharp as that in stock prices, the decline in which up to August 18 had canceled approxi mately 45 per cent of the July rise. Prices of Government securities have established a pattern less similar to the highest quality corporates than to the medium grades, con tinuing firm throughout most of July and then declining slightly in the first few weeks of August. Recent Treasury financing included an issue of about $200 million of Com modity Credit Corporation 2-year % per cent notes. Sub scriptions were about 14 times the ultimate allotment, and only 8 per cent of the notes went to Seventh district investors. New issues of Treasury bills sold at slightly larger discounts during the first three weeks of August than for some time past. 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. 8. Treasury bills....................................................... U. S. Treasury notes................................................ ’.. U. S. Treasury bonds.................................................... Obligations fully guaranteed by U. 8. Government Other securities............................................................... Aug. 16, 1939 $3,202 852 480 34 42 79 104 0 113 211 430 938 287 484 Change from July 19, Aug. 17 1939 1938 $-47 $+337 +22 —24 —25 +6 +1 0 +11 +5 —3 0 +1 +11 0 —4 —3 —2 —52) +227 +14 j +20 +63 —5 +25 Liabilities Demand deposits—adjusted*....................................... Time deposits.................................................................. Borrowings.................................................................. ’ 2,464 931 0 —11 +4 0 +235 +57 0 i he annual velocity of demand deposits (unadjusted) in the four weeks ended August 16 was 18.59 times, as compared with 21.11 times in the preceding five weeks and with 17.51 times m the corresponding period of 1938. * * ♦ BANK DEBITS, SEVENTH DISTRICT (Amounts in millions) July 1939 Chicago............................................... Des Moines.............................. Detroit................................................ Fort Wayne.................................. Grand Rapids............................ Indianapolis........................................ Milwaukee.................................. Peoria..................................... South Bend............................... 32 smaller citieB.................................. Total 41 cities........................ ♦ * Per Cent of Increase or Decrease from June July 1939 1938 —14.8 + 8.2 + 0.4 + 0.2 — 1.6 + 0.7 +10.8 + 2.6 +18.2 +10.4 — — — — +io; 7 3.9 6.1 4.2 9.2 * TRANSIT OPERATIONS OF THE FEDERAL RESERVE BANK OF CHICAGO AND DETROIT BRANCH (Exclusive of Treasury checks and of non-transit items drawn on own bank) Total country and city check clearings: Pieces......................................... Amount.......................... Daily average clearings: Total items cleared— Pieces................................................. Amount.............................. Items drawn on Chicago— Pieces.................................... Amount............... Items drawn on Detroit— Pieces................................... Amount.................................... July 1939 July 1938 16,636,145 Page 7 National Summary of Business Conditions (By the Board of Governors of the Federal Reserve System) INDUSTRIAL PRODUCTION industrial activity, seasonally adjusted, rose sharply and was close to level reached last December. Prices of some industrial materials increased INintheJULY recent weeks while those for agricultural products continued to decline. Index of physical volume of production, adjusted for seasonal variation, 1923-1925 average = 100. By months, January 1934 to July 1939. FREIGHT-CAR LOADINGS PERCENT PERCENT 40 Index of total loadings of revenue freight, adjusted for seasonal variation, 1923-1925 average = 100. By months, January 1934 to July 1939. WHOLESALE PRICES PERCENT ~ 110 v 1934 1935 COMMODITIES 1936 1937 Production—The Board’s index of industrial production, according to preliminary returns, advanced to 102 per cent of the 1923-1925 average in July as compared with 98 in June and 92 in April and May. The advance in July reflected chiefly a considerable further increase in output of iron and steel, which usually declines at this season. Steel ingot production rose from an average rate of 52 per cent of capacity in June to 57 per cent in July and in the first three weeks of August was maintained around 60 per cent which for the month would represent about the usual seasonal increase. Lumber production showed little change in July, although a decline is usual. In the automobile industry output showed a sharp seasonal curtailment during July and the first half of August, reflecting preparations for the shift to new model production which will be made about a month earlier this year than in other recent years. Retail sales of new cars continued in excess of production and dealers’ stocks were greatly reduced. Plate glass production declined sharply in July, following a substantial increase in June. Changes in output of nondurable manufactures in July were largely of a seasonal nature. At cotton textile mills and meat-packing establishments activity showed somewhat less than the usual declines and at sugar refineries output increased from the low level reached in June. Flour production continued in sub stantial volume. Mineral production expanded further in July as output of bituminous coal continued to increase and petroleum production, which had been reduced in June, rose sharply. On August 14 the Texas Railroad Commission ordered a shutdown of most Texas oil wells for 15 days, beginning August 15, and subsequently similar shutdowns were ordered in several other important oil producing States. Value of construction contracts, as reported by the F. W. Dodge Corporation, increased somewhat in July, owing principally to a small rise in contracts for public projects. Awards for residential work, both public and private, were prac tically unchanged from the June total. Employment—Factory employment, which usually declines in July, was maintained this year at about the June level and payrolls showed a less than seasonal decrease, according to reports from a number of leading industrial States. Distribution—Sales at department and variety stores in July showed about the customary seasonal decline. In the first half of August department store sales increased. Freight-car loadings increased further from June to July. Loadings of coal continued to expand and shipments of miscellaneous freight, which usually decline at this season, showed little change. Commodity Prices—Prices of most farm products and foods declined from the beginning of July to the middle of August. Some industrial materials, principally steel scrap, nonferrous metals, and textile fabrics, showed advances in this period, while crude petroleum prices were reduced. 1938 1939 Indexes compiled by the United States Bureau of Labor Statistics, 1926 = 100. By weeks, 1934 to week ending August 12, 1939. MEMBER BANK RESERVES Agriculture—On August 1 prospects for major crops were about the same as a month earlier, according to the Department of Agriculture. The first official estimate on cotton indicated a crop of 11,400,000 bales, somewhat smaller than last year’s crop and 2,400,000 bales less than the 1928-1937 average. World carryover of American cotton, however, was estimated to have been somewhat larger on August 1 than the record volume of a year ago. BILLIONS OF DOLLARS BILLIONS OF DOLLARS TOTAL REQUIRED RESERVES wmwWA. EXCESS RESERVES Wednesday figures of total member bank reserve balances at Federal Reserve banks, with estimates of required and excess reserves, January 3, 1934, to August 16, 1939. Page 8 Bank Credit—Total loans and investments of member banks in 101 leading cities increased substantially during the four weeks ending August 9, reflecting chiefly increases in holdings of United States Government obligations and the purchase hy New York banks of a large share of a new issue of New York State short-term notes. Commercial loans continued to increase at New York banks but declined at banks in 100 other leading cities as corn and cotton loans that were approaching maturity were taken over by the Commodity Credit Corporation in accordance with a standing agreement. Deposits at reporting banks remained at high levels. Excess reserves of member banks increased further to new high levels in the latter part of July and the first half of August, owing principally to gold imports and net Treasury disbursements, partly offset by a reduction in Federal Reserve bank holdings of Treasury bills. Money Rates—The average rate on new issues of 90-day Treasury hills has increased slightly in recent weeks and on August 16 was 0.032 per cent. Prices of Treasury bonds showed little change from the middle of July to the middle of August. DIRECTORS AND OFFICERS Federal Reserve Bank of Chicago DIRECTORS T n Wood, Chicago, III............................... Deputy Chairman W J. Cummings................................ Chicago, 111. C. B. Van Dusen.............................Detroit Mich E. R. Estberg............................. Waukesha Wis M W Rarr m-i iw?r n .................... waunesna, wis. m. W. BABB.................................... Milwaukee, Wis. *■ U- WlLLIAMS•••••• • ■ 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. ............................... ............ .. Prpsidpnt H. P. Pkeston..............................................first Vice President J. H. Dillard..........................................................................VicePresident W. H. Snyder...................................... yice President and Cashier o’ ™ I°mG............................................................................. VicePresident C. B. Dunn......................................................................... GeneralCounsel W. C. Bachman............ Assistant Vice President O. J. Netterstrom........ Assistant Vice President A. L. Olson.................... Assistant Vice President A. T. Sihler.................. Assistant Vice President A. M. Black. .. .Manager, Planning Department J. J. Endres.............................................. Auditor P. C. Hodge.............................. Assistant Counsel 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 C. A. Phillips........................ Economic Adviser J. L. Sweet...............................Statistical Adviser INDUSTRIAL ADVISORY COMMITTEE „ Max Epstein, Chicago, III........................................... Chairman . Harnischfeger..................... Milwaukee, Wis. G. B. Moxley............................. Indianapolis, Ind. R. Monroe.................................... Chicago, 111. G. W. Young....................................... Chicago, 111. DETROIT BRANCH DIRECTORS A. C. Marshall............................ Detroit, Mich. J. E. Davidson............................... Bay City Mich. ‘ U Pierson Detroit, Mich. J. M. Dodge Detroit Mich L. W. Watkins......................Manchester, Mich. W. S. McLucas............................... Detroit’Mich. R. II. Buss..............................................................Detroit, Mich. t ................................................................................. ............................................................................................. OFFICERS T R. H. Buss.......................... ........................... Managing Director H. J. Chalfont........................................Cashier H. L. Diehl............................... Assistant Cashier SEVENTH FEDERAL IOWA RESERVE DISTRICT
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