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MONTHLY REVIEW OF B U S IN E S S C O N D IT IO N S ISAAC B. NEWTON, Chairman of the Board and Federal Reserve Agent Federal Reserve Bank of San Francisco Vol. X V III San Francisco, California, April 20,1934 No. 4 T W E L F T H F E D E R A L R E S E R V E D IS T R IC T C O N D IT IO N S Twelfth District business was considerably more active in March than in February, both industry and trade showing larger than seasonal gains. Lack of rain in some parts of the district did not seriously affect the condition of planted crops or livestock ranges during March, but a shortage of irrigation water in California is anticipated this season. Crops continued to be marketed in larger volume and for much higher prices than in the corresponding month last year, although there was some decrease in prices of farm products from mid-March to mid-April. Industrial employment increased by more than the seasonal amount during March. Lum ber mill operations also expanded sharply, the adjusted index advancing to 55 per cent of the 1923-1925 average, compared with 52 per cent in February. Crude oil production increased considerably in March and the first half of April, although activity at refineries declined. There was little change in output of copper during March. Increased consumption of copper re sulted in further reductions in inventories. Out put of cement was 15 per cent larger in March than in February, an increase of more than the usual seasonal amount. Construction contracts awarded for public works were not as large as in February, but residential and non-residential private building showed the largest in creases in several months. Daily average sales of department stores were 20 per cent higher in March than in February. This increase, which was reported from all parts of the district, was much greater than the seasonal expectation, even after allowing for the early Easter this year. Automobile sales also expanded more than is customary in March. Railway freight movement of merchandise in creased more than seasonally during the month, but industrial freight carloadings increased by less than the usual amount, resulting in a de cline in the adjusted index of total freight car loadings. Volume of intercoastal traffic was the largest since July, 1930. Federal Government expenditures in excess of collections in the district remained the pre dominant influence in the credit situation during the four weeks ending April 18. Funds derived from this source, together with a net inflow from commercial and financial transactions with other districts, resulted in a further accumu lation of excess reserves of member banks. Money rates were reduced slightly. City mem ber banks reported little change in either com mercial or security loans, although there was a moderate reduction in their large holdings of Government securities. Total deposits remained unchanged. Agriculture Rainfall in California was much less than nor mal during March and the first half of April. Although most crops have not yet been ad versely affected by lack of moisture, the out look for irrigation water later in the season and for forage on summer ranges is poor. Precipi tation approached normal in most parts of Oregon and Washington and in northern Idaho during this period. In Arizona, Utah, Nevada, and southern Idaho, rainfall continued deficient, and a shortage of water for livestock is currently reported from some sections. W arm weather throughout the district favored the seeding and growth of wheat, range feed, truck crops, and fruits. Frost damage was confined to minor losses in Oregon and Washington orchards. Winter wheat was in much better condition on April 1 than on the same date last year in all parts of the Twelfth District except Arizona and Nevada, two relatively unimportant wheatproducing states. Spring wheat was sown under favorable conditions and the early growth has been good. The California wheat crop has de teriorated since April 1, and unless rains are received shortly the final outturn will be con siderably less than the April 1 forecast. If the dry weather continues during the next few weeks, an unusually large proportion of the Cali fornia barley and oat crops will be cut for hay rather than grain. M O N T H L Y R EVIEW OF BUSINESS CONDITIONS 26 Until all danger of frost damage has passed no reliable estimate can be made of production of deciduous fruits in the district. W ith the exception of apricots, the set of fruits was ex cellent and damage by frost was not serious through the first three weeks of April. Market ing of berries, cantaloupes, and cherries com menced in March and early April. Most California truck crops are two to three weeks ahead of the normal season and in good condition, although yields have been somewhat reduced by lack of rainfall in the central portion of the state. Shipments of Navel oranges from November 1, 1933, to April 1, 1934, were approximately the same as for that period of the previous season. Prices remained steady during the month and were well above those of March, 1933. It is now expected that this year’s Valen cia orange crop will be moderately larger than last year's crop of 17,554,000 boxes. Receipts of butter and eggs at Pacific Coast markets increased from February to March and were larger than in March, 1933. Reflecting increased production and little demand for butter for storage, butter prices declined in the San Francisco market, going from 24 cents a pound in mid-March to 19 cents a pound in midApril. An increase in demand for butter for storage was reported subsequently and the price advanced to 22 cents per pound on April 20. Egg prices remained unchanged throughout March and the first three weeks of April at a level the same as a year ago. Ranges in Arizona, Utah, Nevada, southern Idaho, and parts of California were beginning to show the effects of lack of rainfall by early April. In northern California, Oregon, and Washington, forage conditions continued good to excellent. Costs for supplemental feeding of livestock were relatively low during the past winter and, with stock in much better condition and prices higher than in 1933, returns to grow ers for stock marketed during the spring should Agricultural Marketing Activity— , ----------- Carlot Shipments Apples and Pears. Citrus Fruits . . . . Vegetables ............ Exports W h ea t (b u .) Barley (bu .) M a rch----------- \ 1933 1934 3,037 2,573 5,552 6,810 7,052 9,666 3,241,943 660,124 6,534 782,499 Receipts Cattle ...................... H ogs ........................ Sheep ........................ E g gs (cases) . . . . Butter (lb s.) . . . . W heat (carlots) . . Barley (c a r lo t s ) .. 92,299 198,673 189,272 207,064 6,481,429 5,859 524 66,611 249,750 190,652 190,631 6,441,491 2.631 '753 otoiagG rioiaings (end of m onth) W h ea t (b u .) . . . . Beans (bags) . . . . Butter (lbs.) . . . . E g g s (cases) . . . . March 5,964,000 1,441,000 1,298,000 234,000 .... .. .. i m a OT \ February 5,962,000 1,596,000 3,034,000 30,000 (— Season to Date — 1934 1933 37,709 32,141 24,298 23,853 46,609 55,493 13,714,147 4,716,224 2,101,907 6,251,619 273,768 203,196 781,151 800,013 613,266 617,237 436,530 515,815 17,477,574 17,303,327 33,987 46,516 5,544 4,995 i nrJ«O > f March 2,360,000 1,107,000 171,000 238,000 February 2,563,000 1,432,000 205,000 29,000 A p r il, 1934 be considerably higher this year than last. Ship ments of California spring lambs to eastern and midwestern markets amounted to 86,000 head by April 23, compared with 73,000 head shipped up to April 22, 1933. Lamb shipments were lighter than a year ago until after the middle of April, when rapid deterioration of ranges ac celerated the movement appreciably. Marketing of cattle increased during March, reflecting in part sales of beef held over from last autumn because of the low prices then prevailing. Cattle prices at district markets are currently about 5 per cent higher than last fall and 10 per cent above those of March, 1933. Industry Twelfth District industrial activity continued to increase more than seasonally during March and was higher in that month than at any time in the past two years. Employment conditions improved further. P E R C EN T I N D U S T R I A L E M P L O Y M E N T — California Index adjusted for seasonal variation. Excludes canning and preserving industry. (1923-1925 average=100). Industrial employment in California and Oregon increased considerably more than the customary amount during March. Larger num bers of employees were reported throughout California, except in Los Angeles County, where releases of workers engaged in motion picture production approximately offset in creases in employment in other important in dustries. Partly because of earlier crop maturity, more than the usual large seasonal increase took place in the number of workers at can neries in Oregon and California. Gains in em ployment in the textile and lumber industries also were reported. The accompanying charts show the marked improvement in industrial employment in Cali fornia and Oregon since the low point reached in March, 1933. There was a sharp gain in employment from April through September of last year, accompanied by a rapid recovery in industrial production. Part of this increase in employment was a result of reductions in the average length of the working week under the program of the National Industrial Recovery A p r il, 1934 FEDERAL RESERVE AG EN T A T SAN FRANCISCO Administration. W hile the number of workers was reduced to some extent throughout the remainder of 1933, part of this loss was re gained during the first quarter of 1934. 1927 1928 1929 1930 19 3 1 1932 1933 19 3 4 I N D U S T R I A L E M P L O Y M E N T -O r e g o n Index adjusted for seasonal variation. (1923-1925 average=100). California crude oil production increased sub stantially between February and March to a daily average of 474,500 barrels, a rate 20,600 barrels in excess of allotments. Partly in antici pation of a seasonal increase in consumption of gasoline, the allotment was increased from 453,900 barrels daily in March to 462,500 bar rels a day in April. Petroleum refining tended downward slightly during March and the first half of April, and there was some decrease in gasoline inventories. Following sharp reductions in gasoline prices during March, some weakness was evident in the crude oil price structure, major companies having withdrawn purchase contracts at posted prices in several important fields. Lumbering expanded by more than the customary large amount during March, the Employment— Industries All Industries* Stone, Clay, and Glass Products. f— -----California----------\-f---------------Oregon-------------- % N o. of N o. of N o. /— Employees —* N o. /— Employees —> of March, March, of March, March, Firms 1934 1933 Firms 1934 1933 118 17,394 12,672 1,161 155,642 112,279 (+ 3 7 .3 ) (+38.6) 59 Lu m ber and W o o d Manufactures . . 121 T e x t i l e s .................... 11 Clothing, Millinery, and Laundering. ’ 142 Food, Beverages, and T o b a c c o ... 286 5,648 ( + 3 4 .5 ) 4,200 3 58 ( + 1 5 2 .2 ) 23 13,573 ( + 4 7 .4 ) 1,530 ( + 4 9 .1 ) 9,208 41 7 9,216 ( + 4 4 .5 ) 1,702 ( + 7 6 .9 ) 6,380 1,026 10,440 ( + 1 3 .2 ) 9,219 7% 204 (— 4.2) 213 962 31 1,269 39,407 25,251 976 ( + 3 0 .0 ) ( + 5 6 .1 ) 42,893 43,619 (— 1.7) Other In d u stries! 492 73,504 57,494 ( + 2 7 .8 ) M iscellaneous . . . 50 11,540 5,881 29 4,945 4,118 ( + 9 6 .2 ) ( + 2 0 .1 ) W holesale and R e t a i l .................... 233 31,555 26,237 ( + 2 0 .3 ) *Public utilities and wholesale and retail figures not included in this total, fIncludes the following industries: M etals, m a chinery, and conveyances; leather and rubber g o o d s ; oils and p a in ts; printing and^ paper goods. $Laundering only. Figures in parentheses indicate percentage change from M arch, Public Utilities . . . 46 27 seasonally adjusted index advancing from 52 to 55 per cent of the 1923-1925 average. Operations were especially active in the Douglas fir area, while the cut of western pine increased some what less than usual for the month, thereby offsetting in part the sharp increase which oc curred in February. Lumber shipments and orders continued to be substantially larger than in the corresponding month a year earlier. Unofficial data indicate that the position of the copper industry in the United States con tinued to improve during March. W ith apparent domestic consumption estimated at 42,500 short tons (5,500 tons more than in February) and estimated mine output unchanged at 20,000 tons, stocks of refined copper held at refineries in North and South America, which virtually means inventories in the United States, were reduced 17,500 tons. The difference between apparent consumption and mine output plus the reduction in stocks was made up by pro duction of metal from secondary sources. The price of electrolytic copper at New York held steady at 8 cents a pound throughout March but strengthened in the first week of April and by the middle of that month was quoted at 8^2 cents a pound. Germany, consistent with her recent policy of reducing imports and hence debits in the international balance of payments, imposed an embargo in late March on imports of copper. The embargo is of considerable interest to pro ducers of copper in the United States, since in many years Germany has been the largest single importer of copper produced in this country. Construction being undertaken was some what smaller in value in March than in Feb ruary, a decline in public works more than off setting increases in most types of building. Industry — Indexes of daily average production, adjusted for seasonal variation ( daily averajre= ) 1923-1925 100 ,-------- 1933 -1934-1933 M ar. Feb. Jan. Dec. Mar. Feb. General 49 42 30 Carloadings— Industrial. 47 48 30 Ele?c. Power Production 151ÍT 145 144 141 135 135 Manufactures 29 Lum ber ............................... 52 55 53 46 28 107 107 116 113 115 Refined Mineral O ilst •. 99 89 92 80 1Ó21T 95 Slaughter of L ivestock. 104 111 113 106 103 103 76 75 85 85 52 Cement ............................... 40 W o o l C on su m p tion f. . . 6411 107 94 80 122 95 Minerals 71 69 72 Petroleum (California) f 68 66 71 Lead (United States) %. 64 64 67 45 40 Silver (United S tates)$. 37 29 44 30 Building and Construction§ T o t a l ....................................... 34 33 37 33 40 47 Building Permits— Value Larger Cities ............... 11 10 9 11 10 10 Smaller Cities ............ 18 14 11 11 11 12 Engineering Contracts Awarded— V alue T o t a l ............................. 66 69 73 71 73 93 Excluding Buildings 136 145 127 125 178 230 Jan. 36 138 35 122 74 102 37 96 71 45 36 64 10 12 145 281 tN o t adjusted for seasonal variation. $Prepared by Federal Reserve Board. § Indexes are for three months ending with the month indicated, fl Preliminary. Value of permits issued for residential building continued to increase gradually. Awards for commercial and industrial building were the largest for any month since February, 1932. Trade March department store sales were stimu lated to some extent by the early occurrence of Easter this year, but after allowance for this and other seasonal factors they were 8 per cent higher than in February. Reports of increasing sales were received from all parts of the district, and seasonally adjusted indexes for most cities approached the highest level in two years. R E T A I L T R A D E — Twelfth District Percentage changes in value of sales and stocks Department Stores . . L os Angeles ............ Other So. California Oakland ...................... San F r a n c is c o .......... B ay R e g i o n ............... Central California . P o r t l a n d ! ................... Seattle ........................ S p o k a n e ...................... Salt Lake City . . . . Apparel Stores ............ Furniture Stores . . . . A ll S t o r e s ........................ t-------------- 1934 compared with 1933--------------\ z--------- N E T S A L E S ----------N ST O C K S Jan. 1 to end March of March March 40.5 ( 66) 24.6 ( 66) 11.6 (49) 35.7 ( 7) 22.2 ( 7) 13.8 ( 7) 62.1 ( 7) 24.2 ( 7) 7.6 ( 5) 37.5 ( 4) 17.9 ( 4) 3.3 ( 4) 39.8 ( 7) 23.5 ( 7) 12.6 ( 7) 39.5 ( 15) 22.3 ( 15) 10.2 (15) 45.2 ( 6) 29.1 ( 6) 13.2 ( 6) 37.8 ( 7) 25.5 ( 7) 6.3 ( 6) 44.8 ( 4) 26.2 ( 4) 11.4 ( 4) 72.4 ( 4) 49.9 ( 4) 1.1 ( 4) 34.8 ( 4) 29.4 ( 4) 35.6 ( 3) 51.5 ( 31) 34.6 ( 31) 30.3 (19) 44.0 ( 32) 33.1 ( 32) 14.6 (23) 41.8 (129) 26.3 (129) 13.5 (91) tlnclud es five apparel store's which are not included in district department store total. Figures in parentheses indicate number of stores reporting. Value of sales was 41 per cent larger in March, 1934, than in March, 1933, reflecting in part earlier Easter buying this year than last and in part increases in retail selling prices. Fur thermore, retail sales were exceptionally low in March, 1933, partly as a result of the banking holiday and the earthquakes in southern Cali fornia during that month. Even after allowance for all of these factors, department store busi ness showed a decided expansion both as com pared with the preceding month and with March, 1933. Distribution and Trade— ,----------- 1934-1933 ----------- v , 1933------------ N M ar. Feb. Jan. D ec. M ar. Feb. Jan. Indexes adjusted for seasonal variation Carloadings$ (1923-1925 average=100) T o t a l ...................... 64 66 67 64 48 50 54 M erchandise . . . 79 78 80 81 65 64 67 Intercoastal Trade T o t a l ...................... 95 W e s t b o u n d .......... 81 Eastbound .......... 105 Retail Trade Autom obile Sales? T o t a l ................. 59 Passenger . . . 55 Commercial . . 110 Department Store Sales* ............... 78 S t o c k s § ............ 62 C ollection s# Regular . . . _______ Installm ent 91 71 99 72 73 69 83 69 89 59 57 63 58 58 59 51 56 48 52 48 99 36 31 87 47 44 80 27 27 33 33 32 40 39 37 61 72 64 68 65 77 65 57 56 64 58 60 61 Pronounced increases were reported in all of the important lines of wholesale trade dur ing March, with activity generally reaching the highest level in nearly three years. In most cases the increases were in excess of seasonal expectations for the month, following several W H O L E S A L E T R A D E —Twelfth District Percentage changes in value of sales t------------------------- Actual Figures ------------------------- > 46.7 43.6 46.9 44.5 38.6 39.0 42.7 17.6 16.9 18.1 15.6 13.1 13.4 15.9 March, 1934 compared with — > :b., 1934 M ar., 1933 42.5 199.5 8.1 36.0 48.9 13.2 65.5 32.6 20.3 60.5 9.4 92.9 17.8 22.0 30.2 67.5 59.0 81.8 33.9 61.5 22.3 50.4 Agricultural Implements . . . Autom obile Supplies ............ D rugs .............................................. D ry G o o d s .................................... Electrical S u p p lie s ................... F u r n it u r e ...................................... Groceries ...................................... H a r d w a r e ....................................... Shoes .............................................. Paper and S t a t io n e r y ............ A ll L i n e s ....................................... Cumulative 1934 compared with 1933 188.9 23.9 41.1 44.6 54.5 81.4 26.1 61.4 72.1 48.3 43.7 months in which activity changed little. In only two lines— automobile supplies and furniture— did sales fail to come up to seasonal expecta tions. A s compared with March, 1933, value of sales was 50 per cent larger. The Bureau of Labor Statistics index of wholesale prices of finished products was 18 per cent higher in March, 1934, than in March, 1933. A further sharp increase in new automobile sales was reported for March and registrations were more than twice as numerous as in March, 1933. District sales of both passenger cars and commercial vehicles in March of last year, how ever, were the lowest since records were first Bank Debits*— Arizona Phoenix ...............$ California B a k e r sfie ld .......... Berkeley ............... March 1934 25,722 $ March 1933t 14,112 $ First three months 1933f 1934 $ 45,887 70,195 8,424 25,760 17,160 23,952 580,597 162,302 20,310 68,323 6,666 31,326 749,124 16,130 7,938 13,876 5,770 10,088 9,921 18,487 414,739 128,406 16,410 29,375 3,496 25,182 531,931 11,220 6,263 7,918 25,210 69,933 50,241 66,395 1,632,756 455,216 57,225 131,616 17,137 90,018 2,060,535 44,866 23,429 38,754 18,029 33,361 33,673 61,439 1,411,033 468,193 54,125 97,067 14,753 82,900 1,697,170 36,205 20,490 27,372 10,635 6,959 31,267 23,569 7,289 3,743 18,404 11,543 4,055 146,323 2,220 78,004 10,263 353,861 7,133 235,814 9,197 45,580 5,817 34,288 28,506 129,727 19,480 109,389 4,652 5,675 144,167 29,765 24,132 4,284 10,372 3,554 3,645 102,843 13,474 16,270 2,072 5,194 12,678 14,516 383,444 75,656 62,953 11,675 27,723 10,277 11,108 294,829 53,271 45,903 7,323 16,597 .$2,2 03,736 $1,511,401 $5,994,199 $4,947,933 L o n g Beach . . . . L o s A n geles. . . . Oakland ............... Pasadena ............ Sacramento . . . . San Bernardino. San D iego .......... San Francisco . . San J ose............... Santa Barbara. . Stockton ............ Idaho Nevada O regon P o r t la n d ............... Utah Salt Lake C it y .. W ashington Bellingham . . . . Spokane JDaily average. § A t end of month. # P e r cent of collections dur ing month to amount outstanding at first of month. A p r il, 1934 M O N T H L Y REVIEW OF BUSINESS CONDITIONS 28 ............ W alla W a lla . . . Y akima ............... Total *In thousands of dollars. fMarch, 1933, figures were incomplete for some cities during the banking holiday period. A p r il, 1934 FEDERAL RESERVE AG EN T A T SAN FRANCISCO compiled in January, 1923. Throughout the second quarter of 1933, rapid improvement was evident, especially in sales of commercial ve hicles. Seasonally adjusted figures did not change greatly from July to November. Be cause of some difficulty in securing deliveries on new models, number of registrations fell off markedly in December, 1933, and January, 1934. Decidedly more than seasonal expansion in February and March of this year approximately offset these declines and brought sales to mid1933 levels. Somewhat less than the usual increase took place in freight carloadings during March. After seasonal allowance, industrial loadings decreased to the December level, while mer chandise and miscellaneous showed a slight ad vance. Total loadings were about one-third higher than in March, 1933. The decrease from February to March in the adjusted index re flected principally the failure of lumber ship ments in the Pacific Northwest to increase as much as is customary during March. Domestic shipments to and from the Pacific Coast through the Panama Canal totaled 876,000 cargo tons during March, an increase of 116,000 tons over February and the largest amount recorded in any month since July, 1930. Inter coastal traffic during the first quarter of this year was more than 50 per cent larger in volume than in the first quarter of 1933. This increase over the year-period resulted from greatly en larged petroleum shipments and a small in crease in general cargo, lumber shipments hav ing been about the same during the two quarters. Prices Wholesale commodity price averages for the United States declined slightly between midMarch and mid-April and at the end of that period were approximately the same as two Wholesale Commodity Prices *— W h ea t ........................ Barley ........................ . . . Rice ............................. Cotton ........................ Lim a Beans ............ C a t t l e ........................... Lam bs ........................ . . W o o l ........................... . E g g s ............................. , , Butter ........................ , . Apples ........................ . . . Prunes ........................ . . Flour .......................... Canned Peaches . . . , , Canned Salmon . . . . . . S u g a r ........................... . . . Copper ........................ Silver ........................ . . . L e a d ............................. C o f f e e .......................... . . . Rubber ...................... Lum ber ..................... Cement ........................ April, 1929 77 135 52 106 139 141 119 101 95 107 118 107 81 80 75 89 142 86 91 Ill 42 114 87 April, 1933 37 58 34 37 51 62 42 42 58 52 60 55 55 52 39 77 41 48 41 41 8 67 76 July, 1933 46 102 45 56 72 70 38 72 71 62 79 66 81 55 45 85 64 58 56 42 16 98 82 M arch20, April Í 1934 1934 48 43 69 69 54 54 62 65 63 63 68 68 66 71 84 82 56 56 59 54 101 82 82 80 77 77 64 64 45 47 81 77 58 62 71 71 51 54 53 51 22 24 115 115 87 87 ^Expressed as percentages of prices in April, 1926. 29 months earlier. Principal decreases were in prices of farm products and foods. Quotations for most Twelfth District agricultural products changed little during March, but declined dur ing the first half of April. Wheat prices fluctuated within a compara tively narrow range during late March and the first ten days of April, and then declined about ten per cent within a period of a few days. Potato, cotton, bean, and hay prices declined somewhat, while prices for sugar and rice re mained unchanged. Quotations on canned pears and apricots increased moderately during the period under review. There was a slight reces sion in quotations for all dried fruits except apricots, prices for which continued to advance. Prices of copper, lead, and zinc increased slightly during late March. After considerable fluctuation in the first three weeks of April, the spot price of foreign silver declined and on April 20 was about the same as a month earlier. The Credit Situation During the four weeks between March 21 and April 18 Twelfth District banking reserves were increased substantially and member bank re serve deposits reached 223 million dollars, more than 30 million dollars above the high point for any time prior to the current year. Loans of member banks showed little net change during this period, although interest rates were re duced slightly. Investments declined mod erately. United States Treasury disbursements con tinued to exceed local collections by a con siderable amount and, in addition, Twelfth Dis trict banks gained substantially from commer cial and financial transactions with other dis tricts, principally New York. Since there was little change in reserve bank credit, in demand for currency, or in other factors affecting the supply of or demand for funds, practically all the reserves gained from Treasury disburse ments and from inter-district transfers accumu lated as member bank excess reserves, inas much as required reserves were unchanged. As in December, January, and February, the Civil Works Administration was the most im portant single agency contributing to the large Treasury disbursements, although substantial amounts were disbursed by the Federal Emer gency Relief Administration, Farm Credit A d ministration, Agricultural Adjustment Admin istration, and Home Owners’ Loan Corporation, in addition to the usual expenditures of the W ar and Navy Departments and other regular ad ministrative and executive agencies. The larger part of Federal funds now being disbursed in the Twelfth District finds its im mediate use as wage payments (which are spent mainly for consumption goods) or as payments M O N T H L Y R EVIEW OF BUSINESS CONDITIONS 30 A p r il, 1934 for durable goods which in their turn involve large wage payments. This type of spending contributes to the immediate demand for goods and services and hence stimulates trade and in dustry more than it builds up the current vol ume of savings. To the extent that Government expenditures are provided for by taxation and other ordinary revenues from within the district or through sales of securities which absorb local savings, there is no change in the wealth, in come, or bank reserves of the district. To the extent that disbursements are met by Govern ment borrowings from local banks, the increased individual deposits thus created are balanced by larger bank investments in Government securi ties. Bank reserves are not changed by this expansion but local bank credit is indirectly converted into purchasing power. To the extent that expenditures are met by use of funds col lected or borrowed in other districts, bank re serves as well as individual deposits are imme diately increased. During the past two months total invest ments of city member banks have averaged about the same as the total loans reported by those banks. This relationship represents a marked change from the apportionment of com mercial bank credit in previous years. During 1927, 1928, 1929, and 1930, loans of all member banks in the Twelfth District were more than twice as large as investments of those banks. Beginning in 1931, however, the extension of credit by banks to commercial enterprises and to borrowers on securities and real estate was curtailed, while investments were moderately increased, as shown in the chart below. This expansion in investments of banks was almost entirely in holdings of United States Government securities and accompanied a growth in Federal borrowing. A s the Govern- S O U R C E S A N D U SE S O F B A N K I N G R E S E R V E S F E D E R A L R ESE R V E B A N K O F S A N F R A N C IS C O (in millions of dollars) Twelfth District Changes in millions of dollars during the weeks indicated SO U RC ES OF FU N D S Treas. and Reserve Bank Commercial N at’l Bank Credit Operations Currency * .5 — 3.2 + — 1.2 — 13.3 .4 — 16.2 .6 + + .1 — 1.2 — 2.3 .2 + — 6.8 — .8 .5 — 1.2 — 15.8 + 1.3 — 1.2 + 12.7 — .1 — — .2 + 3.2 .1 — + 9.5 — .7 .4 — 13.1 1.0 + 4.1 + W eek Ending 1934 February 14. February 21. February 28. M arch 7... M arch 14. . . M arch 21. . . M arch 2 8 . . . A pril 4.... April 1 1 . . . . April 18____ Total Supply — 2.7 — 14.9 — 15.5 — 3.3 — 8.1 — 15.7 + 11.4 + 2.9 + 8.4 — 8.0 * Change less than $50,000 Member Bank Reserve Deposits + 8.1 — 6.7 — 12.2 + 8. 2 + 10.4 — 9.5 + 14.5 — 6. 0 + 2 4 .7 — 1.2 Treasury Other Cash and F .R .B . Deposits at F .R .B . Accounts — 1.4 — 9.0 — 8.2 + 1.2 — 5.4 + .5 — 15.0 + 1.0 * — 14.2 — 1.1 — 2.9 — 4.4 + 1.4 + 4.3 — .8 — 15.0 — .2 — .2 — 5.9 1928 1929 1930 1931 1932 1933 1934 L O A N S A N D IN V E S T M E N T S A ll Member Banks— Twelfth District Data from call reports. March 1934 figures estimated. ment disbursements continued to increase and thus to supply an increasing part of the credit demands of the community, commercial bank holdings of Government obligations increased further. This was particularly true during 1933 and the first few months of 1934 when the broadening of Federal activities was more rapid than during any other peace-time era. The de cline in loans of banks more than offset the in crease in their investments during the three years prior to the middle of 1933 and the total t---------------------Condition--------------A pr. 18, Apr. 11, M ar. 21, Apr. 19, 1934 1933 1934 1934 219 168 170 168 Total Bills and Securities............ 1 73 Bills D is c o u n te d ........................... 1 1 21 1 3 1 Bills Bought .................................. 166 166 125 United States Securities.......... 166 267 225 302 296 Total Reserves .................................. 242 209 160 248 Total Deposits .................................. Federal Reserve N otes in C irc u la tio n ....................................... 201 261 200 196 Federal Reserved Bank N otes in Circulation .................................... 4 5 9 Ratio of T otal Reserves to D eposit and Federal Reserve N ote Liabilities Com bined. . . 53.4 65.8 66.2 68.2 R E P O R T IN G M E M B E R B A N K S — Twelfth District (in millions of dollars) U SE S O F F U N D S Demand W eek for Ending Currency 1934 February 14. . . — .4 February 2 1 . . . — 1.2 +1.6 February 2 8 . . . M arch 7 . . . . . . +2.5 M arch 14. . . . . . — 4.3 M arch 2 1 . . . . — 2. 2 M arch 2 8 . . . . . . — .1 +5.4 April 4 .......... . . Apri l 1 1 .......... — 1.1 — .7 April 1 8 . . . . i 1927 Total Demand — 2.7 — 14.9 — 15.5 — 3.3 — 8.1 — 15.7 + 11.4 + 2.9 + 8.4 — 8. 0 t-------------------Condition---------Apr. 18, Apr. 11, M ar. 21, Apr. 19, 1934 1934 1933 1934 1,762 1,780 Loans and Investm ents— T o ta l. 1,753 1,663 881 881 906 Loans— Total ............................... 876 215 O n Securities ........................... 219 220 218 657 661 663 691 A ll O t h e r .................................... 886 872 899 757 Investm ents— Total ................... 570 557 427 546 United States Securities. . . 329 329 330 Other Securities ...................... 326 132 134 109 Reserve with Reserve B an k .......... 83 621 612 N et Dem and D eposits................... 605 523 904 901 875 898 Tim e D eposits .................................. 182 D ue from B a n k s ................................ 177 173 133 184 D ue to B a n k s...................................... 175 171 143 Borrowings at Reserve B a n k . . . . 64 A p ril, 1934 FEDERAL RESERVE AG EN T AT SAN FRANCISCO amount of credit extended by district banks decreased. Since that time, however, loans have changed little and investments have increased becauseof additional Government securities held. While the decrease in loans as a proportion of total commercial bank credit has been general throughout the Twelfth District, it has been much greater in some regions than in others. The relative amount of Government disburse ments within a given banking area, the extent to which uncollectible loans have been written down, and the extent to which large city banks have supplied credit to borrowers in smaller financial centers are among the many factors which help to explain these differences. Changes in the ratio of loans to total loans and investmentsbetween June 30,1927,a date typical of the period from 1927 through 1930, and December 30, 1933, are shown by cities in the table below. T O T A L LO ANS AS PERCENTAGES OF TO T A L LOANS A N D IN V E S T M E N T S A ll Member Banks—Twelfth District June 30, Dec. 30, 1927 1933 San F rancisco........................................................................ 73 57 L o s A n g e le s............................................................................. 78 60 P o r t la n d .................................................................................... 58 30 Seattle......................................................................................... 62 37 S p o k a n e .................................................................................... 76 46 Salt Lake C ity ........................................................................ 74 38 A ll O th er.................................................................................... 76 50 Tw elfth D istrict...................................................................... 72 55 N O T E : Figures for individual cities include? all branches of banks with head offices in such cities. Figures for the “ A ll O ther” area exclude branches of banks with head offices located in any city shown separately. Acceptance liability of district banks re mained at about 25 million dollars in April. About the same amount of bills was held by the accepting banks. (Such holdings are reported as commercial loans.) The small total amount of bills outstanding reflects principally the rela tively quiet state of foreign trade. The fact that so large a portion of outstanding bills is 31 held by the accepting banks reflects the easy money conditions and the record level of excess reserves wrhich have caused banks to hold an unusually large proportion of available safe short-term paper. Significant changes have occurred in the for eign exchange situation since the end of Janu ary, when the revaluation of the gold dollar became effective. W hile the dollar was fluctuat ing and gradually depreciating in 1933, there was little desire on the part of foreign bankers to maintain large balances here. Immediately following revaluation, deposits of foreign banks with the 15 leading exchange dealers of the Twelfth District doubled, increasing from 3 million dollars to 6 million dollars. Amounts due to local dealers from foreigners also in creased slightly. These latter balances had grad ually been reduced to a negligible amount by the beginning of February, as dealers had taken profits through conversion of foreign currencies to dollars at the new rates. W hen most currencies were redeemable in gold, local exporters and importers customarily carried the bulk of their own foreign exchange risks, since the degree of fluctuation of rates was limited. W ith the disappearance of this stability, however, foreign traders came to the banks to hedge against forward dealings. Re flecting in part the depreciation of the dollar and a slight increase in foreign trade beginning in May, 1933, forward purchases of dealers rose from 2 million dollars early in March, 1933, to 12 million dollars in February, 1934, and for ward sales by dealers increased from 6 million dollars to 20 million dollars during the same period. Forward purchases and sales of ex change reached a peak early in February and have since declined 30 per cent in dollar amount. S U M M A R Y O F N A T I O N A L C O N D IT IO N S Prepared by the Federal Reserve Board Volume of industrial production increased further in March and there was considerable growth in factory employment and payrolls. The general level of commodity prices showed little change between the middle of March and the middle of April, but in the third week of April there was a sharp decline in grain prices. Production and Employment. Output of manufactures and minerals, as measured by the Federal Reserve Board’s seasonally adjusted index of industrial production, advanced from 81 per cent of the 1923-1925 average in Febru ary to 84 per cent in March. This advance re flected chiefly increases of more than the usual seasonal amount in the output of steel, auto mobiles, and lumber and an increase contrary to seasonal tendency in the output of coal. Pro duction of textiles showed little change in vol ume on a daily average basis. In the early part of April, activity at steel mills and automobile factories increased further, according to trade reports, while coal production declined by a more than seasonal amount. Volume of em ployment at factories increased further between the middle of February and the middle of March by about 4 per cent, an amount larger than is usual at this season. Employment on the railroads and at mines also showed an increase. The number on the payrolls of the Civil W orks Administration was reduced from about 3,700,000 in the middle of February to about 2,400,000 in the middle of March and 1,900,000 at the end of the month. The value of construction contracts awarded in March, as reported by the F. W . Dodge Cor poration, showed a considerable increase from M O N T H L Y R EVIEW OF BUSINESS CONDITIONS 32 the low level of February, followed, in the first half of April, by a decline. For the first quarter as a whole, the value of contracts was somewhat smaller than in the last quarter of 1933; pub licly-financed projects continued to make up about three-fourths of the total. Distribution. Volume of freight carloadings showed a further increase in March, reflecting chiefly seasonal increases in shipments of mer- A p r il, 1934 Bank Credit. During the four weeks ending April 18 member bank reserve balances in creased by $ 220,000,000, raising the volume of reserves in excess of legal requirements to $1,600,000,000. This increase reflected a growth of $105,000,000 in the monetary gold stock and further disbursements by the Treasury of funds from its cash holdings and its deposits with the reserve banks. M IL L IO N S O F D O L L A R S IN D U S T R I A L P R O D U C T IO N V A L U E O F C O N S T R U C T IO N C O N T R A C T S A W A R D E D Index numbers of industrial production, adjusted for seasonal varia tion (1923-1925 average=100). Three-month moving averages of F . W . Dodge data for 37 Eastern States, adjusted for seasonal variation. Latest figure based on data for February and March and estimate for April. chandise and miscellaneous freight and a con tinued large volume of coal shipments, which usually decline in March. In the early part of April, total carloadings showed a decline, re flecting a sharp reduction in coal shipments. Dollar volume of trade at department stores increased in March by considerably more than the estimated seasonal amount, after allowance for the early date of Easter this year. 1929 1930 1931 1932 1933 1934 W H O L E S A L E P R IC E S Indexes of the United States Bureau of Labor Statistics. By months 1929 to 1931; by weeks 1932 to date. (1926=100). Latest figure is for week ending April 14. Prices. The general level of wholesale com modity prices, as measured by the index of the Bureau of Labor Statistics, was 73.3 per cent of the 1926 average in the week ending April 14 as compared with 73.8 per cent in the week end ing March 10. During this period prices of steel, copper, and automobiles advanced, while prices of farm products decreased somewhat. In the third week of April, wheat prices declined sharply and there were also declines in the prices of other grains, cotton, and silver. A t reporting member banks in leading cities, an increase of $400,000,000 in net demand and time deposits for the four-week period ending April 11 reflected chiefly the deposit by the pub lic of funds disbursed by the Treasury, as well as a growth in bankers’ balances. Government deposits were reduced by about $200,000,000. Holdings by these banks of securities, other than United States Government obligations, M E M B E R B A N K C R E D IT Wednesday figures for reporting member banks in 90 leading cities. Latest figures are for April 11. increased by $64,000,000 and their loans, both on securities and all other, also increased slightly, with the consequence that total loans and investments showed a growth of $ 100,000,000 for the period. Money rates in the open mar ket declined further in April. Rates on prime 4-6 month commercial paper were reduced from a range of 1-1 % per cent to 1 per cent, and rates on 90-day acceptances were reduced from % per cent to a range of Per cent. Yields on Government securities also declined.
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