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CONDITIONS r mt UeB I S« ■nraiswsss SI 5§^5*@ swrt-w \* %m. m&m. a«pa; ii* MSH^MMiPii gNBS»»«^ feSsOSi *W' Q y^^WgiyjeSgMESSg^BSBgs >mct* C--3L', ;■-t..'- :=sas ■ v&m teigsasssss* stasSKasssaajsSs ISgjlsfe V "WUftWB . ■' Kffisws.va.v' is»spi r ■ . ■ -?^rr--> ] CD ? ilii EB <3 ^xvN^vSviii fcN\\VvX&4 ^mfx: '):WM • IB ' ' . s,k\\v^v^ Volume 21, No. 11 November 29,1938 Prepared by the Research and Statistics Department of the Federal Reserve Bank of Chicago Monthly Review of Business Conditions in the Seventh Federal Reserve District .. ■ -. — If DISTRICT SUMMARY Agricultural Products ED by the automotive industry, Seventh district industrial J activity advanced steadily upward during October, and Lpreliminary data for November indicate that this trend has continued. In several instances current volumes of output have attained or surpassed the levels prevailing a year ago when the recession in business had become quite marked. Unseasonably warm weather in October exerted an unfavor able effect on retail trade, but the first half of November showed improvement. Industrial employment and payrolls in the district recorded further large gains in October. Industry "DECAUSE initial demand for new cars has been greater -L* than expected, manufacturers of automobiles have had to revise production schedules upward, and it appears that the November volume of output will closely approximate that of the month last year. Production of steel, largely stimulated by activity in the automotive industry, had reached a level by mid-November higher than at any time since the close of the third quarter of 1937. A number of steel-consuming industries also experienced improved busi ness through October and into November. Building con struction, as indicated by contracts awarded, recorded a further definite rise in October, the increase bringing the volume for the year to date to within 5 per cent of the cor responding 1937 period. As a result of this activity, demand for building materials has expanded. Paper mills in the Seventh district displayed greater activity in October than either a month or a year earlier, and although output from furniture factories declined counter to trend for the period, incoming business fell off less than seasonally and was above the 1928-37 average for October. Employment and payrolls in the durable goods industries showed another sharp gain in October, while in the non durable goods classification some recession was noted from the preceding month. Non-manufacturing groups increased their employment and payroll volumes in the current period. OLUMES of packing-house commodities produced and sold in October exceeded those of the preceding month and a year ago but were below the 1928-37 average for the period. Because the sales tonnage was more than seasonally greater than production, inventories of these commodities declined further during the month. Although creamery but ter manufacture in the district fell off in October, it remained unusually heavy for the season. Production of American cheese in Wisconsin rose counterseasonally over September and was above that of last October or the ten-year average. The movement of com was exceptionally large for October; wheat receipts declined as is usual in the month, while reshipments expanded. V Trade ESS favorable trends than prevailed in September were -^noted during October in' the department store and retail shoe trades of the Seventh district, attributable to a con siderable extent to mild weather, but business improved in the first half of November. Sales of furniture and housefurnishings fell off during October in accordance with sea sonal trend. Although a number of wholesale trade groups had heavier sales in October than a month previous, aggre gate sales showed some decline from September and were much below those of a year ago. I Credit ECAUSE of operations in connection with recent corpo rate financing in the district, member bank reserve balances failed to gain much in the four weeks ended Novem ber 16, despite a large inflow of funds from other districts through commercial and financial transactions. Both loans and investments of weekly reporting member banks increased in the period. There was a continued gain during the four weeks in velocity of demand deposits at these banks, to a rate only slightly short of that operative in the correspond ing 1937 period. B PER CENT OF CAPACITY Manufacturing --- —^----- 1**0 RATE OF STEEL INGOT PRODUCTION Steel and Allied Industries TIMULATED by demand from automobile manufacturers and their suppliers, operations of Chicago district steel mills were at a higher level in the middle of November than at any time since the end of the third quarter of 1937. Steel ingot output in this area, at 60^ per cent of capacity in mid-November, had risen almost 15 points over four weeks earlier, and indications are that it will be maintained at substantially the same rate through the remainder of 1938, at least; a year ago output had fallen to only 271/9 per cent of capacity and reached 22 per cent at the year-end. Increased buying during recent weeks of sheets and strip, bars, wire, and from iron foundries has been chiefly attributable to the automotive industry .>(\s yet, the building industry has not become a major source of demand, although there has been S 1937 \ 1935, JAN. FEB. By weeks. APB. MAY Source: Iron Age. JUNE JULY AUG. SEPT. OCT. NOV. some business in structural steel; agricultural implement buy ing has been fair of late, as has that from the oil industry; while the railroads have placed only a few miscellaneous orders for steel. Except from makers of automobiles, how ever, users of primary steel products are displaying little tendency to buy other than for current needs. Manufacturers of automobile parts and accessories in the Seventh district have had a decided increase in their business over the past month or two, although November volumes in most instances will not equal those of a year ago. It is ex pected that production schedules, which usually closely fol low customers’ releases on contracts, will be advanced stead ily further and that by the end of the year they will surpass the comparable 1937 level. Although the inventory situ ation is considered normal, few raw materials are being bought in advance of production requirements. Other steel-consuming industries likewise have been ex periencing improvement in their business but are not making purchases of steel in advance of current needs. Producers of excavating and other heavy machinery, also boilers, etc., report that operating schedules will be advanced in line with new orders which in some instances already are greater than a year ago._OpfiraiiQngthowever, have not as yet attained the corresponding 1937 levetaJn the agricultural machinery industry, manufacturers are producing for 1939 business, but consumer buying is lagging at present and little change is expected in the situation in the near-term future. Advance buying of raw steel for this industry has not developed to any great extent. There has been some improvement of late in business of companies whose products are used in building construction and equipment. Firms producing rail way supplies, on the other hand, have experienced no notice able betterment over the low level of activity that has pre vailed for some time. TONNAGE SHIPMENTS OF CASTINGS MALLEABLE STEEL 1950 1S3I 1333 1334 1935 1936 1937 193S Indexes of tonnage shipments of steel and malleable castings, unadjusted for sea sonal variation, 1923-1925 average = 100. By months, January 1929 through October trend for October. Production declined only slightly from September, whereas last October it was sharply curtailed. As compared with a year ago, new business recorded a small gain in the current period, but shipments and production remained much lighter. The Automobile Industry ITH initial demand for the new 1939 model automo biles greatly in excess of earlier expectations, automo bile manufacturers have had to revise production schedules upward and in many instances are unable to keep up with the rising volume of orders. Following a low level of produc tion in September, output rose rapidly in October until by the third week of November it surpassed that of the corre sponding 1937 week by almost 11,000 units. Passenger Shipments from steel casting foundries of the Seventh vehicles produced during the entire month of October num district again declined in October and new orders fell off, bered 187,494 and trucks 22,028, or more by 188 and 20 although production was expanded considerably. Output of per cent, respectively, than a month earlier, though 37 and 29 malleable castings, because of specifications from the auto per cent below output last October. At the current rate of mobile industry, continued to trend upward slightly further, production, it is estimated that output in November will as did production, but new orders showed some decline after closely approximate that of the 1937 month and that if four successive months of gain. The production of both steel schedules are maintained, the December volume will exceed and malleable castings exceeded the volume of shipments and output of December 1937. In contrast to a year ago at this incoming business. Although margins of decline from year- time when inventories were being expanded through heavy ago levels recorded a noticeable narrowing in October, they production and disappointing sales, stocks of both new and remained large, especially in the case of steel castings, de used cars this year were at a low level and unfilled orders mand for which comes largely from the railroads. increasing. STEEL AND MALLEABLE CASTINGS Because of the unexpected demand for new cars, manu SEVENTH DISTRICT October 1938 facturers have had to increase substantially their purchases Per Cent Change of materials over original specifications. Although commit from Sept. O ments to a considerable extent are being made for near-term Steel Castings: *938 requirements, there also has been some buying for needs New orders booked (tons)...................................................................... —19.5 —54.4 New orders booked (dollars).................................................................. —11.4 over a longer period extending at least to the end of the year. Shipments (tons)......................................................................................... — 8.2 —00.8 ^ Shipments (dollars)................................................................................... — 7.8 The results of the November automobile show at Chicago Production (tons)........................................................................................ +22.0 appear to have been satisfactory, with reports that sales Malleable Castings: New orders booked (tons)....................................................................... — 8.5 —15.2 exceeded those of last year by a substantial amount. Report New orders booked (dollars)................................................................. — 7.8 —20.1 Shipments (tons)........................................................................................ +1.4 —40.6 ing dealers and distributors in the Seventh district had much Shipments (dollars)................................................................................... + 1.0 -42.1 Production (tons)........................................................................................ + 5.1 heavier sales in October than a month previous, as new models were received. Stocks rose in the period but at the end of October were less than one fifth those held a year ago. The dollar volume shipped from reporting stove and Sales of used cars increased slightly in October over Sep furnace factories of the district continued to expand in Oc tember; salable cars on hand numbered somewhat greater tober, which trend is usual for the period. However, new at the end of the month but were only three fifths those on orders accepted failed to register a further gain, contrary to hand at the same time in 1937. Page 2 W PER CENT VEHICLES INDUSTRY ---- SEVENTH f during recent months. A noteworthy increase was contributed f by non-residential building which in general has been less active than other types of construction. Contracts awarded for the building of churches, schools, and other public insti tutions were mainly responsible for a 63 per cent rise over September in this classification, which reached a level ex ceeding that of a year ago by 56 per cent. Despite this in crease, such contracts for the year to date were still only about two thirds as heavy as for the corresponding period in 1937. Awards for public works and utilities, more than 90 per cent of which are to be financed by public funds, recorded a slight recession during October but amounted to more than twice the volume of a year ago. DISTRICT BUILDING CONTRACTS AWARDED* SEVENTH FEDERAL RESERVE DISTRICT '32 '34 '35. 1956 1938 Indexes of employment and payrolls in the vehicles industry of the Seventh district, unadjusted for seasonal variation, 1925-1927 average = 100. By years, 1929 through 1937; by months, January 1936 through October 1938. Furniture Other Industry MUCH less than seasonal decline took place during October in orders booked by reporting Seventh district furniture manufacturers, and the volume of new business was within 2 per cent of last October when, however, it fell off 15 per cent from September. Shipments in October re corded a recession of 414. per cent from the preceding month, as against an increase of 3 per cent in the 1928-37 average for the period. Orders booked exceeded the tenyear average by 4 per cent, while shipments were below it by 8 per cent. With output a little heavier than new business and a moderate volume of cancellations, unfilled orders on hand at the end of October totaled 6 per cent smaller than a month previous. Operations were reduced slightly to 711^ per cent of capacity, which rate is 10 points lower than for October last year. A October 1938......................................................................... Change from September 1938..................................... Change from October 1937.......................................... First ten months of 1938................................................... Change from same period of 1937.............................. Total Contracts Residential Contracts $65,861,000 +23.3% +66.9% $414,855,000 -5.0% $17,376,000 +16.2% +58.9% $115,284,000 -4.0% •Data furnished by F. W. Dodge Corporation. The number of permits issued during October in 102 re porting cities of the district were about 5 per cent larger than in either the preceding month or the same 1937 period, while the valuation of the contemplated projects increased by as much as 21 and 33 per cent, respectively, in these comparisons. There was considerable variation in this latter item as among different sections of the district, Indiana and Michigan showing a sharp rise over both a month and a year earlier, while Illinois and Wisconsin cities registered declines. Iowa recorded a moderate gain in the monthly but a loss in the yearly comparison. Of the fifteen cities in cluded in the Michigan data, all hut three contributed to the unusually sharp rise in that State. There was a generally increasing demand for building materials during the month of October, and shipments of brick and cement were heavier than a year ago. Sales of Paper and Pulp lumber increased moderately at wholesale and more sub EPORTS from Seventh district pulp and paper mills for stantially so at retail, the volume of the latter being approx October show some increase in activity over September imately as large as in October last year. Lumber dealers and comparisons with 1937 continued favorable in the paperreported collections as good, and the ratio of outstanding industry. accounts to sales declined slightly from a month earlier for PAPER AND PULP INDUSTRY October 1938 both wholesale and retail dealers. R SEVENTH DISTRICT Paper: New orders booked (tons)........................................................................ New orders booked (dollars)................................................................... Total shipments (tons).............................................................................. Total shipments (dollars).......................................................................... Total production (tons)............................................................................ Stocks on hand at end of month (tons)............................................. Per Cent Change from Sept. Oct. 1938 1937 +8.9 +18.4 +13.1 +1.9 + 2.2 + 7.4 +1.7 +2.9 + 2.2 + 6.3 + 6.6 +10.2 CONSTRUCTION CONTRACTS AWARDED Pulp: Pulp produced (tons)................................................................................. Stook on hand at end of month (tons)................................................ +6.8 — 3.1 — 0.3 — 2.7 The Building Industry ONSTRUCTION activity in the Seventh district registered C a notable expansion during October, contracts awarded increasing for the third successive month and totaling higher than a year ago by a much wider margin than in either of the two preceding months. As a result, awards for the year to date were within 5 per cent of the corresponding 1937 vol ume. Residential contracts amounted to about 26 per cent of the total, or slightly less than the percentage maintained By months, January 1929 through October 1938. Data furnished by F. W. Dodge Corporation. Page 3 Industrial Employment Conditions HE rise during October in employment and payrolls of Seventh district industries was as great as that recorded a month earlier. The automobile industry with an increase of about 50,000 workers in the Michigan area alone, was again the heaviest contributor to the current advance. Prac tically all of the metal industries, however, showed a sub stantial expansion, increasing time-schedules as well as working forces, so that wage payments rose more rapidly than employment volumes. Seasonal activity was reflected especially in the payroll figures of agricultural implement and electrical machinery concerns. All of the durable goods groups shared in the substantial rise recorded in that classifi cation. Consumers’ goods, on the other hand, registered a slight decline in October, seasonal losses in the food products and leather goods industries aggregating somewhat more than the increases in the textiles, chemicals, rubber, and paper and printing groups. The declines within the food products groups were, as usual at this season, occasioned largely by the completion of work in the canning and preserving industry. Non-manufacturing industries as a whole increased employment and payrolls to a moderate extent with merchan dising, the largest group within this classification, ex panding them about as much as is usual at this season. The total employment volume, for all of the industries combined, was approximately 22 per cent below that of a year ago, while wage payments were 28 per cent less. T EMPLOYMENT AND EARNINGS—SEVENTH FEDERAL RESERVE DISTRICT Week of October 15, 1938 Industrial Group Report ing Firms Wage Earn ers No. Change from September 15, 1938 Wage Earn ers Earn ings No. Earn ings (000 Omitted) $ % % - 9.1 -30.4 - 6.4 - 5.9 K18.0 Durable Goods: Metals and Products1............ Vehicles..................................... Stone, Clay, and Glass........ Wood Products........................ Total........................................... 1,802 401 286 504 2,993 344,689 281,551 21,802 43,681 691,723 9,363 9,822 547 933 20,665 + 3.8 +25.5 + 2.6 + 3.1 +11.6 Non-Dubable Goodb: Textiles and Products........... Food and Products................ Chemical Products................ Leather Products.................... Rubber Products.................... Paper and Printing................. Total........................................... 398 1,046 307 170 35 747 2,703 65,530 107,396 31,035 28,581 17,199 73,871 323,612 1,241 2,783 917 569 467 2,122 8,099 + 1.5 —10.2 — 0.0 — 4.0 + 7.0 + 13 — 3.1 + + + + - Total Mfg., 10 Groups............... 5,696 1,015,335 28,764 + 6.4 +12.1 Merchandising*............................ Public Utilities............................ Coal Mining.................................. Construction................................. 5,539 1,090 42 776 137,437 99,381 8,966 11,529 3,011 3,289 216 342 + 1.6 + 0.2 +22.4 — 2.0 + 2.1 0.4 +34.1 + 2.6 1.9 5.8 3.7 5.0 5.6 4.2 0.5 Total Non-Mfg., 4 Groups....... 7,447 257,313 6,838 + 1.5 + 1.7 Total, 14 Groups......................... 13,143 1,272,648 35,602 + 5.4 +10.0 KHher than Vehicles. ‘Illinois, Indiana, and Wisconsin. Agricultural Products from a month earlier other than the fact that corn production was raised 18 million bushels. Unofficial estimates indicate that winter wheat seedings in this area are about 14 per cent smaller than the acreage planted in the autumn of 1937. Cattle, hog, and calf marketings in the United States ad vanced more than seasonally during October, but those of lambs declined somewhat. Trends for the month in inspected slaughter may be noted in the accompanying table. LIVESTOCK SLAUGHTER (In thousands) Cattle Yards in Seventh District, October 1938................................... Federally Inspected Slaughter, United States: October 1938................................... September 1938.............................. October 1937................................... October 1928-37 average............ Hogs Lambs and Calves Sheep .................... 195 557 283 74 .................... .................... .................... .................... 884 917 958 940 3,311 2,671 2,711 3,338 1,638 1,694 1,530 1,724 470 453 525 479 Grain Marketing Wheat URING October receipts of wheat at interior primary markets in the United States fell off seasonally from September but were the largest for the month since 1931. Reshipments expanded somewhat. Exports of the grain con tinued at about the same level as in September but were sharply lower than in 1937. Wheat prices at Chicago dis played a declining tendency in the second half of October, reflecting chiefly weakness in foreign markets as European importers absorbed arrivals of the commodity purchased during the war-scare period. With some strengthening at Winnipeg and Liverpool, moderate domestic country mar ketings, and some purchases by Government agencies, quota tions for No. 2 hard winter wheat in Chicago cash posi tions held fairly steady during the first three weeks of No vember, and at $.641/4 and $.66% on November 21 were about 2 cents lower than a month previous. Visible supplies of wheat in the nation on November 19 equaled the monthearlier amount and stood 14 per cent higher than last year. Corn and Oats HERE was an exceptionally large movement of corn during October at interior primary markets. Receipts were bolstered by deliveries to the Government against earlier loans; reshipments also were heavy. Aggravated by CROP PRODUCTION Estimated by the United States Bureau of Agricultural Economics on the Basis of November 1 Condition (In thousands of bushels unless otherwise specified) Seventh District United States Preliminary Final Average Preliminary Final Average 1938 1937 1927-36 1938 1937 1927-36 Corn.......................... 1,006,142 1,140,744 812,711 2,480,958 2,644,995 2,306,157 Soybeans.................. 43.537(a) 33,096(a) 13.670(a) 54,021 40,997 18,000 Cowpeas................... 729(b) 486(b) 534(b) 8,304 8,822 6,069 Buckwheat.............. 617(a) 616(a) 919(a) 6,358 6,777 8,569 Beans (dry edible)1 4.763(c) 4.574(c) 3.768(d) 14,859 15,839 12,053 White Potatoes.... 55,344 51,039 53,249 368,203 393,289 369,693 Cabbage2................. 363(a) 182(a) 195(a) 1,500 1,165 1,082 Onions1...................... 2.700(a) 2.333(a) 3.100(a) 14,740 14,746 13,638 1In thousands of 100-lb. sacks. *In thousands of tons, (a) Five States including Seventh Federal Reserve district, (b) Indiana and Illinois, (c) Michigan and Wisconsin. AVERAGE PRICES OP LIVESTOCK ARM cash income from crops, livestock, and benefit pay (Per hundred pounds at Chicago) ments for 1938 through September was down from the Week Ended Months of corresponding period of 1937 by only 6 per cent in the five Nov. 19, October September 1938 1938 1938 States which include the Seventh Federal Reserve district, in Native Beef Steers (average)......................... $9.95 $10.55 $10.40 contrast to a decline of 13 per cent for the nation as a whole. Fat Cows and Heifers....................................... 7.65 7.85 7.90 9.25 10.50 10.75 So far as crop production is concerned, the November 1 Calves.................................................................... Hogs (bulk of sales)........................................... 7.65 7.90 8.40 estimates for the Seventh district showed but little change Lambs.................................................................... 8.95 8.15 7.95 F Page 4 October 1937 $12.80 8.85 9.35 10.10 10.10 sizable marketings and a lack of substantial export demand, prices of corn were weak during most of the month. When country marketings dropped to small proportions and it became evident that a large amount of the grain would be sealed for Government loans, cash prices of No. 2 yellow com at Chicago rose slightly above the month-earlier level to $.461/2 and $.471/2 by November 21. Visible supplies of corn increased sharply from mid-October to November 19, and on the latter date totaled over twice as great as 1928-37 average stocks for the date. However, Government holdings constituted a considerable portion of these supplies. The October oats movement fell off somewhat from September, and prices declined slightly but were firmer in November. United States decreased during October from September and continued much below the volume of current exports. Dairy Products ASTURE conditions and milk production fell off some what during October; however, they remained at unusually high levels for the season. October production of creamery butter by Seventh district firms declined 8 per cent from September but totaled about one fifth greater than in the 1937 month. Creamery butter production in the United States likewise declined from September and stood well above 1937 levels. Butter sales by Seventh district firms fell off sharply in October, totaling 19 per cent less than in MOVEMENT 07 GRAIN AT INTERIOR PRIMARY MARKETS IN THE September though exceeding the year-ago and 1928-37 aver UNITED STATES age levels by 22 and 13 per cent, respectively. Government (In thousands of bushels) October October September October 1928-37 purchases were markedly less during October than in recent 1938 1938 1837 Av. months. United States inventories of butter declined season nr neab. Receipts.......................................................... 27,266 36,212 22,663 30,021 ally 17 million pounds from October 1 to November 1, but Shipments...................................................... 23,759 22,176 24,394 22,917 Corn: were about 75 million pounds greater than the 1933-37 aver Receipts.......................................................... 47,417 17,628 17,837 16,183 Shipments...................................................... 19,562 9,919 7,316 9,372 age for the date. More than one half of the amount in storage Oats: was held by Government agencies. The wholesale price of 92 Receipts.......................................................... 7,569 9,580 9,263 8,382 Shipments...................................................... 5,743 6,982 8,698 6,625 score butter held at 25y2 cents throughout most of October, and advanced to 261/0 cents by November 21. Meat Packing With comparatively favorable price relationships during EMAND attendant on the rising trend in industrial October, production of American cheese in Wisconsin rose employment brought about a further decline during contraseasonally 2 per cent over September and totaled 10 October in inventories of packing-house commodities in the per cent greater than in October 1937 or the 1928-37 October United States, despite a substantial increase in inspected average. Distribution of the commodity from primary mar slaughter over September. The tonnage sold was more than kets in the State declined 7 per cent from September, but seasonally greater than current production. While quota was 17 per cent larger than a year ago. Cheese prices held tions for most pork products and lamb declined from a firm through most of October; they displayed some weak month earlier, those of better quality beef, mutton, and ness in early November and production declined owing to choice veal firmed somewhat. Dollar sales billed to domestic this factor and a seasonally smaller milk flow. However, and foreign customers remained slightly above the 1928-37 prices displayed further firmness in mid-November. United average for the month. Slaughtering establishment employ States cold-storage holdings of cheese decreased more than ment and man-hours rose over a month earlier by 3 per cent, seasonally in October, but on November 1 were still at and wage payments increased by 6 per cent. They remained, record levels for the season. however, under a year earlier. P D MEAT PACKING—UNITED STATES Per Cent Change in October 1938 from jptember October 1928-37 October Av. 1938 1937 + 7.0 +7.6 — 4.2 Tonnage produced... +7.4 — 5.2 Tonnage sold.............. + 2.5 + 1.4 Dollar sales................. + 3.7 —4.4 +4.7 —30.6 Inventories (tonnage) —10.2 MONTHLY BUSINESS INDEXES Data refer to Seventh district and are not adjusted for seasonal variation unless other Oct. wise indicated. 1938 1923-25 average = 100 Sept. Aug. 1938 1938 Oct. 1937 Sept. 1937 Aug. 1937 104 112 101 105 101 109 Manufacturing Industries: 77 76 73 68 67 61 68 56 47 98 134 134 64 59 22 49 20 85 102 83 41 139 106 220 28 22 37 45 30 24 37 45 32 25 35 41 70 58 64 77 96 86 76 92 115 107 71 85 221 209 154 305 301 223 65 70 67 74 68 61 66 83 78 89 82 85 59 96 51 78 51 73 37 58 34 57 32 65 91 94 96 85 92 92 82 86 85 84 88 100 75 87 100 67 80 98 102 123 111 153 129 156 86 101 92 122 110 126 84 99 113 102 87 91 83 84 133 113 98 84 96 93 70 69 84 74 72 72 87 98 123 125 120 101 106 97 91 151 124 106 91 105 102 75 87 86 80 75 78 96 Pig Iron Production: Foreign Trade Automobile Production—(U. S.): HIPMENTS of packing-house commodities for export ex panded further in October to replenish stocks in the Casting Foundries Shipments: United Kingdom and to take advantage of the summer freight rates which were to be discontinued on October 31. Orders placed during the war scare also were being filled. Stoves and Furnaces: The demand for United States lard already landed improved Furniture Manufacturing: in the United Kingdom during the last half of October. Other than a moderate demand for fat-backs and other dry Building Contracts Awarded: salt meats in Norway and Sweden and for lard in Belgium, Continental demand was rather quiet during October. Meat Packing—(U. S.): Czechoslovakian trade dropped to almost negligible propor tions following the readjustment of the Sudeten boundaries. Creamery Butter Output: Sales to the South American republics gained in October, but those to Cuba and Porto Rico decreased. Quotations in the Department Store Net Sales: United Kingdom were generally below the Chicago basis ex cept for hams and certain brands of lard. In a few countries on the Continent, prices of lard and meats were up to the Adjusted........................... United States parity. Imports of animal products into the S Page 5 Merchandising Wholesale Trade T^OTAL sales of reporting wholesale trade groups in the Seventh Federal Reserve district declined 2 per cent in October from the preceding month to a volume 16 per cent below that of last October. Recessions in the individual groups amounted to ll/2 per cent each in hardware and electrical goods, 2 per cent in drugs, and to 6 per cent in groceries, with tobacco and its products gaining fractionally and the aggregate for the miscellaneous groups increasing one per cent. It will be noted in the table that tobacco and its products furnished an exception to the generally heavy declines from a year ago, showing a slight increase in the comparison. In some groups, such as drugs, electrical goods, and groceries, stocks rose a little between the end of Sep tember and October 31, but they continued to be considerably smaller than in 1937. As in department store trade, sales of shoes at retail recorded a less favorable trend in October than a month previous, declining 27 per cent or more than seasonally from September and totaling 11 per cent smaller than last October as against a decrease of only 8 per cent in the yearly comparison for September. Inventories held by re porting dealers and department stores were 10 per cent lighter on October 31 than a year ago. * * * Although sales of furniture and housefurnishings by deal ers and department stores fell off 10 per cent in October from September, in accordance with seasonal trend, the decline of less than 12 per cent from last October was the smallest in the yearly comparison so far in 1938 and dealer sales were equal in the aggregate to those of the preceding month. At the end of October stocks were 4 per cent larger than in September but continued at a level approximately 20 per cent below that of a year ago. WHOLESALE TRADE IN OCTOBER 1938" Per Cent Change from Same Month Last Year Commodity Net Sales Stocks Accounts Outstanding Credit and Finance Member Bank Reserves Collections Groceries........................... Hardware.......................... Drugs.................................. Electrical Good*.......... .. Tobacco and Its Products Miscellaneous.................... —12.7 —16.4 — 9.8 —12.2 —20.4 —20.8 —16.0 —19.8 —14.9 —17.9 — 6.2 —13.2 —36.1 —17.9 —34.6 —28.0 + 1.9 — 7.1 + 4.6 + 0.2 -16.7 —24.6 —19.1 —18.4 •Data furnished by Bureau of Foreign and Domestio Commerce. United States Department of Commerce. Retail Trade CTOBER failed to show a continuance of the betterment recorded a month earlier in department store trade of the Seventh district, the mild weather being assigned as one of the principal reasons for the lighter volume of sales than in September and the less favorable comparison with a year ago. Whereas a month previous sales had gained more than seasonally and the margin of decline from the cor responding 1937 period was narrowed to only 9 per cent, in October the dollar volume sold fell off 4 per cent and totaled 15 per cent below that of last October. For the first two weeks of November, however, sales were running only 7 per cent behind those of the same two weeks a year ago. Stocks on hand at the end of October aggregated 8 per cent heavier than a month earlier but were 13 per cent smaller than at the close of October last year. T'|ESPITE an unusually large net inflow of 147 million ^ dollars in commercial and financial funds from other districts during the four weeks ended November 16, Seventh district member bank reserve balances rose only 10 millions in the period. Transfers of about 80 millions from reserve balances, in connection with recent corporate financing, coun teracted to that extent the effect of the gain in inter-district funds. Treasury operations and a 15-million dollar increase in currency circulation exerted an additional curtailing influ ence on the rise in reserves. Balances of banks outside the two largest cities of the district increased more than 6y2 millions, mainly because of the Indiana group. A rise of about the same size was recorded for banks in the Detroit area, more than counteracting a small decline in Chicago. Interest Rates TNTEREST rates charged by outlying Chicago banks on -*- time collateral loans appeared slightly lower on Novem ber 15 than a month earlier, while those of the larger banks ANNUAL RATE OF TURNOVER ANNUAL RATE OF TURNOVER VELOCITY SEVENTH OF DEMAND FEOERAL RESERVE 1 ------ P5 DEPOSITS OISTRICT DEPARTMENT STORE TRADE IN OCTOBER 1938 Locality Per Cent Change October 1938 from October 1937 Net Sales Stocks End of Month Per Cent Change First Ten Months 1938 from Same Period 1937 Net Sales 1938 1937 38.5 46.8 39.7 45.9 37.2 38.4 39. i 39.8 Chicago...................... Detroit....................... Fort Wayne.............. Indianapolis.............. Milwaukee................. Peoria......................... Other Cities*............ —13.5 —20.5 -17.3 — 9.4 —10.7 —12.6 —15.0 —12.4 —19.2 —10.2 —12.5 —23.4 —13.7 — 9.0 —12.0 —10.0 —11.3 7th District.............. —15.3 —13.4 —14.5 *Include Fort Wayne and Peoria. Page 6 —is. 8 — 9.6 Ratio of October Collections to Accounts Outstanding End of September 34.0 35.2 40.0 40.7 V, 4933 FEB. MAR. APR. MAY JUNE JULY AUG, SEPT. Four-week moving averages, centered on the fourth week. over multiplied by number of working days in year. OCT. NOV. Average daily turn in Chicago and Detroit showed little change over the same period. The average rate earned on total loans and dis counts by the latter two groups of banks continued to move higher in October, that for the big Chicago banks exceeding the year-ago average for the fifth successive month. Open Market Paper Selected Seventh District Banking Data * * * FEDERAL RESERVE BANK OF CHICAGO, SELECTED ITEMS OF CONDITION (Amounts in millions) Change from IDDLEWESTERN commercial paper sales in October Nov. 16 Oct. 19 Nov. 17 1938 1938 1937 and outstandings at the end of the month both Total bills and securities................................................ . $277 $-6 $ 0 recorded more unfavorable comparisons with 1937 than was Bills discounted................................................................. . 0 0 0 bought........................................................................ . 0 0 0 the case in September. However, Chicago dealers reported Bills U. S. Government securities........................................ . 276 —5 0 sales in the first half of November as nearly equal to the Total reserves.................................................................... . 2,236 +122 +460 Member bank reserve deposits.................................... +313 1,304 + 10 corresponding year-ago figure. Rates appeared a little All other deposits............................................................ .. +149 + 98 197 Federal Reserve notes in circulation.......................... . 977 — 6 + 11 firmer, after tending downward for several months. Ratio of total reserves to deposit and Federal Reserve note liabilities combined___ . 90.2% +0.6* +2.4* Acceptances created in October by Seventh district banks rose substantially above the September total, and prelim •Number of Points. inary figures from selected Chicago banks indicated that November sales up to the fifteenth of the month were CONDITION OF REPORTING MEMBER BANKS slightly higher than in the same period of October. Out SEVENTH DISTRICT standings on October 31 showed the first increase over a (Amounts in millions) month previous since last January. Both October totals re Change from Nov. 16 Oct. 19 Nov. 17 mained in about the same unfavorable relationship to the 1938 1937 1938 Assets corresponding 1937 and 1928-37 average figures that pre Loans and investments—total........................................ $2,972 $+31 $—23 Loans—total........................................................................ 826 + 7 —184 vailed in September. Commercial, industrial, and agricultural loans........ 472 + 6 —151 M Open-market paper............................................................. Loans to brokers and dealers in securities.................. Other loans for purchasing or carrying securities... Securities Markets Real estate loans................................................................. Loans to banks.................................................................... loans........................................................................... OND prices during October and early November were Other U. 8. Government direct obligations.......................... actuated solely by domestic factors, in contrast to Sep Obligations fully guaranteed by U. 8. Government.......................................................... tember when events in Europe were responsible for mostOther securities.................................................................... B of the fluctuations in the securities markets. These domestic factors were favorable, in the main, over the period in ques tion, leading to firmness in bond prices. A heavy volume of new corporate bonds appeared in October—the largest for any month since early 1937—as most of the financing orig inally planned for September was held over awaiting clarifi cation of the international outlook. Most of the new issues were utility refundings, and over one half of the total rep resented issues of utilities located in the Seventh district, most of them high-grade bonds. The few issues of less con servative quality which met with success did so mainly on the strength of inducements, such as conversion features. Municipal prices continued firm; a large number of issues of this type appeared, but the aggregate volume was not very large. Most municipal offerings were accorded a better recep tion in the East than in the Middle West, in which latter area a substantial proportion originated. Institutions continued to absorb most of the new offerings placed on the market, and more cases of direct placement of bond issues with insur ance companies have been noted. Banks, apparently, are not as yet utilizing their heavy excess reserves to any appreci able extent for bond investment. The Treasury refunded nearly 300 millions of per cent R.F.C. notes, due December 15, by exchange for threeyear % per cent R.F.C. notes, dated November 1. The new notes, like those maturing, are guaranteed by the Govern ment. Treasury short-term financing during the five weeks ended November 23, was done at the average nominal cost of between .020 and .030 per cent on each issue. Chicago stock prices advanced to new high ground for 1938 in the first part of November, the Chicago Journal of Commerce average of 20 stocks reaching $48.75 on Novem ber 12, though receding slightly in the following week. 35 33 77 93 4 112 1,434 238 474 0 0 — 1 0 0 + 2 +16 0 + 8 -19 -11 —14 + 7 — 1 + 5 +29 +60 +82 2,299 884 0 — 4 + 6 0 +109 +13 0 Liabilities Demand deposits—adjusted*.......................................... Time deposits...................................................................... Borrowings............................................................................ •The annual velocity of demand deposits (unadjusted) in the four weeks ended November 16 was 21.93 times, as compared with 20.48 times in the preceding five weeks and with 23.07 times in the corresponding period of 1937. BANK DEBITS, SEVENTH DISTRICT (Amounts in millions) Chicago.............. Des Moines....... Detroit............... Fort Wayne.... Grand Rapids.. Indianapolis___ Milwaukee......... Peoria................. South Bend....... 32 smaller cities October 1938 $3,015 91 777 32 49 196 247 62 32 473 Total 41 cities.. $4,974 Per Cent of Increase or Decrease from September October ' 1938 1937 +14.5 — 1.1 + 1.9 + 0.0 +12.5 —21.9 + 2.2 —15.3 + 5.2 —12.2 + 9.3 — 4.9 —10.4 + 7.8 +14.4 — 7.3 —24.7 + 6.0 + 9.8 —12.7 +12.7 - 7.2 TRANSIT OPERATIONS OF THE FEDERAL RESERVE BANK OF CHICAGO AND DETROIT BRANCH (Exclusive of Treasury checks and of non-transit items drawn on own bank) October Total country and city check clearings: 1938 Pieces...................................................................................... 12,136,710 Amount................................................................................... $2,091,135,401 Daily average clearings: Total items cleared— Pieces...................................................................................... 483,175 Amount................................................................................... $83,241,531 Items drawn on Chicago— Pieces,................................................................................. 79,247 Amount................................................................................... $44,278,000 Items drawn on Detroit— Pieces................. 20,770 Amount................................................................................... $7,402,137 October 1937 11,304,401 $2,187,953,224 449,842 $87,001,704 71,295 $45,014,000 19,527 $9,234,450 Page 7 National Summary of Business Conditions (By the Board of Governors of the Federal Reserve System) NDUSTRIAL production continued to increase sharply in October and the first three weeks of November, reflecting principally larger output of steel and auto Imobiles. Wholesale commodity prices showed little change in this period. Volume INDUSTRIAL PRODUCTION PER CENT 140 ----- of employment and national income increased in October. Production N OCTOBER the Board’s seasonally adjusted index of industrial production was at 96 per cent of the 1923-1925 average, as compared with 90 per cent in Septem ber. Steel ingot production increased considerably, averaging 53 per cent of capacity in October, and in the first three weeks of November there was a further substan tial advance. In the automobile industry output was increased rapidly during October and the first three weeks of November both to stock dealers with new model cars and to meet the increased volume of retail demand accompanying the introduction of new models. Production, which in the first nine months of 1938 had been at a considerably lower level, was at nearly the same rate as in the corresponding period in other recent years. Output of plate glass also increased sharply further iu October. Cement production showed a considerable increase, while lumber pro duction declined slightly. _ Activity at textile mills, which had risen sharply during the summer, continued at about the August and September rate, although usually there is an increase at this time of the year. Shoe production declined somewhat further in October, and there was a decrease in output of tobacco products, while in most other industries manufacturing nondurable goods, changes in output were largely seasonal in char acter. Mineral production showed a further moderate rise, reflecting in large part increased output of crude petroleum and nonferrous metals. Lake shipments of iron ore also were in larger volume, although a decrease is usual in October. Coal pro duction increased seasonally. Value of construction contracts awarded in 37 Eastern states increased consid erably in October, according to figures of the F. W. Dodge Corporation, reflecting chiefly a sharp rise in awards for public projects. Contracts for hospital, educational, and other public buildings included in the Public Works Administration program were in large volume, and there was a further increase in contracts awarded for slum clearance projects of the United States Housing Authority. I Index of physical volume of production, adjusted for sea sonal variation, 1923-1925 average = 100. By months, January 1934 to October 1938. FACTORY EMPLOYMENT AND PAYROLLS Indexes of number employed and payrolls, without adjust ment for seasonal variation, 1923-1925 average = 100. By months, January 1934 to October 1938. Indexes compiled by the United States Bureau of Labor Statistics. WHOLESALE PRICES CENT PER CENT Employment MPLOYMENT and payrolls increased somewhat further between the middle of September and the middle of October. At automobile factories employment continued to rise sharply and there were further moderate increases in most other durable goods industries. The number employed at canning establishments declined and in other nondurable goods industries showed little change. Employment in creased somewhat at mines, on the railroads, and in the construction industry, while in trade the rise was less than seasonal. E Distribution ALES at department and variety stores and by mail order houses showed less than the usual seasonal increase in October, partly because consumer buying of winter merchandise was retarded by unseasonably warm weather during most of the month. In the first two weeks of November department store sales increased moderately. Freight-car loadings rose considerably further in October, owing largely to increased shipments of grains, coal, and miscellaneous freight. In the first half of November loadings showed a seasonal decline. S 1934 1935 1936 193? Commodity Prices 1939 Index compiled by the United States Bureau of Labor StatisticB, 1926 = 100. By weeks, 1934 to week ending Novem ber 19, 1938. , MEMBER BANK RESERVES HOLESALE commodity prices generally showed little change from the middle of October to the third week of November. Prices of steel scrap and leather advanced. Tin plate prices, on the other hand, were reduced, and there were also decreases in zinc, hides, and rubber. Prices of farm products and foods showed small fluctuations in this period. W Bank Credit OTAL loans and investments at reporting member banks in 101 leading cities declined by about $150,000,000 during the first half of November following a substantial increase during October. The decline in November was almost entirely at New York City banks and reflected the retirement of State and local government obligations held by these banks. Adjusted demand deposits, which reached an all time peak of $16,000,000,000 at reporting banks in the last week in October, also decreased somewhat in the first half of November. Member bank reserves in the middle of November were at about the high level reached a month earlier. T Money Rates 1934 1935 1936 1937 193B Wednesday figures of total member bank reserve balances at Federal Reserve banks, with estimates of required and excess reserves, January 3, 1934, to October 23, 1938. Page 8 and Bond Yields HE prevailing rate on open-market commercial paper declined slightly in November to % of I per cent, a new low level. Other short-term open-market rates were unchanged. Yields on U. S. Government securities and on high-grade corporate bonds showed only small changes during November, continuing close to the low levels reached in October. T DIRECTORS AND OFFICERS Federal Reserve Bank of Chicago DIRECTORS R. E. Wood, Chicago, 111.... W. J. Cummings.................................. Chicago, 111. E. R. Estberg............................. Waukesha, Wis. F. D. Williams........................... Iowa City, Iowa N. H. Noyes............................ ................... Deputy Chairman S. T. Crapo...................................... Detroit, Mich. M. W. Babb.................................. Milwaukee, Wis. F. J. Lewis. .........................................Chicago, III. ................. Indianapolis, Ind. MEMBER OF FEDERAL ADVISORY COUNCIL E. E. Brown..................................................................Chicago, 111. OFFICERS G. J. Schaller..................................................................President H. P. Preston.................................................First Vice President J. H. Dillard.............................................................................. VicePresident W. H. Snyder......................................Vice President and Cashier C. S. Young................................................................................ VicePresident C. B. Dunn............................................................................. GeneralCounsel W. C. Bachman............. Assistant Vice President 0. J. Netterstrom. .. .Assistant Vice President A. L. Olson......................Assistant Vice President A. T. Sihler................... Assistant Vice President A. M. Black ... Manager, Planning Department J. L. Sweet............................................................ Manager, Research and Statistics Department J. J. Endres............................ 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 ............... .....................Auditor INDUSTRIAL ADVISORY COMMITTEE Max Epstein, Chicago, 111............................................... Chairman W. Harnischfeger......................Milwaukee, Wis. G. B. Moxley.............................Indianapolis, Ind. R. R. Monroe.................................... Chicago, 111. G. W. Young....................................... Chicago, 111. DETROIT BRANCH DIRECTORS A. C. Marshall..............................Detroit, Mich. J. E. Davidson...............................Bay City, Mich. H. L. Pierson.................................. Detroit, Mich. J. M. Dodge...................................... 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 IOWA ILL • IND RESERVE DISTRICT
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