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M wiU tf FEDERAL RESERVE B A N K OF S A N F R A N C ISC O A U G U S T 1944 Banking and Credit Developments — Commercial Bank Opinions policies which discourage idle cash but which Current emphasize liquidity, based primarily upon expecta tions of deposit losses to other areas after the war, are characteristic of most Twelfth District banks, according to recent interviews with executives of some 40 banks throughout the District. A sharp increase is generally anticipated in personal instalment loans ; for business and agricultural loans, the outlook is more obscure. There is a considerable degree of uniformity in the in vestment policies of these banks under present conditions. The emphasis is upon liquidity, but upon liquidity in terms of Government securities rather than cash. For the most part, cash is being held at a minimum, and includes little more than enough to meet reserve requirements and min imum working balances, including those with correspond ents. Although a few’ banks are very definite exceptions, most of those interviewed make no significant distinction between surplus cash and Treasury bills. Treasury bills are considered as interest-bearing cash, on the assumption that the participation of the Reserve System in that mar ket is relatively permanent, or at least w^ill not be with drawn abruptly. Other security holdings are almost en tirely Government securities, and in large measure are certificates of indebtedness, notes, and bonds maturing in less than five years. A considerable proportion of these banks’ new investments is being placed in securities of less than one year’s maturity. During 1943, the increase in holdings of Treasury bills and certificates of indebted ness of all District member banks was 45 percent of the increase in their total Governments and 42 percent of the increase in their total assets.* Short term adjustments in reserve positions are made largely through the sale and repurchase of Treasury bills. Some banks are also relating, to some degree, their war loan accounts to their holdings of certificates of indebted ness. The principal factor determining the general policy of increased emphasis upon short run securities, how ever, is the possible loss of deposits after the war. A second factor of much less weight is the possibility that interest rates wrill rise in the postwar period. Al though it has contributed to the predominance of short term security holdings, this expectation is not general ^Government security holdings of District member banks in 1939-1943 are given in the table which accompanies the following article on that subject. ★ and in several instances it is based upon the belief that if interest rates change at all, they will rise, rather than upon the thought that an increase is probable. There is quite complete agreement that rates will decline no fur ther and that they will not increase for a year or two after the wrar. As to the probability of rates increasing over a longer period, there is a considerable range of opinion. In general, howrever, there seems to be confidence that Government security prices will be fairly well maintained, and that the Reserve System not only can but will support the market, if necessary. In those cases where banks are in or near excess profits brackets, taxes have occasioned some shift into tax ex empt securities, but for the most part, taxes, according to the banks, have not had an appreciable effect upon invest ment policies. Postwar Deposit Shifts There is general agreement that total deposits in the country as a wThole will not decline. Most banks in this District, however, expect a considerable loss of deposits after the wrar through a net shift of funds to the east, al though in no case is the decline expected to carry depos its back to prewar levels. Deposits are expected to decline less sharply in banks and branches outside major cities than in the larger cities. Deposits in the outlying areas are generally assumed to be associated with levels of farm prices and farm incomes which are expected to be main tained for at least a few years after the war. The greater part of the dollar increase— although not the larger relative increase— has occurred in the large cities and maintenance of current deposit levels is gener ally considered to be dependent upon war production. Various reasons are assigned for the expected loss of de posits wrhen war production is cut back: migration out of the area, shifts of balances of national concerns eastward as their activities here are curtailed, settlement with east ern suppliers and with the Government by firms engaged in wrar production, and expenditures by consumers for automobiles and other durable goods and by business firms for inventories, maintenance and repair, and equip ment, which the wrar has postponed. The last reason for anticipating deposit losses, that in dividuals and firms will shift from cash into goods, is probably considered one of the most important, not only VicioJuf ★ ßiuf, T/Oasi ßosull ★ 34 August 1944 FEDERAL RESERVE BANK OF SAN FRANCISCO in the Twelfth District but elsewhere as well, and de serves a brief further comment. In the nation as a whole, individual holders of deposits can reduce their balances, but all together can not unless total deposits decline. When checks are written against one account, they are deposited in another. Whether on balance this will mean a loss of deposits for a particular bank or a particular area is not always considered. Although deposits are not ex pected to decline for the country as a whole, the net total of the deposit changes expected by individual banks throughout the nation would, one may hazard a guess, reflect a marked drop in total deposits from present levels. Postwar Loan Volume These banks anticipate some increase over present lev els but no boom in their postwar volume of business loans. Those with substantial loans to war industries are doubt ful about any net increase. There is some belief that banks will find it necessary in meeting demands for credit to shift to longer term, though not necessarily long term, business loans. The banks which have any volume of agricultural loans expect little increase in the demand for long term agricul tural credit. An increase in short term credit is expected by some, but not all of those banks. It should be noted that the improved cash position of farmers was suggested as a factor limiting the demand for loans more frequently than were increased business or consumer balances. It is in the field of personal loans that banks are almost uniformly and highly optimistic. Those already in the instalment loan field expect a marked expansion and many not in the field expect to enter it actively after the war. A considerable expansion in real estate loans is also rather generally anticipated. Internal Effects of Deposit Loss or Loan Increase Requirements which may arise from a loss of deposits or an increase in private loans and investments are not considered likely to be a serious problem. They will be met without difficulty, it is expected, primarily through the run-off of Government securities. Should needs go beyond this point, sales of Governments might be neces sary, of course, and there is an expressed willingness, again with some rather definite exceptions, to borrow from the Reserve System rather than to sell securities if conditions favor the former. That either sales or borrow ing would be substantial, however, is considered a remote possibility. Capital Positions The ratios of capital accounts to total assets (and to deposits) of banks have been declining with the expan sion in security holdings, but little or no concern is ex pressed over capital positions beyond the advisability of strengthening them through the retention of profits, which is being done. Few banks state that their capital positions play any significant part in their investment pol icies or that they expect capital positions to be a limiting factor in any possible loan expansion in the postwar period. Government Security Holdings of Twelfth District Member Banks, 1939-43 last four years, especially in 1942 and 1943, memInberthebank investments in Government securities have been increasing rapidly, both in amount and relative to total assets. Total Governments, direct and guaranteed, amounted to 1,450 million dollars and were 27 percent of total assets on December 31, 1939; on December 31, 1943, they amounted to 6,235 million dollars and were 53 percent of total assets. At the same time, short term Gov- ernments have been increasing in importance in Government security portfolios. At the end of 1939, securities which matured in less than 5 years were 31 percent of all Governments and 8 percent of total assets; four years later, they were 58 percent of all Governments and 31 percent of total assets. Of the total dollar increase in member bank assets over the period, one-third occurred in Treasury bills and certificates of indebtedness, one- G o v e r n m e n t S e c u r it ie s , b y M a t u r i t y , a n d O t h e r A s s e t s o f T w e l f t h D is t r ic t M e m b e r B a n k s , (as of December 31) -Millions of dollars--------- ,-----1939 United States Government securities Treasury bills ................................................................. ■\ Increase 1939-43 t 1939-43 Percent of total----- 1939 1941 1942 1943 1 5 6 6 12 9 13 1941 1942 1943 101 714 1,432 1,505 707 1,432 1,058 — — 8 7 "" .. A Increase 1939-43 447 — 445 473 506 842 Total under 5 y e a r s ..................................................... ...................... 454 546 1,821 3,651 3,197 8 8 20 31 50 Bonds maturing in 5 to 10 years........................... ...................... Bonds maturing after 10 years............................... ...................... 478 518 330 861 913 896 1,756 830 1,278 312 9 10 10 15 7 20 10 5 13 Total G overn m en ts........................................................ ...................... 1,450 1,737 3,630 6,237 4,787 27 26 41 53 75 524 1,967 674 542 2,451 974 ...................... ...................... 458 185 717 168 33 139 556 — 15 S94 — 38 1 2 202 557 2,106 1,230 107 1,352 147 5 18 122 538 2,170 1,238 159 1,056 162 Total assets ........................................................................... ...................... 5,380 6,791 8,953 11,736 6,356 Other securities under 5 years1 ................................ ...................... Other assets Other securities ................................................. Total lo a n s ......................................................................... Cash assets, except r e s e r v e s .................................... Excess r e s e r v e s ............................................................... Required r e s e r v e s .......................................................... Other assets .................................................................... ...................... ...................... ...................... 1 Includes all savings bonds and guaranteed obligations. — 10 8 6 37 12 2 36 14 3 24 14 9 3 11 2 12 2 10 1 12 1 100 100 100 100 N o te : Figures do not necessarily add to totals because of rounding. o 11 23 17 5 9 — 14 — 1 100 August 1944 35 MONTHLY REVIEW tive to total assets and in the relative importance of Gov ernment securities of under 5 years maturity. It is notice able that by the end of 1943, however, banks in every size group, except the two smallest, and in every deposit in crease group had increased their Governments to be tween 50 and 58 percent of total assets and their short term Governments (under 5 years) to between 30 and 35 percent of total assets. This convergence indicates much greater similarity among current investment poli cies, partly by choice and partly by necessity, than was the case before the war. half in all Government securities maturing in less than 5 years, and three-fourths in total Government security holdings. The increasing importance and shortening maturities of Government securities are general among District banks. Classifications of banks in terms of their deposit growth and in terms of size reveal no clearly defined as sociation between those factors and the character of the banks’ Government security holdings. There wras considerable variation in 1939 among these groups of banks in the importance of Governments rela A ssets of T w e l f t h D is t r ic t M e m b e r B a n k s b y D e p o s it I n c r e a s e a n d T o t a l D e p o s it s , (percent of total) 1939 and 1943 Banks classified by percentage increase, Banks classified by amount of total deposits, December 31, 1943 1939-43, in demand deposits of individuals, —(in millions of dollars)— t--------- partnerships and corporations--------- t ---------------Over Over Under 50-500 500 1-2 2-5 5-10 10-50 50-150 150-200 200-300 300-500 500 1943 United States Government securities Treasury b i l l s ........................................... Certificates of indebtedn ess.............. Other securities under 5 years1 6 10 15 Total under 5 y e a r s ............................... 17 Bonds maturing in 5 to 10 years. . . Bonds maturing after 10 years.......... 10 4 13 14 9 7 7 5 8 10 11 6 11 6 7 7 14 14 14 13 14 10 10 15 11 15 5 13 12 12 7 9 17 35 30 33 31 26 25 32 31 33 30 32 14 5 15 7 14 5 14 5 7 4 13 4 13 5 12 12 13 7 7 18 9 50 37 42 50 50 53 57 50 2 11 3 5 16 37 6 6 18 42 14 30 13 31 4 15 28 3 14 26 6 22 22 100 100 100 100 100 100 100 *7 8 9 8 Total G overn m en ts............................... 58 54 52 52 Other assets Other secu rities ...................................... Total l o a n s ................................................ Other a s s e t s .............................................. 12 3 4 18 24 5 20 23 4 15 29 37 Total assets .................................................. 100 100 100 100 100 6 1939 United States Government securities Treasury b i l l s ........................................... Certificates of indebtedness.............. Other securities under 5 years1 9 "7 *5 6 *4 4 4 9 9 7 5 6 4 4 4 7 8 9 2 3 5 6 3 14 10 6 7 2 4 4 4 4 5 9 4 5 9 15 10 6 25 25 15 18 11 12 11 18 16 32 25 12 ’9 Total under 5 y e a r s ............................... 12 Bonds maturing in 5 to 10 years. . . Bonds maturing after 10 years 19 Total G overn m en ts............................... Other assets Other secu rities ...................................... Total l o a n s ................................................ Other a s s e t s ............................................. 8 11 10 10 11 40 25 44 31 41 30 13 41 34 15 41 33 34 36 9 38 37 11 37 27 11 41 37 8 24 29 29 31 43 Total a s s e t s ..................................................... 100 100 100 100 100 100 100 100 1 00 100 1 00 10 0 Number of b a n k s ......................................... 20 27 98 92 19 19 60 86 32 32 24 3 Total assets (in mill, of dollars) 1943 .......................................................................................................... 1,777 1939 .......................................................................................................... 1,061 ,779 938 7,380 3,110 665 216 77 16 16 7 98 39 279 104 242 95 763 311 4,800 5,480 2,585 1 Includes all savings bonds and guaranteed obligations. 2,200 21 N o te : Figures do not necessarily add to totals because of rounding. Review of Business Conditions— Twelfth District Results of the Fifth War Loan Drive x c e e d in g the goal of the drive by nearly 5 billion E dollars and the largest volume of sales in any previous drive by almost 2 billion, national sales of Government securities during the Fifth War Loan Drive amounted to 20.6 billion dollars. In addition, sales outside the loan drive were made to commercial banks holding savings ac counts in the amount of 0.8 billion dollars and to Treasury investment accounts in the amount of 0.6 billion. Sales to individuals totaled 6.4 billion dollars, about one billion more than in either the third or fourth drives. Sales of Series E bonds were not quite half of total sales to individuals, and were somewhat less than in the fourth drive. Many larger investors probably had previously purchased the limit allowed in a calendar year, as indi cated by the fact that, although the total declined, sales of 25 and 50 dollar denomination bonds increased over the previous drive. Twelfth District sales wxre also higher than in any other drive, and amounted to 1.7 billion dollars. As in the country as a whole, District sales to individuals in creased, totaling 703 million dollars compared with 623 million in the fourth drive, but Series E bond sales did 36 FEDERAL RESERVE BANK OF SAN FRANCISCO not quite reach the level of the previous drive. District sales were about the same share of the national total, 8 percent, in the fourth and fifth drives. S a l e s o f S e c u r i t i e s , F i f t h W a r L o a n D r iv e U n it e d S t a t e s a n d T w e l f t h D is t r ic t b y S t a t e s (in millions of dollars) t--------Sales to individuals--------> Total United S t a t e s ...........................20,639 Twelfth District- ................. 1,690 Arizona2.................................. 43 California ............................. 1,070 Idaho .................................... 32 Nevada .................................. 14 Oregon .................................. 188 Utah ....................................... 58 Washington ........................ 285 Series E Series F & G Other Other1 3,036 414 12 260 12 4 45 15 66 574 2,741 69 217 2 7 51 98 1 6 1 3 5 69 1 7 8 27 14,288 988 22 660 13 6 69 35 183 Total 6,351 703 21 410 19 8 119 24 102 1 Includes corporations, associations, state and local governments, and Fed eral field agencies. 2 Includes sales in five southeastern counties of Arizona in the Eleventh Fed eral Reserve District. N ote : Figures do not necessarily add to totals because of rounding. Food Production and Processing The decline in Twelfth District nonagricultural em ployment which began last fall was reversed in July and August as the processing of food crops entered its active season. Agricultural employment also increased. Indus trial and agricultural activity and employment customa rily attain a seasonal peak, somewhat less marked now than before the war, in August and September. This year, however, because of outmigration and retirement from the labor force, total employment is not increasing in the numbers characteristic of the same period in other recent years, and will, according to present indications, fall off more sharply than is customary in the late fall months even in the absence of substantial cutbacks in war produc tion. Nonagricultural employment currently approxi mates 3.9 million, compared with 4.2 million a year ago. The attention of manpower officials is currently fo cussed on the agricultural and food processing labor situ ation as w7ell as on continuing shortages in the war indus tries. Shortages in the war industries relate largely to activities requiring high skills or heavy labor. Because of lack of training and other factors, women are not adapt able to most of these activities which, to name a few, in clude ship repair and conversion, heavy tire manufacture, and waterfront, warehousing, and transport operations. Averages of Wednesday figures (m illio n s of dollars) Condition items of weekly reporting member banks Total l o a n s ................................................... Com ’l., ind., & agric. loans............ Loans to finance transactions in : U . S. Government securities . . . . Other secu rities................................ Real estate l o a n s .................................. A ll other lo a n s ....................................... Total in v estm en ts.................................... U . S. Government securities.......... A ll other secu rities............................. Adjusted demand deposits...................... Time d e p o sits.............................................. United States Government deposits. - Change from - t--------- ----- 1 9 4 4 - ----------- -N July + + 60 2 + — 108 46 296 100 4,494 4,184 346 + 52 + 5 — 1 + 2 + 380 + 367 + 12 •— 111 + 14 + 587 + + 2,679 1,479 1,144 _ 1,467 + + — 75 74 48 1943 July M ay June 1,018 469 Coin and currency in circulation Total (changes o n ly )............................... Fed. Res. notes of F . R. B. of S. F . . 2,316 Member bank reserves.................................. To an increasing extent employers are seeking persons having certain capabilities to fill particular jobs, rather than taking workers at random, a procedure which has resulted in some unemployment in localities where work ers and jobs do not match. Early apprehension that there would be a critical in sufficiency of agricultural and food processing workers to handle this year’s crops has not, at latest reports, been borne out. Although agricultural employment averaged about 870,000 in July, some 16,000 workers fewer than were available in July 1943, an unusually large apricot crop was harvested satisfactorily, and only scattered shortages wTere reported in other farm activities. That current farm employment has not fallen farther short of 1943 levels reflects the utilization in greater numbers than last year of Mexican nationals, Japanese evacuees, American volunteer workers and servicemen, and pris oners of war. More than 47,000 Mexican nationals were employed in agricultural work on August 1. D e c id u o u s F r u it a n d C o m m e r c i a l T r u c k C r o p P r o d u c t io n — T w e l f t h D is t r ic t (in thousands) Average 1932-41 1942 Apples (bu.) ........................ 38,195 Apricots (tons) ................... ............... 250 228 Cherries (tons) ................... 90 Grapes (tons) ...................... 2,179 Peaches (bu.) ...................... .............. 25,241 32,074 Pears (bu.) ........................... 20,884 Plums (tons) ........................ .............. 64 72 Prunes Ida., W ash ., Ore. (fresh tons) . . 147 113 California (dry tons) , . .............. 195 171 Asparagus (crates) .......... .............. 7,513 7,851 Snap beans ( b u .) ................. .............. 1,513 1,391 Peas (b u .) ............................. 2,761 Tomatoes (bu.) ................. 5,472 + + + + — + + 73 5 62 1 12 J 0 5 476 454 22 78 41 611 + + 102 28 + 111 — + + + + + + 33 3 1,211 1,163 47 262 261 718 — + 159 + 156 + + 760 752 + + 162 11 1943 35,580 106 80 2,808 27,873 20,878 76 136 196 8,198 1,328 3,561 5,820 Indicated 1944 41,169 330 84 2,515 34,732 20,300 73 101 163 8,262 974 4,659 6,683 Source : United States Department of Agriculture. Wage-earner employment in the fruit and vegetable canning industry increased sharply in July, the latest month for which data are available, to 76,000, compared with 58,000 in July 1943 when the apricot crop was unusually small. July employment at canneries during the three-year period 1940-42 averaged 67,000. In midAugust, canning facilities were reported taxed as har vesting of the largest peach crop since 1930 was accelerProduction and Employment— Index numbers, 1935-39 daily average=100 Banking and Credit— August 1944 Industrial production1 Lumber / . ............................. Refined oils2 .......................... Cement2 .................................. W heat flour2 .......................... Petroleum2 ............................. Electric power2 ................... With seasonal ,--------adjustment-------- N ,----------1944--------- >> 1943 July June M ay July 126 rl3 1 r l2 2 141 —■ — — — 124 119 116 137 151 153 153 126 — ■ — —• —407 418 437 378 Factory employment and payrolls3 Employment Twelfth D is tr ic t ........................ California ...................... 332 Pacific N o r th w e s t .............. Oregon ............................... W a s h i n g t o n ...................... In te rm o u n ta in ...................... Payrolls California ...................... 681 Without seasonal t------- adjustment-------- N ,--------- 1944----------\ 1943 July June M ay July 136 r l4 9 141 150 214 225 216 192 136 135 122 150 133 134 135 110 129 128 126 118 454 448 444 422 284 334 224 193 243 121 288 342 223 190 244 120 313 370 241 222 252 164 .. 332 .. .. .. .. 283 334 223 194 240 124 287 342 222 191 241 121 314 370 243 224 254 168 r691 695 717 680 r694 698 716 1 Daily average. 2 1923-25 average — 100. 3 Excludes fish, fruit, and vegetable canning, r Revised. August 1944 37 MONTHLY REVIEW ated and the Farm Labor Offices of the War Food Ad ministration were cooperating with the W M C to meet cannery labor shortages in several areas. Workers such as housewives and school children among whom the turn over rate is abnormally high, comprise a large propor tion of cannery help. Under wartime conditions, the civilian demand for processed foods at ceiling prices exceeds the supply avail able to civilians. Stocks of canned goods carried over from the previous season, the unsold portion often un movable at asking prices before the war, are now almost negligible at the beginning of each new packing season. C a n n e r s ’ S old a n d U n s o l d S t o c k s o f M ajo r C a l if o r n ia C a n n e d F r u it a n d V egetables (July 1 figures—thousands of cases) Fruits (N o . 2 y 2 can basis) A p r i c o t s ................................................ Cherries ................................................ Fruit c o c k t a il.................................... Fruits for salad................................. Peaches, cling .................................. Peaches, freestone .......................... Pears ..................................................... Vegetables (actual cases) Asparagus2 ...................... Spinach2 ........................... Tomatoes ........................ 19441 1 1 156 0 . 210 2 . 28 19431 103 5 239 81 768 63 159 19411 276 16 653 46 792 165 244 1937-41 Average 762 60 651 226 2,656 244 306 . 398 1,418 2,192 4,905 . 177 , 98 121 . 795 220 57 310 1,290 307 183 543 1,390 424 267 1,085 2,077 1,191 1,877 2,423 3,853 1 Exclusive of stocks sold to U . S. Government. 2 March 1 figures. Source: Canners’ League of California. Unlimited packs of most fruits and vegetables canned in the Twelfth District are permitted under W PB Tin Conservation Order M-81, the principal exception being spinach. The canning of fruits for salad is not permitted. Official figures of 1944 packs will not be published until 1945, but trade reports indicate that the California apri cot pack was very large, possibly approaching the record pack of 5,553,000 cases packed in 1937. The peach pack, to be completed in September, will also be large, pos sibly 14 to 15 million cases, compared with a previous high of 14,975,000 cases packed in 1928, but a small pear pack is anticipated. In July, an asparagus pack of 2,433,000 cases, the largest since 1930, was completed. The spinach pack, also completed earlier in the year, was limited in amount to the average for 1942-43. P r o d u c t io n , G o v e r n m e n t R e q u i r e m e n t s , a n d C i v i l i a n S u p p l i e s o f S e l e c t e d C a n n e d F oods (in millions of cases: fruit No. 2V2 can basis, vegetables No. 2 can basis) -U n ited States----Government Twelfth District ------Civilian «. t— production— /-—Production-^ (—requirem’ ts-^ f—supply—> 1943 ............ 1.2 ............ 0.9 ............11.3 ............ 4.5 Asparagus . . ............ 2.6 ............10.4 . . . , 2.5 Tomatoes . . . ............ 6.6 1942 3.2 1.0 14.8 5.5 2.7 8.1 3.6 9.3 1943 1.2 1.3 11.3 4.5 4.0 35.4 6.7 29.0 1942 3.2 3.5 16.0 6.0 4.3 36.0 9.6 41.0 1943 1.1 0.4 5.1 3.0 1.3 6.9 3.3 9.0 1942 1.5 1.4 5.5 2.3 1.3 12.5 4.3 16.0 1943 0.1 0.9 6.2 1.5 2.7 28.5 3.4 20.0 1942 1.7 2.1 10.5 3.7 3.0 23.5 5.3 25.0 Source : United States figures, Office of Price Administration. Twelfth D is trict figures partly estimated from National Canners Association data. Government processed food requirements are consid erably larger this year than in 1942 or 1943, and nearly half the 1944 pack is being set aside under the provisions of W ar Food Administration order W F O 22.6. This compares with 31 percent in 1942 and 27 percent in 1943, and means that even though the national processed food pack is larger this year than last, civilians will get less. Distribution and TradeW ith seasonal -adjustm ent— 19441943 July June May July Department store sales (value)1 Twelfth D is t r ic t ............... 223 210 210 200 Southern California . . . Northern California . . . Portland ............................. W estern W ashington. . . Eastern W ashington and Northern Idaho . . . . P h o e n ix ............................... Index numbers, 1935-39 daily average=100 Carloadings (num ber)2 Total .................................... 120 r l l 6 Merchandise and misc. 135 r l3 2 O t h e r ................................ 102 r 96 119 138 96 117 117 118 1 Seasonally adjusted indexes in process of revision. 2 1923-25 daily average — 100. r Revised. Without seasonal - adjustment -1 9 4 4 1943 July June May July 185 190 173 179 219 193 199 178 198 223 202 206 184 206 241 166 166 152 174 199 172 195 183 202 185 225 161 176 123 rl25 144 rl40 97 106 120 129 108 119 125 112 38 FEDERAL RESERVE BANK OF SAN FRANCISCO INDUSTRIAL PRODUCTION August 1944 Summary of National Business Conditions Released August 26, 1944— Board of Governors of the Federal Reserve System n d u str ia l production and employment declined slightly further in July. Wholesale I commodity prices generally continued to show little change, while the cost of living increased somewhat. I n d u s t r i a l P r o d u c t io n 1937 1930 1939 1940 1941 1342 1943 1944 Federal Reserve index. Monthly figures, latest shown is for July. COST OF LIVING 1937 1938 1939 1940 1941 1942 ¡94 3 1944 Output at factories and mines continued to decline slightly in July and the Board’s sea sonally adjusted index was 233 percent of the 1935-39 average as compared with 235 in June. The decrease in industrial production largely reflected small declines in a number of industries due to continued minor readjustments in the munitions program and to man power shortages. Output of steel and of nonferrous metals declined further in July to levels respectively 8 percent and 20 percent below the high levels of last autumn. A small decrease in activity in transportation equipment industries reflected partly the indirect effects of manpower shortages in foundries and continued readjustments in the shipbuilding and aircraft indus tries. In August a cutback in aircraft production was announced which was expected to result in the immediate release of 20,000 aircraft workers and the gradual release of 100,000 more during the balance of this year. Production of manufactured dairy products and meats, after allowance for seasonal change, was maintained in July while output of other food products declined slightly. Cotton consumption showed little change from the rate of the last two months. Activity in the rubber products industry continued to decline slightly in July and supplies of heavy truck and bus tires available for civilians during the third quarter were substantially below estimated needs. Output of chemicals likewise continued to decline slightly. Crude petroleum output and metal mining were maintained in large volume during July. Coal production dropped 5 percent from the level of the preceding month, but for the year through August 12 was approximately 8 percent above the corresponding period of last year, reflecting uninterrupted operations, longer working hours, and a great ex pansion of strip mining. So far this year the value of construction contracts awarded, as reported by the F. W . Dodge Corporation for 37 states, has fluctuated around 160 million dollars a month— the lowest level since early 1935. D is t r ib u t io n Bureau of Labor Statistics’ indexes. Last month in each calendar quarter through September 1940, monthly thereafter. Mid-month figures, latest shown are for July. MEMBER BANKS IN LEADING CITIES Department store sales declined considerably less than is usual in July, and have con tinued in August at a higher level than a year ago. Freight carloadings continued to rise in July and were maintained at a high level during the first two weeks in August. There were considerable increases in shipments of grain, forest products, and miscellaneous freight, offset partly by a small decrease in coal ship ments. A g r ic u l t u r e Dry wTeather during July in the east central area has reduced somewhat national pros pects for corn, hay, and potatoes. Aggregate crop production, however, is likely to exceed last year by 5 percent, reflecting chiefly a record wheat crop 35 percent larger than last year. Total production of all feed grains is estimated at 112 million tons compared with 115 million tons produced in 1943. While hay production, except in the drought areas, has been large, it will provide a smaller supply per animal unit than has been available in any of the last 6 years. Crop prospects for most fruits and vegetables, except potatoes, are better than last year. Tobacco production is indicated as being above average and cotton yields may be good as dry weather has held the boll weevil in check. B a n k C r e d it Demand deposits (adjusted) exclude U . S. G o v ernment and interbank deposits and collection items. Government securities include direct and guaranteed issues.Wednesday figures, latest shown are for August 16. MEMBER BANK RESERVES AND RELATED ITEMS Wednesday figures, latest shown are for August 16. In the five wreeks following the close of the Fifth W ar Loan Drive, loans by banks for purchasing and carrying U. S. Government securities declined sharply; calls on war loan deposits and subsequent Treasury expenditures increased adjusted demand deposits and consequently required reserves; the rapid outflow of currency into circulation was renewed; and excess reserves declined. In the five weeks from July 12 through August 16 loans to brokers and dealers for pur chasing and carrying Government securities declined 500 million dollars to about the pre-drive level. Loans to others for purchasing and carrying Government securities de clined about the same amount, but are still considerably larger than before the drive. Commercial loans continued to show little change. Treasury war-loan balances at all depositories declined in the five-week period by 2.7 billion dollars. A t weekly reporting banks, Government deposits fell by 2.2 billion during the same period and adjusted demand deposits increased by 1.4 billions. Time deposits continued the steady increase that has been in progress for more than a year. Following a slackened rate of outflow during the war loan drive, currency renewed its rapid outflow and in the next few weeks increased at a rate of about 500 million dollars a month. The resulting drain on bank reserves and the increase in required reserves were met in part by purchases of Government securities by the Reserve Banks and in part by a decline in excess reserves. Weekly average excess reserves of all member banks, declined about 300 million dollars from their peak during the war loan drive and amounted close to 1.1 billion dollars in mid-August. The rate of decline was about the same at reserve city and at country banks.
@FedFRASER