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MONTHLY REVIEW
B U S IN E S S
F ederal R eserve
Bank
C O N D IT IO N S
o f San
IN
T H E
T W E L F T H
F E D E R A L
R E SE R V E
F r a n c isc o
D IS T R IC T
A p ril 1 ,1 9 4 0
h i l e no marked change has taken place in Twelfth
current operations well into the year. Steel mill opera
District industrial activity since the first of the tions were maintained in February at the high level of the
preceding
two months. Trade reports, however, indicate
year, operations in a few lines tended to recede slightly
in
February from the high early winter levels. As elsewhere some decline in new orders during the month and a re
duction in unfilled orders held by steel producers and fab
in the United States, new business received by manufac
turers has, in general, been somewhat dull since late in ricators. Furniture production advanced seasonally but
remained lower than in most months of 1939.
1939, although in several industries subject to special in
fluences new orders continue heavy and production re
mains at practical capacity. The decrease in industrial
activity as a whole was accompanied by small reductions
in employment during February, and total payrolls de
clined slightly from the January peak. Consumer pur
chases of miscellaneous nondurable goods, on the other
hand, increased in February after declining more than
seasonally in January, and sales of furniture stores ad
vanced by about the usual large seasonal amount. Value
of new residential building was somewhat lower than in
December or January, after allowance for seasonal in
fluences, and expansion in March is indicated by pre
liminary data to have been somewhat smaller than is
1936
1937
1938
1939
1940
customary in that month.
W
EASTBOUND INTERGOASTAL TRAFFIC
I ndustry
Shipments through the Panama Canal, in long tons.
Lumber was the major district industry in which opera
tions were reduced during February. On a seasonally
adjusted basis, production during January continued the
expansion evident since last March but in February the
large increase customary in that month was not realized.
This is attributed in trade circles to decreases in output at
tidewater mills which, to an important extent, depend
upon water transport facilities to reach their markets.
Intercoastal freight rates on lumber were increased 7 per
cent effective February 15 and the shipping of lumber
was unusually active in the weeks preceding that date.
Intercoastal shipments of lumber through the Panama
Canal in January and February, as shown in the accom
panying chart, rose to 380,000 tons, the largest for any
two-month period since early 1930. New orders increased
moderately further through mid-March, continuing the
expansion of other recent months. Production of shingles
in the Pacific Northwest is reported to have remained at
relatively depressed levels during February. On the other
hand, most plants in the important plywood industry were
reported to be operating at practical capacity and to have
substantial unfilled orders.
Among other industries in which activity declined dur
ing February, assemblies of automobiles were reduced
and production of tires was curtailed. Output in the pe
troleum industry continued at the level of recent months.
Exports of petroleum declined sharply, about half the
decrease reflecting reduced Japanese takings.
At the other extreme, activity at district aircraft plants
continued at forced levels with the receipt of further large
orders since the end of January adding to an already huge
backlog. Pulp and paper production continued at prac
tical capacity with sufficient orders on hand to maintain
Primary sales of processed foods produced in the
Twelfth District and sold in important volume in outside
markets remained dull in February, reflecting partly the
large volume of advance buying last fall. The export
market for these commodities has been restricted by the
war and, particularly in the case of dried prunes and
raisins, Government aid has been extended producers to
relieve them of part of their surplus stocks. Sales of
canned goods since the first of the year also have been
relatively inactive. Carry-over stocks of canned fruits,
vegetables, and fish were low with relation to demand
early in 1940, however, and quotations have been main
tained at the levels of last fall. The market for Pacific
Northwest flour has likewise been dull in recent months,
with Government subsidized exports continuing in only
small volume.
Private new residential building undertaken in Febru
ary declined from the high levels of the preceding two
months, after allowance for seasonal influences. Prelim
inary data for March indicate a smaller expansion than
is customary at this time of year. New nonresidential
building continued relatively inactive in February, value
of permits declining to the lowest level since May 1938.
A g r ic u l t u r e
The outlook for district agricultural production was
improved by favorable weather during February and
March. The heavy, district-wide precipitation was of
pronounced immediate benefit, although some flood dam
age was reported in the San Joaquin and Sacramento val
leys and the Delta area in California. Recent snow sur
veys on principal mountain ranges indicate that stored
irrigation water, while still below normal in some sections
18
April 1, 1940
FEDERAL RESERVE B A N K OF S A N FR A N C ISCO
of the Pacific Northwest, generally will be adequate for
the usual summer needs.
Industrial operations affecting the domestic demand
for farm products, after an uninterrupted rise during the
last seven months of 1939, declined considerably during
the first three months of 1940. Consumers’ income, how
ever, has not decreased correspondingly and continues
well above the levels of last summer, with the result that
demand for farm products has been relatively well main
tained. The expansion in domestic industrial activity and
incomes, to which the war contributed, has largely offset
the curtailment in export sales of apples, dried fruits,
wheat, barley and several other important farm com
modities. Reflecting these conditions and shortages of
some farm products in other crop producing areas of the
United States, marketings of agricultural commodities
produced in the Twelfth District during the first quarter
were larger than during the first three months of 1939.
Shipments of citrus fruits from Arizona and California
have been much heavier than in 1939, and a considerable
portion of the heavy stocks of wheat under loan in the
Pacific Northwest moved to market in February and
early March. Other important farm products which are
consumed throughout the year such as milk, butter, meat
animals, potatoes, and other staples, have moved to local
markets in about the usual volume during recent weeks.
Total cash returns to agriculturists in this district con
tinued at a somewhat higher level than a year ago, influ
enced by the larger volume of products marketed and the
somewhat higher prices received for most products.
Revised estimates of damage to Florida and Texas
orange groves from the freezing temperatures of late
January reduced prospective output 2,000,000 boxes fur
ther, while estimates of production in Arizona and Cali
fornia were increased about the same amount. This dis-
Production and Employment—
Index numbers, 1923-1925
average=100
Industrial Production*
Manufactures (physical volume)
L u m b e r........................................
Refined oils..................................
Cement ........................................
Wheat flour..................................
Minerals (physical volume)
P etroleum ....................................
Lead (U. S .) t .............................. .
Silver (U. S .) t ............................
Construction (value)
Residential building perm itsî. ,.
Twelfth District
Southern California.......... ..
Northern California............
Oregon ................................
Washington .........................
Intermountain states..........
Public works contracts............ .
Miscellaneous
Electric power production........,
Factory Employment and Payrolls!
Employment
Pacific Coast .............................. .
California .............................. .
Oregon . ................................. .
Washington .......................... .,
Payrolls
Pacific Coast ............................
California .............................. .
Oregon .................................. .
.
With
Seasonal
t—Adjustment—\
r-1940—N 1939
Feb. Jan. Feb.
92
—
69
158
81
112
58
150
76
124
93
88
90
94
75
108
51
50
47
56
46
35
47
49
191
60
38
27
43
39
174
55
44
26
24
32
157
212
206
213
194
126
138
116
106
107
118
104
86
117
131
101
96
116
129
101
96
100
112
94
79
126
138
109
110
104
115
100
82
114
129
93
95
112
126
90
93
96
109
88
74
98
—
115
112
74
—
86
124
—
78
—
87
89
—
73
100
57
67
52
64
44
37
57
104
76
48
60
58
94
—
62
42
27
29
69
—
224
230
124
137
113
104
124
137
105
90
119
—
Without
Seasonal
/—Adjustment—n
f— 1940—N 1939
Feb. Jan. Feb.
70
154
119
92
81
* Daily average.
t Prepared by Board of Governors of Federal Reserve System,
jlncludes figures from 197 cities and Los Angeles County, unincorporated.
{Excludes fish, fruit, and vegetable canning.
trict's proportion of total domestic orange production for
the 1939-40 season was increased from 50 percent prior
to the freeze to almost 60 percent on March 1. Both ship
ments and prices of locally produced oranges advanced in
February, shipments averaging 22 percent and prices
averaging 40 percent higher than a year ago. Returns to
California lemon growers have also increased from early
1939 levels, but no advance in returns to local grapefruit
producers has been reported.
Favored by above-normal precipitation in February
and mild temperatures in that month and in March, live
stock ranges are now in fair to good condition. Shipments
of early spring lambs from Arizona and California, which
are made in large volume to eastern and midwestern cities
as well as to local markets each spring, began late in Feb
ruary and became heavier in March. Contract prices
reported from the more important early lamb producing
areas ranged from $8.50 to $10.00 per hundred pounds,
and generally were slightly above prices paid a year ago.
Present prospects are for a smaller proportion of feeder
lambs, and a much better quality of slaughter lambs than
last spring. Shearing of sheep is now progressing through
out the district, with wool buyers purchasing clips at prices
above those paid in 1939. Farm income from this branch
of the livestock industry returned $21,727,000 in 1939,
compared with $19,184,000 in 1938, and $30,844,000 re
ceived in 1937. Cattle have wintered well with only slight
losses and are in good condition in most sections of the
district. Current market quotations have remained rela
tively stable in recent months, at about the same level as
a year earlier. Hog prices, reflecting large supplies, con
tinued low and in recent weeks have averaged about 25
percent below a year ago.
C r e d it a n d B a n k i n g
Expansion in demand for bank credit from district
commercial and industrial enterprises, evident since late
last summer, continued through February but was fol
lowed by a small decline during the first three weeks of
Distribution and Trade—
Index numbers, 1923-1925
average=100
Retail Trade
Department store sales (value)*
Twelfth District..........................
California ....................................
Los Angeles .............. ..............
Bay Region ............................
San Francisco..........................
Oakland ..................................
Pacific Northwest........................
Portland ..................................
S eattle......................................
Spokane ....................................
Salt Lake City..............................
Department store stocks (value) t
Furniture store sales (value) * $ ...
Furniture store stocks (value) t$. •
Automobile sales (number)*
Passenger ........................
Commercial ............................
Carloadings (number)*
Total ................................................
Merchandise and misc..................
O th e r ............................................
Intercoastal Traffic (volume)
Eastbound....................................
Westbound ..................................
*Daily average.
tA t end of month.
With
Seasonal
✓—Adjustment—\
r—1940—s 1939
Feb. Jan. Feb.
Without
Seasonal
t—Adjustment—x
r-1940—> 1939
Feb. Jan. Feb.
99
97
89
102
93
125
103
107
103
93
88
64
79
74
98
96
88
102
94
123
103
98
107
106
87
64
80
74
99
100
89
111
103
133
95
98
96
87
99
65
74
66
83
83
78
85
80
100
81
89
78
68
71
62
71
70
—
—
—
—
—
—
—
—
—
90
98
81
94
98
89
81
94
64
77
75
104
67
56
104
59
52
86
80
80
75
83
78
96
79
84
78
69
64
58
67
70
83
85
78
93
88
106
75
82
73
63
79
63
66
63
106
101
161
75
69
137
74
81
66
74
82
64
67
78
53
69
61
94
66
58
94
53
46
78
{1929 averages 300.
April 1, 1940
19
M O N T H L Y R E V IE W OF B U S IN E S S C O N D IT IO N S
March. The increase in such borrowings during Febru
ary was largely concentrated at banks in San Francisco,
but gains also were reported in the other principal dis
trict cities except Los Angeles. The decline during the
first three weeks of March also was widespread, decreases
taking place at banks in all the larger district cities.
Investments of district reporting member banks in
United States Government securities were reduced fur
ther from mid-February to mid-March. On March 20, a
more inclusive group of member banks reported invest
ments of $1,275,000,000 in such obligations, compared
with $1,335,000,000 on January 3. These banks account
for about 90 percent of all Government securities held by
district member banks. Liquidation of Government se
curities holdings since the first of the year has occurred
mainly at banks located in San Francisco.
other institutions and discontinued operations. Half this
number were member banks and all but one, which had
assets of about $5,500,000 on December 31, 1938, were
relatively small institutions, their assets averaging approx
imately $1,000,000 on December 31,1938. This reduction
Branch Banks in O peration—T welfth D istrict
Number of Banks
,------ Number of Branches------ x
— Operating Branches---/^-Operated by—v
State NonState Non- Outside
Nat. Mem. Mem.
Nat. Mem. Mem. Home
Total Bks. Bks. Bks.
Total Bks. Bks. Bks.
City
December 31, 1938
3
0
2
1
25
21
0
24
4
California............, 35 10
7
18
852 683 129 40
615
6
4
1
1
31
16
13
2
31
2
2
0
0
10
10
0
0
9
4
2
0
2
65
63
0
2
54
U t a h ....................
5
2
0
3
12
8
0
11
4
Washington . . . . , 9
1
6
2
76
73
1
2
61
--- --- ------------ ----- ----- __
___
9
. 64 28
27
1,071 874 143 54
805
December 31, 1939
Arizona ............ .. 3
2
0
1
25
21
0
4
24
California............ 34
9
7
18
850 683 126 41
617
6
4
1
1
32
17
13
32
2
2
2
0
0
10
10
0
0
9
4
2
0
2
66
64
0
2
55
U t a h ...................., 5
2
0
3
12
8
0
4
11
Washington
9
6
1
2
83
80
1
2
68
Changes in Twelfth District Banks— 1939
Changes of a structural character among banks in the
Twelfth District in 1939 were comparatively few and un
important. Among other developments, the number of
banks declined further. This did not restrict the avail
ability of banking facilities to the public, however, since
the banks discontinuing operations were absorbed by
other institutions and in most instances were continued
as branches. In the several instances where banking of
fices were discontinued, adequate and nearby facilities
were available.
, 63
No. of
Branches
22
55
171
107
113
610
Assets
$ 377,018,000
394.037.000
966.629.000
438.929.000
456.606.000
2,256,109,000
Total— banks having branch offices.,
$4,889,328,000
63
1,078
Banks having no branch offices. .. . 511
0
1,310,497,000
Total— all banks........................ 574
1,078
$6,199,825,000
9
27
1,078
883
140
55
816
in the number of banks was partly offset by the estab
lishment of five new banks, two each in Idaho and Nevada
and one in Washington. The net change, as shown in the
accompanying tables, was a reduction in the total number
of banks from 585 at the close of 1938 to 574 on Decem
ber 31, 1939.
The decline in the number of banks was accompanied
by an increase of seven in the number of branches to 1,078
on December 31, 1939. Of the 16 banks absorbed during
the year, ten were subsequently operated as branches. In
addition two de novo branches were established, both in
California. On the other hand, five branches were discon
tinued by banks in California resulting in the elimination
of some duplicate facilities. The net expansion of seven
in the number of branch offices practically offset the de
cline in banks, and 1,652 banking offices were in operation
at the year end, a decrease of four during the year.
While almost two thirds of all banking offices in the
Twelfth District at the end of 1939 were branches, these
branches were operated by only 63 of the 574 active banks.
O f these 63 banks, 22 operated only one branch each
while an additional 19 operated from two to five branches
each and accounted for a total of 55 such offices. At the
other extreme, as shown in the accompanying tabulation,
seven banks had 830 branches, almost 80 percent of the
total. Two of these banks, each operating more than 100
offices, accounted for 610 branches and for 36.4 percent
of the total assets of all banks in the district.
T welfth D istrict Banks Grouped A ccording to N umber
of B ranch O ffices O perated
December 31, 1939
No. of
Banks
Banks having
22
1 branch..........................................
19
2 to 5 branches............................
15
6 to 25 branches............................
3
26 to 50 branches..........................
2
51 to 100 branches........................
2
More than 100 branches..............
27
Although the number of branch offices increased fur
ther, the proportion of total district bank assets held by
branch banks declined slightly from 80.8 percent at the
beginning of 1939 to 78.9 percent at the end of the year.
Contrary to the trend of other recent years, the proportion
of total district bank assets held by banks which are mem
bers of the Federal Reserve System also declined slightly
from 87.8 percent on December 31, 1938 to 86.8 percent
at the end of 1939.
During the year, a total of 16 banks were absorbed by
Banks in O peration—T welfth D istrict
(Figures as of December 31, 1939. Assets in thousands of dollars)
r
State
Arizona . .
California
Utah ..........
Washington
Total
8
227
51
11
75
59
143
Total .................................... 574
---- All Banks-----NumberMem.
5
115
28
7
34
33
60
NonMem.
3
112
23
4
41
26
83
Total
77,578
4,795,846
113,008
44,675
350,427
183,977
634,314
282
292
6,199,825
A
............-■■■>
Member
66,632
4,207,155
95,039
41,875
307,595
150,225
511,062
Total
68,743
4,004,169
75,027
36,600
270,446
46,195
388,148
M ember
63,894
3,603,996
71,243
36,600
267,37 0
42,986
383,368
NonMember
4,849
400,173
3,784
— 0—
3,076
3,209
4,780
5,379,583
820,242
4,889,328
4,469,457
419,871
Note: For similar data for December 31, 1937 and 1938 see April 1, 1939 issue of Monthly Review.
t------------- -Branch Banks-
NonMember
10,946
588,691
17,969
2,800
42,832
33,752
123,252
Ratio Branch
Bank to All
Bank Assets
88.6
83.5
66.4
81.9
77.2
25.1
61.2
78.9
FEDERAL RESERVE B A N K OF S A N FRA NC ISCO
20
A pril 1, 1940
S u m m a ry o f N a tio n a l B u sin e ss C o n d itio n s
Prepared by the Board of Governors of the Federal Reserve System
I ndustrial activity showed a further sharp decline in February and a less marked
reduction in the first half of March. Wholesale commcxiity prices generally were
steady, following some decline in January and early February.
IN D U ST R IA L PROD UCTION
Index of physical volume of production, adjusted for sea
sonal variation, 1923-1925 average=100. Durable manu
factures, nondurable manufactures, and minerals
expressed in terms of points in the total index.
By months, January 1934 to February 1940.
PO’NTS IN TOTAL INDEX
0!NTS IN TOTAL INDEX
F R E IG H T -C A R LO AD IN G S
Index of total loadings of revenue freight, adjusted for sea
sonal variation, 1923-1925 average=100. Miscella
neous, coal, and all other expressed in terms
of points in the total index. By months,
January 1934 to February 1940.
W H O L E SA L E PRICES
Index compiled by the United States Bureau of Labor
Statistics, 1926=100. By weeks, 1934 to
week ending March 9, 1940.
PER CENT
4
iv J
TREASlJRY BONDS
( 12 YE.AFIS and OVE.R)
V
Y
—
RESERVE BANK
DISCOUNT RATE t
\
-
TREASlIRY NOTES
(,3-S>YEARS)
L ,
BILLS / V'V/1
TREA!5URY
(NlE* ISSUES)
IT
VVv
rv.
^
—
1934
1935
1936
1937
1938
-A ™
1939
1940
M O N E Y RATES IN N E W YORK C IT Y
For weeks ending January 6, 1934 to March 16, 1940.
D istribution
Retail distribution of general merchandise showed little change from January
to February and remained somewhat below the high level of the latter part of last
year, with due allowance for seasonal changes. Sales at variety stores and mail
order houses showed about the usual seasonal rise in February, while at depart
ment stores, where some increase is also usual at this time of year, sales remained
at about the January level. Freight-car loadings declined considerably from Janu
ary to February, reflecting for the most part a sharp reduction in coal shipments
and some further decrease in loadings of miscellaneous freight.
F oreign T rade
Exports of United States merchandise in February declined less than season
ally from the high levels reached in December and January. The principal de
creases were in shipments of cotton, copper, and aircraft, which had been excep
tionally large in previous months. Exports to Japan fell sharply and there were
declines also in shipments to the United Kingdom, The Netherlands, and Russia,
while exports to Belgium and the Scandinavian countries increased. There has
been little change in the rate of gold inflow. The monetary gold stock increased by
$246,000,000 in February and by $109,000,000 in the first two weeks of March.
Commodity P rices
Prices of nonferrous metals advanced from the middle of February to the
middle of March, while steel scrap and textile materials declined somewhat fur
ther. Most other commodities showed little change and in the week ending March
9 the general index of the Bureau of Labor Statistics was at 78.3 percent of the
1926 average as compared with 78.5 a month earlier.
Government Security M arket
Following a relatively steady market during February, prices of long-term
Treasury bonds increased sharply after the announcement by the Treasury early
in March that its operations during that month would be limited to the issuance of a
five-year note to refund a note maturing next June.
a
V ¡1
P roduction
In February the Board’s seasonally adjusted index of industrial production
was 109 percent of the 1923-1925 average as compared with 119 in January and 128
in December. A further decline at a slower rate is indicated for March on the basis
of data now available. In August 1939, the month prior to the outbreak of war, the
index was 103. Steel production, which had risen sharply in the latter part of 1939
and then decreased considerably in January, showed a further marked reduction in
February to 69 percent of capacity. In the first half of March output was steady
at a rate of about 65 percent. Plate glass production declined further in February
and output of lumber, which had dropped sharply in January, showed less than the
usual seasonal rise. Automobile production in February was maintained at the
high level prevailing in January. Dealers’ stocks of new cars rose to high levels
in this period, notwithstanding the fact that retail sales of cars were in large volume
for this time of the year. In the first half of March output of automobiles showed
less than the customary sharp increase. In some industries not included directly in
the Board’s production index, particularly the machinery, aircraft, and rayon in
dustries, activity continued at high levels. Changes in output of nondurable goods
were largely seasonal in February except at textile mills and sugar refineries. At
cotton textile mills activity declined somewhat from the high levels prevailing since
early last autumn. Activity at woolen mills, which had decreased considerably in
December and January, declined further in February and output of silk products
was reduced to an exceptionally low level. Sugar refining showed less than the
sharp rise usual at this season. Mineral production declined in February, owing
chiefly to a considerable reduction in output of anthracite. Bituminous coal pro
duction declined somewhat, following a rise in January, while output of crude
petroleum increased to new high levels. Value of construction contract awards in
February showed little change from the January total, reflecting a further decrease
in contracts for public construction and a contraseasonal increase in private con
tracts, according to figures of the F. W . Dodge Corporation. The increase in
private residential awards nearly equalled the decline that occurred in the previous
month when severe storms curtailed building operations in many areas.
Bank Credit
Total loans and investments at reporting member banks in 101 leading cities
rose during the six weeks ending March 13, largely as a result of increases in in
vestments at New York City banks. Following a reduction during January, com
mercial loans increased, mostly at banks in cities outside New York. Bank reserves
and deposits continued to increase during the period.
@FedFRASER