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MONTHLY REVIEW OF B U S I N E S S C O N D I T I O N S ISAAC B. N EW TO N , Chairman of the Board and Federal Reserve Agent Federal Reserve Bank of San Francisco Vol. X I I I San Francisco, California, August 20,1929 No. 8 S U M M A R Y O F N A T IO N A L C O N D IT IO N S Prepared by the Federal Reserve Board Industrial production decreased slightly dur ing July, but continued at a higher level than in other recent years. W holesale com m odity prices increased further during the month, re flecting chiefly higher prices of agricultural products. Loans for commercial and agricul tural purposes by reporting member banks in creased during July and the first half of August. Production. Output of manufactures de creased in July, while mineral production in creased. Average daily output of automobiles, copper, tin, zinc, and cotton and w ool textiles decreased and there was a small decline in the production of iron and steel. In all of these in dustries, however, output was larger than in the same month in earlier years. A ctivity in creased during July in silk and shoe factories and in meat packing plants, and there was also a larger output of bituminous coal and crude petroleum than in June. Reports for the first half of August indicate sustained activity in the iron and steel and automobile industries and a further increase in the output of coal and petroleum. Employment in manufacturing industries de creased in July by less than one per cent, while a somewhat greater decrease in payrolls was reported. A t this level, factory employment and payrolls, as in earlier months, were larger than in any other year since 1926. Value of construction contracts awarded in PER CENT July was higher than in the preceding month or in July, 1928, reflecting chiefly a sharp in crease in contracts for public works and utili ties. For the first half of August, however, total contracts declined to a level below the corre sponding period a year ago. A wheat crop of 774,000,000 bushels is indi cated by the August estimate of the Depart ment of Agriculture. This estimate is slightly below the five-year average, and 128,000,000 bushels below last year’s production. The esti mated corn crop is approximately equal to the five-year average crop and about 100,000,000 bushels smaller than in 1928. The cotton crop is estimated at 15,543,000 bales, seven per cent larger than last year. Distribution. Freight carloadings increased seasonally during July and the first two weeks of August, reflecting chiefly increased loadings of coal, grain, and ore, while shipments of mis cellaneous freight continued in about the same volume as in June. Sales of department stores declined seasonally from June and on a, daily basis were about the same as in July a year ago. Prices. W holesale prices in July continued the rise which began in June, according to the index of the Bureau of Labor Statistics, reflect ing chiefly higher prices for farm products and their manufactures, particularly livestock and meats, grains and flour, and potatoes. Prices of PER CENT W H O L E S A L E P R IC E S Index number of production of manufactures and minerals, combined, adjusted for seasonal variations (1923-1925 average = 100). Latest figure, July, 124. In dex o f U nited States Bureau o f L a bor Statistics (1926=100, base adopted by B u re a u ). Latest figure, July, 98.0. hides and leather also increased. W ool, rayon, and textile products declined slightly in price. There was a marked advance in the price of sugar, and rubber prices also rose somewhat. Prices of petroleum and gasoline declined and prices of iron and steel were slightly lower. During the first three weeks in August there PER 6 _ A u g u s t, 1929 M O N T H L Y R EVIEW OF BUSINESS CONDITIONS 58 CENT averaged 45 million dollars less during the week ending August 17 than in the week ending July 20, reflecting increased sales of ac ceptances to the reserve banks and further im ports of gold. Open market rates on call and time loans on securities were firmer during the last half of B IL L IO N S 10 "^ C O M M E R C I A L PAPER R A T E “ — R E S E R V E B A N K D IS C O U N T R A T E — AC CEPTAN CE RATE I 2W- 1925 1926 1927 1926 1929 M O N E Y RATES M on th ly rates in the open m arket in N e w Y o r k : com m ercial paper rate on 4- to 6-m onth paper and acceptance rate on 90-day bankers* a c c e p t ances. Latest figures are averages o f first 24 days in A u gust. were declines in the prices of cotton, petroleum, beef, sugar, oats, rubber and tin, and marked fluctuations in prices of pork and wheat. Bank Credit. Loans for commercial purposes by reporting member banks increased to new high levels during the four weeks ending August 14, while security loans, after increas ing further during the latter part of July, de clined during the first two weeks in August. M ember bank borrowing at the reserve banks 1927 1928 1929 M E M B E R B A N K C R E D IT M on th ly averages o f w e e k ly figures for reporting m em ber banks in leading cities. Latest figures are averages o f first three w ee k s in A u gu st. July and the first week of August. During the second week of August rates on call loans de clined, while rates on commercial paper in the open market advanced from six to six and onefourth per cent. On August 8 the discount rate of the Federal Reserve Bank of New York was increased from five to six per cent and the buy ing rate on bankers' acceptances was reduced from five and one-fourth to the market rate of five and one-eighth per cent. 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 Business activity in the Tw elfth Federal R e serve District reached a high level during July. The agricultural outlook improved moderately, price movements, on the whole, were not un favorable, and the supply of credit continued ample although its price advanced slightly. Increased prices for many farm products and favorable weather, which benefited growing crops and facilitated early harvesting opera tions, were important developments in the agri cultural situation during the month. Substantial advances in prices of wheat, potatoes, and de ciduous fruits pointed to an improvement in aggregate farm income. The announcement, on August 19, by the recently created Federal Farm Board, that it had agreed to extend sub stantial financial aid to California organizations engaged in handling raisin grapes, was an addi tional factor in the improved agricultural out look. The number of unemployed in the District is estimated to have decreased during July and was smaller than a year ago, a natural accompani ment of increased activity in industry. Perhaps the most noteworthy production figures of the month were those pertaining to the record out put of oil in California. Average daily output during July, 1929, was 868,165 barrels, an in crease of nearly 10,000 barrels or more than one per cent over the previous record output of September, 1923. This record flow accentu ated the problem of temporary overproduction which has faced the oil industry for some months past. The usual mid-summer recession in trade failed to appear during July of this year. Rail road and waterborne traffic was well main tained, and a relatively large volume of goods was distributed at wholesale and at retail. Con trary to the seasonal movement, sales of new automobiles increased during the month and established a new monthly sales record. There was a large outflow of funds from this District to New Y ork during late July and early August. This was a delayed seasonal movement which ordinarily occurs early in July and which is related to the customary June 30 adjustments of banking position. This year the movement was evidently postponed by reason of credit needs grow ing out of the curiosity de A u g u st, 1929 mand for the new small-size currency which was placed in circulation on July 10. Deposits of member banks declined during this period (July 17 to August 14) while their loans in creased, as did their borrowings from the Fed eral Reserve Bank. The discount rate of the Federal Reserve Bank of San Francisco was unchanged at five per cent but the Bank’s buy ing rate for short term bankers’ acceptances was reduced from five and one-fourth to five and one-eighth per cent, on August 13. Agriculture Physical conditions in most parts of the Dis trict favored grow ing crops and early harvest ing activities during July. D ry weather and low humidity in some areas, however, have in creased the fire hazard and hindered the growth of forage on fall and winter livestock ranges. Production forecasts of the principal crops have recently been increased, early harvest returns indicating that yields will be somewhat larger than was expected a month ago. Prices for agri cultural products have generally advanced dur ing recent weeks, and it now seems probable that the District’s gross return from crop sales will approximate that of one year ago, despite the smaller volume of production this year. F IE L D A N D G R A IN C R O P S -P R O D U C T IO N (In thousands) F orecast F oreca st 1927 A u g. 1,1929 Julyl.1929 1928 B ea n s ( b u .) 6,531 5,901 6,178 6,057 C a liforn ia , I d a h o 16,891 16,630 17,626 18,223 U n ite d S tates .............. C o t t o n (b a le s ) * 321 182 376 A r iz o n a , C a liforn ia . . * 14,478 15,543 12,955 U n ite d States ............... H o p s (lb s .) 32,742 29,794 31,649 29,550 C a lif., O re ., W a sh . . . . 32,742 29,550 29,794 31,649 U n ite d S tates ............... P o ta to e s (b u .) 47,107 55,756 38,620 39,870 T w e lfth D is tr ic t 379,290 464,483 406,964 372,812 U n ite d S tates .............. R ic e (b u .^ 8,073 4,902 4,845 8,960 C a liforn ia ........................ 34,810 32,686 41,881 40,231 U n ite d S tates ............... T a m e H a y (to n s) 13,614 15,312 14,048 14,568 T w e lft h D is t r ic t 106,001 U n ite d S ta tes ............... 97,421 98,991 92,983 S u g a r B e e ts ( t o n s ) 1,411 1,328 1,578 1,534 C a lif., U ta h , I d a h o . . . 7,101 U n ite d S ta tes ............... 7,617 7,633 7,753 B a rle y ( b u .) T w e lft h D is t r ic t 33,435 41,656 39,041 46,413 U n ite d S ta tes ............... 304,381 265,882 317,764 356,667 O a ts ( b u .) T w e lfth D is t r ic t 34,382 34,666 35,230 41,147 U n ite d S tates ............... 1,202,895 1,247,147 1,448,677 1,182,594 W h e a t (b u .) T w e lfth D is tr ic t . . . . 106,544 125,746 138,822 109,925 U n ite d S ta tes ............... 773,885 833,869 902,191 878,374 * F e d e ra l le g is la tio n d o e s n o t p e r m it a fo r e c a s t o f c o t t o n p r o d u c tio n on this date. S o u r c e : U n ite d States D e p a r tm e n t o f A g r ic u ltu r e . During July, 1929, exports of wheat from Puget Sound and Columbia River ports totaled 1,860,994 bushels as compared with 1,170,199 bushels exported during July, 1928. This evi dence of rapid marketing of wheat is supported by figures of receipts of this grain at Portland, Seattle, Astoria, and Tacom a during the cur rent marketing season. Up to August 13, receipts of wheat at these seaboard terminals 59 FEDERAL RESERVE AG EN T A T SAN FRANCISCO totaled 6,877 carloads as compared with 5,986 carloads received during the comparable period in 1928. August 1 estimates of field crop production showed increases as compared with July 1 esti mates but, with the exception of cotton and beans, the 1929 yield of these crops will prob ably be less than that of 1928. August 1 esti mates of cotton production in Arizona and California indicate a 17 per cent increase this year, reflecting particularly the increased acre age planted to cotton in California. Growing conditions for deciduous fruits im proved during July and the August production estimates were slightly larger than earlier fore casts. Interstate shipments of apricots, cher ries, figs, grapes, peaches, pears, and plums from California totaled 9,229 carloads during the current marketing season to August 10, which may be compared with 15,716 carloads shipped during the corresponding period in 1928. Unit returns for fruit shipped to Eastern markets have been much higher than a year ago. The crop of pears now being picked in Oregon and W ashington is estimated to be 20 per cent smaller than the 1928 crop. D E C ID U O U S F R U IT S A N D N U T S -P R O D U C T I O N (in thousands of tons) F orecast C a liforn ia A u gust 1,1929 A p r ic o t s ................................................ 184 C h erries ................................................ 15* G ra p es ................................................... 1,791 R a isin ............................................... 1,010 T a b le ................................................ 361 W i n e .................................................. 420 P e a ch e s ................................................ 303 C lin g s to n e ....................................... 162 F r e e s to n e ......... . ............................ 141 P e a rs ..................................................... 173 P lu m s .................................................... 39 P ru n e s ................................................... 122 A lm o n d s .............................................. 5 W a ln u ts ................................................ 42 1928 175 19 2,366 1,406 478 482 618 414 204 225 66 220 14 25 1927 208 12 2,406 1,443 490 473 492 322 170 181 57 203 12 51 * F o r e c a s t o f J u ly 1, 1929. S o u r c e : C a lifo rn ia C ro p R e p o rt. The 1929 commercial apple crop of the Dis trict is expected to approximate that of 1927 and 1926 and will be smaller than the large 1928 crop. In California, low prices for Gravenstein apples sold for fresh consumption have resulted in an increased use of this variety for drying purposes. A P P L E S — C O M M E R C IA L P R O D U C T IO N (in thousands of bushels) F oreca st A u gu st 1,1929 C a lifo rn ia .......................... 4,507 I d a h o .................................... 4,047 O r e g o n ............................... 4,203 U ta h ..................................... 423 W a s h in g t o n ...................... 25,029 T o t a l .................................... 38,209 U n ite d S tates ................. 88,983 1928 6,861 4,500 4,800 570 30,000 46,731 105,804 1927 4,656 5,400 2,925 402 22,302 35,685 77,700 1926 6,144 2,775 5,250 480 25,950 40,599 117,357 S o u r c e : U n ite d S tates D e p a r tm e n t o f A g ric u ltu re . Estimated production of Valencia oranges in California, which was set at 19,310,000 boxes on July 1, was reduced by 320,000 boxes in the August 1, estimates. This latest estimate is still more than double the 1928 crop. The con- 60 M O N T H L Y REVIEW OF BUSINESS CONDITIONS dition of the forthcom ing Navel orange crop is 58 per cent of normal as compared with 93 per cent of normal a year ago. The 1929 lemon crop is now estimated to be 5,222,000 boxes, an 11 per cent increase from the estimate of July 1. Shipments of oranges from California during July totaled 5,775 carloads, a record total for that month. Prices for citrus fruits have been lower during the 1928-1929 marketing season than during corresponding periods of the 19271928 season, a not unnatural consequence of this year’s large yield of small-sized fruits. Feed conditions on livestock ranges of the District improved during July, although range forage is still scant in some areas. Rains in Arizona, Nevada, and Utah have benefited live stock ranges in those states, and stockmen have been able to discontinue the movement of stock to other grazing areas. The cattle raising branch of the livestock in dustry has continued to profit from an excellent market for its product. During the half year, January to July, receipts of cattle and calves at the eight principal markets in the District totaled 539,910 head as compared with 590,290 head received during the first half of 1928. Prices during the year to date have generally approximated those of one year ago, which were at higher levels than in any like period since 1919. During the first half of this year 2,075,940 head of sheep were marketed in the District. In the same period of 1928, receipts of sheep at the same markets totaled 2,062,340 head. Ship ments of sheep from the District to m id-W estern markets have also been heavier this year than a year ago. The United States Depart ment of Agriculture estimates that the 1929 lamb crop, in the seven far-W estern states, totaled 8,489,000 head compared with the 1928 (A ) Employment— Industries S to n e , C la y and G lass P r o d u c t s . —Oregon■California-------- 's r " —% No. of No. of /— Employees —* No. r—Employees —> No. July, July. of July. July, of 1928 Firms 1929 1928 Firms 1929 30,733 698 157,455 140,192 148 28.630 (7.3) (12.3) 39 L u m b e r and W o o d M a n u fa c tu r e s . . 105 T e x t ile s ................... C lo th in g , M illin e ry and L a u n d e r in g . 18 6,284 (2 .8 ) 6,113 23,666 — 0— 23,662 2,460 (4 .5 ) 2,354 54 7,053 (6 .1 ) 6,648 F o o d , B e v e ra g e s and T o b a c c o . . . 152 29,335 (1 4 .9 ) 25,528 W a t e r , L ig h t and P o w e r ................. 4 3,797 ( — 2 .9 ) 3,912 I n d u s t r ie s f 314 83,006 (1 8 .0 ) 70,357 12 1,854 (1 4 .6 ) 1,618 O th e r M is c e lla n e o u s . .. 123 (- - 5 3 . 1 ) 17,951 53 (5 .4 ) 5 11 8* 42 29 262 17,037 2,190 (6 .9 ) 2,049 472 (4 .2 ) 453 4,532 (2 7 .5 ) 3,555 5,465 (3 .6 ) ^ L a u n d e r in g o n ly , t ln c l u d e s th e f o llo w in g in d u s tr ie s : m a c h in e r y and c o n v e y a n c e s ; leath er and r u b b e r ch e m ic a ls , oils and p a in t s ; p r in tin g an d p a p e r g o o d s . 5,274 m eta ls, goods; Figures in parentheses indicate percentage changes from July, 1928. A u g u s t, 1929 crop of 9,230,000 head. Lamb prices during the first four months of 1929 were higher than in 1928. Toward the end of April, prices began to decline and in July the price level was lower than in any July since 1922. Estimates published in August by the United States Department of Agriculture indicate that the 1929 w ool clip in this District amounted to 99.532.000 pounds as compared with a clip of 103.429.000 pounds in 1928. Although more sheep were sheared during 1929 than in 1928, the fleece weight per sheep was lower than a year ago. There has been a sharp decline in w ool prices during 1929, and prices at the mid year were lower than at any time since 1922. Industry The slackening of industrial activity noted during June did not persist beyond that month and, in many industries, output was increased during July. A record production of petroleum in California was the outstanding feature of the month, but building and construction, miscel laneous manufacturing, and fruit canning and packing (which began later than usual this year) contributed to the general picture of sus tained activity. In a number of cases the usual July curtailment of operations in the lumber industry extended over a longer period than the customary shutdown of a week or two on or about the Fourth of July. As a result, produc tion declined more than seasonally, approxi mating that of July, 1928. There was a further reduction of output of the non-ferrous metals during July, but production continued well above the levels of a year ago. Flour milling activity increased substantially during the month although sharp fluctuations in the price of wheat are reported to have caused millers to defer making additional grain purchases. Em ployment conditions improved during July as compared with June, and volume of em ploy ment was larger than a year ago. (B ) Industry— Indexes of daily average production, adjusted for seasonal variations (1923-1925 daily average = 100) -1 9 2 9 1928 July . 120 S la u g h te r o f L i v e s t o c k ...................... . . . 88 M a n u fa c t u r e s : . .. W o o l C o n s u m p t i o n ............................... M in e ra ls : P e tr o le u m ( C a l i f o r n i a ) f .................... C o p p e r (U n it e d S t a t e s ) ! ................. L e a d (U n it e d S ta te s ) $ ...................... S ilv e r (U n it e d S ta te s ) $ ...................... G en era l : C a rlo a d in g s — I n d u s t r i a l ..................... V a lu e o f B u ild in g P e rm its § T w e n t y L a r g e r C itie s ................... S e v e n ty S m a lle r C itie s ................. V a lu e o f E n g in e e r in g C o n tr a c ts A w arded§ T ota l ................................................... E x c lu d in g B u ild in g s ................. 90 . . . 131 . . . 122 June 105 810 11O0 190 96 86 M ay 94 82 105 180 103 July 84 91 106 158 106 66 126 125 112 96 117 139 1250 100 97 97 97 76 120 124 113 68 95 64 96 73 96 78 103 . . . 149 .. 127 121 101 134 146 120 103 . . . . .. ^Preliminary. fN ot adjusted for seasonal variation. $Prepared by Federal Reserve Board. §Indexes are for three months ending on the month indicated. QRevised. A u g u st, 1929 FEDERAL RESERVE AG EN T A T SAN FRANCISCO During the first six months of 1929, oil pro duction in the United States (488 million bar rels) was 52 million barrels larger than in the corresponding period of 1928. Half of this in crease was accounted for by increased produc tion at the Santa Fe Springs field in California. Production of petroleum in California reached new high levels in July, this Bank’s index slightly surpassing the previous high points 61 during July. Shipments of petroleum to the East coast through the Panama Canal decreased as compared with June, 1929, and July, 1928. Value of building permits issued in the larger cities of the District declined less than sea sonally during the quarter ending with July, while smaller cities experienced a slightly more than seasonal decrease. In both classes of cities, building was less active than a year ago. Engi neering construction work, which is always at a high point during the summer months, followed the usual trend this year, but its volume in creased more than seasonally and was greater than a year ago. Output of lumber decreased during July. This was largely the result of a prolonged Fourth of July shut-down at many lumber camps and of the five-day week adopted in some instances when operations were resumed. Rail shipments of lumber decreased less than seasonally during July, and cargo shipments through the Panama Canal were larger than in either June, 1929, or July, 1928. As in May and June, however, total shipments and new orders received were smaller than production which would indicate an accumulation of mill stocks. A further decline in production of non-fer rous metals was reported during July. Output of the District’s copper mines was curtailed, but still was greater than in July of last year. Sales of copper (particularly to foreign con sumers, it is reported) were larger than for the (C ) Bank Debits*— July, P h o e n ix C R U D E O IL - P R O D U C T IO N A N D ST O C K S T h e logarithm ic scale, used in the above chart, show s percentage increases or decreases. recorded in 1923. During the last week of July there was some decline in output, largely be cause of the small number of completions of new wells at Santa Fe Springs. A large number of deep wells are still being drilled in that field. Although production of gasoline at District refineries increased 21 per cent during July as compared with June, stocks of gasoline at the end of the later month were but three per cent larger than on June 30. The chief factor oper ating to keep gasoline stocks at or about the level of earlier months was a substantial in crease in shipments through the Panama Canal to Atlantic and Gulf Coast ports. Consumption of gasoline within the District was 11 per cent smaller in July than in June. Stocks of both heavy and light crude oils continued to increase ..........$ 38,917 July, $ 33,261 t— F irst Seven M o n th s —^ $ 308,167 $ 242,409 C a lifo rn ia B a k e rsfie ld . . . 13,585 12,597 98,850 99,945 21,331 22,972 147,847 152,806 B e r k e le y ......... F r e s n o ............ 34,913 28,493 218,727 228,355 L o n g B e a c h .. 63,988 56,699 451,236 382,735 L o s A n g e le s . . 1,145,712 944,388 8,538,190 7,474,486 O a k la n d .......... 242,506 233,229 1,691,669 1,747,366 P a sa d e n a ____ 37,697 35,69 7 300,871 292,946 S a cra m e n to . . 51,412 50,824 351,174 339,776 S a n B e r n a r d in o 12,321 11,233 80,400 75,674 San D ie g o . . . 64,568 62,403 457,856 448,798 San F r a n c is c o . 1,336,922 1,304,510 9,521,350 10,991,394 San J o s e ____ 31,367 28,938 200,360 193,219 S an ta B a rb a ra 16,449 14,335 119,312 96,949 S tock ton ____ 32,117 30,851 197,995 206,775 Idaho B o is e .............. 15,110 16,190 102,765 100,990 N evada R e n o ................. 15,490 10,313 88,567 65,342 O re g o n E u g e n e ............ 8,935 7,524 P o r tla n d ____ 197,081 ' 185,255 54,278 l,3 2 6 ,2 0 0 f 51,430 1,212,114 U ta h O g d e n .............. S alt L a k e C ity 18,168 85,881 18,191 71,864 124,376 559,025 118,574 511,757 W a s h in g t o n B e llin g h a m . . . E v e re tt ............ R itz v ille ......... S e a ttle ............ S p o k a n e .......... T a c o m a .......... Y a k im a .......... 11,117 14,582 807 284,991 63,961 52,073 12,823 9,962 15,776 987 232,614 56,197 43,999 12,211 73,808 100,172 6,075 1,862,829 421,700 350,845 94,871 70,445 94,347 6,373 1,704,422 392,142 315,980 88,160 T o t a l ............ $3,924,824 $3,551,513 $ 2 7 ,8 4 9 ,5 l5 f $27,705,709 * I n th o u sa n d s o f do lla rs, f ln c l u d e s $7,584,000 at fo u r b a n k s n o t r e p o r t in g p r io r t o w e e k e n d e d M a y 2, 1928. 62 M O N T H L Y REVIEW OF BUSINESS CONDITIONS A u g u s t, 1929 past several months, and many orders speci than in July, 1928. This Bank’s seasonally ad fied early delivery. The price, delivered at justed index of daily average department store Connecticut Valley points, remained at 18 sales stood at 125 (1923-1925 average = 100) cents per pound. Mining of lead and silver was as compared with 122 in June, 1929, and 120 in also less active in July than in June, but more IN D EX N U M B E R S active than in July of last year. The output of flour increased substantially during July, 1929, as compared with June and 1 3 0 PE T A I L was larger than a year ago. Sharp fluctuations 120 k J\.l v \ / iA L E S in the price of wheat during this period have % A /V Y ft affected both foreign and domestic sales of 110 d WH OLESALE /» 1 wheat and flour. Millers have been hesitant SALES a / / V v * A r,; V v \ buyers of wheat, and their stocks of both flour 100 ‘vv/V\yr v'; ' and of milling wheat decreased sharply during 90 July. Trade 1925 Trade in the Twelfth Federal Reserve Dis trict failed to show the usual mid-summer re cession during July, and continued at the high levels of the first six months of the year. Trade at retail, even after allowing for one more trad ing day in July of this year than in July, 1928, was about three per cent larger in value than a year ago. W holesale sales were larger in value than last year. Sales of new automobiles reversed the trend of the past two months and increased substantially, establishing a new high record for the month. Shipments in inter coastal and foreign trade increased as com pared with the previous month and were larger than in the same month last year. Total monthly sales at retail of 141 depart ment, apparel, and furniture stores were seven per cent greater in value during July, 1929, (D) Distribution and Trade~ F o r e ig n T r a d e 0 T o t a l f .................... I m p o r t s f .............. E x p o r t s ................. — 1929------------> 1928 July June May July -Index Numbers*--------138 128 143 130 115 138 89 131 77 86 125 76 88 114 80 118 116 119 118 118 121 100 101 109 94 155 153 176 132 130 147 136 136 141 103 103 102 125 104 122 105 121 103 120 109 In t e r c o a s ta l T r a d e 0 93 140 81 C a rlo a d in g s J T o t a l .......................................................... M e r c h a n d is e an d M is c e lla n e o u s . W h o le s a le T r a d e § S ales .......................................................... R e ta il T r a d e A u t o m o b ile S ales$ C o m m e r c ia l V e h ic le s D e p a r tm e n t S to r e S ales$ ................................ Actual Figures ■ S t o c k Turnover|| C o lle c tio n s # R e g u la r .......... I n s ta llm e n t .. . .23 45.5 15.1 .24 45.5 14.4 .26 47.4 14.8 .21 44.0 15.2 * A d ju s t e d f o r se a s o n a l v a r ia tio n s, 1923-1925 a v e r a g e = 1 0 0 . f E x c lu d in g ra w silk. J D a ily a v e ra g e . § M o n th ly to ta ls o f ten lin es c o m b in e d , ifA t end o f m o n th . (¡P r o p o r tio n o f ave ra g e s t o c k s s o ld d u r in g m o n th . # P e r c e n t o f c o lle c t io n s d u r in g m o n th t o a m o u n t o u t s t a n d in g at first o f m o n th . 0 In d e x e s are fo r th r e e m o n th s e n d in g o n m o n th in d ica te d . 1926 1927 1928 .:rr-“ W 1929 R ETAIL A N D W H O L E S A L E T R A D E -T W E L F T H DISTRICT Indexes adjusted for seasonal variations(1923-1925 average = 100). Daily average figures of department store sales. Monthly figures of sales at wholesale. July, 1928. Increases were reported from all parts of the District except the central valleys of California and the states of Utah and Idaho. Stocks carried by all reporting stores were smaller than a year ago, and the rate of stockturnover increased substantially. RETAIL T R A D E —Twelfth District ,------ -N E T SALES*---------n Jan.l to July 31,1929 July, 1929 compared with compared Jan.1 to with July 31,1928 July,1928 D e p a r tm e n t S t o r e s f - - . A p p a r e l S to r e s ............... F u rn itu r e S to r e s .......... A ll S to r e s ........................ 6.3 4.2 11.6 6.9 ( 68) ( 29 ) ( 44) (1 4 1 ) 2.8 2.8 3.6 2.9 ( 67) ( 29) ( 42) (1 3 8 ) STOCK* July, 1929 compared with July,1928 — 4.8 ( 5 2 ) 0.3 (1 6 ) — 0.6 (2 8 ) — 3.8 (9 6 ) * P e r c e n t a g e in c re a s e o r d e cre a s e ( — ), , F ig u r e s in p a re n th e s e s ind ica te n u m b e r o f s to re s r e p o r tin g . f l n c l u d e s d ry g o o d s stores. Sales at wholesale were substantially larger during July, 1929, than in July, 1928, the in creases extending to all of the lines of trade upon which this Bank receives data excepting dry goods and shoes. W holesalers’ stocks de creased during July but were larger at the end of the month than they were a year ago. Contrary to the usual seasonal movement sales of new automobiles increased substan tially during July as compared with June. Total number of sales for the month was five per cent larger than in March of this year, the previous record month, and 50 per cent greater than in July, 1928. Intercoastal trade, as evidenced by Panama Canal transits, increased substantially during July, 1929, as compared with both June, 1929, and July, 1928, the largest increase being in shipments from the Atlantic to the Pacific Coast. The movement of goods from the Pa cific to the Atlantic Coast also increased as compared with the previous month and the same month a year ago, though by a smaller amount than westbound shipments. Shipments of lumber and of general cargo were responsible A u g u st, 1929 FEDERAL RESERVE AG EN T AT SAN FRANCISCO for the increase in eastbound traffic. Shipments of petroleum were smaller than in June, 1929, or July, 1928. During May foreign trade of the four prin cipal ports in the District increased, reversing the declining trend of the first four months of the year. The increase was due entirely to a larger volume of imports, the volume of exports having decreased slightly. The volume of im ports and exports combined was larger than in May a year ago. Prices Relatively wide variations in the general level of com m odity prices at wholesale have characterized the price movements of the past two months. Prices turned sharply upward in early June and continued to rise through most of July. During the last week of that month and the first part of August, however, price indexes declined as rapidly as they had risen. Prices for commodities in general now average slightly higher than at the beginning of June and approximately the same as in early August of 1928. Both the advance in the price level during June-July and the recent declines are largely attributable to changes in prices of farm products and foods. The price of wheat continued to advance dur ing July, but reacted sharply during the first week in August since when it has moved er ratically, at a slightly higher level than last year. Hide prices advanced during July and have since remained firm at higher levels than in any month since January, 1929. Quotations for wool showed signs of improvement in midJuly when a small rise checked the steady down ward movement which had been in progress since the first of the year. During July cattle and hog prices averaged higher than in June but tended downward during the latter part of the month. Prices of California oranges and lemons averaged lower during July and the first part of August than in June. Prices now being paid to growers for the 1929 prune crop are approxi mately 100 per cent higher than those paid last year. Opening prices, recently announced by packers on future deliveries of the 1929 crop of dried fruit, including apricots, apples, prunes, peaches, and raisins ranged from slightly to substantially above those of a year ago. Farm ers in Idaho, W ashington, and California, which are the chief potato grow ing states in the District, have benefited by the recent rapid rise in potato prices, reflecting the most active de mand for this crop since 1925. Softw ood lumber prices have continued firm during July at slightly lower levels than last year. Douglas fir, however, is reported to have been bringing a premium as compared with 63 other softw ood lumber, and prices for it are higher than in July, 1928. Portland cement prices in Southern California showed an in crease during July, but remained unchanged in other parts of this District. Petroleum and gasoline prices were firm on the Pacific Coast during July although they declined in other parts of the United States. Quotations for copper have shown no change during the past four months. Lead prices moved slightly lower in mid-July, but have since been steady at the new figure. Credit Situation There was a heavy outflow of funds from the Twelfth Federal Reserve District during the latter part of July and the first two weeks of August, which was accompanied by an increase in borrowings at the Reserve Bank and a reduc tion of deposits at member banks. This was largely a delayed seasonal movement, repre senting a return flow to New York of funds transferred into the District by member banks during the last week of June, in anticipation of the Comptroller of the Currency’s usual mid year call for a statement of condition. Ordi narily these funds flow out of the District soon after the Fourth of July holiday demand for currency has passed. This year, however, the issuance of new sized currency on July 10 pro longed the period of active currency demand, and the funds withdrawn from New York in June were retained in the District until late July. W hile funds were flowing out of the Dis trict there was, beginning in late July, a corre sponding inflow of funds from country banks to San Francisco banks to build up bankers’ bal ances, which on July 17 were at the lowest point in years. R E P O R T I N G M E M B E R B A N K S — T w elfth D istrict (In millions of dollars) f---------------- — C o n d it io n ------- -----A u g . 14, 1929 1,940 T o t a l L o a n s and In v e s t m e n t s . . . 1,352 934 C o m m e r c ia l L o a n s ........................... 418 L o a n s o n S e cu ritie s ...................... 588 In v e s tm e n ts ........................................ 781 N e t D e m a n d D e p o s it s ................. 960 T im e D e p o s its .................................. B o r r o w in g s fro m F e d e ra l R e s e r v e 54 July 17, Ju n e l9 , A u g .15, 1929 1929 1928 1,855 1,932 1,984 1,249 1,332 1,353 921 922 888 411 431 361 600 631 606 784 778 781 933 979 984 33 57 69 During the four-week period from July 17 to August 14, total loans and investments of re porting member banks in the District increased from 1,932 million dollars to 1,940 million dol lars. This increase of eight million dollars was the result of increases of 14 million dollars in commercial loans and of six million dollars in security loans, which were partially offset by a reduction of 12 million dollars in the banks’ investment holdings. The reduction in invest ment holdings indicated, in part, an attempt by commercial banks to meet additional demands 64 A u g u s t, 1929 M O N T H L Y REVIEW OF BUSINESS CONDITIONS for credit without further borrowing at the R e serve Bank. Available evidence indicates that the net increase of six million dollars in security loans was the result of a larger increase in loans to brokers and dealers in New York City, and that security loans to brokers and dealers, and to others, within the Twelfth District de clined. Total deposits of reporting member banks declined 32 million dollars during this same four-week period (July 17 to August 14). This decline accompanied the previously mentioned movement of funds to New York City, which also amounted to 32 million dollars. As loans increased and deposits decreased, the ratio of loans to deposits at these banks rose from 74.8 on July 17 to 77.3 on August 14, the latter ratio being the highest in recent months and one which has been exceeded only once during the past five years. Follow ing this rise in the loandeposit ratio, interest rates on commercial paper eligible for rediscount at the Reserve Bank advanced slightly. (In millions of dollars) T o t a l B ills an d S e c u r i t i e s . . . . B ills D i s c o u n t e d ........................... B ills B o u g h t .................................. U n ite d S ta tes S e c u r it ie s ............ T o t a l R e s e r v e s ............................. T o t a l D e p o s i t s ............................... F e d e ra l R e s e r v e N o te s in C ir c u la tio n .................................. R a tio o f T o t a l R e s e r v e s to D e p o s its and F e d e ra l R e s e r v e N o t e L ia b ilit y C o m b i n e d .. A u g. 14, 1929 92 68 10 13 285 182 174 79.9 ------ C o n d ltio n -------■> July 17, June 19, A u g. 15, 1929 1929 1928 92 68 113 47 66 75 9 13 21 12 17 11 309 266 259 184 183 178 175 86.3 161 78.8 R e s e r v e D e p o s its , D e cr e a s e ................................ M o n e y in C ir c u la tio n , D e c r e a s e ...................... L o s s e s th r o u g h G o ld S e ttle m e n t F u n d . . . . G o ld P u rc h a se s b y M in t ..................................... I n c r e a s e in D is c o u n t s at the F e d e ra l R e s e r v e B a n k ........................................................ D em and for D em and for C redit* C redit* .. 2 .. 5 32 . . 4 ----------- * I n m illio n s o f d o lla rs. F E D E R A L R E S E R V E B A N K O F SA N F R A N C IS C O r— discounts and holdings of bills and securities at the middle of August were 24 million dollars greater than on July 17, when, at 68 million dollars, they were lower than at any time in the past several years. The increase in discounts, which amounted to 21 million dollars, was en tirely on behalf of city member banks. There was no increase in country member bank bor rowings. It is probable, however, that an in creasing proportion of country bank borrowing is being attributed to city banks through the widespread influence of branch banking, partic ularly in California. Holdings of United States securities increased one and a half million dol lars during the four-week period, and accept ance holdings increased one million dollars. Factors affecting Reserve credit in the Dis trict Were . Increasin g D ecreasin g 165 74.0 During the four weeks ending August 14, the amount of credit extended by the Federal Re serve Bank of San Francisco increased to the highest point since early in May, 1929. Total . . 21 32 32 Effective August 13 this Bank’s bu}dng rates for bankers’ acceptances were reduced as fol lows . (------------------Rates E ffe c tiv e ------------------- > M aturities 1 -1 2 0 d a y s 1 2 1 -1 8 0 d a y s A u gu st 13, 1929 ...................... 5^ ...................... 5}4 July 16, 1929 5'A 5^4 M a rch 21, 1929 5 ^ -5 ^ 5H A ctivity on the principal stock exchanges of the District increased during July as compared with June. There was a gain of four per cent in number of shares and of 17 per cent in market value of shares traded. These gains, which were general in Pacific Coast markets, were contrary to the usual seasonal experience. M E M B E R B A N K B O R R O W IN G S A N D T R A N S F E R S O F F U N D S B orrow in gs of city m em ber banks from the F ederal R eserve Bank of San F ra n cis co com pared w ith T w e lfth D istrict gains or losses o f funds through the F ed era l R eserv e System ’ s G o ld Settlem ent Fund. (W e e k ly figu res). N ote the increased borrow in g s w hen funds flow out and the decreased borrow in gs w hen funds flow into the D istrict. T h e data have been adjusted to e x clu d e purely inter-reserve bank transactions. MONTHLY REVIEW OF B U S IN E S S C O N D IT IO N S ISAAC B. N EW TO N , Chairman of the Board and Federal Reserve Agent Federal Reserve Bank of San Francisco Supplement San Francisco, California, August 20, 1929 R eserve System C r e d it E m p lo y e d F e d e ra l R eserve Although the Federal Reserve A ct set up a system of semi-independent regional reserve banks, it was not contemplated that this re gional organization would serve to confine credit movements within reserve district bor ders. On the contrary, it was believed that the establishment of the Federal Reserve System would greatly increase the fluidity of credit in the United States. Am ple verification of this belief is found in the ease with which credit now flows from one part of the country to an other. The inter-regional employment of Federal reserve funds has been a part of this general development. Not all of the credit extended by a regional reserve bank is placed solely at the disposal of its own reserve district. Conversely, the individual regional reserve banks do not, at all times, and under all circumstances, provide all of the credit needed by their respective re serve districts. It is interesting and at times necessary, how in Vol. X III th e T w e lft h D is t r ic t ever, to determine the proportions in which a Federal reserve bank is extending credit to its own district and to other Federal reserve dis tricts. Such a segregation is attended with some difficulty, but reasonably accurate results can be obtained. The accompanying chart pre sents the segregated figures for the Federal Reserve Bank of San Francisco during the period January 1, 1927 to August 14, 1929. The top line in the chart shows the total amount of credit extended by this Bank, both to the Twelfth Federal Reserve District and to other Federal reserve districts. The bottom line shows the total amount of credit advanced by the entire reserve system, but chiefly by the Federal Reserve Bank of San Francisco, to the Twelfth District. The difference between the sums indicated by the top and bottom lines is approximately the amount of credit extended by the Federal Reserve Bank of*San Francisco to reserve districts other than the Twelfth District. R E S E R V E SY ST E M C R E D IT T h e total am ount o f R e se rv e System credit em ployed in the T w elfth D istrict, and the am ount o f credit extended by the F ederal R e se rv e Bank o f San F ra n cisco to this and other districts. (W e e k ly figures). No. 8 2 M O N T H L Y REVIEW OF BUSINESS CONDITIONS-----SU PPLEM EN T During- 1927 and the first six months of 1928, this Bank made available to money markets outside this Reserve District a relatively large volume of credit. This was accomplished chiefly through purchases of government securities from holders outside the Tw elfth District. Since the middle of 1928, this Bank’s holdings of government securities have declined. During the last quarter of 1928, and the first two months of 1929, most of the credit extended to other districts was extended through the purchase of acceptances originating in those districts. Since February and March of this year, the Bank’s holdings of both government securities and ac ceptances purchased in other districts have declined and its funds have been used almost entirely for the accommodation of Twelfth D is trict credit needs. The total amount of Federal Reserve System credit furnished to the Twelfth District (shown by the bottom line of the chart) includes the follow ing item s: 1. Bills or notes discounted or rediscounted by the Federal Reserve Bank of San Francisco for Tw elfth District member banks. These are local documents arising in the usual course of banking operations. 2. United States securities purchased and held in the Tw elfth District. This item represents funds supplied to the local market through the purchase of govern ment securities from local member banks and other agencies. 3. Acceptances purchased in the Twelfth D is trict. A t times this item includes acceptances purchased in this District and sold to other reserve banks. The amount of these latter transactions is usually relatively small. 4. M ember bank overdrafts against their re serve accounts. This item, in effect, represents unsecured loans to member banks. 5. Net claims on account of closed or suspended banks. This item represents credit which has been placed at the disposal of now insolvent banks. That part of the credit which cannot be recovered is written off as a reserve for losses. Only the net amount estimated to be recoverable is included as credit actually em ployed in the commerce and industry of the District. A u g u s t, 1929 6. Float in connection with the clearing of checks. Member banks are given credit for de posited checks in accordance with a schedule based on average collection time. If collec tion takes longer than the scheduled time, member banks enjoy the use of funds ad vanced by the Reserve Bank prior to col lection of the checks. If collection is completed in advance of the scheduled time, the Reserve Bank has the use of funds pend ing the time when the member bank is given credit for the collection. Certain additional items, all but one of which cover credit advances made by this Bank to other districts, are included in the top line of the chart (called credit extended by the Federal Reserve Bank of San Francisco). They are: 1. The amount of government securities pur chased from owners in other districts by or for the Federal Reserve Bank of San Fran cisco. Such transactions are handled chiefly through the System Open Market Invest ment Committee* in New York City. 2. Acceptances originating in or held by owners in other districts which are purchased by or for this Bank. Such transactions are handled chiefly through the System Open Market Invest ment Committee* in New York City. 3. Rediscounts for other Federal Reserve Banks. The Federal Reserve A ct gives the Federal Reserve Board the power to permit or to require such transactions. This power has not been used since 1919, 1920, and 1921. 4. Unearned discount on discounted and pur chased bills. This discount is collected in advance and the borrowing bank does not have the use of these funds. T o the extent of this item, which is relatively small, the published fig ures of par value of bills and securities held by this Bank represent more than the actual amount of funds made available to the money markets through the purchase of such bills and securities. *A co m m itte e o f th e g o v e r n o r s o f th e F e d e ra l R e s e r v e B a n k s, a c t in g u n d e r the ge n e ra l s u p e r v is io n o f th e F e d e ra l R e s e r v e B o a rd , an d in a c c o r d w ith the f o llo w in g p r in c ip le laid d o w n b y th e B o a r d : “ T h a t the tim e , m a n n e r, ch a r a c te r , and v o lu m e o f o p e n m a rk e t in v e s tm e n ts p u r c h a s e d o r s o ld b y F e d e ra l re s e rv e ba n k s b e g o v e r n e d w ith p r im a ry r e g a r d to th e a c c o m m o d a t io n o f c o m m e r c e and b u s in e s s an d to the e ffe ct o f s u ch p u r c h a s e s o r sales o n the g e n e r a l c r e d it s itu a t io n .”
@FedFRASER