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SINESS CONDITIONS *r 84*K ^9 •iJvVS m (^sscas^* Wm mm mm*. mm wHP! -'ZrZ* g^fr^s^a ■ik, «k\v\m^ ssaaa Klips*] gKaewteagam !jjjAi-ui£i<j»^jB,»s!^a!yjA«aamgjSg!J?.Eg«ui m Hi 'j5K7~^}gjgsS»- irnlfffo mm* ~T 2£'i k> >ww iVwv'W'.xVSjg XT*'1 saw »3f ]□□ * I -i mr l|^i»'i'No «» ■&?SSSSa ^H2 HM8ii Volume 22 !M JULY, 1939 ESsm »'Me Number 7 Prepared by the Research and Statistics Department of the Federal Reserve Bank of Chicago 0 Monthly Review of Business Conditions in the Seventh Federal Reserve District DISTRICT SUMMARY TNSTEAD of showing the usual midsummer lull which appears in June, Seventh district business activity in the month this year was well maintained. Declines, where evident, were for the most part less than seasonal in nature, and several phases recorded contraseasonal in creases over May. An important reflection of these trends was a gain in industrial employment over a month earlier. Throughout the first half of 1939, the level of industry and trade in the district has been well above the low volumes of the corresponding 1938 period. Some hesitancy developed at times in production phases but, with employment and payrolls held at relatively steady levels and with farm in come above a year ago, consumer buying has been good over the six months. Inventories still appear to be in satis factory position. The volume of building construction has been an especially favorable factor in the district this year, although the June amount showed a small decrease from the month last year. During the first half of 1939, business failures in the area were sharply lower in aggregate liability involved than in the 1938 period, while their number totaled only slightly less. corn this year. The crop was well ahead of normal schedule in the third week of July, and the prospective yield per acre was unusually good. The harvesting of small grains showed excellent progress; garden truck was in rela tively good condition; and pastures were for the most part very satisfactory. Wheat receipts at interior primary markets of the country totaled in exceptionally large volume during June, but marketings of corn and oats declined. Prices of these grains recorded pronounced weakness over most of June and the first three weeks of July. Production of packing-house commodities decreased in June from May; that of butter and of Wisconsin cheese expanded, the increase in the latter being considerable be cause of a substantial diversion of milk from butter to cheese manufacture. Sales of dairy products totaled heavier than a month previous, but those of packing-house com modities recorded a recession in the period. The latter, how ever, were above a year ago and the 1929-38 average for June. Butter inventories at the end of June again were the largest on record for the date; those of meat products and of cheese remained in better position. Industry—Sustained by miscellaneous sources of demand, Trade—In accordance with seasonal trend, most lines of operations of Chicago district steel mills were averaging 54 per cent of capacity in the third week of July, or 41/2 points higher than a month earlier. Aggregate production of automobiles in June showed a non-seasonal gain over May and the largest increase over a year ago so far in 1939; by the middle of July, 1939 model runs were being rapidly completed. Shipments from steel and malleable casting foundries of the Seventh district expanded over the preceding month, as did those from paper mills; incoming business in these industries declined in June. In contrast to the heavier output in most production phases, building construction diminished 8 per cent from the May volume, mostly because of a decrease in residential building, and was 3 per cent under a year ago. However, in the first half of 1939, total construction exceeded that of the same 1938 period by almost one third, with residential building heavier by 80 per cent. The increases during June in industrial employment and payrolls of the Seventh district were counter to the usual trend for the month. Employment has been well maintained so far this year, and in midsummer remained much larger than in 1938. Agriculture—Of particular interest in the agricultural situation are the especially favorable district prospects for Manufacturing Steel and Steel Products—Miscellaneous sources of de mand have accounted for most of the recent steel buying in the Chicago district and were responsible for maintaining ingot output at 54 per cent of capacity in the third week of July. This rate represented a rise of 41/2 points over that prevailing a month previous and was the highest since the third week in March. Operations throughout the first half of 1939 were considerably above the corresponding 1938 levels but well under those of the first six months in 1937. Business from agricultural machinery firms and the rail roads has been light in recent weeks, although some rails are still being rolled, and other than a rather good demand retail trade in the Seventh district showed some decline in June from the preceding month, although the decrease in department store sales was only one per cent, that of 19 per cent in the retail furniture trade was smaller than usual for the period, and sales of shoes at retail rose 6 per cent in the total over May. There was a slight gain during June in the aggregate of wholesale trade in the area, and except in groceries it was well above a year earlier. Both the retail and wholesale distribution of commodities in the first half of 1939 exceeded the corresponding 1938 levels. Although margins of decline from a year ago have narrowed, in ventories remain smaller than at that time. Finance—Because of heavier Treasury receipts than dis bursements and increased currency circulation over the July 4 holiday, Seventh district member bank reserve bal ances were $30 million lower on July 19 than five weeks earlier. Total loans of weekly reporting member banks rose 12 millions and investments 96 millions in this period, and deposits in these banks also gained. Quarterly data on interest rates show that both Chicago and Detroit banks were charging somewhat higher rates on new commercial and industrial loans in mid-June than in the early spring. Underlying conditions in the securities markets have changed little recently. for reinforcing bars, buying by the construction industry is not heavy. Specifications from the automotive industry for 1940 model requirements have not been in any great volume as yet but are expected to develop in August. Of late there has been a noticeable tendency on the part of steel producers to firm up prices, and concessions are not so common as in June and previously. * * * Following a rather substantial increase in May, the ag gregate of orders booked by reporting steel casting foun dries of the district recorded a decline in June, which trend is contrary to seasonal for the period; and new business of malleable casting foundries was lighter for the second suc cessive month. However, shipments of both types of castings expanded, and in malleable castings production also in creased. Shipments of steel and of malleable castings ex ceeded incoming business during the current period, al though production of steel castings was lighter than either new orders or shipments. As in each previous month of the first half of this year, activity in June showed a highly favorable margin of gain over the low 1938 levels. STEEL AND MALLEABLE CASTINGS SEVENTH DISTRICT field remained favorable through June: sales by reporting dealers increased 2 per cent in the period and numbered one fourth above those of last June, while salable cars on hand continued to diminish moderately in volume and were slightly less than a year ago. In the first half of 1939, deal ers’ sales of used cars recorded a 12 per cent gain over the same six months of 1938. PASSENGER June 1939 Per Cent Change from June May 1939 1938 Steel Castings: Orders booked (tons)............................................................................... —14.9 Orders booked (dollars).......................................................................... — 7.6 Shipments (tons)...................................................................................... +17.2 Shipments (dollars).............................................. .................................. +14.7 Production (tons).................................................. .................................. —1.9 Malleable Castings: Orders booked (tons)............................................................................... —11.7 Orders booked (dollars)......................................................................... —11.4 Shipments (tons)....................................................................................... +4.9 Shipments (dollars).............................................. .................................. +4.2 Production (tons).................................................. .................................. + 6.6 AUTOMOBILES PRODUCTION A NO NEW CAR REGISTRATIONS TED STATES +141.9 +105.8 + 89.5 + 68.7 + 78.7 + + + + + 31.3 20.6 58.6 50.7 63.5 PRODUCTION REGISTRATIONS The decline of 15 per cent in June shipments of Seventh district stove and furnace manufacturers was seasonal in nature, and output continued well above the year-ago level. Operations followed the trend of shipments. New orders also fell off in the period, after increasing sharply in May, and totaled only 2 per cent heavier than in June 1938. There was a small expansion in inventories between the end of May and June 30; they continued somewhat under a year ago. Automobiles—Sustained by an unusually good demand, by increased schedules in one instance to make up for earlier suspension due to a strike, and by the possibility of further unsettled labor conditions, aggregate June produc tion of automobiles in the United States showed a nonseasonal gain over the preceding month and the heaviest increase over the corresponding 1938 period so far this year. Factory shipments of passenger cars in June num bered 246,704 and those of trucks 63,016, or 4 and 6 per cent greater, respectively, than a month previous and 81 and 65 per cent above a year ago. The June volumes brought United States output for the first six months of 1939 to close to 2,000,000 passenger cars and trucks, which is more than 60 per cent larger than for the first half of 1938; as in 1938, however, the number of units produced was smaller in the second quarter than in the first quarter of the year. Although manufacturers were rapidly completing their 1939 model runs in July, thus causing a considerable reduction in output, it is expected that production for the month as a whole will be in comparatively sizable volume for the period. In accordance with seasonal trend, sales of passenger automobiles in the Seventh district tapered off further in June, those at wholesale being approximately 10 per cent and at retail 15 per cent lighter in number than in May. However, favorable margins over a year ago were well maintained, with wholesale distribution almost double that of last June and sales to consumers better than 50 per cent larger. Aggregates for the first six months of this year show retail demand about one third heavier than in the same 1938 period. New-car stocks in dealers’ hands continued to dimin ish during June—by 5 per cent—but at the end of the month exceeded by more than 50 per cent those held on the cor responding year-earlier date by which time, however, they had become relatively light. District trends in the used-car Page 2 1S54 1936 1937 1936 1939 Number of new passenger automobiles produced and registered each month in the United States. Latest figures: Production, June 1939; Registrations, May 1939. Sources: Production, United States Department o( Commerce; Registrations, R. L. Polk & Company. Furniture—Because the usual midsummer furniture show ings were held in June this year, rather than in July, orders booked by Seventh district manufacturers recorded a sharp contraseasonal expansion in the period. However, the gain of 29 per cent over May was much smaller than is usual for the period when the summer marts take place. An excep tionally large gain—88 per cent—was shown over last June, similarly due to the earlier marts this year. Shipments de clined 5 per cent in June from the preceding month, or less than seasonally; they totaled 25 per cent above last June and 13 per cent in excess of the ten-year average for the period. As was to be expected in view of the increased bookings and lighter shipments, unfilled orders on hand June 30 rose substantially over a month previous, by 54 per cent, and aggregated 90 per cent larger than a year ago. Although their ratio to incoming business increased from 82 per cent for May to 98 per cent, it was no higher than for June 1938. Operations, at 63 per cent of capacity, were down a little from those prevailing in the preceding two months, though 13 points above the rate of last June. PER CENT FURNITURE '50 ‘32 '34 '36 '3B 1936 SHIPMENTS 1931 1338 Index of furniture shipments by reporting manufacturers in the Seventh dis trict, 1923-1925 average = 100. By years, 1929 through 1938; by months, January 1936 through June 1939. Industrial Employment A slight gain in the number of workers employed and a more substantial increase in wage payments were recorded by Seventh district industries for June over May, the rise in the latter item being sufficient to offset the decline which took place a month previous. The increases were well dis tributed among practically all of the principal industrial groups except coal mining where there was a further sharp reduction in both number of workers and in wage payments. Several groups, including the metals industries, showed fractional losses in employment volumes. Vehicles, which were responsible for the greater portion of the May de clines, recorded a sizable recovery in wage payments but little change in number employed. Current gains were especially favorable in that the trend is usually downward in June, the average for the past ten years registering a decrease for the period of one per cent in employment and of 2 per cent in payrolls. Since last December, fluctuations in employment and payroll volumes have been of minor proportions and have practically offset one another from month to month. In the manufacturing industries, current levels are lower than six months earlier by 3 per cent each in employment and payrolls. Non-manufacturing industries show a sharper decline, owing to the seasonal reduction in these groups between December and January. Since January, however, both employment and payrolls in this classification have increased V/2 per cent in the aggregate. Last year at this time the industrial recession begun in October 1937 was approaching a low point, so that June comparisons of cur rent volumes with the corresponding 1938 levels show wider margins of gain, amounting to 14 per cent in em ployment and 25 per cent in wage payments. 36 per cent of total awards thus far in 1939 as against only 26 per cent a year earlier. One-family dwellings comprised by far the greater part of residential building—about 85 per cent—with only a little more than one third of them constructed for the purpose of rent or sale rather than for owner-occupancy. Over the past two years, construction of one- and two-family residences under the Federal Hous ing Administration has been principally responsible for the growth in privately-financed residential building, although there is some evidence recently that the construction of such buildings has tapered off in certain parts of the district. Apartment building construction has been at a low level throughout the Seventh district. Only a few Federal Housing units are under way, and the number planned is relatively small. Residential occupancies and rents in most localities have declined during the past year. Building costs are little changed from 1938. MILLIONS OF OOLLARS MILLIONS OF OOLLARS 220 CONSTRUCTION CONTRACTS AWARDED QUARTERLY tZZl PUBLICLY FINANCED CONSTRUCTION BH PRIVATELY FfNANCED CONSTRUCTION EMPLOYMENT AND EARNINGS—SEVENTH FEDERAL RESERVE DISTRICT Week of June 15, 1939 Report ing Firms Wage Earn ers No. No. Earn ings (000 Omitted) * 1,772 383 290 481 2,926 374,135 308,988 24,428 42,693 750,244 Textiles and Products.......... Food and Products............... Chemical Products............... Leather Products................... Rubber Products................... Paper and Printing................ Total......................................... 406 1,020 295 108 34 740 2,663 Total Mfg., 10 Groups.............. Merchandising2........................... Public Utilities.......................... Coal Mining............................ Construction............................. Industrial Group 1939 Change from May 15, 1939 Wage Earn Earn ings ers % % 10,481 10,322 626 896 22,325 —0.5 +0.1 +0.7 +4.4 +0.0 +0.4 +7.5 +7.5 +4.5 +4.0 63,623 106,251 38,150 24,923 11,455 74,034 318,436 1,169 2,808 1,182 526 270 2,142 8,097 —0 2 +5.6 —1.1 +1.7 -0.9 -0.7 +1.8 +4.0 +5.7 +5.0 +7.2 +5.1 +0.2 +3.9 5,589 1,068,680 30,422 +0.5 +3.9 5,517 1,156 79 789 139,006 100,057 12,599 11,999 3,098 3,335 227 376 +1.1 +1.0 —26.4 +17.2 +2.1 +0.5 —21.6 +19 4 7,541 263,661 7,036 —0.1 +1.2 +0.4 +3.4 Durable Goods: Metals and Products*........... Vehicles.................................... Stone, Clay, and Glass........ Wood Products....................... Total......................................... Non-DttKABLE Goods: Total Non-Mfg., 4 Groups... Total, 14 Groups........................ lOther than Vehicles. 13,130 1,332,341 37,458 ^Illinois, Indiana, and Wisconsin. Building Seventh district building contracts awarded in the entire first half of this year were nearly one third again as large as in the corresponding period of 1938. Residential build ing was 80 per cent heavier than a year ago and constituted *Data furnished by F. W. Dodge Corporation for the Chicago and Southern Michi gan territoriea which closely approximate the Seventh district area. By quarter-yearly periods, 1937 through first half of 1939. Non-residential building in the district during the first six months of 1939 exceeded the same 1938 period by 20 per cent. In this classification the most outstanding change occurred in the amount expended for social and recreational building, which gained 83 per cent. Commercial and in dustrial construction, which represents exclusively the in vestment of private funds, recorded a combined gain of 16 per cent. With a continued overabundance of office-building space in most metropolitan areas, prospects for this type of building are considered generally unfavorable. The con struction in the first half of this year of buildings devoted to education and science recorded approximately the same increase in actual dollar volume over the first six months of 1938 as did commercial and manufacturing buildings. Data for the month of June show a moderately smaller amount of contract awards in the Seventh district than in either of the two preceding months. The contraction from the May volume was mainly in residential construction, although public utility awards also failed to maintain the relatively high level reached a month earlier. The fact that total building was under that of a year ago for the first time since last July was due entirely to a smaller volume of public works construction. Public funds financed 35 per cent of all building during June as against nearly 50 per cent last June. Pagtt 3 BUILDING CONTRACTS AWARDED* SEVENTH FEDERAL RESERVE DISTRICT Total Contracts Period June 1939........................................................................... Change from June 1938............................................... First six months of 1939................................................ Change from same period 1938................................ Residential Contracts 347,587,000 -8.4% -2.6% $269,718,000 +31.4% 117,520,000 —17.0% +28.6% $97,490,000 +79.5% smallest so far this year. The rate of stock turnover for the first six months of 1939 was rather noticeably greater than in the first half of last year, being 2.15 times as against only 1.95 times a year ago. In each month of this year, collection ratios have shown improvement over those in 1938. DEPARTMENT STORE TRADE IN JUNE 1939 *Data furnished by F. W. Dodge Corporation. The estimated cost of proposed construction in the dis trict declined slightly in June from May, according to data on building permits issued, although the City of Chicago showed a substantial increase. The margin of gain over a year ago continued large but was somewhat smaller than in a similar comparison for May. Except for sales of lumber at wholesale, which expanded more than seasonally, demand for building materials fol lowed less favorable trends in June than usual for the month. Total dollar sales at retail lumber yards declined 9 per cent from May, and lumber sales alone by these yards recorded decreases in both board-foot and dollar volume, contrary to trend for the period. These declines, however, followed upon considerably greater than seasonal increases in the preceding month. Shipments of cement and brick in the Chicago territory were heavier than in May and well above those in June 1938. MILLIONS OF DOLLARS MILLIONS OF DOLLARS CONSTRUCTION CONTRACTS AWARDED Locality Per Cent Change June 1939 from June 1938 Net Sales Stocks End of Month Per Cent Change First Six Months 1939 from Same Period 1938 Ratio of June Collections to Accounts Outstanding End of May Net Sales 1939 1938 41.3 46.3 37.6 40.2 37.6 39.1 37.2 38.1 —2.9 + 2.2 +14.3 + 3.5 + 8.2 + 4.2 — 0.2 + 8.2 35.9 32.9 —1.8 + 5.9 40.8 37.3 Chicago..................... Detroit...................... Fort Wayne.............. Indianapolis............. Milwaukee................ Peoria........................ Other Cities*........... +10.4 +20.0 +11.2 +11.5 +10.8 + 8.2 +14.6 —2.9 +1.5 7th District.............. +12.9 —i.3 +0.6 *Include Fort Wayne and Peoria. Retail Shoes—Increases recorded by a few firms effected a 6 per cent gain for June over May, in total sales of shoes by dealers and department stores in the Seventh district; the 1929-38 average shows a decrease of one per cent for the period. Sales aggregated 4 per cent larger than in June last year, whereas in May they had been almost 15 per cent heavier than in the same 1938 period. The six months’ total recorded a 4 per cent increase over the first half of 1938. Although retail stocks of shoes were reduced 14 per cent during June, at the end of the month they were only one-half per cent lighter than a year ago. Retail Furniture—Sales of furniture and housefurnish- ings at retail fell off 19 per cent in June from May, or somewhat less than is usual for the month, and totaled 14 per cent heavier than in the same period last year. In this latter comparison, dealer sales showed a much greater in crease than did those of department stores. By the end of June, inventories had diminished 4 per cent from a month previous and were 2 per cent smaller than on June 30, 1938. TOTAL RESIDENTIAL.*, Wholesale Trade—With the exception of groceries, where 1934 1935 1936 1937 1939 By months, January 1934 through June 1939. Data furnished by F. W. Dodge Corporation. Merchandising Department Store Trade—Because of a 5 per cent increase in the City of Chicago, aggregate sales of Seventh district department stores declined only one per cent during June from May, as against a decrease of 4 per cent in the 1929-38 average for the period. Trade in Indianapolis fell off 8 per cent and that in Detroit 6 per cent, while Mil waukee trade was less by one per cent and the total for stores in smaller cities by 10 per cent than in the preceding month. The increase of 13 per cent over last June was slightly smaller than the 15 per cent gain recorded in the yearly comparison for May, which was the heaviest so far in 1939; and in the two weeks ended July 15, dollar sales of the larger department stores in the district were only 5 per cent greater than in the corresponding two weeks of 1938. Between the end of May and June 30, inventories were reduced about seasonally—6 per cent—but the de crease of 2 per cent from the same 1938 date was the Page 4 prices are lower than a year ago, practically all wholesale trade groups in the district reporting to the Department of Commerce recorded sales gains in June over the 1938 month. The aggregate for all lines totaled 9 per cent larger than at that time, this increase representing a slight narrowing of the margin of gain over the 1938 level from 11 per cent a month previous. Throughout the first six months of 1939, wholesale trade in this district has shown improvement over the slack business of a year ago. As compared with May this year, a number of the major wholesale lines had heavier sales in June, the gains ranging from less than one WHOLESALE TRADE IN JUNE 1939* Per Cent Change from Same Month Last Year Commodity Net Sales Stocks Accounts Outstanding Collections —1.9 — 2.1 — 2.3 + 2.6 Groceries......................... +9.2 +13.3 +10.8 — 1.6 Hardware........................ +5.5 + 7.3 — 1.1 Drugs & Drug Sundries. + 4.0 +8.7 + 9.2 +22.7 + 0.8 Electrical Goods............ +12.4 Meats & Meat Products. +14.5 +31.9 +4.1 +6.9 +ii.i +25.0 + 3.2 Paper & Its Products... + 8.8 Tobacco & Its Products. +18.5 +1.2 + 7.1 +19.5 +2.4 +15.5 + 1.2 Miscellaneous.................. ♦Data furnished by Bureau of the Census, United States Department of Com merce. to 7 per cent, but the aggregate dollar volume sold in creased only one per cent. Wholesale inventories totaled iy2 per cent larger on June 30 than a year earlier and expanded slightly over the end of May. Agriculture Crops—Especially favorable prospects are indicated for the 1939 corn crop in the Seventh Federal Reserve district. By the third week in July the crop was ten days to two weeks ahead of normal schedule and in the best condition for the period since 1925; most of the corn was over six feet tall, a considerable portion was in the tasseling stage, and some was growing ears. Practically the entire crop had been laid by,” with fields relatively clean. In some areas, however, deterioration from excessive heat was evidenced in mid-July. The prospective yield per acre is unusually promis ing, and an important factor in this high yield is the large percentage of acreage in hybrid corn this year. Over the Middle West as a whole, about two fifths of all corn acreage is planted with the hybrid varieties; in Illinois about two thirds and in Iowa about three fourths of the fields are in hybrid corn. The harvesting of small grains showed the greatest prog ress in mid-July since 1933. Most of the combining and harvesting of winter wheat had been completed by July 18, and threshing was progressing excellently. Yield and quality ranged between fair and good, according to early threshing returns. The cutting of rye, barley, and oats was well ad vanced. Although the early oats crop in general was poor, later varieties were better. Garden truck, greatly improved by recent rains, was in relatively good condition in the third week of July; pastures for the most part were very good; and the outlook for soy beans was excellent. In contrast to the first cuttings, second cuttings of alfalfa and clover were luxuriant. Estimates by the United States Department of Agriculture show the spring crop of pigs in the Seventh district as over 15 per cent greater than a year ago; the increase for the nation amounted to 20 per cent. CROP PRODUCTION Estimated by the United States Bureau of Agricultural Economics on the Basis of July 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......................... ,000,003 1,038,749 847,142 2,570,795 2,542,238 2,309,674 Oats......................... 348,644 430,768 454,618 872,823 1,053,839 1,049,300 Winter Wheat........ 53,883 67,734 56,540 537,767 686,637 560,160 Spring Wheat......... 1,933 1,847 3,227 178,888 244,164 192,792 Barley..................... 44,802a 46,964a 48,128a 245,886 252,139 233,021 Rye.......................... 8,492a 9,942a 7,866a 41,486 55,039 36,330 Potatoes (white)... 50,926 53,457 53,056 366,074 371,617 372,258 Cherries1................. 43b 24b 38b 184c 141c 125c Beans (dry edible)* 3,508b 4,575b 3,885b 11,897 15,268 12,638 Canning Crops: Snap Beans1........ 17d 23d 16d 81 128 76 Green Peas1........ 66a 131a 97a 185 303 194 All Tame Hay1_ _ 16,838 18,379 15,201 72,794 80,299 68,765 *—In thousands of tons. *In thousands of 100-lb. bags. a—Ffve States including Seventh Federal Reserve district, b—Michigan and Wisconsin, c—I weive States only, d—Michigan, Indiana, and Wisconsin. Grains—An exceptionally heavy volume of wheat was received during June at interior primary markets of the United States, due to an unprecedented rush of winter wheat marketing in the Southwest where crops seemed to ripen simultaneously over a much larger area than in any previous year. A large part of receipts went into Govern ment loan, with only a small part of the marketings up for sale. United States visible supplies of wheat showed a very sharp advance from mid-June to mid-July. Marketings of corn declined slightly in June; those of oats also were lighter. Farm holdings indicated a disappearance of only 377 million bushels over the second quarter of the year in the United States, as against 430 million bushels during the same period of 1938. Corn stocks on farms as of July 1 this year totaled 837,000,000 bushels, which amount is about 30 per cent higher than at the same time last year and well over twice as large as 1928-37 average stocks for the date. Of total United States farm stocks of com, almost two thirds were held in the five States including the Seventh district. Early in July, the Government offered to renew for a period of one year all corn loans, both on the 1937 and 1938 crops, which fell due on August 1, and to pay storage charges of 6 cents per bushel for that time. In contrast to trends in May, prices of these three grains recorded pronounced weakness over most of June and the first three weeks of July, and spring advances were elim inated. Wheat markets were under considerable pressure from improved domestic crop prospects, extensive liquida tion of July contracts, the excellent condition of the grow ing crop in Canada, and the heavy marketings of wheat in the Southwest. Cash prices at Chicago of No. 2 hard winter wheat were down about 9 cents from May and fell 6 cents further in the first three weeks of July. Cash quotations for No. 2 yellow corn at Chicago declined 3 cents in June and another 7 cents by July 22, at which time they were approxi mately 17 cents lower than in July 1938. This market was affected by excellent weather conditions for the growing crop over most of the com belt. Despite generally unfavor able prospects for the new crop, oats prices by July 22 were down about 7 cents from June 1, the decline being brought about largely by the progressively weaker actions of the other grains. MOVEMENT OF GRAIN AT INTERIOR PRIMARY MARKETS IN THE UNITED STATES (In thousands of bushels) _ June 1939 ................................................................. Shipments.............................................................. Com: Receipts................................................................. Shipments............................................................. Oats: Receipts.................................................................... Shipments.............................................................. May 1939 June 1938 June 1929-38 Avg. 45,925 14,830 25,928 16,433 17,153 14,728 21,135 16,353 17,432 17,462 20,490 20,159 28,614 27,891 17,676 12,674 5,974 8,889 3,639 5,301 5,418 5 628 4,577 5,266 Livestock and Meat Packing—Following a sharp rise in May, receipts of livestock at public stock yards in the United States registered a greater than seasonal decline dur ing June. Those of hogs continued well above year-ago levels, but cattle, calves, and lambs were in lower volume than at that time. Trends in Federally inspected slaughter LIVESTOCK SLAUGHTER (In thousands) Yards in Seventh District, June 1939.................................... June 1938.................................... Federally Inspected Slaughter, United States: June 1939................................ May 1939................................ June 1938................................ June 1929-38 average............ Lambs and Sheep Calves Cattle Hogs 175 178 504 467 164 193 72 73 778 814 840 746 3,185 3,416 2,110 3,162 1,401 1,392 1,425 1,384 448 509 579 457 Months of May 1939 89.75 8.30 9.75 6.75 9.50 June 1938 $9.50 7.75 8.50 8.55 8.95 AVERAGE PRICES OF LIVESTOCK (Per hundred pounds at Chicago) Week Ended July 22, June 1939 1939 Native Beef Steers (average)........... ............. $9.20 $9.30 Fat Cows and Heifers......................... 7.80 Calves....................... 9.15 Hogs (bulk of sales)............................. 6.35 Lambs.............................. 9.60 Page 5 rather closely followed those of receipts, except that slaughter of lambs increased slightly over May. A seasonal decline took place during June in shipments of livestock to feed lots, although those of calves continued rather heavy. As may be noted in the accompanying table, most livestock prices have been weak recently, especially for hogs. Production of packing-house commodities totaled smaller in June than in May, after recording a more than seasonal expansion a month previous and in contrast to an increase for the period in the three preceding years. The sales ton nage, on the other hand, fell off less than is usual for June and slightly exceeded current production. Inventories of lard in the United States continued to accumulate and on July 1 were approximately 7 per cent above the 1934-38 average for the date; on the other hand, stocks of both beef and pork totaled lighter in these comparisons. Despite the decrease in slaughtering-house activity, payroll items rose about 4 per cent further during June, and at the end of the period, employment, hours worked, and wage pay ments showed a slightly wider margin of gain over the corresponding 1938 period than a month earlier. During the first half of July, production at twenty-seven selected centers remained moderately in excess of a year earlier. MEAT PACKING—UNITED STATES Tonnage produced Tonnage sold........ Dollar sales.......... Inventories........... Per Cent Change in June 1939 from May June June 1939 1938 1929-38 Avg. , —3.9 +10.2 + 4.6 . —2.5 + 8.2 + 4.3 . —1.1 +1.8 +5.7 . —1.7 +16.6 —15.9 Dairy Products—As a result of the good to excellent pas ture conditions, production of milk in the central States continued relatively heavy in June. Figures on creamery butter make in the Seventh district indicate a seasonal in crease of 6 per cent over May; but the total was lower than the high year-ago level by the same percentage. Estimates for butter make in the United States indicate a close to seasonal expansion over May and a level of production about equal to the heavy volume of last June. Seventh dis trict butter sales, after rising sharply in May, failed to increase as much as usual in June and were 3 per cent lighter than in the month last year. Although United States cold-storage holdings of butter gained less than seasonally during June, the July 1 total of 132 million pounds again was the largest on record for the date. Government agencies have reduced their holdings of creamery butter in recent months. However, in late June the Department of Agri culture announced that the Commodity Credit Corporation has approved new loans amounting to $6,000,000 for buying up to 25 million pounds of butter during the 1939-40 season. These loans will make possible the continuation of the butter price-stabilization program of last year; initial purchases were not made until late July. There was a softening tendency over most of June and early July in butter prices in the central markets, but quotations firmed slightly after mid-July. Consumption of butter in the United States has been unusually high during recent months. Considerable diversion of milk from butter to cheese production took place in June, since cheese prices were relatively more favorable despite some weakness in quota tions during late June and early July. The manufacture of American cheese in Wisconsin expanded 38 per cent over May and was slightly higher than in June 1938. For the first six months of the year, however, it was somewhat less than in the same 1938 period, while sales of cheese from Page 6 MONTHLY BUSINESS INDEXES Data refer to Seventh district and are not adjusted for seasonal variation unless other June 1939 wise indicated. 1923-25 average = 100 Manufacturing Industries: Pig Iron Production: 81 80 May April June 1939 1939 1938 80 77 May April 1938 1938 83 81 69 61 72 63 74 66 76 61 79 35 48 52 84 167 81 158 93 170 47 101 53 99 60 114 47 38 48 60 41 32 46 57 40 31 49 62 29 20 32 38 27 19 34 40 27 18 34 41 130 150 134 114 123 119 86 56 66 59 49 65 46 44 51 46 47 54 60 70 72 76 63 76 46 71 41 73 36 53 91 92 88 95 95 89 81 80 82 83 85 86 81 85 87 77 81 82 89 94 97 86 80 Seventh District—Unadjusted..................... 89 Adjusted......................... 1 91 84 98 107 88 88 89 1 88 82 101 107 98 84 89 86 83 83 91 83 74 82 84 79 80 95 82 77 80 79 100 98 82 i 87 [ 82 Automobile Production—(U.S.): Casting Foundries Shipments: Stores and Furnaces: Furniture Manufacturing: Building Contracts Awarded: Meat Packing— (U.S.): Department Store Net Sales: 82 primary markets in the State were greater by about 12 per cent. June sales expanded 16 per cent over May and were 9 per cent larger than a year earlier. Between June 1 and July 1, United States inventories of American cheese showed a close to seasonal rise, though remaining well under the 1938 level. Credit and Finance Member Bank Reserves—Increased currency circulation and an excess of Treasury receipts over disbursements re duced Seventh district member bank reserves by $30 mil lion in the five weeks ended July 19. A sharp expansion over the July 4 holiday was responsible for the gain in currency circulation, while Treasury receipts. were aug mented by heavier sales than redemptions of bills and by income tax collections in the first week of the period. Off setting considerably the effect of these factors was a con tinued net gain—91 millions—in the inflow of funds from other districts through commercial and financial transac tions. Increased deposits at member banks over the five weeks required heavier reserves, so that estimated excess re serves were reduced 49 millions, or to a greater extent than total reserves. Weekly Reporting Member Banks—Total loans of Seventh district weekly reporting member banks rose 12 millions and investments 96 millions between June 14 and July 19, the gain in the latter representing a continuance of the expansion in holdings of short-term Treasury se curities evident since late April. Deposits in these banks also rose further—by 40 and 10 millions for demand and time deposits, respectively. From the close of 1938 to the end of June there was no significant change in loan volume of the reporting banks, but investments were up 81 millions, due to an increase in holdings of Government-guaranteed and other than Government securities. In this same period demand deposits expanded $112 million. Interest Rates—For the third successive month, the aver age rate earned on total loans and discounts by the larger Chicago banks recorded an increase in June. However, the average for selected Detroit banks was sharply lower, being the smallest since its computation was begun late in 1936 and under the corresponding year-ago level for the first time since last September. Data compiled quarterly on interest rates charged by these banks on new commercial and industrial loans show that the Chicago group was charging somewhat higher rates in mid-June than in the early spring. Furthermore, borrow ers were paying nearly one-half per cent more for funds than last fall. The Detroit group of banks reported rates on such loans as about one-third per cent higher than in March but still below the level of September 1938. Securities Markets—Underlying conditions in the securi ties markets, as noted by representative Chicago bond houses, have shown little change. Banks appear willing to consider somewhat longer maturities for high-grade bonds than in several months. Also, individual investors are displaying slightly increased interest, centered largely in medium-grade bonds and preferred and common stocks; but institutions continue to be the major buyers of high-grade securities. Except for a slight hesitation apparent toward the end of June and confined largely to the speculative rails, medium grades followed the stock market in its upward trend in the first half of July. Volume of trading was curtailed in early July by war scares and the July 4 holiday, but it returned to more satisfactory levels in the second week of the month. New issues in the municipal field were in the largest volume during June of any month in several years; prices continued firm. Unlike the situation in the corporate field, such issues have been mostly for new capital rather than for refunding purposes. Most municipal offerings are in serial form and consequently are paid off during the duration of the loan. June long-term corporate bond issues, 92 per cent for re funding, were the heaviest since last October—about 17 per cent of them originated in this district. _ Prices of Government securities up to mid-July were irregularly lower than the early June highs, in contrast to trends in the highest-grade corporates. There has been some reaction from the widening of the spread which rose be tween prices of Treasury bonds and those of highest-grade corporate securities during the spring. New issues of 91-day Treasury bills have continued in July to sell practically at par, although discounts on the first three offerings in July were nominally larger than for the past two months. MILLIONS OF DOLLARS 1500 1-400 NEW CAPITAL I MATURING CORPORATE I 1500 1200 ISSUES LATER BONOS AND QUARTERLY THAN NOTES FIVE YEARS 1400 1300 □ total domestic flotations 1200 1100 1000 Selected Seventh District Banking Data FEDERAL RESERVE BANK OF CHICAGO, SELECTED ITEMS OF CONDITION (Amounts in thousands) July 19, 1939 Total bills and securities........................................... $272,543 Bills discounted................ ’901 Bills bought...................................................................................... 7q U. S. Treasury bills........................................ 46 230 U. S. Treasury notes.................................................. m’,054 U. 8. Treasury bonds................................................. 98,424 Total Government securities............. 271 708 Total reserves.............................................................. 2,224,618 Member bank reserve deposits................................ 1,302 847 All other deposits................................................ '' [ ’ 160,373 Federal Reserve notes in circulation...................... 997^570 Ratio of total reserves to deposit and Federal Reserve note liability combined.......... 90.4% Change from June 14, July 20, 1939 1938 $—15,200 $-6,992 +201 +177 +3 —1 —7,165 —24,000 —4,651 —627 —3,603 +17,504 —15,419 —7,123 —83,133 +75,490 —30,244 —14,552 —86,767 +41,906 +14,316 +38,801 +0.4* +0.7* •Number of Points. * * * CONDITION OF REPORTING MEMBER BANKS SEVENTH DISTRICT (Amounts in millions) Assets Loans and investments—total...................................... Loans—total........................................................ . Commercial, industrial, and agricultural loans........ Open-market paper................................................. Loans to brokers and dealers in securities.......!! ” ! Other loans for purchasing or carrying securities... Real estate loans..................................................... Loans to banks................................ Other loans.............................................. U. S. Treasury bills......................... U. 8. Treasury notes........................... !!!!!!!!!!!!!! U. S. Treasury bonds....................................... ' '" Obligations fully guaranteed by U. S. Government Other securities............................................................... July 19, 1939 $3,249 876 505 33 37 82 103 0 116 263 430 924 267 489 Change from June 14, July 20, 1939 1938 *+108 $+407 +12 +59 +7 +39 +2 +2 —1 +6 +2 +3 +1 +12 —1 —4 +2 +1 +721 +18 +269 +11J —2 +44 —3 +35 Liabilities Demand deposits—adjusted*..................................... Time deposits.......................................................' ' ’ Borrowings..................................................... 2.475 927 0 +40 +250 +10 +50 0 0 velocity of demand deposits (unadjusted) in the five weeks ended -/Y in^70" + 21-11 times, as compared with 19.69 times in the preceding four weeks and with 19.72 times in the corresponding period of 1938. BANK DEBITS, SEVENTH DISTRICT (Amounts in millions) Per Cent of Increase or Decrease from May June . 1939 1938 +17.5 +13.4 —10.6 +4.4 Detroit........................................... one —6.4 +17.8 Fort Wayne...................................... 31 —5.2 +7.4 Grand Rapids...................... !.!!....................................... 62 +2.4 +18.6 Indianapolis............................ !”"!!”!!!!!!!............... 194 +0.6 +7.2 Milwaukee.................................... 253 +4.9 +3.6 —3.2 +7.8 South Bend..........................................................................................38 +7.7 +21.4 32 smaller cities......................... 400 +3.0 +11.9 Total 41 cities........................ .......................... .... ’. * 5 298 +9.3 +13.0 June 1939 SOO ♦ * * 800 600 TRANSIT OPERATIONS OF THE FEDERAL RESERVE BANK OF CHICAGO AND DETROIT BRANCH EOO (Exclusive of Treasury checks and of non-transit items drawn on own bank) 600 400 400 30C 500 Onn a. 1934 i ii 1335 200 MM 1336 IOO 1S37 Source: The Commercial & Financial Chronicle. Total country and city check clearings: Jr'ieces...................... Amount.... Daily average clearings: Total items cleared— Pieces................... Amount........... Items drawn on Chicago— Pieces...................... Items drawn on Detroit— Pieces........................ Amount......... June 1939 June 1938 11,102,879 73,529 *40,203,000 $7,288,531 Page 7 National Summary of Business Conditions (By the Board of Governors of the Federal Reserve System) mines increased June, reflecting OUTPUT of atfactories andand bituminous coalinmines. In the first chieflyot sharp steel mills halt July, expansion INDUSTRIAL PRODUCTION industrial activity was generally maintained. Production—The Board’s seasonally adjusted index of industrial production advanced to 97 in June as compared with 92 in April and May. 1934 1935 1936 1937 1938 1939 Index ot physical volume of production, adjusted for sea sonal variation, 1923-1925 average = 100. By months, January 1934 to June 1939. FACTORY EMPLOYMENT At steel mills output increased from a rate of 45 per cent of capacity in the third week of May to 54 at the end of June and to 56 m the third week of July. Automobile production, which had declined in May, showed some increase in June when a decline is customary. In the first three weeks of July automobile output was at a lower rate, reflecting in part curtailment preparatory to the changeover to new models. Plate glass production rose considerably in June. Output of lumber, which usually shows some increase over May, was unchanged. Among nondurable goods industries, woolen mills showed increased activity June, and activity at cotton and silk mills was maintained though declines are usual at this season. Meat packing was lower than m May. Mineral production increased considerably in June, reflecting a sharp rise in output at bituminous coal mines which had been closed during April and the first half of May. Production of anthracite declined from May to June and there was some reduction in output of petroleum. Value of construction contracts awarded declined in June, according to F. W. Dodge Corporation figures, reflecting chiefly a greater than seasonal decrease in private residential building. Contracts awarded for public residential construcBon, principally for United States Housing Authority projects, were maintained at theP advanced level reached in May, while public construction other than resi dential showed a small decline. Employment—Factory Index of number employed, adjusted for seasonal vanaation, 1923-1925 average = 100. By months, January 1934 to June 1939. employment and payrolls increased somewhat from the middle of May to the middle of June, according to reports from a number of important industrial States. There was a sharp expansion m employment at bituminous coal mines following the reopening of the mines in the middle oi May, and the number employed on the railroads increased more than seasonally from May to June. FREIGHT-GAR LOADINGS Distribution—Department store sales showed a less than seasonal decline from May to June and the Board’s adjusted index advanced from 85 to 86 which com pares with a level of 88 during the first four months of the year. Sales at variety stores and by mail order houses showed little change. Freight-car loadings increased more than seasonally in June, reflecting a sharp rise in shipments of coal and smaller increases in shipments of grain and miscel laneous freight. Commodity Prices-Prices of hides, silk, steel scrap, copper, and some other industrial materials advanced from the middle of June to the third week of July, while some farm products, particularly grains, declined. Prices of most other commodities showed little change. Index of total loadings of revenue freight, adjusted for seasonal variation, 1923-1925 average = 100. By months, January 1934 to June 1939. MEMBER BANKS IN 101 LEADING CITIES U.S. GOVT OBLIGATIONS Bank Credit—Total loans and investments of member banks in 101 leading cities continued to increase during the four weeks ending July 12, reflecting laig y purchases of United States Government securities. Commercial loans which had shown little change in recent months, increased slightly. Deposits and reserves at these banks rose to new high levels in July, reflecting continued gold imports and Treasury disbursements from its balances at the Reserve hanks. COMMERCIAL LOANS 1938 Wednesday figures for reporting member banks in 101 leading cities, September 5, 1934, to July 12, 1939. Com mercial loans, which include industrial and agricultural loans, represent prior to May 19, 1937, so-called Other loans as then reported. Page 8 Agriculture—A total wheat crop of 716,655.000 bushels was indicated on the basis of July 1 conditions, according to the Department of Agriculture. This would be much smaller than last year s large crop and somewhat below the 1928 1937 average. Cotton acreage in cultivation was estimated to be about the same as last year but one third less than the 10-year average. A record tobacco crop is indicated. Most other major crops are expected to approximate last years harvests and are generally larger than average. Money Rates—Prices of United States Government securities, which had declined somewhat during June, recovered part of the loss in July. The longest-term Treasury bonds outstanding showed a yield of 2.31 per cent on July 20, as compared with a record low of 2.26 on June 5. Open-market money rates showed little change. DIRECTORS AND OFFICERS Federal Reserve Bank of Chicago DIRECTORS R. E. Wood, Chicago, III............................... Deputy Chairman W. J. Cummings................................ Chicago, 111. C. B. Van Dusen.............................Detroit, Mich. E. R. Estberg.............................. Waukesha, Wis. M. W. Babb.................................Milwaukee, Wis. F. D. Williams............................ Iowa City, Iowa F. J. Lewis......................................... Chicago, 111. N. H. Noyes....................................................Indianapolis, Ind. MEMBER OF FEDERAL ADVISORY COUNCIL E. E. Brown..............................................................Chicago, 111. OFFICERS G. J. Schaller..............................................................President H. P. Preston..............................................First Vice President J. H. Dillard...............................................................................VicePresident W. H. Snyder....................................Vice President and Cashier C. S. Young............................................................................. VicePresident C. B. Dunn......................................................................... GeneralCounsel W. C. Bachman............ Assistant Vice President 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.......................... Assistant Cashier C. A. Phillips........................ Economic Adviser J. L. Sweet...............................Statistical Adviser INDUSTRIAL ADVISORY COMMITTEE Max Epstein, Chicago, 111.............................................. 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. H. L. Pierson.................................. Detroit, Mich. J. M. Dodce.......................................Detroit, Mich. L. W. Watkins........................Manchester, Mich. W. S. McLucas.................................Detroit, Mich. R. H. Buss................................................................. Detroit, Mich. OFFICERS R. H. Buss......................................................... Managing Director H. J. Chalfont.......................................... Cashier H. L. Diehl................................. Assistant Cashier SEVENTH FEDERAL RESERVE DISTRICT
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