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MONTHLY REVIEW o f Financial and Business Conditions F ifth Federal Re s e r v e D is tr ic t September 30, 1939 Federal Reserve Bank, Richmond, Va. Summary of August Business Conditions shipped nearly as much yarn as in July; tobacco manu facturers sharply increased output o f all their products; and bituminous coal operators mined a very heavy ton nage for this season. Cotton mills have sufficient orders on hand to keep them running for a number o f weeks, and the demand for rayon is so strong that producers have reduced stocks to a relatively low figure and are begin ning to readjust base prices upward. H E total volume o f trade and industry in the Fifth Federal Reserve district was fully up to seasonal level in August, although one or two indicators lagged slightly for special reasons. Since the beginning o f Sep tember, war in Europe has had several concrete effects on business, among them being heavy buying o f textiles, suspension o f auction tobacco sales, and some accumu lation o f inventories. Distribution o f goods in August showed a substantial rise over July, much o f which was seasonal. Sales in representative department stores rose 20 per cent above sales in the preceding month, and were also 6 per cent larger than sales in August last year. Due chiefly to the customary August sales, furniture sales at retail advanced by 41 per cent over sales in July, and in addition rose 7 per cent over August 1938 sales. Wholesale trade in creased 22 per cent in August in comparison with July, and was 7 per cent above trade in August last year. Sales o f new automobiles in August exceeded sales in the same month last year by 45 per cent, but declined somewhat more than seasonally from July sales, buyers beginning to wait for new models earlier than usual this year. T CO N STR U C TIO N A N D E M P L O Y M E N T H O LD UP Construction continues at recent high levels, although the value o f permits issued and contracts awarded in August were both smaller than July figures. However, both July figures were comparatively high. A continu ation o f construction on a large scale, with increased activity in many lines, is keeping employment up and is increasing the number o f workers in some fields. A U C T IO N T O B A C C O M ARKETS SUSPEND The only outstanding development o f an unfavorable nature in the district in the past month was the necessity o f closing auction tobacco markets early in September to prevent price demoralization as a result o f the retirement o f export buyers. W ith a very large crop o f tobacco to be sold, this first direct result o f the European conflict is extremely serious to tobacco growers in North Carolina and Virginia, and to all lines o f business in the tobacco growing sections o f those states. IN D U S T R IA L A C T IV IT Y EXPAN D S In industry, cotton textile mills expanded operations around 17 per cent in A ugust; rayon mills, except for one which was tied up by a strike, ran full time and BUSINESS STATISTICS— FIFTH FEDERAL RESERVE DISTRICT August 1939 July 1939 August 1938 Debits to individual accounts (24 cities)........... Sales, 30 department stores, 5th district.............. Sales, 37 furniture stores, 5th district................. Sales, 189 wholesale firms, 5th district................ Registrations, new autos, 5th district................. $1,218,844,000 7,409,362 $ 1,324,494 $ $ 12,664,000 15,840 $1,221,748,000 6,193,095 $ 941,894 $ $ 10,367,000 19,962 $1,125,303,000 6,965,642 $ 1,238,416 $ $ 11,831,000 10,903 Tobacco sold in 5th district (F ou nds)............... Growers receipts from tobacco, 5th district......... Average price o f tobacco, per hundred pounds.. Number o f business failures, 5th district........... Liabilities in failures, 5th district........................ Value o f building permits, 31 cities.................... 219,924,342 35,233,572 16.02 35 246,000 $ 8,498,125 $ Value o f contracts awarded, 5th district............. Cotton consumption, 5th district (B a les)........... Cotton price, t per lb., end of month................... Print cloths, 3 8 ^ in., 64x60s, end of month....... Rayon yarn shipments, U. S. (P ou nds)............... Rayon yarn stocks, U. S. (P ou nds)..................... Bituminous coal mined, U. S. (T o n s )................. $ $ $ 32,213,000 299,195 8.76 4.63 31,300,000 18,400,000 34,470,000 141,771,927 33,894,137 23.91 72 727,000 $ 6,757,976 $ $ 32,347,000 273,351 8.31 4.38 36,700,000 41,100,000 28,665,000 % Change Year Month 0 +20 +41 + 22 —21 — 38 + 55 + 4 — 33 ... 51 — 66 +26 — 8 +17 — 6 — 3 — 5 — 26 +18 0 + 9 + 5 + 6 — 15 — 55 +20 $ $ ' $ $ $ 35 486,000 13,635,565 35,117,000 255,264 9.28 4.75 32,900,000 24,900,000 29,135,000 + 8 + 6 + 7 + 7 + 45 "o MONTHLY REVIEW 2 G O V E R N M E N T SECU RITY H O LDIN GS H IG H ER Circulation o f Federal Reserve notes rose during the past month as auctioning of tobacco increased and other fall crops began to come on the market. Member bank reserve deposits and cash reserves of the Richmond bank also increased between the middle o f August and the mid dle of September. Perhaps the most significant change in the statement this month is the increase in the bank’s portfolio of Government securities, due to System pur chases of securities in the open market to maintain orderly conditions 111 the money market following the outbreak of war in Europe. RESERVE BANK STATEMENT ITEMS Fifth District 000 omitted Aug. 15 Sept. 15 ITEMS 1939 1939 J 200' $ 560 Discounts held .............................. 87 87 Foreign loans on gold............... 23 23 Open market p a p e r ................... 1,043 1,067 Industrial advances ................... 137,064 151,912 Government securities ............... 153,265 Total earning assets ........... 138,801 210,496 Circulation of Fed. Res. notes 202,007 273,187 257,993 Members’ reserve deposits .. . Cash reserves ................................ 398,943 377,097 Reserve ratio .............................. 72.48 74.01 Sept. 15 1938 555 0 23 1,472 127,873 129,921 199,151 221,881 353,254 74.00 $ Industrial plants on the whole were more active in August than in either July this year or August last year, and production in bituminous coal mines last month was higher than in either the preceding month this year or the corresponding month last year. Cotton textile mills increased operations in August, and rayon mills were fully employed except one large plant which was closed by a strike. Opening o f additional tobacco markets in North Caro lina in August added to the number o f handlers, graders, etc., at work, but this improvement was lost in September when markets closed after withdrawal o f buyers for ex porters. The following figures, compiled for the most part by the Bureau o f Labor Statistics, show the trends o f em ployment and payrolls in the Fifth district from July to A u gu st: Percentage change from July 1939 to Aug. 1939 in number in amount on payroll of payroll + 2.0 + 1.4 — 2.2 — 0.7 + 3.9 + 4.7 + 1.9 + 13.6 + 2.8 + 5.6 + 2.0 + 2.4 STATES Maryland ............... Dist. of Columbia Virginia ................. West Virginia ___ North Carolina . . . South Carolina . . . FU R TH E R RISE IN LO AN S A N D IN VESTM EN TS Reporting member banks in 12 Fifth district cities in creased both loans and investments between August 9 and September 13, and showed a substantial rise in demand deposits. Reserves of the 41 banks also were higher on the later date. Cash in vaults rose seasonally as crop marketing and early fall trade began. SELECTED ITEMS— 41 REPORTING BANKS Fifth District 000 omitted ITEMS Sept. 13 Aug 9 1939 1939 Loans & discounts .............................. $248,637 $245,316 Investments in securities ................. 433,539 431,633 Reserve bal. with F. R. Bank _____ 183,969 169,311 Cash in vaults ................................ 20,411 Demand deposits ................................. 521,368 494,508 200,308 Money borrowed Sept. 14 1938 $234,138 384,509 148,342 19,212 458,960 197,934 M U T U A L SAVINGS CO N TIN U E SU M M ER DECLIN E Ten mutual savings banks in Baltimore had total de posits of $219,426,239 on August 31, 1939, compared with $219,774,904 on July 31, 1939, and $217,598,810 on A u gust 31, 1938. The small decline last month was a con tinuation o f a drop which usually occurs during the vaca tion season. FA ILU RES W E L L BELOW LA ST Y E A R Commercial failures in the Fifth district and the United States were reported by Dun & Bradstreet as fo llo w s: PERIODiS August 1939 ............. ........... July 1939 ................... ........... August 1938 ............. ........... 8 Months, 1939 .......... .......... 8 Months, 1938 ......... .......... Number of Failures District U. S. 859 35 35 917 72 1,015 401 446 8,339 9,114 Total Liabilities District U. S. $ 246,000 $ 11,259,000 486,000 14,150,000 727,000 16,382,000 $4,397,000 5,901,000 $119,092,000 170,115,000 DEBITS A T SE ASO N AL L E V E L Debits to individual accounts in 24 trade centers in the Fifth Reserve district were approximately the same in August as in July this year, but exceeded August 1938 debits by 8 per cent. O f the 24 cities reporting for both years, 12 reported higher and 12 lower figures for August than for July, while all but 3 cities reported higher figures last month than for August 1938. DEBITS TO IN DIVIDUAL ACCOUNTS Fifth District CITIES Aug. 1939 Maryland Baltimore ............. Cumberland ......... Hagerstown ......... Dist. of Columbia Washington ......... Virginia Danville ............... Lynchburg ........... Newport News . . . Portsmouth ......... Richmond ............. Roanoke ............... West Virginia Charleston ........... Huntington ......... Parkersburg ......... North Carolina Asheville ............... Charlotte ............. Durham ............... Greensboro ........... Raleigh ............... Wilmington ......... Winston-Salem . . South Carolina Charleston ........... Columbia ............. Greenville ............. Spartanburg District Totals . . 000 omitted July Aug. 1989 1938 % of Change Month Year $ 325,562 7,546 8,030 $ 346,938 8,878 8,962 $ 303,924 7,485 7,717 — 6 — 15 — 10 + + + 246,187 266,293 221,504 — 8 + 11 9,170 13,405 9,602 43,747 3,913 169,458 24,621 7,380 15,380 9,023 48,264 4,072 143,081 25,853 8,749 13,443 7,683 42,439 3,738 164,377 22,223 + 24 — 13 + 6 — 9 — 4 + 18 — 5 + 7 1 4 5 0 + 25 + 3 + 5 + 3 + 11 46,420 15,673 9,607* 45,197 15,440 10,145* 38,701 14,252 + 3 + 2 — 5 + 20 + 10 12,499 61,310 41,281 18,095 40,266 11,111 40,681 11,810* 59,292 29,503 18,430 41,713 10,373 37,257 11,707 51,250 46,634 15,556 36,448 11,350 36,658 + 6 + 3 + 40 — 2 — 3 + 7 + 9 + 7 + 20 — 11 + 16 + 10 — 2 + 11 15,489 27,256 17,710 9,812 $1,218,844 15,757 24,901 18,298 9,653 $1,221,748 13,938 21,738 15,814 7,975 $1,125,303 — + — + + 11 +- 25 + 12 + 23 2 9 3 2 0 + 8 E M P L O Y M E N T CO N TIN U ES U PW A RD Specific data on employment are not sufficiently avail able to indicate changes from month to month with pre cision, but it seems clear that conditions in the Fifth dis trict improved during August. A U T O BU YERS A W A IT N EW MODELS New automobile sales in August fell below July sales by somewhat more than seasonal average, but this was probably due to the expectation o f earlier showing o f new 3 MONTHLY REVIEW models this year, and to incomplete stocks of new cars on some dealers’ floors toward the end o f the month. Stocks o f used cars are not burdensome this fall, and automobile dealers appear to be optimistic on fall and winter prospects. The following registration figures for new cars were furnished by R . L. Polk & Cov o f De troit : REGISTRATION OF N E W PASSENGER CARS— NUMBEIR STATES Maryland ........... Dist. of Col. . . . Virginia ............. W est V a............... No. Carolina . . . So. Carolina . . . District ........... Aug. 1939 2,935 1,681 3,636 1,716 3,805 2,067 15,840 Aug. 1938 1,868 1,189 2,269 1,172 3,015 1,390 10,903 % 8 Months 8 Months Change 1939 1938 +57 26,911 17,667 +41 17,851 11,901 +60 29,489 21,170 +46 15,655 11,295 +26 31,152 20,789 +49 17,397 9,870 +45 138,455 92,692 % Change +52 +50 +39 +39 +50 +76 +49 CO N STR U C TIO N DECLINES SE A SO N A LLY There was a decline in the value o f building permits issued in August from the high July total, but last month’s valuation was materially higher than the August 1938 figure. Permits issued in 31 cities in August 1939 totaled $8,498,125, compared with $13,596,301 in July 1939 and $6,757,976 in August 1938. Washington reported the highest figure last month, $2,290,900, Baltimore was sec ond with $1,636,990, Raleigh third with $800,283, Rich mond fourth with $796,095, and Charlotte fifth with $425,066. Contracts actually awarded in the Fifth district in A u gust totaled $32,213,000, a decrease of 8 per cent from $35,117,000 awarded in July 1939, and also a fraction below contracts totaling $32,347,000 in August 1938. However, except for August 1938, last month’s awards were the highest for any August in this bank’s records which run back through 1929. Figures collected by the F. W . D odge Corporation by states for August 1939 and 1938 on construction contracts awarded are as fo llo w s: CONSTRUCTION CONTRACTS AW ARDED STATES Maryland ................................ Dist. of Col................................ Virginia .................................. West Virginia ....................... North Carolina ..................... South Carolina ..................... Fifth District ................... Aug. 1939 $ 8,568,000 10,035,000 6,760,000 2,376,000* 3,271,000 1,529,000 $32,539,000* Aug. 1938 $ 6,650,000 5,553,000 9,751,000 2,205,000* 5,810,000 2,696,000 $32,665,000* % Change + + — + — — 29 81 31 8 44 43 0 C O TTO N T E X T IL E A C T IV IT Y ROSE 17% Cotton textile mills in August increased operations after a seasonal recession during July. Both cotton con sumption and actual spindle hours o f operations rose 17 per cent in the Fifth district in August in comparison with July. Further, with declining cotton prices while the prices for textiles were firm, mill margins widened in August. In the first half o f September orders were re ceived in excess o f production and many mills are assured of full time operations for some weeks. Meanwhile mills have grown reluctant to book further advance orders at current prices, and therefore today’s quotations are nomi nal in many constructions. Consumption o f cotton by states in the Fifth district in August 1939, July 1939, and August 1938, in bales, is shown b elow : COTTON CONSUMPTION Fifth District — Bales— MONTHS No. Carolina So. Carolina August 1939 ......................... 163,494 121,535 July 1939 ................................ 143,266 100,757 August 1938 ......................... 143,560 114,916 8 Months 1939 ....................... 8 Months 1938 ....................... 1,229,760 964,160 927,332 744,991 Virginia 14,166 11,241 14,875 District 299,195 255,264 273,351 92,956 91,511 2,250^048 1,800,662 R A Y O N IN STRO N G POSITION In spite o f the absence o f one o f the largest producers from the market because o f a strike during nearly all o f August, shipments o f rayon filament yarn during that month totaled 31,300,000 pounds, only 5 per cent below 32.900.000 pounds shipped in July 1939 and 15 per cent less than 36,700,00 pounds shipped in August 1938. Ship ments o f rayon exceeded production in August, and stocks declined from 24,900,000 pounds on July 31 to 18,400,000 pounds on August 31. Settlement o f the strike previ ously mentioned increased production in September, but demand for rayon is very strong and on September 19 the largest producer announced an increase in price o f 2 cents per pound. Some o f the mills are restricting orders for deliveries beyond November until price adjustments now in process are completed. CO TTO N PR O D U C TIO N ESTIM ATE RAISED * Includes some contracts outside 5th district. C O A L M IN IN G CO NTIN UES A B O V E 1938 L E V E L Bituminous coal production in August was unusually high for that month, totaling 34,470,000 net tons, an in crease o f 18 per cent over production of 29,135,000 tons in the shorter month o f July this year and 20 per cent above 28,665,000 tons mined in August last year. Total production this calendar year to August 31 of 224,862,000 tons is 11 per cent higher than 1938 production o f 202,666,000 tons for the corresponding months. Increased production o f coal during the past three months was prin cipally to rebuild reserve stocks which were depleted in April and May, but coal consumption also increased sub stantially in industry and reserve stocks have therefore not yet been replenished. Shipments of coal through Hampton Roads ports this calendar year to September 9 totaling 12,546,906 tons exceeded 11,140,833 tons handled in the corresponding 8 months last year by 13 per cent. Spot cotton prices, which declined steadily during A u gust, rose again early in September, but failed to hold all the gain at the middle o f the month. On August 18, the average price for middling grade upland cotton on 10 Southern markets was 8.95 cents, from which it dropped to 8.74 cents on August 25. However, by September 8 the average was up to 9.49 cents, and on September 15 stood at 9.18 cents. The second cotton condition report estimated probable production in 1939 at 12,380,000 bales, an increase o f 968.000 bales over the August 1 estimate. The unfavor able effect o f this marked increase in prospective yield was lessened by European developments, which may tend to increase demand for American cotton both at home and abroad. If the price rise which occurred in September is maintained, in addition to the higher production indicated by the September report, farm purchasing power in the Carolinas during the fall and winter should be very ma terially increased. MONTHLY REVIEW 4 COTTON CONSUMED AND ON HAND (Bales) August 1939 Fifth district states: Cotton consumed ................................ 299,195 August 1938 273,351 Cotton growing states: Cotton consumed .................................. Cotton on hand August 31 in Consuming establishments ........... Storage & compresses ................... 531,632 470,431 494,911 11,777,604 856,529 9,757,925 United States: Cotton consumed ................................ Cotton on hand August 31 in Consuming establishments ........... Storage & compresses ................... Exports of cotton .................................... Spindles active in month ..................... 628,448 1,059,052 9,825,329 200,843 22,157,528 + 3 — 30 — 1 + 12 559,409 653,874 11,805,195 218,792 22,012,186 Individual Cities: Baltimore, 9 stores . . Columbia, 3 stores . . . Richmond, 5 stores . . Washington, 7 stores TO B A C C O M ARKETS D E M O R A LIZE D Auction tobacco markets in the two Carolinas were open in August and sold 55 per cent more tobacco than in August 1938, but growers received only 4 per cent more for their tobacco since average prices were 33 per cent lower in the 1939 month. Early in September the lead ing export buyer retired from the markets because o f disturbed European conditions, and a few days later all auction tobacco markets closed to prevent complete de moralization o f prices. Sales in August, all o f the fluecured type, were as follow s: Producers’ Tobacco Sales, Pounds August 1939 August 1938 STATES So. Carolina ......... No. Carolina ......... Total ................... 76,832,115 143,091,227 219,924,342 Price per Hundred 1939 1938 $15.96 16.05 $16.02 58,683,790 83,088,137 141,771,927 23.94 $23.91 T O B A C C O PRODUCTS IN CREASE S U B S TA N TIA LLY All branches o f the tobacco manufacturing industry in creased operations materially in August over July, and output in every line was also higher than August 1938 output. The Bureau of Internal Revenue reports as fol lows on August manufacturing: TOBACCO PRODUCTS MANUFACTURED August 1939 Smoking & chewing tobacco, pounds ............... Cigarettes, number ................. Cigars, number ....................... Snuff, pounds ............................ 29,839,260 16,571,041,957 500,807,236 3,451,554 August 1983 c t 27,504,760 15,891,586,977 477,59*5,984 2,966,448 Change + 8 + 4 + 5 + 16 R E T A IL A N D W H O LESALE TR A D E Same stores by states, with 24 stores added: Virginia (13) . . . West Va. (10) . . No. Carolina (8) . So. Carolina (9). Net Sales August 1939 compared with Aug. July 1939 1938 LINES Auto Supplies (5) ......... +20 Drugs (10) ....................... Dry Goods (9) ............... Electrical Goods (14) . . Groceries (62) ................. Hardware (20) ............... Indus. Supplies (10) . . . Paper & Products ( 7 ) . . Tobacco & Products (8) . Miscellaneous (39) . . . . Totals (189) ............... + + 2 3 + 14 + 40 + 2 + 7 + 8 — 4 + 11 + + 7 7 Stocks Ratio Aug. collections Aug. 31, 1939 compared with to accounts Aug. 31 July 31 outstanding August 1 1938 1939 + 9 + 82 + 10 + 77 0 + 7 + 29 + 17 + 11 + i2 + 6 — 6 + 41 + 5 + 6 + 8 — 7 — 5 — 1 + *3 + 7 + *1 + 1 + 13 + 15 + 22 + + + + + 3 5 4 3 1 0 50 48 83 44 69 87 51 60 60 89 69 66 CROP FORECASTS The following figures show forecasts o f production based on September 1 conditions, compared with yields in 1938 and in the 10-year period 1928-1937, and per centage changes in acreage this year over or under 1938. Yield figures marked ( + ) were raised between August 1 and September 1, and those marked ( — ) were low ered. Cottofn (Bales) Y Change c Acreage Virginia ............ North Carolina South Carolina , — 15 — 11 0 Maryland .......... Virginia ............ West Virginia , North Carolina South Carolina . + Yield 1939 Yield 1938 Yield 1928-1937 12,000 388,000 648,000 40,000 702.000 827.000 29,250,000 98,806,000 2,208,000 516,850,000 98,800,000 25.217.000 98.075.000 3,400,000 493,927,000 79.624.000 18,537,000 34,775,000 12,640,000 46,398,000 26,767,000 15.617.000 32.225.000 12.384.000 41.355.000 21.335.000 1,312,000 1,978,000 1,806,000 5,566,000 10,648,000 1.364.000 2.287.000 2.218.000 3.906.000 8.488.000 543,000 1,138,000 802,000' 863,000 431,000 464.000 916.000 645.000 654.000 338.000 2,990,000 10,349,000 2,720,000 8,690,000 2,784,000 3.257.000 12,352,000 3.109.000 8.028.000 2,476,000 1,040,000 3,570,000 8,748,000 6,468,000 1.156.000 4.285.000 7.896.000 4.965.000 15,000 — 464,000 — 833,000 + Tobacco (Pounds) 1 + 16 — 6 + 21 + 20 28,804,000 + 126,488,000 + 2,205,000 + 694,550,000— 118,750,000 Corn (Bushels) Maryland ......... Virginia ........... West Virginia North Carolina South Carolina + 1 0 1 — 1 — 5 + 17,710,000 36,166,000 13,978,000 47,151,000 — 25,433,000 Oats (Bushels) Maryland ......... Virginia ........... West Virginia North Carolina South Carolina + 5 + 10 — 15 + 4 + 7 1,226,000 + 2,020,000 1,460,000 + 5,786,000 11,750,000 Hay (Tons) Stocks Aug. 31, 1939 compared with Aug. July 1939 1938 + 3.9 + 3.9 + 1.3 + 15.1 + 5.4 + 7.6 + 9.4 + 4.6 4- 4.2 + 9.4 Ratio Aug. collections to accounts outstanding August 1 30.2 29.2 26.3 25.7 27.6 Maryland ......... Virginia ........... West Virginia North Carolina South Carolina + + + 1 + 1 1 1 — 1 503,000 1,010,000 + 688,000 + 820,000 + 475,000 + Irish Potatoes (Bushels) Maryland ......... Virginia ........... West Virginia North Carolina South Carolina — 4 0 — 3 + 10 + 17 2,200,000 — 7,031,000 2,790,000 + 8,091,000 3,108,000 Sweet Potatoes (Bushels) + + 2.7 4.9 + 8.1 + 13.2 + + 3.0 Maryland ......... Virginia ........... North Carolina South Carolina 2.2 + 0.9 + 16.3 % Change in Sales, Aug. and 8 Months 1939 STATES Maryland, 9 stores ........... Dist. of Col., 7 stores . . . Virginia, 10 stores ........... North Carolina, 4 stores South Carolina, 7 stores District, 37 stores Compared with Aug. 1938 + 3 +12 3 + 8 + + 7 + 7 + 0 0 0 5 1,120,000 — 3,978,000 — 8,586,000 — 6,900,000 ipples, Commercial (Bushels) RETAIL FURNITURE SALES + + 3 5 2 5 W HO LESALE TRADE, 189 FIRMS DEPARTMENT STORE TRADE Net Sales Net Sales Aug. 1939 J an. 1 to date comp, with compared with August same period last year 1938 + 2.4 Richmond (3) . . . + 2.2 Baltimore (8) . . . . + 5.1 + 1.1 + 4.6 Washington (6) . + 8.7 + 4.1 Other Cities (13)1 + 6.3 + 3.1 District (30) + 6.4 + — Compared with I Months 1938 + 3 + 5 + 9 + 9 + 20 + 6 Maryland ......... Virginia ........... West Virginia North Carolina 1,700,000 + 8,000,000 + 4,300,000 + 580,000 1,419,000 7,268,000 3,227,000 480,000 1.331.000 8.153.000 3.576.000 657,000 146.010.000 249.075.000 9,100,000 148.630.000 238.750.000 8,517,000 Peanuts (Pounds) Virginia ........... North Carolina South Carolina (Compiled September 21, 1939) 181,500,000 279,000,000 — 11,250,000 + MONTHLY REVIEW, September 30, 1939 FEDERAL RESERVE BANK OF RICHMOND SUMMARY OF NATIONAL BUSINESS CONDITIONS (Compiled by the Board of Governors of the Federal Reserve System) INDUSTRIAL PRODUCTION Industrial activity, w hich had increased substantially during the summer, showed a sharp advance in the first h a lf o f Septem ber a fter the outbreak o f w ar in Europe. P rices o f basic com m odities and equ ity securities rose sharply while prices o f high-grade bonds declined. PRODUCTION Index of physical volume of production, ad justed for seasonal variation, 1923-1925 average = 100. By months, January 1934 to August 1939. DEPARTMENT STORE SALES AND STOCKS In A ugust, the B oard’s seasonally adjusted index o f industrial production w as at 102 per cent o f the 1923-1925 average as com pared w ith 101 per cent reached in July. Volum e o f m anu factu ring production increased fu rther, but m ineral production declined, ow ing to a tem porary curtailm ent in output o f crude petroleum. In the iron and steel industry output increased som ewhat fu rth er in A u gust and rose sharply in the first h a lf o f September, steel in got production reaching a rate o f 70 per cent o f cap a city in the week ending Sep tem ber 16 as com pared w ith about 63 per cent at the begin ning o f the month. A utom obile production showed about the usual sharp seasonal changes in this period as the sh ift to new model production w as being made. O utput o f plate glass increased sharply. Production o f nondurable m anufactures advanced in A ugust, reflecting chiefly increased a ctivity at cotton and w oolen textile mills. A t m eat-packing establishm ents activity declined less than seasonally, w hile at flour m ills, where output has been at a high rate in recent months, there w as not the usual large seasonal increase. Shoe production advanced seasonally. A t coal m ines output increased by about the usual seasonal am ount and ship ments o f iron ore w ere a t the highest rate o f this season. Petroleum production declined sharply during the latter h a lf o f A ugust, reflecting shut-downs o f wells in m ost o f the principal oil producing states, but increased rapid ly in the first h alf o f September when the wells w ere reopened. V alue o f construction contracts, as reported b y the F. W . D odge C orpora tion, increased somewhat in A ugust, ow in g to la rger aw ards fo r publicly-financed projects, including several large dams and an increased volum e o f United States H ousing A dm inistration projects. P riva te residential building showed little change, although there is usually some seasonal decline. Other private con struction, w hich in Ju ly had been the highest f o r any month in tw o years, declined in August. DISTRIBUTION Indexes of value of sales and stocks, adjusted for seasonal variation, 1923-1925 average=100. By months, January 1934 to August 1939. WHOLESALE PRICES D epartm ent store sales increased m ore than seasonally from Ju ly to August. The B oa rd’s adjusted index advanced from 86 to 89 per cent o f the 1923-1925 average and w as at about the level reached in the latter part o f la st year. Sales at variety stores showed little change in A ugust. F reigh t-car loadings rose som ewhat fu rth er in August, reflecting chiefly con tinued increases in shipments o f coal and m iscellaneous freigh t. COMMODITY PRICES P rices o f most basic foodstuffs and industrial m aterials advanced sharply in the first h a lf o f September. Prices o f w heat, corn, sugar, cocoa, and v ege table oils as w ell as o f hides, rubber, w ool, zinc, and tin showed the largest increases. The general level o f w holesale com m odity prices as m easured b y the Bureau o f Labor Statistics index rose 3.1 points and in the w eek ending Sep tem ber 9 w as at 78.4 per cent o f the 1926 average, about the sam e level as a year ago. AGRICULTURE Indexes compiled by the U. S. Bureau of Labor Statistics, 1926=100. By weeks, 1934 to week ending September 16, 1939. Crop prospects showed some im provem ent on Septem ber 1 over a month earlier, according to the D epartm ent o f A gricu lture. Indications are that p ro duction o f all leading crop s except cotton w ill be average or above average in volume. A cotton crop o f 12,380,000 bales, about 10 per cent below the 19281937 average, is forecast. This com pares w ith a crop o f 11,940,000 bales in 1938 and an estimated w orld consum ption o f 11,265,000 bales o f A m erican cotton during the past season. GOVERNMENT SECURITY MARKET A v era ge yields on long-term T reasu ry bonds, w hich had advanced fr a c tionally since last June, increased sharply by about V o f 1 per cent in the 2 latter h a lf o f August and early September. In pursuance o f the System ’s policy o f endeavoring to m aintain orderly conditions in the money market, the Federal Reserve banks during the first h a lf o f Septem ber increased th eir holdings o f G overnm ent securities by about $400,000,000. On September 1 the Board o f Governors o f the F ederal Reserve System announced that the F ederal Reserve banks are prepared at this time to make advances on Government obligations to member and nonmember banks at par and at the same rate o f discount. MONEY RATES IN NEW YORK C ITY BANK CREDIT For weeks ending January tember 16, 1939. 6, 1934, to Sep T otal investments held by reportin g mem ber banks in 101 leadin g cities declined during the first h a lf o f September. A t N ew Y ork City banks the de cline represented the redem ption at m aturity o f Federal F arm M ortgage C or poration bonds and at banks in other leading cities it represented the sale o f T reasu ry bills and bonds. Com m ercial loans o f city banks showed a substantial grow th during A ugust and the first h a lf o f September.
