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|J8RARV ^||Ji ! •^\|| 1K^| SSNWW w»N»«>\r; ^\XsX\>\>* j-sTSiS^J gggigg |ggp H ssx^-wv '-". i\\\\mf? *A\3^ x'v\y».s< ,":£;A.-^5;-:;-| : - kv>\v\\my Vv*^%».\v»l ]□□ 1 - I- ^ spJSSKiSS .wsr.'»'; *xsix.>.xvv>wyv,v> i'fegrsis •'v^NS' SK*AXS!\S^?S A»..VVW*W y,vV'v»'*.«v%*\csvv^ fJ ^AwttSSvv ^»"WSKiw%w mvMz >vmSv5wSjw »\«\ >v«\W ■ L"C«9£&8! > 'V%-»■».'« liSti m%\ si? S^v£j mm A\NVyjK*.y.?!«S»w Mj(T? irrwi' I, IJJt'vA-i Ivr^aTo] » \ ■ mm ftgfcsfil Volume 21, No. 10 =tv.N ^^-'-ys.Vv xyj October 28,1938 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 DISTRICT SUMMARY There was a sharp rise during September in Seventh dis HE business trend in the Seventh district has continued to rise over the low level prevailing in the first half of trict industrial employment and payrolls. Although almost the year. Although the improvement has become increasinglyall reporting groups shared in the aggregate gains, reem more marked, activity has not as yet reached a level equal ployment in the automotive industry was mainly responsible to that operative a year ago at which time recessions pre for the size of the increases. dominated. An important indication of current industrial Agricultural Products expansion is found in employment and payrolls which have ONNAGES sold by packing-house establishments con shown definite gains. Agricultural income in the district for tinued during September to exceed the volume of produc the first eight months of 1938 was down 6 per cent from the tion, as has been the case in each month this year since corresponding 1937 period. February. Both the volumes produced and sold were above those of a month previous and September 1937 but, because Industry prices remained below those of last year, the dollar value of AMONG the major industries of the district to show further sales totaled less than at that time. Inventories, though -£*■ expansion in activity has been iron and steel, the rate larger than a year ago, are less than usual at this season. The of steel ingot output in the third week of October averaging manufacture of dairy products declined in September, but 46 per cent of capacity as against a rate of only 36 per cent sales volumes were well maintained. However, consumption two months earlier. Specifications from the automotive indus has failed to keep pace with the heavy production in 1938, so try were responsible to a great extent for the increased that stocks of dairy products have reached record high levels. operations. Actual production of automobiles reached a new Grain surpluses also are heavy this year. low level for the year in September, but advanced rapidly in Trade October. New business of steel and malleable casting foun dries improved in September and output of malleable cast HOLESALE trade groups in the district reported con ings increased, although that of steel castings declined. Stove tinued expansion in sales in September and retail trade and furnace factories had heavier orders and shipments in phases experienced sharp increases in business, in accordance September, and a greater than seasonal gain was recorded with seasonal trend. The gain over August in department over August in shipments by furniture manufacturers. store trade was greater than usual for the month and the Activity at paper mills eased off slightly but was greater than decline from a year ago only moderate. In the first half of October, however, department store sales showed a less a year ago. September building contracts awarded in the district were favorable trend as compared with the period last year. in the largest volume since June 1937, the trend having been Credit almost steadily upward since February this year. Except for N THE five weeks ended October 19, reserve balances of the corresponding 1937 period, residential building so far in Seventh district member banks declined slightly. Princi 1938 has been the heaviest since 1930. Actual construction pally because of increased holdings of United States Govern was retarded in September by rainy weather so that building ment direct obligations, total loans and investments of weekly materials moved less actively than in August. Production of bituminous coal in Illinois and Indiana, reporting member banks rose 62 millions in the period. which has been running throughout 1938 behind that of a Velocity of demand deposits in these banks has increased in year ago and the 1928-37 average, rose sharply in September recent weeks. Commercial failures in this district during the first three to a level above the average for the month and within 11 per cent of the volume last September. Daily average runs of quarters of 1938 totaled almost 50 per cent greater in number crude oil to stills in this area increased in September over and more than 60 per cent larger in liabilities involved than August and a year ago, and the operating rate at refineries in the same 1937 period. Because of the greater gain in lia advanced 10 points in the period to 92 per cent of capacity at bilities than in number, the average liability also showed some increase in the comparison. the close of the month. T T W I The Agricultural Situation INVENTORIES OF SELECTED FARM COMMODITIES IN THE UNITED STATES Per Cent Change from October 1, Year 1927-36 1938 Earlier October 1 Av. Creamery butter: 1X2,483,000 lbs. Excluding Govt, holdings........... —13.0 —5.2 Including Govt, holdings............ 210,351,000 lbs. +77.2 +62.7 Cheese: 121.342.000 lbs. +19.9 +37.8 American......................................... 141.120.000 lbs. +20.0 +35.0 All varieties.................................... Evaporated milk: Manufacturers’ stocks................... 419,142,000 lbs.* +57.6* +95.9s Wheat: On farms and in visible position, 532,150,000 bu. +16.4 +9.5 Corn: 2,811,450,000 bu. +13.1 +3.9 New crop plus farm carry-over.. Oats: 866,417,000 bu. +1.3 On farmB and in visible position. —7.0 Packing-house commodities: 460,122,000 lbs. +4.7 —36.1 Commercial holdings.................. •September 1 and the 1933-37 average for that date. HE problem of possible repercussions from agricultural surpluses, particularly with respect to grains and dairy Tproducts, is a matter of much concern in the Seventh Federal Reserve district, and Government agencies have intervened in the situation to a considerable extent. On the other hand, the outlook in the livestock and meat-packing industries appears comparatively favorable at the present time. Dairy Products TOCKS of creamery butter, cheese, and evaporated milk have attained unprecedented peaks. Growth in these sur pluses has been due partly to lack of response in fluid milk consumption to the sustained flow occasioned by an unusual continuance of good pasturage throughout the summer and early autumn, and partly due to the marked lowering in urban incomes. S Butter production during September continued at close to record levels, though declining seasonally from August. The butter make by Seventh district firms showed a decline of 14 per cent from August but exceeded the 1937 level by one fifth. Creamery butter production in the United States likewise declined seasonally in September, but continued about 11 per cent greater than the 1928-37 average for the month. Butter consumption has held up fairly well, but not enough so to move the increased production in 1938. Septem ber sales by Seventh district firms declined only 2 per cent from August and totaled about two fifths higher than the ten-year September average. Butter prices at Chicago have held steady since mid-July. The Dairy Products Marketing Association has practically completed its buying quota of 115 million pounds; in recent weeks, the Federal Surplus Commodities Corporation has made purchases from the Association as well as in the open market, and has been authorized to purchase up to 90 million pounds during the fiscal year ended next June 30. A sizable portion of these Government purchases probably will be distributed through relief channels during the winter. MUAJOiS DF FOUNDS what more favorable statistical position, United States coldstorage holdings of American cheese declined 6% million pounds in September, although a slight rise is seasonally expected, and cheese prices displayed a firming tendency throughout September and held steady in October. With more favorable prices, many factories shifted back to the manufacture of cheese in early October and prospects were for a rather high level of production. AMERICAN CHEESE MILLIONS OF PGUNDS By months, January 1934 to August 1938. Grains ESPITE larger exports in the 1938 season to date over the corresponding 1937 period and recent substantial disappearance in domestic supplies, stocks of wheat on farms and in visible positions on October 1 were heavier than a year ago at the same time by close to the increase in production over 1937. A substantial amount of wheat has been taken over by the Federal Surplus Commodities Corporation against loans previously made, at loan values, and an export subsidy has been inaugurated in recent months. Even with the present low prices of wheat, the United States Department of Agriculture estimates that the world carry-over of wheat on July 1, 1939, will be close to the 1933 record high of 1,195 million bushels. In the latter half of September wheat prices were domi nated by the disturbing political events in Europe, but with the passing of the crisis, prices declined about 4 cents. Quota tions later recovered the lost ground, reflecting extension of the Government subsidy program, strength in the security markets, and lighter domestic country marketings. Prices for No. 2 hard winter wheat stood at $.67 and $.70 on October 22, slightly above December futures prices. Government estimates show a total supply of four feed grains in the United States as 4 per cent larger on October 1 than a year earlier. Because of a much heavier than normal carry-over from last season, October 1 supplies of corn were about 13 per cent above the 1927-36 average, and all of this increase was within the five States including the Seventh Federal Reserve district. Farmers have marketed substantial amounts of old crop corn to make crib room for the new, and many are liquidating indebtedness for earlier corn loans by actual delivery of the grain to the Government. Current quota tions are much below the Government loan basis. Cash corn prices held fairly steady throughout most of September, re flecting firmness in wheat and a good shipping demand. They declined sharply in the last few days of the month and the first half of October until, at $.45% to $.46% on October 15, quotations for No. 2 yellow corn for immediate delivery at Chicago stood about 8 cents lower than in mid-September D By months, January 1934 to September 1938. Hatched area indicates purchases by Government agencies in open market. Production of cheese has also been heavy this year, but in September there was considerable diversion of milk to cream ery butter manufacture, and the production of American cheese in Wisconsin declined 25 per cent from August and totaled slightly under the ten-year average level. On the other hand, recent distribution from Wisconsin primary markets has been unusually well maintained, September sales being one fourth greater than in August and 31 per cent above the 1928-37 average. As a consequence of this someCEOP PRODUCTION Estimated by the United States Bureau of Agricultural Economics on the Basis of October 1 Condition (In thousands of bushels unless otherwise specified) Seventh District United States Forecast Final Average Forecast Finat Average 1938 1937 1927-36 1938 1937 1927-36 Com................... 988,330 1,140,744 812,711 2,459,316 2,644,995 2,306,157 Oats................... 421,474 544,644 443,866 1,041,577 1,146,258 1,042,461 Barley............... 45.316(a) 42.767(a) 48.881(a) 252,578 219,635 234,895 Soybeans........... 36.760(b) 32.833(b) 13.504(b) 43,684(e) 38.128(c) 16.410(c) All Tame Hay'. 18,990 15,360 15,558 81,786 73,785 69,754 Total Wheat.... 71,607 79,707 58,323 940,229 873,993 752,891 Rye.................... 9.993(a) 13.632(a) 7.221(a) 52,500 49,449 36,454 Buckwheat....... 612(a) 616(a) 919(a) 6,997 6,777 8,569 White Potatoes. 56,309 51,039 53,249 373,275 393,289 369,693 Tobacco2........... 34,448 26,635 33,665 1,484,690 1,553,405 1,325,243 Fruits, Vegetables, and Canning Crops: Changes from September 1 have been rela tively small and have not been included. 'In thousands of tons. 2In thousands of pounds. (a)Five States including the Seventh Federal Reserve district. (b)Illinois, Indiana, and Iowa. (c)Six leading commercial production States. Page 2 -v a year ago and within one per cent of the 1928-37 average for the month. Both production and sales volumes for the year to date have been well above last year’s levels and although production expanded only 2 per cent further in September, it was 12 per cent above that in the month last year. September prices averaged close to those of August but remained much below a year ago; the total value of sales billed to domestic and foreign customers increased 8 per cent over August and one per cent over the ten-year average, MOVEMENT OF GRAIN AT INTERIOR PRIMARY MARKETS IN THE UNITED STATES but was 8 per cent under September 1937. Shipments of ani (In thousands of bushels) September mal products for export thus far in 1938 have been above the September August September 1928—37 1938 1938 1937 Av. corresponding period of 1937 and were larger in September Wheat: Receipts...................................................... 36,212 61,670 33,636 39,070 than in August. British trade was good during most of Septem Shipments.................................................. 22,176 25,044 18,285 23,846 ber and an increased quantity of lard and fat backs was sold Corn: Receipts...................................................... 17,628 16,636 8,564 14,729 to Czechoslovakia; demand from both countries slackened Shipments.......................................................... 9,919 17,694 4,341 8,195 Oats: during the period of war scare and unsettled exchange condi Receipts............................................................. 9,580 24,824 13,984 11,450 tions. Cuban demand for lard was quite heavy during Sep Shipments.......................................................... 6,982 10,711 6,341 6,530 tember and trade with Porto Rico and the South American Livestock and Meat Packing republics equaled that of August; there was some improve IVESTOCK operations are currently in a favorable posi- ment in demand from Belgium and the Scandinavian coun J tion both with respect to cost of feed and the status of tries. Prices in England were below Chicago parity, but packing-house commodity inventories. While both hogs and quotations elsewhere were close to the United States basis. corn have shown weakness in October and cattle have tended Inventories of United States packing-house commodities in to ease somewhat since mid-month, the wide margin in selling foreign countries—inclusive of stocks in transit—declined prices of all livestock over corn continues. This condition is sharply on October 1 from the beginning of September. an incentive to an improved demand for feeding cattle and Imports of animal products into the United States for 1938 to the finishing of all animals to heavier than normal to date have fallen considerably below the corresponding weights, thereby tending to increase future supply. Hog period of 1937. marketings during the next several months are expected to PER CENT exceed those of a year earlier, owing to a 13 per cent increase AGRICULTURAL INCOME in the crop of spring pigs and the probability of a close to 10 per cent gain in autumn farrowings over 1937. The upward trend in industrial payrolls throughout the country and the fact that inventories of packing-house commodities can be expanded much more than normally between October 1 and the beginning of March before attaining an average level, appear favorable to such expansion. There is no carry-over from the preceding year of rough cattle to be fed, such as increased the supply in 1938. However, packing-house com modity production might be swelled by liquidation of dairy cattle because of the current situation in that industry. and almost 20 cents under a year ago. Factors in this later weakness were long liquidation and selling by cash interests to hedge country purchases. With a decline in old crop marketings and a revival in export demand, prices recovered somewhat in the following week. Stocks of oats in the United States are in comparatively good position and prices have held relatively more steady in comparison with other grains. I PER CENT MEAT - PACK! MS TOMNASE Indexes of agricultural income in dollars, unadjusted for seasonal variation, 1923— 1925 average = 100. By months, January 1929 to August 1938. Industrial Employment Conditions m Indexes of physical volume of production and sales, unadjusted for seasonal varia tion, 1923-1925 average = 100. By months, January 1934 to September 1938. Hatched area in 1934 represents tonnage produced for Government agencies. Since February this year the tonnage sold at inspected slaughtering establishments in the United States has exceeded current production by a considerable margin, and September showed a continuance of this trend. The volume sold in that month rose 6 per cent over August, and was 5 per cent above LTHOUGH employment and payrolls in practically all reporting industrial groups of the Seventh district A■totaled heavier in the middle of September than a month earlier, the substantial proportions of the gains in aggregate volumes were determined mainly by the return to work of men within a single group of industries. This group, classi fied as vehicles and represented by over 400 establishments and a weekly payroll of 7^ million dollars, increased its employment and payrolls by more than one third over those of the preceding month. The gains contributed by this indus try amounted to approximately three quarters of the net rise in all groups combined. Rubber products likewise recorded an expansion considerably in excess of the average for all industries. Aside from these two groups, increases within the manufacturing classification were limited to a range of from 0 to 3 per cent in employment and from 1 to 44/2 per Page 3 cent in payrolls. Paper and printing furnished an exception to the generally upward movement in the manufacturing industries with a decline of 2 per cent in wage payments. The non-manufacturing groups as a whole increased employ ment and payrolls to a moderate extent, the merchandising division showing the most substantial advance. Due to the current rise in aggregate employment and payroll volumes, there has been a marked reduction in the margin of decline from the corresponding volumes of a year ago, employment currently being approximately 25 per cent and payrolls 30 per cent below those of September last year. Manufacturing Iron and Steel Products ITH specifications from the automotive industry be coming steadily greater, operations at Chicago district steel mills have continued to rise. In the third week October the rate of steel ingot output averaged 46 per cent of capacity, as against but 36 per cent in the comparable week two months earlier and compared with 45 per cent a year ago at the same time. Demand from the automotive industry as well as other sources is for immediate needs only, how ever, and there appears to be no tendency on the part of steel consumers to replenish their stocks. The reopening of several farm equipment plants has failed so far to bring new orders from that source, although a sizable portion of an order for rails and track accessories by the New York Central has been placed in this district. Lower prices for rails and accessories were quoted the latter part of September. Because of competition, concessions of as much as $6 per ton were made on sheets in the first half of October, which conces sions, however, were later withdrawn. The price of pig iron was raised $1 per ton toward the end of September. Scrap iron and steel prices weakened in the third week of the month and again in October. W * * * The noticeable increase for September over August in the aggregate of orders booked for steel castings was due to a sharp rise at only a few foundries of the district. A smaller EMPLOYMENT AND EARNINGS—SEVENTH FEDERAL RESERVE DISTRICT Week of September 15, 1938 Report ing Firms Wage Earn ers No. Change from August 15, 1938 gain in new orders for malleable castings represented the fourth successive monthly expansion. Following a decided increase in August, output from steel casting foundries de clined in the current period, while that from malleable cast ing foundries recorded further expansion. Production of steel castings ran well behind the volume of September shipments and new business; the tonnage of malleable castings pro duced somewhat exceeded shipments and orders. STEEL AND MALLEABLE CASTINGS SEVENTH DISTRICT September 1938 Per Cent of Increase or Decrease from August September Steel Castings: 1938 1937 New orders booked (tons).................................................................. +43.7 —63.7 New orders booked (dollars)................................................................ +23.2 —60.6 Shipments (tons)................................................................................... —7.4 —71.9 Shipments (dollars).............................................................................. —8.1 —68.6 Production (tons).................................................................................. —22.2 —77.0 Malleable Castings: New orders booked (tons).................................................................... +11.4 —24.4 New orders booked (dollars)............................................................. +9.0 —24.0 ofShipments (tons)................................................................................... +10.0 —50.7 Shipments (dollars).............................................................................. +7.3 —51.6 Production (tons).................................................................................. +13.7 —52.1 * * * In accordance with seasonal trend, new business and ship ments of reporting stove and furnace manufacturers in the Seventh district expanded considerably further in September. Production rose only slightly over August and was much below a year ago. New orders were only a little and ship ments considerably less than last September. Automobile Production and Distribution RODUCTION of automobiles rose rapidly in October, as output of 1939 models got well under way. Because manufacturers were delayed somewhat in their changeover to the new models, total September production fell to a new low for this year. Passenger vehicles and trucks produced during the month in the United States numbered 65,159 and 18,375, respectively, as compared with 58,624 and 31,860 in August and with 118,671 and 52,542 in September last year. In the first three quarters of 1938, the number of passenger cars manufactured totaled 1,167,141 and that of trucks 352, 188, which aggregates are 62 and 51 per cent below those for the corresponding 1937 period. Seventh district automobile dealers reporting to this bank appeared to be in excellent inventory position at the end of September with respect to both new and used cars, stocks of each being further reduced during the month to levels approximately three fourths and two fifths, respectively, below those of a year ago. At the close of September last year, dealers had relatively large stocks of 1937 models and of used cars on their hands. The trend of retail sales con tinued downward in the current period, as was to be expected, but receipt of new models by a few distributors effected a slight increase over August in the aggregate number of cars sold at wholesale by reporting firms. P Wage Earn ers Earn ings No. Earn ings (000 Omitted) $ % % 1,781 431 282 486 2,980 328,052 225,245 20,009 40,933 614,239 8,491 7,411 487 854 17,243 + 2.6 +36.8 + 0.4 + 2.3 +12.8 + 4.4 +36.7 + 1.2 + 1.9 +15.9 Textiles and Products.......... Food and Products............... Chemical Products............... Leather Products.................. Rubber Products................... Paper and Printing................ Total........................................ 401 1,036 305 168 35 743 2,688 63,834 119,371 34,054 25,351 16,079 71,671 330,360 1,208 2,908 997 538 442 1,967 8,060 + 2.6 + 2.6 + 2.9 + 1.2 +10.7 — 0.0 + 2.3 + 2.7 + 2.3 — 0.0 + 1.1 +18.4 — 2.1 + 1.6 Furniture Total Mfg., 10 Groups.............. 5,668 944,599 25,303 + 8.9 +11.0 Merchandising*.......................... Public Utilities.......................... Coal Mining................................ Construction............................... 5,494 1,091 39 767 134,160 99,280 6,854 11,369 2,920 3,285 148 337 + + — + + — + — Total Non-Mfg., 4 Groups....... 7,391 251,663 6,690 + 2.6 + 1.2 13,059 1,196,262 31,993 •Illinois, Indiana, and Wisconsin. + 7.5 + 8.8 August. The decline of 2 per cent, though comparing with a small increase in the 1928-37 average for September, was less than took place in the month last year. Shipments, which totaled 23 per cent above the August volume, recorded a much greater than seasonal expansion. They moderately ex ceeded new orders, thus reducing unfilled orders on hand by about 10 per cent in the period. Current volumes booked Industrial Group Durable Goods: Metals and Products1........... Vehicles................................... Stone, Clay, and Glass....... Wood Products...................... Total........................................ Non-Dubable Goods: Total, 14 Groups........................ •Other than Vehicles. Page 4 4.9 0.0 1.7 1.1 2.8 0.2 4.6 0.2 OTHER INDUSTRY EW business booked by reporting furniture manufac turers of the Seventh district fell off slightly during NSeptember, after having shown a counterseasonal gain in financed projects, the latter constituting 52 per cent of the September valuation and nearly 50 per cent of that for the entire period. In residential construction less than 4 per cent of the nine months’ total comes under the classification of public ownership, while in non-residential building the percentage is close to 41 per cent and in public works and Paper and Pulp utilities as high as 93 per cent. Permit figures for 94 smaller cities located within the EPORTS from Seventh district firms indicate a slight decline during September in activity among pulp and district showed no change for September from August in paper mills. Comparisons with the low 1937 level continuedthe number of contemplated projects but a decline of 12 for the most part favorable in the paper industry. per cent in estimated cost. The five larger cities of the district differed from the smaller centers in that the number of PAPER AND PULP INDUSTRY SEVENTH DISTRICT September 1938 permits issued declined and estimated cost increased sharply. Per Cent of Increase The five larger cities also recorded a marked increase over or Decrease from August September a year ago in estimated cost of projects, while the smaller Paper: 1938 1937 cities showed considerable declines in both number and New orders booked (tons)................................................................... —0.3 +11.7 New orders booked (dollars)............................................................. —5.0 +1.0 value of permits. Total shipments (tons)......................................................................... —3.9 +4.4 Total shipments (dollars)................................................................... —0.9 — 0.4 Building materials as a whole experienced a less active Total production (tons).......................................................................... —7.1 +0.4 demand in September than in August, actual construction Stocks on hand at end of month (tons)........................................... —2.4 +11.5 Pulp: having been considerably retarded by the rainy weather Pulp produced (tons).................... ........................................................ —2.0 —8.5 Stock on hand at end of month (tons)............................................. —7.3 — 0.9 prevailing during the first half of the month. Wholesale lumber distribution increased while sales at retail declined, both trends being contrary to those generally operative at The Building Industry this season. Cement shipments, though practically as large A CONTINUED rise in construction activity in the Seventh as a month earlier, were 10 per cent below those of a district was indicated by September contracts awarded, year ago. Demand for brick, depending mainly on the their total valuation being the largest recorded since June volume of residential building, was well maintained during a year ago. The increase over last September raised cumula the month and only slightly smaller than in September tive awards for the year to date to a volume only 12 per cent last year. Prices of building materials early in October below that of the corresponding period in 1937, as against showed little change in the aggregate from a month earlier a difference of 42 per cent at the close of the first quarter and and remained approximately 7 per cent lower than at the one of 21 per cent at the end of the second quarter. The trend same time in 1937. in 1938, as may be noted in the accompanying chart, has been almost steadily upward since February, whereas last MILLIONS OF CONSTRUCTION CONTRACTS AWARDED year there was a definite recession from a high point in June. For the past three years, 1936-38, total awards in the first nine months have ranged between $350,000,000 and $400,000,000, which is considerably higher than in the intervening years since 1931 but lower than in those prior to that year. TOTAL Residential building continued in September at a level practically equal to that reached in August, following a steady expansion since the beginning of the year. Cumulative awards for 1938 in this type of construction were, except for the corresponding period in 1937, the highest since 1930. Building in this field has been greatly stimulated by the assistance rendered by the Federal Housing Administration in the insurance of mortgages. Of the $53,000,000 in total RESIDENTIAL contracts awarded during September, approximately 28 per cent was for residential construction work, almost as large a percentage for non-residential building, and the remainder By months, January 1929 to September 1938. Data furnished by F. W. Dodge for public works and utilities. For the year to date these Corporation. several types of construction held relatively the same Merchandising positions as in September. Wholesale Trade BUILDING CONTRACTS AWARDED* SEVENTH FEDERAL RESERVE DISTRICT ISTRIBUTION of commodities at wholesale continued to expand during September in this district, according Total Residential to data for groups reporting to the United States Department Period Contracts Contracts of Commerce. Total sales for these groups gained 6 per September 1938 .............................................................. *53,410,000 $14,957,000 Change from August 1938......................................... + 7.3% - 0.3% cent over the preceding month; the increases in the major Change from September 1937 .................................. +48.7% +35.9% lines ranged from 4 per cent in groceries to as much as First nine months of 1938............................................. 1348,994,000 *97,908,000 Change from same period of 1937............................ -12.1% —10.3% 15 per cent in the hardware trade, while tobacco and its •Data furnished by F. W. Dodge Corporation. products showed a loss of 3 per cent. The dollar volumes It may be of interest to note that awards during the cur sold were generally under those of a year ago, aggregate rent period as well as for the first three quarters of the year sales for all reporting groups decreasing 13 per cent from are almost evenly divided as between privately- and publicly- last September. Sales declines for the first three quarters of and shipped were around 15 per cent below those of a year ago when trends were not so favorable. A further advance of 10 points was made during September in the rate of production which averaged 73 per cent of capacity for the month, approximately 10 points less than for last September. R D Page 5 1938 from the same 1937 period amounted to only 2 per cent for tobacco and its products, to 9 per cent in groceries, 14 per cent in drugs, 24 per cent in the electrical goods trade, 25 per cent in hardware, and to but 3 per cent in the total for miscellaneous groups. Stocks remained on September 30 well below the year-ago level. WHOLESALE TRADE IN SEPTEMBER 1938* Per Cent Change from Same Month Last Year Commodity Net Sales Groceries......................... Hardware...................... .. Drugs............................... Electrical Goods........... Tobacco and Its Products Miscellaneous.................. —13.2 —20.3 —14.6 —28.1 —0.8 —8.3 *Data furnished by Bureau of Foreign Department of Commerce. Stocks Accounts Outstanding —11.6 —22.3 —13.8 +2.9 —5.9 —10.8 and Domestic Collections —8.1 —12.1 —17.2 -17.7 —2.5 —16.2 —35.0 —35.2 —0.2 —5.9 —14.0 —17.4 Commerce, United States Retail Trade t'OR the most part, favorable trends prevailed during September in retail trade groups reporting to this bank. Department store sales rose 34 per cent, or more than season ally, and the margin of decline from last year was narrowed slightly further, although data covering the first half of October show a poorer comparison with the corresponding 1937 period. Stocks on September 30 recorded a slightly greater decrease from a year ago than a month previous, and for the second successive month turnover exceeded that of the same month in 1937. September sales of shoes at retail by dealers and department stores were almost double those of August and within 8 per cent of the dollar volume sold in September last year. By the end of September, stocks of shoes had been reduced to a level 12 per cent under that of a year ago. The increase of 26 per cent for September in the retail furniture trade was somewhat less than the gain in the 1928-37 average for the period, but the decline of 15 per cent from last September was no greater than that shown in the year-to-year comparison for August. Inventories of furniture and housefurnishings in hands of dealers and department stores continued through September to be 20 per cent lighter than last year. DEPARTMENT STORE TRADE IN SEPTEMBER 1938 Locality Per Cent Change September 1938 from September 1937 Net Sales Chicago..................... Detroit...................... Fort Wayne............. Indianapolis............. Milwaukee................ Peoria........................ Other Cities*........... — 7.6 -13.7 —15.5 - 7.9 — 7.4 — 4.8 — 7.9 7th District............. — 9.2 •Include Fort Wayne and Peoria. Stocks End of Month Per Cent Change First Nine Months 1938 from Same Period 1937 Ratio of September Collections to Accounts Outstanding End of August Net Sales 1938 1937 29.9 40.5 29.9 41.4 32.9 35.6 33.7 37.1 —io.4 —12.0 —23.7 —12.6 — 8.8 —10.7 — 9.7 —10.8 —14.1 zi'.i 3L0 -16.8 —15.8 —25.7 —2i.O —13.0 33.6 34.2 A survey of textile stocks in the hands of retailers indi cates that they have diminished to a greater extent than inventories as a whole, considerable reduction having been effected since last spring except for seasonable merchandise in woolen lines. Stocks of textile goods may, therefore, be considered to be in good shape, although this inventory position was accomplished in some instances by rather severe Pag® 6 liquidation and there has been some holdover of merchandise in heavier lines of men’s apparel. In general, commitments for new stock are higher than last spring but remain well below 1937. MONTHLY BUSINESS INDEXES Data refer to Seventh district and are not adjusted for seasonal variation unless other Sept. Aug. wise indicated. 1938 1938 1923-25 average = 100 July 1938 Sept. Aug. 1937 1937 July 1937 101 109 104 108 Manufacturing Industries: Pig Iron Production: Automobile Production—(U. S.): Casting Foundries Shipments: Stoves and Furnaces: Furniture Manufacturing: Building Contracts Awarded: Meat Packing—(U. S.): Creamery Butter Output: Department Store Net Sales: Adjusted......................... 73 68 67 61 67 59 101 105 56 47 39 134 134 127 22 49 20 85 37 92 41 139 106 220 123 209 30 24 37 45 32 25 35 41 25 19 28 33 96 86 76 92 115 107 71 85 111 107 65 80 209 154 115 301 223 172 67 74 68 61 65 43 78 89 82 85 95 68 51 78 51 73 47 59 34 57 32 65 51 77 84 91 92 82 86 85 79 82 88 75 87 100 67 80 98 65 79 98 111 153 129 156 139 141 92 122 110 126 131 133 84 133 113 98 84 96 93 70 69 84 74 72 72 87 57 61 70 66 57 59 83 91 151 124 106 91 105 102 75 87 86 80 75 78 96 66 84 75 77 65 71 98 Credit and Finance Member Bank Reserves ESERVES held at the Federal Reserve Bank by Seventh district member banks declined 17 million dollars in the five-week period ended October 19, as operations of the United States Treasury and the usual seasonal expansion in currency circulation more than counteracted the effect of an inflow of funds from other sections of the country. Most of the Treasury activity was in the first week of the period when distribution of new security issues coincident with the bulk of the quarterly income tax collections brought about a net excess of receipts over expenditures for the period as a whole. R Interest Rates I ^HE average rate of earnings during September on total J- loans and discounts of the large Chicago banks was the highest for any month in over two years, while the corre sponding average for the major Detroit banks exceeded that for any month since last September. Interest rates charged on prime commercial loans by banks in the two largest cities of the district softened somewhat between September 15 and October 15, but a slight rise was noted in rates on time collateral loans of reporting Chicago banks. A special survey recently completed of commercial, indus trial, and agricultural loans, into which classification falls a large proportion of the total loans of reporting member banks, indicated that a small fraction of the total number of loans made at low rates of interest accounted for over one half of the total volume. The largest number of loans were made at rates of 5 per cent and over. ' Open Market Paper r I ’'OTAL liability of Seventh district banks for acceptances outstanding continued to decline during September, with the volume at the end of the month less than 20 per cent of the 1928-37 average for the date. New financing during September, as is seasonally expected, dropped off even more sharply, although the total was slightly more favorable in relation to the ten-year average than was that for outstandings on September 30. In the first half of October, acceptances made by selected Chicago banks were in somewhat greater volume than during the corresponding September period. Commercial paper sales in the Middle West recorded a contraseasonal increase in September over August, although the volume remained substantially below both last year and the 1928-37 average. Outstandings on September 30 also registered declines in the last two comparisons as well as being nominally lower than a month previous. Rates con tinued extremely easy. The rising trend of sales continued into the first half of October, as the supply of paper was more plentiful. Dealers have no difficulty in selling all the paper they can obtain. Securities Markets "DOND market developments in September and early Octo ber mainly reflected the unsettled conditions in Europe. Prices of all bonds, even the highest grades, remained de pressed and the market practically stagnant until the inter national outlook was clarified at the end of September, and then a rapid recovery took place. Municipal prices rebounded even more sharply than corporates, according to information received from Chicago bond houses. New corporate issues for September were in the lowest volume since last winter, most financing being held up for the reasons mentioned above. Despite this severe contraction, the total continued above a year ago. Municipal emissions, while not restricted to the extent of the corporates, nevertheless recorded a rather low total for the month. Most issues attempted were high-grade refundings, and as such received a satisfactory reception. The few not strictly high-grade issues met with only fair success, indicating that market conditions are not as yet ripe for any large volume of second-grade financing. Institutional invest ors continue to be the largest buyers of bonds, with bank purchases still restricted and those by individuals practically negligible. Most bond houses, however, point to the com paratively large number of issues contemplated or already in registration, the prospect for continued heavy excess reserves of banks, and the clarification of the foreign situa tion for the visible future, at least, as indicators of sustained activity in the bond market for several months to come. United States Treasury bonds followed about the same price pattern during the past weeks as did other “gilt-edge” securities. The weekly issues of Treasury bills in October sold at lower discounts than any similar issues since early summer, those dated October 19 selling to yield approxi mately .018 per cent. The Chicago Journal of Commerce average of Chicago stocks showed that prices of these equities closely followed the familiar pattern established on the New York Stock Exchange during and after the European war scare. The average touched a three-months’ low point late in September, but then rose steadily to a new recovery high of $48.20, established on October 18, and stood close to this figure on October 22. Selected Seventh District Banking Data * * * FEDERAL RESERVE BANK OF CHICAGO, SELECTED ITEMS OF CONDITION (Amounts in millions) Total bills and securities....................................... Bills discounted....................................................... Bills bought........................................................ ... U. S. Government securities................................ Total reserves.......................................................... Member bank reserve deposits............................ All other deposits.................................................... Federal Reserve notes in circulation.................. Ratio of total reserves to deposit and Federal Reserve note liabilities combined. Change from October 19 Sept. 14 October 20 1938 1938 1937 $277 1—3 $-4 0 —1 0 0 0 0 276 —3 —2 2,114 +36 +335 1,294 —17 +290 99 +46 +55 966 +5 —10 89.6% +0.3* +1.8* •Number of Points. CONDITION OF REPORTING MEMBER BANKS SEVENTH DISTRICT (Amounts in millions) Change from October 19 Sept. 14 October 20 1938 1938 1937 Loans and investments—total...................................... $2,941 $+62 $-81 Loans—total.................................................................. 819 —14 —215 Commercial, industrial, and agricultural loans....... 466 — 6 —174 Open-market paper......................................................... 35 + 2 —20 Loans to brokers and dealers in securities................ 33 — 1 —20 Other loans for purchasing or carrying securities... 78 — 1 —11 Real estate loans............................................................. 93 0 + 7 Loans to banks................................................................ + 1 4 — 1 Other loans....................................................................... 110 + 4 — 9 U. S. Government direct obligations......................... 1,418 +71 +13 Obligations fully guaranteed by U. S. Government...................................................... 238 + 1 +50 Other securities............................................................... 466 + 4 +71 Assets Liabilities Demand deposits—adjusted*....................................... Time deposits.................................................................. Borrowings....................................................................... 2,303 879 0 0 + 1 0 +84 +11 —1 •The annual velocity of demand deposits (unadjusted) in the five weeks ended October 19 was 20.48 times, as compared with 17.67 times in the preceding four weeks and with 23.61 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.................................... Per Cent of Increase or Decrease from September August September 1938 1938 1937 $2,634 +4.6 —12.2 90 +1.9 —28.2 690 +7.2 —22.6 31 +7.8 —9.1 —0.5 —14.0 47 +2.9 —8.7 179 +1.6 —13,2 +5.7 —12.3 54 30 +6.0 —20.0 431 +3.9 —13.6 ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ ............................ Total 41 cities........................................ ............................ $4,416 +4.6 —14.5 TRANSIT OPERATIONS OF THE FEDERAL RESERVE BANK OF CHICAGO AND DETROIT BRANCH (Exclusive of Treasury checks and of non-transit items drawn on own bank) Total country and city check clearings: Pieces.................................................... Amount................................................. Daily average clearings: Total items cleared— Pieces..................................................... Amount................................................. Items drawn on Chicago— Pieces..................................................... Amount................................................. Items drawn on Detroit— Pieces.................................................... Amount................................................. September 1938 11,017,515 $1,957,414,865 September 1937 10,775,913 $2,197,163,516 440,701 $78,296,595 431,037 $87,886,541 , 75,001 $41,637,000 70,111 $45,933,000 , 19,840 $7,496,415 18,775 $9,535,346 Page 7 National Summary of Business Conditions (By the Board of Governors of the Federal Reserve System) INDUSTRIAL PRODUCTION SEPTEMBER industrial production and employment continued to advance, and there was also an increase in the volume of retail trade. Building activity INcontinued at the increased level reached in August, reflecting a large volume of awards for publicly-financed projects. Production OLUME of industrial production increased further in September and the Board’s seasonally adjusted index advanced to 90 per cent of the 1923-1925 average as compared with 88 per cent in August. There was a substantial rise in pig iron production and output of steel ingots continued to increase, averaging 45 per cent of capacity. In the first three weeks of October activity at steel mills showed a further increase and was at a rate of about 50 per cent of capacity. Plate glass production continued to advance rapidly in September. Output of lumber and cement was maintained, although at this season activity in these industries usually declines. Automobile production in September remained at about the same low rate as in August; in October, however, output increased rapidly as most manu facturers began the assembly of new model cars. In the nondurable goods industries there were substantial increases in activity at meat-packing establishments, sugar refineries, and tire factories. Output of shoes declined somewhat. Textile produc tion, which had been rising sharply since spring, showed little change in September, although an increase is usual. Activity increased further at silk mills, but at woolen mills there was a decline and at cotton mills output did not show the usual seasonal rise. At mines, coal production increased considerably in September and there was also an increase in output of copper. Crude petroleum output declined as wells in Texas were shut down on both Saturdays and Sundays whereas in August only Sunday shutdowns had been in effect. Value of construction contracts awarded, which had increased considerably in August, showed little change in September, according to figures of the F. W. Dodge Corporation. Awards for private residential building continued at the advanced level prevailing since early summer and contracts for public residential projects were also maintained following a rise in the previous month. Other public projects continued in substantial volume. V Index of physical volume of production, adjusted for sea sonal variation, 1923-1925 average = 100. By months, Jan uary 1934 to September 1938. FREIGHT-CAR LOADINGS 1934 1935 1936 1937 1938 Employment Index of total loadings of revenue freight, adjusted for seasonal variation, 1923-1925 average = 100. By months, January 1934 to September 1938. WHOLESALE PRICES PE. CENT PER CENT MPLOYMENT and payrolls increased further between the middle of August and the middle of September, reflecting principally increases at manufac turing concerns. Employment rose sharply at automobile factories and increased moderately in other durable goods industries. At factories producing nondurable goods there was slightly more than the usual seasonal rise in the number employed. E Distribution ISTRIBUTION of commodities to consumers showed a more than seasonal rise in September. There were increases in sales at department and variety stores and mail order sales also increased. Department store sales for the first three weeks of October showed somewhat less than the usual seasonal rise. Freight-car loadings continued to increase in September and the first half of October, reflecting chiefly a further rise in shipments of coal and miscellaneous freight. D FARM PRODUCTS, FOODS OTHER COMMODITIES Commodity Prices RICES of a number of industrial raw materials, particularly hides and copper, advanced from the middle of September to the third week of October. Crude oil and gasoline prices, on the other hand, were reduced. Livestock and meat prices showed large seasonal declines in this period. In the first half of October there were sales of many finished steel products at prices below those announced for the fourth quarter, but in the third week of the month it was reported that prices had been restored to former levels. P Indexes compiled by the United States Bureau of Labor Statistics, 1926 = 100. By weeks, 1934 to week ending Octo£ber 15, 1038. MEMBER BANK RESERVES AND RELATED ITEMS BILLONS OF DOLLARS BILLONS OF DOLLARS Bank Credit TOURING the four weeks ended October 19 there were further substantial in creases in the gold stock of this country. As a result largely of these gold acquisitions and of net expenditures by the Treasury from its deposits with the Reserve banks, excess reserves of member banks increased to a total of $3,270,000,000 on October 19. Demand deposits at reporting member banks in 101 leading cities were also increased by the inward gold movement and on October 19 amounted to $15,750, 000,000, the largest volume ever reported by these banks. Following substantial increases during September, reflecting purchases of new issues of United States Government obligations, total loans and investments at reporting banks showed little change during October. Money Rates 1934 1935 1936 1937 1938 Wednesday figures, January 3, 1934, to October 19, 1938. Page 8 and Bond Yields 'T'HE average yield on long-term Treasury bonds declined from 2.48 per cent on -*- September 27 to 2.28 on October 21. Yields on Treasury notes and Treasury bills also declined in the period. DIRECTORS AND OFFICERS Federal Reserve Bank of Chicago DIRECTORS R. E. Wood, Chicago, 111....................................Deputy Chairman W. J. Cummings....................................Chicago, 111. S. T. Crapo......................................... Detroit, Mich. E. R. Estberg............................... Waukesha, Wis. M. W. Babb.....................................Milwaukee, Wis. F. D. Williams............................. Iowa City, Iowa F. J. Lewis............................................. Chicago, III. N. H. Noyes..........................................................Indianapolis, Ind. MEMBER OF FEDERAL ADVISORY COUNCIL E. E. Brown.....................................................................Chicago, 111. OFFICERS G. J. Schaller..................................................................President H. P. Preston.................................................First Vice President J. H. Dillard.............................................................................. VicePresident W. H. Snyder...................................... Vice President and Cashier C. S. Young................................................................................ VicePresident C. B. Dunn............................................................................. GeneralCounsel W. C. Bachman............. Assistant Vice President 0. J. NetterstrOM. .. .Assistant Vice President A. L. Olson......................Assistant Vice President A. T. Sihler....................Assistant Vice President A. M. Black. . .Manager, Planning Department J. L. Sweet............................................................ Manager, Research and Statistics Department J. J. Endres............................ 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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