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CONDITION S BUSINE A REVIEW BY THE FEDERAL RESERVE BANK OF CHICAGO ^ ■' JO/) SQ >, Volume 24 JULY 1 , 1941 h § I • ■EL ■. „• i 1P| ite < Employes Who Are Now In Military Training (For identification, see inside front cover) AM Number 6 Employes Who Are Now In Military Training Thirty-three employes of the Federal Reserve Bank of Chicago and four from the Detroit Branch have entered the armed forces of the Government during the present preparedness program. Twenty-three have entered the army under the Selective Service Act, twelve are members of the Illinois National Guard, one was a member of the Naval Reserve, and one is a member of the Michigan National Guard. Those now in active service are: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. Richard Armato 19. Bernard V. McDonagh Albert L. Beauvais 20. William F. Moehle Harley C. Burk 21. Albert E. Mommsen Daniel Burnham 22. Harold R. Noren John A. Chudd 23. Frank B. Norris LeRoy A. Davis 24. James P. O’Brien Harry 0. Engle 25. John C. Ortman Clement E. Globis 26. Vernon F. Peterson Robert W. Heinke 27. Roy John Risting Charles A. Henderson 28. Roy H. Sandvik Fred H. Hoelck 29. Edward C. Schultz Paul W. Johnson 30. Vincent P. Schumacher Thomas Kennealy 31. Joseph A. Severtsen Ralph N. Kent 32. Laurence M. Sheahan Edward H. Koch 33. John J. Shimkus Theodore H. Kuyper 34, Harry H. Tiedemann Kenneth P. Laux 35. Willard VonBergen Herman H. Longfield 36. Rhys W. Wagner 37. John G. Zuurbier Business Conditions in the Seventh Federal Reserve District Department Stores—Responding to increased activity in business engendered by the defense program and the re sulting augmented purchasing power of increased employ ment and payrolls, department store trade in the Seventh district has continued to show increases in recent months over the corresponding periods of 1940. Starting at a higher level in January 1941 than it did in January 1940, the volume of trade has increased consist ently over the previous year. Based on indexes computed on daily average sales, the difference in January ranged from 5 per cent to 18 per cent for the cities shown in the accompanying chart, with an average of 9 per cent for the district. By the end of May, this difference in level had increased, ranging from 15 per cent to 25 per cent and averaging 18 per cent for the district. These increases were most consistent in Milwaukee; beginning with 13 per cent in January they rose to 14 per cent in February, 17 in March, 20 in April, and 25 in May. Chicago, starting 5 per cent above the January 1940 volume, showed the most even month-to-month expansion during the January to May period, but averaged lower than any of the other cities shown on the chart. Sales in Detroit have registered the largest average monthly increase. The rise in dollar volume of sales has, to some extent, reflected price advances, but there has also been a sustained increase in the physical volume of goods distributed. All of the principal cities of the district have shown an ex pansion in retail trade since the defense program was started. The increase has been particularly noticeable throughout 1941. Cumulative sales for the period of January through May, as shown in the table below, recorded increases of 27 per cent in Lansing and Flint, 24 per cent in Fort Wayne, and 21 per cent in Detroit. The increase for the district as a whole was 15 per cent. With an increase of 22 per cent, total sales for May re corded the largest gain in the year-to-year comparison so far in 1941. May sales at Lansing increased 33 per cent over those of a year ago; Detroit sales registered a gain of 28 per cent in this comparison; Milwaukee and Fort Wayne recorded gains of 27 per cent; Flint and Indianapolis in creases were 24 per cent. Des Moines and Sioux City stores recorded their largest year-to-year gain since January. Notwithstanding this increase in the physical volume of goods sold, inventories continued above the level of a year ago, and on May 31 were about equal to those of April 30. DEPARTMENT STORE TRADE IN MAY 1941 Locality May 1941 Compared with May 1940 (Per Cent Change) Net Sales Stocks End of Month First Five Months 1941 Compared with First Five Months 1940 (Per Cent Change) Net Sales Chicago........................ Peoria............................ Fort Wayne................. Indianapolis................. Des Moines.................. Sioux City.................... Detroit.......................... Flint.............................. Grand Rapids............. Lansing......................... Milwaukee................... Other Cities................. +144 -15 -27 -24 -14* -14 +28 +24 +16 +33 +27 +33* + 7 + 7 + 9 + 4 + 8* +12 +24 +19 + 9 + 8 +21 +27 +13 +27 +18 +22 7th District................. +22 + 7 +15 +ii + 8 +i DEPARTMENT 1935 - 1939 PER CENT 150 CHICAGO STORE SALES AVERAGE - 10D PER CENT ---------ISO DETROIT 1940 1940 INDIANAPOLIS MILWAUKEE f 1940 SEVENTH DISTRICT Index numbers based on daily Miscellaneous Retail Trade—The increase of 21 per cent during May over a year ago shown by apparel stores reporting in this district is approximately the same as that shown by department stores. Cumulative sales for the five months of 1941 were 12 per cent larger than those of the corresponding period of 1940. At the end of the month, stocks were only 2 per cent above a year ago and diminished 6 per cent from the close of April. Although sales of shoes as reported by dealers and de partment stores failed to reach the 36 per cent increase shown for April over a year ago, the gain of 24 per cent over May 1940 is a substantial one. Dealers gained a little more than department stores. May sales about equaled those of April, but in that comparison dealers showed a decline whereas department stores registered a slight gain. Sales for the five months of 1941 totaled 14 per cent above the corresponding period of 1940. Dealers’ inventories were lower than either a month or a year earlier. The unusually good business in retail furniture which had prevailed since the beginning of the year, although checked somewhat in April, resumed its more favorable trend in May. Furniture sales in that latter month, as re ported by dealers and department stores in the Seventh district, rose 24 per cent over May 1940. Dealers and de partment stores shared about equally in the gain. In the monthly comparison, an increase of 14 per cent was shown, which is about equal to the ten-year average. Dealers gained 32 per cent over April, but department stores in creased only 11 per cent. Sales for the five months of 1941 totaled 24 per cent above the same period a year ago. Page I SALES OF INDEPENDENT RETAIL STORES (As compiled by the Bureau of the Census) Total All Groups*.............................. Apparel Group..................................... Drug Stores......................................... Eating and Drinking Places............. Food Group......................................... Furniture-Household-Radio Group Hardware Stores................................ Jewelry Stores..................................... Lumber and Building Materials---Motor Vehicle Dealers...................... May 1941 Compared with May 1940 (Per Cent Change) Indiana Iowa Michigan Wisconsin +26 +22 +23 +24 +35 +27 -22 +19 -14 +17 +12 +20 +12 - 8 +11 +16 +16 +16 -15 + 9 +23 +20 +23 -33 +30 -34 +21 +24 +53 +28 -43 +41 +16 +18 +21 - 7 +51 +38 +45 +66 Illinois +22 4-30 4-13 +10 4" 8 4-23 +19 +41 + 6 +45 •Includes classifications other than those listed. WHOLESALE TRADE IN MAT 1941 May 1941 Compared with May 1940 (Per Cent Change) Drugs and Sundries...................... Electrical Goods........................... Groceries........................................ Hardware....................................... Jewelry............................................ Meats and Meat Products........... Paper and Its Products............... Tobacco and Its Products........... Miscellaneous................................. Net Sales Stocks + 9 +42 + 9 +41 +41 +27 +24 + 8 +38 b 8 -33 -14 -27 -12 -29 -10 - 9 h!2 Accounts Outstanding Collections +u +73 +12 +31 +26 +17 +23 +4 +25 +n +89 +10 +46 +30 +21 +35 + 7 +36 7th District.................................... +25 +20 +24 +28 Data furnished by Bureau of the Census, United States Department of Commerce. Wholesale Trade—With the exception of tobacco and tobacco products which showed a slight decline in February 1941 from a year ago, all large wholesale groups reporting to the Bureau of the Census have recorded sizable gains in the year-to-year comparison each month so far in 1941. District total sales for May 1941 exceeded those of May 1940 by 25 per cent, all lines sharing in that substantial gain. For the fourth consecutive month, electrical goods recorded the largest gain, the increase in May 1941 totaling 42 per cent over a year ago. Hardware and jewelry groups followed closely with a gain of 41 per cent each. For the district as a whole, inventories continued their expansion over 1940, and in May 1941 increases ranged from 8 to 33 per cent. At the end of May they totaled only 3 per cent more than a month previous. Industrial Activity Steel—Under the pressure of an unprecedented demand for all forms of finished products, the steel industry has been operating at or near-capacity levels, and if the five-month average is continued throughout the year, the industry will have produced approximately 82,000,000 tons of ingot steel. This activity, resulting from the demands of the defense program and civilian needs, has been felt through out the industry. Shipments of iron ore on the Great Lakes have been stepped up considerably, idle blast furnaces have been placed in operation, consumption of iron and steel scrap has been increased, and plans are being worked out for increasing the use of rolling mill capacity for the pro duction of plates needed in the building of ships and rolling stock for railroads. Pig iron production, which suffered a setback late in April because of the idleness of the coal mines, was again at a high level in May, the daily average output of the Seventh district exceeding the previous month by 6 per cent and the high figures of March by 2 per cent. Furnaces that have been idle for years were put back in operation. The Camegie-IIlinois Steel Company now has 55 furnaces in blast out of a possible 59. In this district, they have 22 out of 23 in operation. Ore shipments on the Great Lakes were unusually heavy in May, totaling 11,000,000 Page 2 gross tons. This volume exceeded the previous high of 10,800,000 tons recorded in August 1937. During the first four months of this year, consumption of iron and steel scrap in the country as a whole totaled 17,500,000 tons as against 11,700,000 tons the same period last year. There has been an increasing demand for this material during the past month. The number and tonnage of orders booked by the Chicago mills during May registered a definite decline, as backlogs had mounted to a point where mills were having difficulty in making further commitments for the year. By means of its priorities critical list, which is subject to revision each month, and its inventory control plan, the Priorities Divi sion of the OPM has been seeking to give defense and essen tial civilian needs first claim on all forms of steel, and has found it necessary to issue a further order that a steel supplier, upon complaint, must make a sworn state ment as to why a particular order was rejected or deferred. The situation has been complicated by an extremely heavy demand for plates, a finished steel product required in large volume for shipbuilding, railroad car-building, and other urgent defense projects. In ordinary years, this item constitutes less than 10 per cent of the finished steel pro duction of the country, whereas sheets make up almost 25 per cent. Plans are now under consideration for the curtail ment in production of sheet and strip steel, in order to make use of rolling mill capacity for the production of plates. Automobile Industry—Current demand for automobiles continues at high levels, and manufacturers are finding it increasingly difficult to produce enough cars to insure prompt deliveries. Field stocks have decreased to a point where some dealers are reporting an actual shortage of automobiles. For the week ending June 21, production of passenger cars and trucks in the United States and Canada was 133, 565 units, compared with 134,682 last week which was the highest recorded in the previous four years. Only seven weeks in 1941 showed an output of less than 120,000 cars and trucks per week, 3,016,000 units being produced in the first 25 weeks of this year. During May, output of 525,000 passenger cars and trucks in the United States represented an increase of 14 per cent from a month previous, and a gain of 34 per cent over a year ago. THOUSANDS OF UNITS PRODUCTION JAN. FEB. MAR. OF APR. MAY PASSENGER JUNE JULY Data furnished by Ward’s Reports, Inc. CARS AND TRUCKS--- AUG. SEPT. OCT. NOV. ----- 1160 DEC. The shutdown of production for changeover to new models may be shorter this year than in previous years, as many preliminary preparations have been made. It has been the practice of some manufacturers in recent years to incorporate certain improvements in vehicles produced in the spring or summer months, and to delay announcing the changes until the new models are presented in the autumn. Automotive producers will be able to continue operations at capacities through July only. Beginning August 1, re duction schedules will be in effect to permit the industry to release more men and materials for defense needs. The extent to which the automobile industries have par ticipated in the national armament program during the past year cannot be measured by the actual production of arma ments. Factories and arsenals have been erected, new machines and tooling installed, and pilot or working models of airplane engines developed from intensive research work. According to the latest available reports, output of the Allison Division of General Motors is now 100 airplane engines per week, and a production level of 250 units per week is expected by the end of the year. Last Septem ber Packard Motor Car Company contracted to produce 9,000 Rolls-Royce Merlin aircraft engines. New factories for this project are about completed, and 800 motors per month are expected by February 1942. Ford’s River Rouge plant is scheduled to open September 1, with an output of 15 Pratt and Whitney, 2000-hp. units per day. This plant is designed for maximum expansion. Buick Division of General Motors, which started construction March 17 of this year, has completed 25 per cent of the steel structure of the main manufacturing building, and by January 1942 a monthly production of 500 Pratt and Whitney, 1200-hp. engines is expected. The Studebaker Corporation has three plants under construction which are designed to produce 1700-hp. Wright Cyclone engines at the rate of 600 per month. First output is scheduled for December of this year. The Chevrolet Division of General Motors is also planning to produce Pratt and Whitney airplane engines. Chrysler Corporation has many defense contracts for aluminum forg ings, anti-aircraft guns for the navy, Bofors guns, and a $20,000,000 tank arsenal. Wyllis is converting its Toledo, Ohio, forging plant to aluminum work. Hudson is con structing a huge naval ordnance plant which will produce anti-aircraft machine guns, gun mounts, and torpedo tubes. The provision of armored motorized vehicles for the army is taken as a matter of course by the automobile in dustry, and by July 31 it is estimated that the army will have received about 137,000 such units. STEEL AND MALLEABLE CASTINGS SEVENTH DISTRICT May 1941 Per Cent Change from April May Steel Castings: 1941 1940 Orders booked (tons)........................................................................... —39 + 88 Orders booked (dollars)...................................................................... —35 4*106 Shipments (tons)................................................................................... — 2 4-78 Shipments (dollars)............................................................................... — 0 4-83 Production (tons)................................................................................... — 4 4-86 Malleable Castings: Orders booked (tons)........................................................................... Orders booked (dollars)...................................................................... Shipments (tons)................................................................................... Shipments (dollars).............................................................................. Production (tons)................................................................................... — 3 — 3 — 6 — 5 —11 +136 4-145 4-70 4-77 4- 79 that month. Shipments continued to gain, the May figure reflecting an increase of 6 per cent from the previous month and 43 per cent from a year ago. Inventories showed little change from a month earlier but were 16 per cent lower than on May 31, 1940. As a result of the various showings by the Chicago furniture marts early in the month, furniture manufacturers booked an unusually large volume of orders in May, the amount exceeding that of April by almost 50 per cent. Bookings were twice as large as in May a year ago. Ship ments remained at the level of a month earlier and unfilled orders showed an accumulation of close to 40 per cent. Cancellations of orders were less than in April and about the same in volume as in May last year. Shoe production in the district has been rising steadily since last December, with the rate of increase slowing down during the past two months. The level reached in May exceeded that of a year ago by close to 45 per cent. SHIPMENTS BY SELECTED SEVENTH DISTRICT INDUSTRIES 1935-1939 AVERAGE- 100 PER CENT STEEL CASTINGS (tons) MALLEABLE CASTINGS (tons) 1940 1940 STOVES AND FURNACES FURNITURE Miscellaneous Manufactures—Operating activity at Seventh district foundries slowed down perceptibly during May, and shipments totaled somewhat lower than in the previous month. Incoming business lost the ground gained in April, and for steel castings was smaller in volume than during either March or April. Although the May business declined from April, it continued well above year-ago volumes. The favorable margin for shipment remained as pronounced as in previous months, while that of new business was considerably reduced. Operations at stove and furnace manufacturing plants held steady at the level reached in April and maintained the same favorable margin over a year ago as was reported for 1940 i i i i i i i i i SHOES i 1940 i i i i I I I I I jjJ 1941 1340 1341 Pege 3 PAPER AND PULP INDUSTRY SEVENTH DISTRICT May 1941 Per Cent Change from April May Paper: 1941 1940 Orders booked (tons)........................................................... —4 Orders booked (dollars)...................................................................... +3 +37 Shipments (tons)................................................................................... +4 +20 Shipments (dollars).............................................................................. +8 +27 Production (tons).................................................................................. +4 +12 Stocks at end of month (tons)............................................................ +3 —17 Pulp: Production (tons).................................................................................. +6 + 8 Stock at end of month (tons)................................................................ —1 —27 Production of paper at district mills for the past three months has been at an increasing rate, the daily average output in May exceeding that of February by 9 per cent. Shipments and orders are approximately one-fifth larger in tonnage volume than last year, while inventories are in creasingly lower. Building—Except for the extremely high March figure which included almost $90,000,000 of defense contracts, construction awards in the Seventh district during May were higher than those of any other month since June 1930. Residential awards in the five months of this year to date have averaged higher than in any corresponding period BUILDING CONTRACTS AWARDED SEVENTH FEDERAL RESERVE DISTRICT Period Total Contracts Residential Contracts May 1941........................................................................... Change from April 1941............................................. Change from May 1940........................................... First five months of 1941............................................... Change from same period of 1940............................ *76,218,000 +6% +25% *375,100,000 +69% *32,911,000 -3% +17% $133,683,000 +40% Data furnished by F. W. Dodge Corporation. since 1929. Much of the increase in this type of building during the past year has been due to the need for can tonments and for other buildings incident to the defense program. The effect of this program has been especially noticeable in the awards for commercial and industrial buildings which so far this year have constituted fully one third of the aggregate contracts. In 1940 this type of building constituted only about 20 per cent of the total. In 1939 they were 14 per cent, and in 1938 they were 11 per cent. The increase in May over the already large volume of contracts recorded for April was of moderate proportion. An increase of about $5,000,000 in awards for heavy engineering projects, mainly public utilities, was more than sufficient to counteract minor decreases in the residential and non-residential classifications. Building permits issued during May showed little change from April in either number or estimated cost of con templated projects. There was considerable variation within the district, however, with Michigan and Wisconsin show ing definite declines, while Illinois, Indiana, and Iowa registered substantial increases. All of the States reported increases over year-ago figures. The average rise in number of projects amounted to 10 per cent and in cost to 25 per cent. Wholesale lumber dealers reported moderate declines in sales for the month, while retail dealers registered a continued expansion. Dollar sales at both wholesale and retail were approximately 20 per cent higher than a year ago. Cement shipments from mills within the district showed a continued seasonal expansion, and, according to pre liminary reports, were almost 40 per cent ahead of those Page 4 of a year ago. Brick deliveries continued at the high level reached in April, and reports indicate that there has been some reduction in inventories of this material. Wholesale prices of building materials held steady during the month, and in early June were about 9 per cent higher than in the +20 corresponding week a year ago. Bituminous Coal Production—Coal mines in the Seventh district area resumed operations on a large scale after the settlement reached between operators and union on May 1. Production was stepped up rapidly during the month and the daily output averaged more than four times as large as the low April volume and 14 per cent larger than the corresponding figure of last year. Notwithstanding the large volume produced during March in anticipation of the shutdown which came in April and the subsequent gain in May, the tonnage produced in the five months to date is approximately 4 per cent below that of the same period a year ago. Stocks in the hands of industrial users and retail dealers of the entire country on May 1, as re ported by the Bituminous Coal Division of the United States Department of the Interior, totaled a little less than 37,000,000 tons, or 28 per cent below the 51,000,000 tons held a month earlier. Petroleum Refining—On a daily average basis, runs of crude oil to stills in the Ulinois-Indiana-Kentucky area in creased 11 per cent from April to May. Gasoline production showed a similar substantial rise but was insufficient to satisfy the rising volume of consumption, and stocks on hand registered a decline of 7 per cent from a month earlier. The reduction in freight rates from the mid-continent field, which went into effect June 11, has resulted in an additional large volume of trade demand previously held back in anticipation of this reduction. Employment and Payrolls The most rapid expansion in employment and payrolls that has been recorded in any yearly comparison since the days of the NRA has taken place in the manufacturing industries in the Seventh Federal Reserve district during the EMPLOYMENT AND PAYROLLS—SEVENTH FEDERAL RESERVE DISTRICT Week of May 15,1941 Industrial Group Per Cent Change from April 15, 1941 Wage No. of No. of Payments No. of Wage Reporting Employes (000 Employes Payments Firms Omitted) Durable Goods: Metals and Products1........... Vehicles................................... Stone, Clay, and Glass......... Wood Products...................... Total......................................... 1,796 391 258 452 2,897 564.643 429.643 20,898 55,043 1,070,227 $20,025 18.517 598 1,378 40.518 + + + + + 3.5 1.2 3.7 11 2.5 + 7.1 +18.2 + 7.9 + 5.8 +11.9 Textiles and Products.......... Food and Products............... Chemical Products............... Leather Products................... Rubber Products................... Paper and Printing................ Total......................................... 410 1,017 300 171 33 710 2,641 72,777 113,292 38,686 29,625 23,560 86,043 363,983 1,499 3,224 1,289 724 782 2,710 10,228 — + + — + + + 0.4 4.8 2.1 0.8 0.0 1.5 1.9 + + + + + + + Total Mfg., 10 Groups.............. 5,538 1,434,210 50,746 + 2.3 +10.4 Merchandising............................ Publio Utilities.......................... Coal Mining................................ Construction............................... 5,199 1,000 48 410 146,363 107,816 7,480 7,514 3,431 3,805 219 303 + 0.5 + 1-6 +225.5 +18.6 + 1.1 + 3.4 +431.0 +15.1 Non-Durable Goods: 0.6 9.6 5.6 3.6 1.5 3.6 5.0 Total Non-Mfg., 4 Groups....... 6,657 269,173 7,758 + 3.3 + 5.1 Total, 14 Groups........................ 12,195 1,703,383 *58,504 + 2.5 + 9.7 1Other than vehicles. Data furnished by State agencies of Illinois, Indiana, Michigan, and Wisconsin. past year. By the end of May employment showed a gain of approximately 27 per cent over the corresponding period a year ago. Payrolls were up 47 per cent. This gain was all the more striking since it was recorded over a fairly high level, whereas the increase during the first year follow ing the passage of the National Recovery Act, which re sulted in a rise of 35 per cent in employment and 50 per cent in payrolls, was from the low level prevailing in June 1933. Durable goods have contributed the greater share of the gains, advancing steadily during the entire period and at a rate that has been three times as rapid as that shown by the non-durable goods industries. Employment in these in dustries rose as much as 34 per cent, and payrolls 58 per cent. Under the pressure of the present defense program which apparently has not yet reached its full proportions, these industries will absorb an even larger number of work ers in the coming months. Some of the workers will have to come from those who are now engaged in public emergency projects and some from those now unemployed. The problem of training new workers has already become an important part of the Government’s defense program. Non-durable goods industries also have shown a definite expansion during the past year, but the rise has been marked by considerable fluctuations. Reporting non-manufacturing groups as a whole showed the effects in May of the resumption of coal mining operations, as well as a sharp seasonal rise in the con struction industries. Merchandising and public utility con cerns, however, shared in the current uptrend. In the monthly comparison, May indicated a rise in employment and larger payrolls in practically all industries in all sections throughout the Seventh district. The employ ment rise, while larger than that which generally occurs from April to May, conformed closely to the average of the expansion that has been in continuous progress since last July. The rise in wage payments during May was particularly large, as the result of the settlement of disputes which during the previous month had interrupted the normal operating schedule. This payroll increase was especially noticeable in the vehicle industries. Payrolls in practically all of the reporting industries expanded to a greater degree than employment as increases in wage rates have become widespread in recent months, and there has also been a definite tendency toward longer operating time schedules in several of the reporting industries. The Agricultural Situation Voting of marketing quotas for wheat by a substantial majority, approval of loans at 85 per cent of parity for certain crops, supporting of prices by Government pur chases in the open market, and predictions of bumper crops have been the outstanding recent developments in agriculture. The referendum vote by the farmers, establishing market ing quotas for the 1941 crop, was the final step necessary to put into effect the Agricultural Farm Marketing Law providing for loans at 85 per cent of parity. This action was followed immediately by the announcement of a regional basic price for loans at Chicago of $1.15 a bushel. Government reports predict a combined crop of winter and spring wheat of 910,699,000 bushels. This volume has been exceeded only five times in the history of the country. In 1915, the record wheat crop of 1,008,600 bushels was produced. Grain Marketing—Receipts of wheat at primary interior markets of the country have been unusually large. During MOVEMENT OF GRAIN AT INTERIOR PRIMARY MARKETS IN THE UNITED STATES (In thousands of bushels) Wheat: Receipts.............................................. Shipments........................................... Corn: Receipts.............................................. Shipments........................................... Oats: Receipts.............................................. Shipments........................................... May 1941 31,396 17,464 April 1941 17,106 11,685 May 1940 28,275 19,267 May 1931-40 Avg. 17,932 15,794 25,852 22,599 16,930 14,229 12,417 17,276 15,402 15,221 3,850 3,049 4,381 3,264 2,966 4,391 5,646 8,062 May, wheat received amounted to 31,396,000 bushels. This was a gain of 84 per cent over April and of 75 per cent over the ten-year average. The visible supply of 119, 506,000 bushels on June 14 was over 32,000,000 bushels greater than a year ago, a gain of 37 per cent. Since the first of June, prices have moved up sharply, and dollar wheat has been the rule during most of the trading sessions. The urgent demand for flour has given strength to the market, and purchases by large bakers have been unusually heavy. The market has apparently dis counted the crop estimate and has developed into what traders classify as a “weather market,” chiefly because of the heavy rains that have persisted in the Southwest. A sustaining influence also was the report that the CCC proposed to withhold marketing old wheat which it owns through de faulting loans. While corn prices have followed other grains, the market has moved within narrow limits and has been influenced by the announcement of the Secretary of Agriculture that Government-owned corn would be for sale at a maximum of 75 cents in Chicago. During the latter part of May, there was some fear of drought, but since the first of June, rains have been general throughout the corn belt, inter fering with the country movement of grain to market. Sub soil moisture reserves have been created and crop reports are highly favorable. Closing prices at Chicago have ranged around 73 cents a bushel, which, with the exception of 1934, 1935, and 1936, is the highest that has been recorded in the last ten years. Receipts of corn at principal interior markets during May have been 53 per cent above the previous month and 68 per cent above the ten-year average. Dairy Products—June 4 the Secretary of Agriculture pre sented the dairy industry with the problem of increasing the production of cheese by one third, the supplies of evaporated milk one fourth, and the available supplies of milk for fluid consumption by at least 3 per cent, in order to meet the needs of the lease-lend act and to maintain sufficient supplies for home requirements. The total production of American cheddar cheese in the last twelve months, according to the Department of Agriculture, was about 605,000,000 pounds, and the total production of evaporated milk was 58,000,000 cases. The quantity of milk required to increase American cheese production by one third and evaporated milk one fourth is equal to about 3 per cent of the total milk produced in the United States in 1940. If milk production is increased by 6 to 8 per cent the desired increases in milk products can be obtained without diminishing the supplies available for either butter or fluid milk. This desired milk production is being attained despite the effects of the drought in the Eastern half of the United Page 5 States, although the cheese and evaporated milk increases have not been achieved. The increase in milk production, which has been in evidence all spring, has continued through May, and on June 1 was the largest on record for that date. The increase in milk production per cow and the larger number of cows on farms indicated that the total milk production on June 1 was 5 per cent larger than a year earlier. Price relationships in Wisconsin have been such as to divert milk from butter to cheese and evaporated milk. Pro duction of American cheese in Wisconsin during May in creased 32 per cent over the previous month and was 48 per cent above the ten-year average for the month. Sales were up 38 per cent over those of May 1940. While this increase in American cheese production was being made, butter produced in the district was increased by 29 per cent over the previous month, and for the entire country the increase was 35 per cent. Government purchases of dairy products continue on a large scale. The Department of Agriculture announced that during May it purchased 16,324,000 pounds of American cheese, 1,000,000 pounds of canned process cheese, 617,800 cases of evaporated milk, 60,000 pounds of dry whole milk, and 528,000 pounds of dry skim milk. Prices of cheese on the Wisconsin Cheese Exchange re mained at 18 cents per pound from May 10 through June 7. This price compares with 16.5 cents a month earlier and 13 cents a year ago. Recent purchases for the Surplus Marketing Administration were made at 21.5 cents. EvaporPRICES OF FARM PRODUCTS HOGS' By weeks, 1937 through June 21,1941. Page 6 AT CHICAGO LIVESTOCK SLAUGHTER (In thousands) Yards in Seventh District: May 1941............................................... ........ May 1940............................................... Federally Inspected Slaughter, United States: May 1941............................................... ........ April 1941............................................. ........ May 1940............................................... ........ Cattle 203 908 792 796 Hogs 649 666 4,023 3,807 3,890 Lambs and Calves Sheep 221 75 212 80 1,551 1,436 1,420 501 507 501 AVERAGE PRICES OF LIVESTOCK (Per hundred pounds at Chicago) Native Beef Steers (average).......... Fat Cows and Heifers....................... Calves................................................... Hogs (bulk of sales)........................... Lambs................................................... Months of Week Ended June 21, May April 1941 1941 1941 ............... $10.75 $10.10 $10.60 ............... 9.60 9.25 9.20 ............... 10.50 10.50 10.00 8.35 ............... 9.90 9.00 ............... 11.35 10.20 10.80 May 1940 $ 9.80 8.30 10.25 5.65 9.65 MEAT PACKING—UNITED STATES Tonnage produced.......................................... ....................... Tonnage sold................................................... ....................... ....................... Inventories, end of month............................ ....................... Per Cent Change in May 1941 from May April May 1931-40 Avg. 1941 1940 +8.5 + 9.9 +25.1 +7.9 + 6.5 +19.8 +7.7 +29.8 +47.8 +30.0 +50.9 +1.5 ated milk has been commanding a price which should pro vide the dairymen with a differential sufficient to divert milk from butter production. Butter prices on the Chicago market, while somewhat irregular, have inclined to firm ness. Wholesale quotations for 92-score butter at Chicago declined one cent from mid-May to mid-June, probably influenced by the United States cold-storage report showing holdings in excess of trade estimates. During the last half of May and the first half of June, butter prices were higher than they have been during the corresponding period in the last ten years, fluctuating around 35 cents per pound. Livestock and Meat Packing—The advance in hog prices which has been more or less steady throughout the year rose sharply in April and May. Prices weakened early in June but strengthened again toward the middle of the month. The average price for the month of May was $9.00, compared with $8.35 for April and $5.65 for May a year ago. Continued heavy purchases of pork products for the Department of Agriculture have contributed to the upward price movement. Cattle slaughter increased sharply in May, indicating an increase in marketings of grainfed cattle. Prices of all grades of slaughter cattle increased some what in early June, following the sharp decline in May. Production of packing-house commodities in the United States increased 9 per cent from April to May and ID per cent over May 1940. Tonnage sold was up 8 per cent during May, after declining half that much during the previous month. Dollar sales in the Seventh district were up 30 per cent over May a year ago. Foreign trade in meat products continued to be dominated by purchases under the lease-lend act. Trade with Latin American countries was smaller during May than it was in April. This decrease was due no doubt to exchange condi tions. Credit and Finance Weekly Reporting Member Banks—Commercial, in dustrial, and agricultural loans of weekly reporting mem ber banks in the Seventh district expanded $24,000,000 in the four weeks ended June 11, reaching a total of $821, 000,000 which represents a gain of $242,000,000 over the same period a year ago. Total investments increased even more, registering a gain of $370,000,000 during the year. Of this increase, $31,000,000 was recorded during the four weeks beginning May 14 and ending June 11. The principal addition to portfolios consisted of Treasury bills, as hold ings of Treasury bonds increased only $8,000,000 during the four-week period and $190,000,000 during the year. Demand deposits continued to expand, reaching a high for the year of $3,402,000,000, a gain of $144,000,000 during the last two weeks of May and the first two weeks of June. Member bank reserves in the Seventh district increased $52,000,000 during the four weeks ended June 11. A siz able gain through commercial transactions with other dis tricts more than offset the increase in Treasury cash and deposits at the Federal Reserve Bank and an increase in the demand for currency. Treasury Financing—June 2 the Treasury delivered $662,000,000 of 2y2 per cent 15-17 year bonds which had been sold for cash, and exchanged an additional $788,000, 000 for 3y2 per cent bonds maturing August 1, 1941. The Treasury also delivered $924,000 of % per cent Series D notes due 1943 for bonds of the August maturity. Approxi- SEVENTH MAY DISTRICT BU5INE55 ACTIVITY 1941 COMPARED WITH MAY MONTHLY BUSINESS INDEXES Data refer to Seventh District and are not adjusted for seasonal variation unless other May wise indicated. 1941 1935-39 average = 100 Manufacturing Industries: Durable Goods: Employment................................................. Payrolls.......................................................... Non-Durable Goods: Employment................................................. Payrolls.......................................................... Total: Employment................................................. Payrolls.......................................................... Pig Iron Production:* Illinois and Indiana......................................... Automobile Production—(U. S.): Passenger Cars and Trucks........................... Casting Foundries Shipments: Steel—In Dollars............................................. In Tons.................................................. Malleable—In Dollars.................................... In Tons.......................................... Stoves and Furnaces: Shipments.......................................................... Furniture Manufacturing: Orders in Dollars............................................. Shipments in Dollars...................................... Paper Manufacturing:* Tonnage Production........................................ Petroleum Refining—(Indiana, Illinois, Kentucky Area):* Crude Runs to Stills........................................ Gasoline Production........................................ Bituminoua Coal Production:* Illinois, Indiana, Iowa, and Michigan......... Building Contracts Awarded: Residential........................................................ Total................................................................... Meat Packing—(U. S.): Production......................................................... Sales Tonnage................................................... Sales in Dollars................................................ Department Store Net Sales:* Chicago.............................................................. Detroit............................................................... Indianapolis....................................................... Milwaukee......................................................... Other Cities...................................................... Seventh District—Unadjusted..................... Adjusted.......................... Apr. 1941 Mar. 1941 May 1940 Apr. 1940 Mar. 1940 144 184 140 167 135 163 108 117 108 119 110 119 108 124 106 118 103 115 96 102 96 101 97 102 132 166 129 152 124 149 104 113 104 113 105 114 200 188 196 134 117 118 164 144 158 122 135 132 228 181 192 171 228 184 202 182 213 168 176 159 106 86 109 101 120 109 113 103 128 116 114 105 154 145 132 125 107 84 252 107 168 163 157 160 125 111 95 in 98 118 130 129 120 116 107 103 155 147 140 133 146 135 144 141 135 128 138 129 89 21 150 78 85 109 285 194 292 181 254 333 244 155 222 155 177 110 132 129 131 121 120 122 121 124 120 120 121 101 113 119 98 116 115 95 121 133 139 128 124 126 124 113 125 140 128 128 120 118 103 118 124 115 109 109 116 105 109 114 102 110 107 106 100 105 109 107 104 103 104 97 100 113 98 101 99 101 1940 •Daily average basis. 50 40 30 20 10 INDUSTRY STEEL PRODUCTION1 MFG. EMPLOYMENT MFG. PAYROLLS BUILDING CONTRACTS_____ MALLEABLE CASTING SHIPMENTS. 10 20 30 40 50 60 70 80 PER CENT INCREASE PER CENT DECREASE ■HH FURNITURE SHIPMENTS PAPER SHIPMENTS________ AUTOMOBILE PR0D..U.S....... BIT. COAL PROD........................... AGRICULTURE FARM CASH INCOME?............ MEAT-PACKING PR0D,U.S._ CHEESE PROD., WIS-------------BUTTER PRODUCTION____ CATTLE RECEIPTS............. HOG RECEIPTS........................ ■ ■ ■ TRADE OFPT. STORE SALES DEPT. STORE STOCKS........... RET. SHOE SALES................... RET. FURNITURE SALES....... WHOLESALE TRADE ............ FINANCE MEMBER BANK RESERVES.?... REP. MEIIB. BK. DEMAND DEPOSITS, ADJ.?.... REP. MEMB. BK. LOANS.?.......... BANK DEBITS........................... ■ 1. Ingot rate, Chicago district, week ending June 21. 2. April data. 3. As cfJune 18. mately $129,000,000 of the new issue was placed in the Seventh district. Reporting member banks in 101 leading cities showed an increase of $142,000,000 in their holdings of Treasury bonds during the period of May 28 to June 4, indicating that there were large purchases of the new bonds by other than commercial banks. The sale of $438,230,000 of defense savings bonds and $3,552,000 of savings stamps during the month of May gave the first test of the appeal these bonds might have for the investing public. This volume would indicate an annual sale of well over five billion dollars. While it is probably true that the sales for the first month might have been made up largely of accumulated savings which cannot be reinvested, and the figures, there fore, may not represent a true index of monthly sales, there was no special campaign to stimulate sales. It is also true that investors who purchased the full amount allowed by law in any one calendar year cannot make additional purchases until January 1942. Succeeding months will furnish a better indication of what the demand really is. Series E bonds sold totaled $114,930,000, Series F $45, 500,000, and Series G $277,800,000. Sales during the first month were considered satisfactory. Interpreting these sales in terms of military needs, Secretary of the Treasury, Henry Morgenthau, Jr., said that the money received from the sales during May would “pay for four of the giant battle ships we are building, or enough to pay for the building of twenty cruisers, or one hundred destroyers to guard the ocean lanes.” Pag© 7 Bond Prices—After marking time awaiting the new financing announced May 22, Government bond prices ad vanced slightly with some indication of trading from taxexempt to taxable issues. Long-term bonds at the middle of June were selling within 26/32 of a point of their high of December 10. The new taxable 2Per cent bonds due 1956-58 have been in demand since May 23, the first day the issue was traded, and on June 13 were selling to yield 2.21 per cent. High-grade railroad bonds have not displayed any changes of importance. Medium-grade and speculative rail bonds have moved somewhat lower. The utility bond market has been quiet with prices holding firm. A moderate demand for lower grades has been in evidence. Industrial bonds have been generally higher, and during the first week of June were showing fractional changes which carried the averages up approximately a full point. Current Events May 22, Paul C. Hodge, Assistant Counsel of the Federal Reserve Bank of Chicago, spoke before the Central Illinois Conference of the National Association of Bank Auditors and Comptrollers in Springfield, Illinois, on the subject, “United States Defense Bonds.” On the same date, Arthur L. Olson, Assistant Vice Presi dent of the Bank, talked on the operations of the Federal Reserve System and defense loans before the Lions Club of Joliet, Illinois. A. T. Sihler, Assistant Vice President of the Federal Reserve Bank of Chicago, spoke before the Cook County League of Savings and Loan Groups in Chicago, May 23, on savings bonds. The Federal Reserve System and the present monetary situation was the subject of a talk given, June 9, by Charles B. Dunn, General Counsel of the Bank, at the annual meet ing of the National Association of Insecticide and Disin fectant Manufacturers. Morgenthau Praises Bankers Secretary of the Treasury, Henry Morgenthau, Jr., in a radio address reporting the sale of defense savings bonds during May, paid a very gracious compliment to the bank ers of the country for their part in making these new bonds available to the investing public. “No praise of mine,” he said, “can be too high for the willing, helpful cooperation of bankers, great and small, East and West, in getting behind the Treasury’s program.” Selected Seventh District Banking Data FEDERAL RESERVE BANE OF CHICAGO, SELECTED ITEMS OF CONDITION (Amounts in millions) Change from une 18, May 21, June 19, 1941 1941 1940 $251 Total bills and securities................................................ $0 8—20 U. S. Government securities direct and guaranteed: 94 0 —30 Notes............................................................................... 157 0 Bonds............................................................................... +10 Total Government securities.................................. 251 0 —20 3,441 +233 +671 Total reserves................................................................... Member bank reserve deposits..................................... 1,870 +21 +91 377 +196 All other deposits........................ .................................. +258 Federal Reserve notes in circulation............................ 1,412 +26 +298 Ratio of total reserves to deposit and 94.0% +0.1* Federal Reserve note liability combined............... +2.0* *Number of points. * * * CONDITION OF REPORTING MEMBER BANES SEVENTH DISTRICT (Amounts in millions) Change from June 18, May 21, June 19, Assets 1941 1941 1940 Loans and investments—total............................................. $4,000 $+43 $+649 1,274 +314 Loans—total............................................................................ +31 Commercial, industrial, and agricultural loans............... 822 +19 +231 Open-market paper................................................................ 0 +8 46 Loans to brokers and dealers in securities........................ 42 +7 +14 Other loans for purchasing or carrying securities............ 67 0 —6 Real estate loans.................................................................... 134 +1 +15 Loans to banks....................................................................... 0 0 0 163 +4 +52 Other loans.............................................................................. +53 U. S. Treasury bills............................................................... 368 +91 218 U. S. Treasury notes............................................................. —2 —98 1,230 —12 U. S. Treasury bonds............................................................ +220 Obligations fully guaranteed by U. S. Government---329 +62 +9 —36 Other securities...................................................................... 581 +60 Cash reserves, other than items in process of collection. 2,255 +16 +112 Liabilities 3,357 995 1,389 135 June 1-18, 1941 Turnover velocity of demand deposits (annual rate) — 20.57 Demand deposits—adjusted................................................ Time deposits......................................................................... Interbank deposits................................................................. U. S. Government deposits................................................. * * The increasing number of member banks in the Seventh Federal Reserve district reached a total of 883 on June 19. Five State banks have been admitted to the Reserve System since May 16. The new members are: State Bank of Arthur, Arthur, Illinois The First State Bank, Bourbon, Indiana, Bourbon, Indiana Auburn Savings Bank, Auburn, Iowa State Bank of Fox Lake, Fox Lake, Wisconsin State Bank of Francis Creek, Francis Creek, Wisconsin Page 8 +571 +29 +126 0 June 1940 18.19 * BANE DEBITS, SEVENTH DISTRICT (Amounts in millions) Chicago............. Des Moines....... Detroit.............. Fort Wayne___ Grand Rapids.. Indianapolis___ Milwaukee........ Peoria................ South Bend.... 32 smaller cities, Total 41 cities.. May 1941 $3,489 108 1,374 44 70 271 320 82 54 658 6,470 Per Cent Change from May 1940 +13 +12 +35 +30 +19 +29 +17 +31 +10 +24 +19 First Five Months of 1941 $17,355 531 6,413 193 330 1,290 1,568 352 264 3,031 31,327 Per Cent Change from Same Period 1940 +12 + 8 +29 +20 +13 +22 +15 +20 +22 +18 +16 VOLUME OF OPERATIONS IN PRINCIPAL DEPARTMENTS FEDERAL RESERVE BANE OF CHICAGO Items Handled New Member Banks +43 —11 +7 +9 May 1941 19.01 Commercial checks........................................................... Non-cash collections (Bills, notes, bonds, coupons, etc.) Paper currency received and counted............................ Coins received and counted............................................. Wire and other transfers of funds (Inter- and intra district) ..................................... ...................................... Securities in and out of safekeeping............................... Coupons cut from securities in safekeeping................... Average for Each Banking Day during May 1941 May 1940 542.000 493.000 2,080 2,062 1,276,000 1,174,000 526.000 355.000 521 1,204 2,052 478 941 1,940 127.678.000 3.025.000 5.494.000 64,426 95.114.000 2.794.000 4.992.000 39,753 85.012.000 24.475.000 905.301.000 8.202.000 923,507,000 Dollar Amounts Commercial checks............................................................ Non-cash collections (Bills, notes, bonds, coupons, etc.) Paper currency received and counted............................ Coins received and counted....................................;........ Wire and other transfers of funds (Inter- and intra district) ..................................... ...................................... Securities in and out of safekeeping................................ Value of securities held in safekeeping at end of month 65.726.000 National Summary of Business Conditions (By the Board of Governors of the Federal Reserve System) INDUSTRIAL PRODUCTION AFTER a slight April, industrial activity increased sharply in May con and the first decline half of in June. Wholesale commodity prices showed a further siderable advance and retail prices also increased. Distribution of commodities to consumers was maintained in large volume. Production—Volume of industrial output increased sharply in May, following a decline in April, and the Board’s seasonally adjusted index rose to 149 per cent of the 1935-1939 average as compared with 140 in April and 143 in March. The decline in April had reflected mainly reduced output of bituminous coal and auto mobiles occasioned by shutdowns accompanying industrial disputes. These were settled during the month, and in May and the first half of June output in these industries rose to the high levels prevailing earlier. Federal Reserve index of physical volume of production, adjusted for seasonal variation, 1935-39 average = 100. Sub groups shown are expressed in terms of points in the total index. By months, January 1935 to May 1941. DEPARTMENT STORE SALES AND STOCKS Federal Reserve indexes of value of sales and stocks, adjusted for seasonal variation, 1923-25 average = 100. By months, January 1935 to May 1941. WHOLESALE PRICES In a number of other lines, activity increased steadily throughout the spring months, particularly in the machinery, aircraft, and shipbuilding industries. Steel production was maintained at 99 per cent of capacity, except for a short period during late April and early May when output was reduced somewhat owing to a shortage of coal. Output of nonferrous metals also continued near capacity; deliveries of foreign copper in May increased to 49,000 tons, amounting to about one third of total deliveries to domestic consumers. Toward the end of the month, as it became apparent that combined military and civilian need for these metals would soon greatly exceed available supplies, a general preference order covering all iron and steel products was issued by the Priorities Division of the Office of Production Management, and in June mandatory priority controls were established for copper and zinc. Textile production rose further in May, reflecting increased activity at cotton, wool, and rayon mills. A continued rise in output of manufactured food products was likewise reported, and activity in the chemical and shoe industries was main tained at earlier high levels, although usually there is a considerable decline at this season. Petroleum production increased, and output of anthracite also ad vanced, following some curtailment in April. Iron ore shipments amounted to 11,000,000 tons in May, a new record level and near the shipping capacity of the present Lake fleet. Value of construction contract awards rose sharply in May, reflecting increases in both public and private construction, according to F. W. Dodge reports. Awards for private residential and nonresidential building increased more than seasonally, and contracts for defense projects continued in large volume. Distribution—Distribution of commodities to consumers was sustained at a high level in May. Department store sales showed a further rise, while sales at variety stores declined by slightly more than the usual seasonal amount. Retail sales of new automobiles continued at the high April level, and sales of used cars rose further. Freight-car loadings increased sharply in May, reflecting a marked rise in coal shipments and a further expansion in loadings of miscellaneous freight. In the first half of June total loadings were maintained at the advanced level of other recent weeks. Bureau of Labor Statistics’ indexes, 1926 = 100. “Other” includes commodities other than farm products and foods. By weeks, January 5, 1935 to week ending June 14, 1941. MONEY RATES IN NEW YORK CITY Commodity Prices—Wholesale prices of a number of agricultural and industrial commodities showed further increases from the middle of May to the middle of June, and the general index of the Bureau of Labor Statistics advanced two points to 87 per cent of the 1926 average. Federal action to limit price increases was extended to some consumer goods, principally new automobiles, hides, and certain cotton yarns. In retail markets prices of most groups of commodities have advanced, reflecting in part increases in wholesale prices earlier this year. Bank Credit—Commercial loans at reporting banks in 101 cities continued to rise during the four weeks ending June 11. Bank holdings of United States Government securities increased further, chiefly through the purchase of bills by New York City banks and of bonds by banks in other leading cities. As a result of the expan sion in loans and investments, bank deposits continued to increase. Weekly averages of daily yields of 3- to 5-year tax-exempt Treasury notes, Treasury bonds callable after 12 years, and average discount on new issues of Treasury bills offered within week. For weeks ending January 5, 1935 to June 14, 1941. United States Government Security Prices—Following a rise in the latter part of May, Treasury bond prices declined slightly in the first half of June. On June 14 the 1960-65 bonds were 7S of a point below the all-time peak in prices of December 10. Yields on both taxable and tax-exempt 3- to 5-year notes declined slightly from the middle of May to the middle of June. SEVENTH FEDERAL IOWA RESERVE DISTRICT
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