The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
MONTHLY REVIEW B U S IN E S S C O N D IT IO N S IN T H E T W E L F T H F E D E R A L R E SE R V E Federal Reserve Bank of San Francisco to the increasing pressure of defense spend Ining,response industrial production in the Twelfth District expanded further in February and March, and factory employment and payrolls again established new records. As a result of enactment of the Lend-Lease Bill, it ap pears probable that this pressure upon productive facili ties will continue for some time to come and that further expansion in economic activity may be expected. The district industries which have been chiefly affected by recent developments are clearly revealed by available figures of factory payrolls. Year-period gains in midFebruary were particularly large in the aircraft and shipbuilding industries. In California, payrolls in these industries were 175 and 222 percent higher than a year earlier. Available information suggests that similar in creases occurred in construction, which has experienced a mushroom-like growth since last summer in order to meet the urgent need for army and navy camps, bases, flying fields, and other facilities. Industries supplying these three major lines (aircraft, shipbuilding, and con struction) with materials have likewise experienced marked increases. In part as a direct result of the military construction program, for example, payrolls in the dis trict lumber industry were higher in mid-February, after allowance for seasonal influences, than in any previous month in the past decade. Other industries in which yearperiod gains of upwards of 25 percent have taken place include the steel, machinery, machine tool, foundry, and miscellaneous metal-working industries. Not all lines of manufacturing, however, have shown like increases in activity. In fact, during February a number of important district industries were operating at rates not much higher than a year ago. For the most part these are consumer goods industries, including packing and processing of staple foods, gasoline refining, newspaper publishing, and the like. In addition, operations in some lines suffering loss of foreign markets, including the motion picture in dustry, remained dull. As previously indicated, however, factory payrolls in all lines combined were at peak levels in February, and available evidence points towards fur ther gains in March. While the overall picture of industrial operations, em ployment, payrolls, and trade may be described as one of expansion, new problems concerned with economic sta bility and the rapid increase of production are demanding the attention of government as well as of business. Fore most is the problem of checking sharp or potentially sharp advances in prices, particularly of raw materials, when and where they appear. This is not an isolated problem, for such developments are deeply rooted in the fabric of the entire economic structure. Large and rapid increases in prices which tend toward economic instability are en couraged when market demand presses or threatens to press upon available market supplies of a commodity. Enlarged demand may spring from an actual increase in immediate consumption requirements or it may originate in advance buying induced by efforts to place orders or to D IS T R IC T April 1,1941 accumulate stocks in anticipation of increased prices and shortages of supply. Insofar as expansion in demand has its source in greater consumption, the basic corrective is an increase in output entailing an increase in production facilities. Among district industries this line of action has been most evident in the aircraft and shipbuilding indus try and among numerous suppliers of materials and equip ment to these industries. But despite expansion in output, shortages have developed in many lines, particularly in the case of metals. In these situations, priorities and the allocation of available supplies, on a voluntary or compulsory basis, serve as emergency measures to assure that supplies will be made available to meet the most vital demands. Substitution of materials likewise plays a part in easing the demand for materials deficient in supply. Speculative or protective buying, already experienced by some industries, can, of course, create a situation in which sellers may succeed in raising prices, but such advances are likely to stimulate, temporarily at least, even greater demand and further price increases rather than to dis courage extravagant buying. In several such cases confer ences of the industry and the Price Stabilization Division of the National Defense Advisory Commission have had the effect of curbing further undesirable price changes. Added to these problems, all of which may be identified with the broad problem of preventing abrupt price in creases, but which also may be considered apart from price and as related to the question of maximizing output of vital supplies and equipment, is the problem of labor supply, and of maintaining satisfactory labor relations in the interests of uninterrupted defense activity. Active trade training programs, both public and private, are under way in the more important industrial areas, but reports continue to indicate actual or potential shortages of skilled workers in a number of lines, the more acute being in the metal-working trades and in construction. Problems such as these, involving labor supply, industrial relations, supplies of raw materials and equipment, priori ties, and price relationships are becoming increasingly important to the successful outcome of the defense effort. A g r ic u l t u r e Precipitation this season has been markedly above nor mal in Arizona, California, Nevada, and Utah, and in California the excessive rains caused minor flood damage which was confined largely to low lying delta lands in the central part of the State. In the Pacific Northwest, on the other hand, precipitation through mid-March was less than 80 percent of the long-term average. In general, the winter was relatively mild and damage to crops and live stock losses from severe temperatures were less than usual. Mild temperatures have also held down the depth of snow packs in the mountains despite the heavy precipi tation. District farm cash income in January and Febru ary was at seasonally low levels, but exceeded returns of a year ago. Larger agricultural returns were a result of higher prices and larger marketings, or both, particularly A p r il 1,1941 FEDERAL RESERVE B A N K OF SAN FRANCISCO 18 in the case of meat products, some dairy products, wool, oranges, vegetables, and several field crops. The current citrus fruit crop in the Twelfth District and in the country as a whole, is now expected to be the largest on record. As shown in the accompanying table, the aggregate production of oranges in this district is expected to be substantially larger than last season and well above the previous record crop of 1938. Although production estimates o f Navel oranges (marketed from early November through April) were reduced about 2 percent during February due to losses from water rot caused by recent excessive rains, the crop is expected to P r o d u c t io n of C it r u s F r u i t s — T w e l f t h D is t r ic t * (in thousands of b ox e s) Grapefruit ...................... Lemons ........................... O r a n g e s ........................... Navels ........................ V a le n c ia s ................... Average 1930-39 2,892 8,233 35,170 15,340 19,830 1938 4,693 9,360 46,264 17,030 29,234 1939 4,624 11,106 41,850 18,400 23,450 1940 4,875 11,963 44,924 18,041 26,883 Indicated 1941 4,640 13,588 49,357 20,575 28,782 * Crop year ends October 31 of the year shown. be 14 percent larger than in 1940. With plentiful supplies and improved consumer demand, shipments and average prices of oranges during the first four months of the current season were about 20 percent larger than last sea son, and returns to growers increased over 40 percent from the same period a year ago. Output of lemons in California has increased consistently during the past six years while the current season’s output is expected to be 13 percent larger than last year and about 66 percent larger than the average annual production during the decade 1930 through 1939. Despite diversion of a large proportion of the crop to by-product uses, supplies of fresh fruit have been heavy and prices low. Reflecting P rod u ction and E m ploym ent— Without Seasonal With Seasonal Index numbers, 1923*1925 average=100 r —Adj ustment—> t—Adjustment-^ 1941 — y 1940 Feb. Jan. Feb. t— 1941— N 1940 Feb. Jan. Feb. r~ Industrial Production1 Manufactures (physical volume) Lumber2 .............................................. Refined oils......................................... Cement ............................. .................. W heat flour......................................... Minerals (physical volume) Petroleum ......................................... Lead ( U . S . ) 3....................................... Silver ( U .S .) 3.................................... Copper ( U .S .) 3.................................. Construction (value) Residential building permits4 Twelfth D istrict........................... Southern California............... Northern California............... Oregon ....................................... Washington ............................. Intermountain states............ Public works contracts................. Miscellaneous Electric power production............ Factory Employment and Payrolls5 Employment Pacific C oast..................................... California ....................................... Oregon ............................................ W ashington .................................. Payrolls Pacific Coast....................................... California ....................................... Oregon ............................................ Washington .................................. — — — 127 119 148 115 94 119 91 157 113 119 85 162 105 115 69 155 83 119 — — — 93 150 116 119 148 116 120 140 153 92 116 118 145 92 116 123 142 87 75 62 45 261 205 91 95 80 80 66 192 57 64 42 41 57 104 — — — 74 66 66 43 217 97 377 68 75 64 37 48 79 490 51 56 45 39 47 49 191 258 227 239 208 155 180 127 119 124 137 111 104 143 169 111 107 116 131 100 96 122 161 182 126 137 180 203 135 154 117 175 202 139 137 93 124 137 106 105 151 174 113 126 166 192 119 139 156 185 115 117 114 129 94 95 1 Daily average. 2 Revised series. 3 Prepared by Board of Governors of Federal Reserve System. ( 1 9 3 5 -1 9 3 9 = 1 0 0 ). 4 Includes figures from 197 cities and Los Angeles County, unincorporated. 8 Excludes fish, fruit, and vegetable canning. these lower prices, returns to growers during the four months through February were approximately 15 percent smaller than during the like period last season and not much above depression levels. District wool growers are now actively contracting 1941 clips at prices ranging from 30 to 45 cents per pound, depending upon the quality and shrinkage of the wool. Recent quotations have been about 25 percent higher than a year ago and only slightly under those of the spring of 1937, when wool prices were at the highest level in the last decade. Cash income from wool produced in the Twelfth District in 1940 was over $26,600,000, compared with returns of $21,700,000 in 1939, and $30,800,000 in 1937. Preliminary data indicate that cash income from this year’s clip should be larger than in 1940, and may approxi mate the peak returns of recent years received in 1937. B a n k in g and C r e d it Demand for bank credit from commercial and industrial enterprises continued to expand during the four weeks ending March 19. Borrowing from district city member banks by such enterprises rose to $394,000,000, an in crease of $16,000,000 during the four-week period. Since the first of the year, these loans have increased $23,000,000, although there is a seasonal tendency for this type of borrowing to decline during the first quarter. Almost the entire increase since January 1 has occurred at member banks in Los Angeles, San Francisco, and Seattle; little change has been reported at banks in Portland and Ta coma ; while small declines have taken place at banks in the two interior cities, Spokane and Salt Lake City. Also continuing to increase in recent weeks have been advances by local city banks in the miscellaneous “ other” loan classification. Included in this classification are per sonal loans and loans to finance the purchase of durable consumers goods. Real estate loans of member banks in the seven district cities for which data are collected weekly had fluctuated narrowly with little net change during the past year but declined in mid-March. The decline largely reflected one transaction involving a substantial loan on residential property. Distribution and Trade— Index numbers, 1923-1925 average=100 With Seasonal r-—Adjustment-^ r— 1941— a 1940 Feb. Jan. Feb. Retail Trade Department store sales (value)1 Twelfth D istrict............................... 108 California ........................................... 102 Los A n geles.................................... 90 Bay R egion.................................... 109 San F ra n cisco ............................... 100 O a k la n d ........................................... 132 Pacific Northw est........................... 120 Portland ......................................... 121 S e a t t le .............................................. 125 Spokane ......................................... 103 Salt Lake C ity.................................. 99 63 Department store stocks (value)Furniture store sales (value)1-3. . . 95 Automobile sales (num ber)1 — — Passenger ....................................... — C om m ercial.................................... Carloadings (num ber)1 106 Merchandise and misc................... 108 104 Intercoastal Traffic (volume) . 64 E a s tb o u n d ......................................... .. 44 Westbound ......................................... 132 1Daily average. 2At end of month. 109 106 96 114 106 137 117 114 125 103 103 62 95 99 97 89 102 93 125 103 107 103 93 88 64 85 Without Seasonal r-Adjustm ent—> ,— 1941— N 1940 Feb. Jan. Feb. 90 87 80 92 86 105 94 100 95 75 79 61 84 90 89 82 93 88 107 90 98 91 67 77 57 80 83 83 78 85 80 100 81 89 78 68 70 62 74 139 134 183 101 95 160 — — — — — — 105 109 100 91 99 81 88 90 85 83 91 72 75 82 66 65 48 125 77 75 104 57 39 120 64 50 112 69 61 94 31929 average — 100. A p r il 1,1941 19 M O N TH LY REVIEW OF BUSINESS CONDITIONS C h a n g e s in T w e lft h D is tr ic t B a n k s — 1 9 4 0 Changes of a structural character among Twelfth Dis trict banks in 1940 were again relatively few and unim portant, and in character were generally similar to those of other recent years. Branch banking expanded further, the number of banks continued to decline, and the number of banking offices in operation in the district at the end of 1940 was unchanged from a year earlier. Membership in B r a n c h B a n k A s s e t s — T w e l f t h D is t r ic t (in thousands of dollars) Ratio Branch Nonmember Bank Assets to Member i—Branch Banks—^ All Bank Assets -Branch Banks 1940 1939 1939 1940 1939 1940 5,338 89.6 4,849 70,675 63,894 Arizona ................. 83.5 83.2 400,173 415,518 3,977,380 C a lifo rn ia ...............3,603,996 66.4 69.7 3,829 3,784 81,339 71,243 Idaho 81.9 81.9 41,990 36,600 Nevada . . . . 4,568 77.2 81.7 3,076 314,190 267,370 Oregon . . . 25.4 25.1 3.327 3,209 47,231 42,986 U t a h .............. 61.2 63.7 4,780 5.327 460,049 383,368 W ashington 88.6 0 Twelfth D istrict. 4,469,457 4,992,854 419,871 0 437,907 78.9 79.2 the Federal Reserve System decreased, the decline largely reflecting withdrawals occasioned by the merger of the withdrawing banks with other institutions, all but one of which were members of the System. Total resources of district member banks on December 31, 1940, however, accounted for 87.5 percent of the resources of all district banks, a fractionally higher percentage than that of a year earlier. At the end o f 1940 there were eight fewer banks in operation in the Twelfth District than a year earlier. Dur ing the course of the year, twelve institutions, eight of which were members of the Federal Reserve System, were absorbed by other banks and discontinued opera tions. In two instances the mergers were assisted by the Federal Deposit Insurance Corporation. Generally speak ing the banks discontinuing operations in 1940 were small, six of the twelve having total deposits of less than $1,000,000 each. One bank located in Oregon, however, reported deposits in excess of $10,000,000 while another, also located in Oregon, had deposits of more than $2,250,000 at the end of 1939. Partly offsetting the reduction in the number of active banks in the district occasioned by the merger of the twelve institutions was the organization of four new banks during the year. These new banks were all established in relatively small towns, one each in Cali fornia, Idaho, Oregon, and Utah. As a result of these changes, total banks active in the district at the end of 1940, as shown in the accompanying tables, numbered 567 compared with 575 a year earlier. A decade previously, on December 31, 1930, banks operating in the Twelfth Dis trict totaled 1,300. While there was a net decline of eight in the number of banks in the district, the number of banking offices re mained unchanged. At the year-end 1,086 branches were operated by local banks, a small increase over the 1,078 branches active on December 31, 1939. O f the twelve banks absorbed during the year, eight were subsequently operated as branches of the institutions with which they were merged; the others were located in the vicinity of branches of the institutions absorbing them and their continuance would have perpetuated the duplication of facilities with but little if any contribution to public con venience. Five de novo branches were established during the year, all located, like the new banks, in smaller towns. Three of these branches were established in Idaho and one each in California and Oregon. At the same time, however, five branches previously operated by banks in the district were discontinued. Thus the net change in number of branches operated by local banks was an in crease of eight. Banks having branches increased during the year by one to a total of 64 on December 31,1940, and these banks held 79.2 percent of all local bank assets. Membership of district banks in the Federal Reserve System declined to 277 on December 31, 1940 from 282 B r an c h B a n k s in O p e r a t io n — T w e l f t h D is t r ic t Banks Operating -N u m ber of Branches------- Branches---------\ r-Operated by—\ r ~ Located-^ N o. State N onState N on- In Outside of N at.M em .M em . N at.M em .M em . Hom e Hom e Bks. Total Bks. Bks. Bks. Total Bks. Bks. ]Bks. City City December 30, 1939 8 3 2 1 21 Arizona . . . . 0 25 4 0 1 24 California . . r228 34 9 7 18 850 683 126 41 2.33 617 51 6 4 1 32 1 17 13 0 2 32 2 Nevada . . . . 11 2 0 0 10 10 0 0 1 9 75 4 2 0 2 66 64 0 2 11 55 2 . 59 5 3 0 12 8 0 4 1 11 W ashington. 143 1 9 6 2 80 83 2 1 15 68 ------ ---- ---- -------------- ------ ------ — ____ ___ Twelfth District ...5 7 5 63 27 9 27 1,078 883 140 55 262 816 December 31, 1940 Arizona . . . . 8 California . .226 , 50 Nevada . . . . 11 73 Utah .......... . 60 Washington .139 -----Twelfth District ...5 6 7 3 2 0 33 9 8 7 5 1 2 2 0 5 2 0 5 2 0 9 6 1 — — — 64 28 10 1 16 1 0 3 3 2 — 26 25 850 37 10 67 12 85 -------1,086 21 681 22 10 64 8 82 -----888 0 126 13 0 0 0 1 -----140 4 43 2 0 3 4 2 — 58 1 230 0 1 11 1 15 -----259 24 620 37 9 56 11 70 -----827 r Revised. a year earlier. O f the twelve banks discontinuing opera tions during the year, eight were member institutions, while one state bank withdrew voluntarily from the Sys tem. On the other hand, four state banks were admitted to membership. While slightly less than half the number of banks in the district were members of the Federal Re serve System, member banks held 87.5 percent of all local banking resources on December 31, 1940, compared with 86.8 percent a year earlier. B a n k s i n O p e r a t io n — T w e l f t h D is t r ic t (Figures as of December 31. r Arizona ........................ California ................... Idaho ............................. Nevada ........................ Oregon ........................ U tah ............................. W ashington .............. .. Twelfth D is t r i c t .... . . . r Revised. r-N u m ber-^ 1939 1940 5 5 115 115 28 27 7 8 34 32 33 33 60 57 282 277 Member Banks------------------- ^ t— -Assets------------ \ 1939 1940 66,632 73,399 4,207,155 4,655,451 95,039 103,911 41,875 49,171 307,595 356,292 150,225 163,470 511,062 599,316 5,379,583 6,001,010 Assets in thousands of dollars) f-------------- Nonmember Number-^ 1939 1940 3 3 r ll3 111 23 23 4 3 41 41 26 27 82 83 293 290 Banks-------------^ t----------Assets----------s 1939 10,946 588,691 17,969 2,800 42,832 33,752 123,252 1940 11,437 623,156 18,319 2,118 33,696 35,392 131,560 820,242 855,678 ( r-N um ber—N 1939 1940 8 8 r228 226 51 50 11 11 75 73 59 60 143 139 575 567 —All Banks— , -------------A Assets 1939 1940 77,578 84,836 4,795,846 5,278,607 113,008 122,230 44,675 51,289 350,427 389,988 183,977 198,862 634,314 730,876 6,199,825 6,856,688 20 FEDERAL RESERVE B A N K OF SAN FRANCISCO POINTSINTOTALIN A p r il 1 , 19< POINTSINTOTALINDEX S u m m a ry o f N a tio n a l B u s in e s s C o n d it io n s Prepared by the Board of Governors of the Federal Reserve System I activity and employment increased further in February and the fir half of March. Buying by producers and consumers continued in large volun and wholesale commodity prices, particularly of imports, advanced. n d u s tr ia l P r o d u c t io n I N D U S T R I A L P R O D U C T IO N Federal Reserve index of physical volume of production, adjusted for seasonal variation, 1935-39 avera^e=100. Sub groups shown are expressed in terms of points in the total index. By months, January 1935 to February 1941. W H O L E S A L E P R IC E S O F B A S IC C O M M O D I T IE S Bureau of Labor Statistics' indexes based on 12 foodstuffs and 16 industrial materials, August 1939—100. Thursday figures, January 3, 1935 to March 13, 1941. In February volume of industrial output, on a daily average basis, rose moi than seasonally, and the Board's adjusted index advanced from 139 to 141 percei of the 1935-39 average. Increases in February, as in other recent months, were largest in the durab goods industries where a large proportion of defense program orders have bee placed. Activity continued to rise sharply at machinery plants, aircraft factorie shipyards, and in the railroad equipment industries. Steel production fluctuatt around 96 percent of capacity in January and February and rose to 99 percent the first half of March. New orders for steel continued large and, despite the hig rate of output, unfilled orders increased further. Many orders have been placed f< delivery in the second half of this year, reflecting the prospect of heavy consum] tion and some uncertainty on the part of steel users regarding future availabilii of supplies. Output of pig iron, coke, and nonferrous metals was likewise at ne; capacity rates in February and unfilled orders for these products, too, were ; exceptionally high levels. Demand for lumber continued large owing to a high ra of construction activity and output was sustained in large volume for this time < year. Automobile production increased in February and the first half of March about the peak rate attained last November. Retail sales of new and used ca: advanced to unusually high levels. In industries manufacturing nondurable goods, activity continued at the recoi levels reached in the latter part of 1940. There were further increases in the cottc textile, rubber, and chemical industries and activity at woolen mills also increase following a temporary reduction in January. In most other lines activity was mail tained at the high levels of other recent months. Coal production rose less than seasonally in February but increased conside ably in the first half of March when, according to trade reports, there was son inventory accumulation in anticipation of a possible shutdown on April 1 at tl expiration of the present contract between the mine operators and the miner union. Copper and zinc production increased in February and recently domest supplies of copper have begun to be supplemented by imports from South Americ Output of crude petroleum continued at about the rate that had prevailed durir the three preceding months. Value of construction contract awards in February declined somewhat moi than seasonally, reflecting decreases in both public and private work, according 1 reports of the F. W. Dodge Corporation. Awards for public construction, althoug sharply reduced from the high levels reached in the latter half of 1940, were som what above those of a year ago, and awards for private construction were near half again as large as in February of last year. D is t r ib u t io n 1935 l$36 1937 1938 1939 1940 1941 M O N E Y R A T E S IN N E W Y O R K C I T Y W eekly averages of daily yields of 3- to 5-year tax-exempt Treasury notes, Treasury bonds callable after 12 years, and average discount on new issues of Treasury bills of fered within week. For weeks ending January 5, 1935 to M arch 15, 1941. Distribution of commodities to consumers increased more than seasonally fro January to February. Sales at variety stores and by mail-order houses were tl largest on record, making allowance for usual seasonal changes, and departmei store sales were also at a high level. Freight-car loadings increased by about the usual seasonal amount. Shipmen of miscellaneous freight, consisting mostly of manufactured products, showed a increase while loadings of forest products rose less than seasonally and gra: shipments declined. W h o l e s a l e C o m m o d i t y P r ic e s Prices of a number of basic imports rose sharply from the early part of Fel ruary to the middle of March. Cotton yarns and gray goods and nonferrous met; scrap showed further increases in this period and there were also advances : prices of some other domestic commodities, including lead, wheat, cotton, ar oils and fats. B a n k C r e d it Commercial loans continued to increase at member banks in 101 leading citi< in February and the first half of March and these banks also purchased addition; Treasury notes and bills issued in connection with the defense program. As a resu of the increase in loans and investments, bank deposits showed a further marke advance. U n it e d S t a t e s G o v e r n m e n t S e c u r i t y P r ic e s M E M B E R B A N K S IN 101 L E A D I N G C IT IE S Wednesday figures, January 2, 1935 to March 12, 1941. Commercial loans, which include industrial and agricul tural loans, represent prior to M ay 19, 1937, so-called 1 1r\ano*9 a e fliAn fAnnrfoH Prices of Government securities increased after February 15, following a shai decline in the preceding ten weeks. The 1960-65 bonds on March 15 were about 3) points above their price on February 15 and about 1*4 points below the all-tin peak of December 10. The yield on this issue, which increased from 2.03 percent; the peak in prices on December 10 to 2.30 percent on February 15, had decline to 2.14 Dercent on March 15.
@FedFRASER