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MONTHLY REVIEW OF B U S IN E S S C O N D IT IO N S Federal Reserve Agent Federal Reserve Bank of San Francisco Vol. X X San Francisco, California, August 20,1936 No. 8 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 District in July was practically unchanged from the June level after allowance for the usual seasonal influences. Industrial output increased sharply, but the advance took place principally in ex tremely seasonal industries in which activity customarily expands greatly in July. These industries include salmon canning, fruit and vegetable canning, and beet sugar refining. Excluding the fruit and vegetable canning in dustry, industrial employment increased m od erately, although little change has taken place in July of most other recent years. Pay rolls were also somewhat higher on a seasonally adjusted basis. The usual large increases in employment and pay rolls occurred at fruit and vegetable canneries. Value of building permits issued was about the same as in June but contract awards for engineering construction were somewhat higher. In general, seasonally adjusted measures of trade were unchanged. The regulation announced by the Board of Governors of the Federal Reserve System in mid-July increasing by 50 percent the reserves member banks are required to maintain against their deposit liabilities, became effective on August 15. Practically all district member banks had idle funds either in the form of ex cess reserves or large correspondent balances, and readily met the increase without borrowing from the Federal Reserve Bank or liquidating earning assets. A substantial increase in reserve balances of district member banks during the five weeks ended August 19 resulted from United States Treasury disbursements in excess of local col lections and a net inflow of funds from other districts because of commercial and financial transactions. Earning assets of reporting mem ber banks increased slightly during this period, an advance in loans other than on securities and real estate more than offsetting a reduction in investments in direct obligations of the United States Government. Adjusted demand deposits increased to new record levels, but time deposits declined. Agriculture In contrast with severe drought conditions in some other parts of the United States, Twelfth District weather conditions during July and the first three weeks of August were favorable for the maturing of late field and fruit crops and for the harvesting of matured crops. Rains early in July and above normal temperatures later in the month caused only minor damage. Ranges were in good to excel lent condition. Livestock were in better than average condition in all district states except Arizona. Prices of many farm products advanced sharply in July and early August, reflecting decreases in production forecasts because of drought in the Midwest. Since grow ing con ditions in the Twelfth District are average or better, the advancing prices will enlarge farm income in this district this year, and it is ex pected to be considerably larger than in 1935. Official estimates of district farm income dur ing the first six months of 1936 show a 7 percent gain over the same months last year. Higher prices and heavier marketing during the late summer and fall months will undoubtedly re sult in a larger percentage gain over 1935 for the year as a whole. Production estimates for most crops grown in the Pacific Northwest were about the same on August 1 as a month earlier. Abnormally high temperatures in late July and early August caused some fruits to ripen before reaching the most desirable commercial size, but on the whole grow ing conditions were good. Harvest ing and threshing of grains and picking of summer apples, apricots, berries, cherries, pears, green peas, potatoes, and tomatoes for fresh consumption and commercial canning made rapid progress. Indicated output of wheat did not change materially during July. Marketing of the new crop was active at advancing prices ranging up to approximately one dollar per bushel to the grower. Potato production in W ashington, Oregon, and Idaho was estimated at 36,495,000 bushels for the current year, 2 per- 58 MONTHLY REVIEW OF BUSINESS CONDITIONS cent larger than last year’s crop and 5 percent above average 1928-1932 outturn. Harvest ing began in July in the early sections with a considerable number of growers holding for higher prices. Influenced by a 25 percent re duction from last year in total United States production of potatoes, prices have been mate rially higher than those received last season and income of potato growers is expected to be considerably larger than in 1935. Prices of citrus fruits shipped from California advanced during July. By-products plants are receiving only a small amount of fruit in con trast with the 1935 season when a large volume of fruit was processed. Although out-of-state shipments of California Valencia oranges were not as large as the heavy movement in July 1935, they approximated the average July ship ments during recent years. F. O. B. prices were 23 cents per box hig'her than in June, averaging $2.80 per box, at which level they exceeded prices of last July by 37 percent. Influenced by extremely high temperatures, sales of lemons in the East and Midwest were larger than in June and prices wrere higher. Returns to lemon growers continued materially larger than last season, when prices, reflecting a record crop, were low. Harvesting and marketing of California’s many deciduous fruit crops were active during July and early August. A variety of crops matured earlier than usual this season, and apples, apricots, grapes, early peaches for fresh consumption and commercial canning, pears, and plums moved into trade channels in con siderable volume during July. Prices received by growers varied considerably, some fruits selling higher and some lower than in 1935. Peach growers and canners united in a program under the State Department of Agriculture which will limit the pack to No. 1 grade peaches. Prices paid growers are around $30 per ton, or approximately the same as last year. A gricultural M arketing A ctivity— ,--------- July -------- \ 1936 1935 Carlot Shipments 9,484 5,164 Deciduous Fruits. 9,470 10,872 Citrus Fruits . . . . 9,887 11,791 V e g e ta b le s .......... Exports 0 166 Wheat ( b u . ) ........ Barley (bu.) 305,083 532,749 Receipts* 87,939 77,751 Cattle .................. 127,152 Hogs .................... 104,961 473,714 590,173 Sheep .................. 161,620 Eggs (cases) 176,390 6,766,337 7,538,162 Butter (lbs.) . . . . 5,745 3,645 Wheat (carlots) .. Barley (carlots) . . 924 553 utorsgc XxOiQings 1936 (end of month) July June Wheat (bu.) ___ 1,505,000 2,306,000 Beans (bags) 517,000 765,000 Eggs (cases) 634,000 635,000 Butter (lbs.) . . .. 10,130,000 8,480,000 *At principal district markets. (---- Season to Date---- \ 1936 1935 13,222 7,494 69,452 61,701 54,282 59,025 0 305,083 166 532,749 593,637 523,899 993,400 907,407 2,279,824 2,480,050 1,346,909 1,257,713 46,176,623 47,508,259 5,745 3,645 924 553 tO’JC 'S ( July June 1,127,000 950,000 565,000 698,000 672,000 667,000 10,456,000 7,815,000 August 1936 Preliminary estimates indicate a record Cali fornia cotton crop of 419,000 bales from 364,000 acres. Output last year was 239,000 bales and annual outturn from 1928 through 1932 av eraged 200,000 bales. The farm value of the 1935 crop was over 12 million dollars and a marked increase in value of the current crop is anticipated. Although barley prospects declined somewhat as the harvesting season advanced, output is expected to be somewhat larger than the av erage of recent years. Marketings have been heavy, prices have advanced, and by midAugust more than 85 percent of the crop had moved out of grow ers’ hands. Prices averaged considerably above those of last season when marketing was slow because of extremely low prices. The California bean crop was in excel lent condition on August 1, and production was estimated at 3,925,000 bags, approximately the same as last year’s output and 17 percent above the average of recent years. Prices for old-crop beans, influenced by the low estimates of total United States production and advancing food prices, increased moderately from July 1 through mid-August and on the later date were about 25 percent higher than a year earlier. Marketings were much larger than customary during July and by the end of the month storage stocks were reduced to 517,000 bags, an amount 8 percent smaller than stocks on August 1, 1935. The 1936 district w ool clip is estimated at 99.094.000 pounds, compared with a clip of 101.433.000 pounds in 1935. The number of sheep shorn was about the same as in 1935, but there was a slight decline in the average weight per fleece, which accounts for the small decrease in total clip this year. Prices paid growers for w ool have been about 35 percent higher this year than last and gross income is estimated to be about 30 percent larger. A current release of the United States D e partment of Agriculture estimates this year’s lamb crop in the Twelfth District to be 6 per cent larger than in 1935. M ost of the increase occurred in late lambs to be marketed after August 1, which largely explains the fact that marketing of lambs during the first seven months of this year was smaller than in 1935, when the early lamb crop was unusually large. Since mid-March, when early lamb shipments began, prices paid growers have been about 20 percent higher than in the same months last year. Industry Industrial production in the Tw elfth Federal Reserve District, after allowance for customary seasonal influences, was about the same in July as in June. Industrial employment and pay rolls advanced further. Value of building FEDERAL RESERVE AGENT AT SAN FRANCISCO A u g u s t 1936 permits approximated the June total, while engineering contracts increased. Factory employment in California, excluding the fruit and vegetable canning industry, in creased 4 percent in July, a larger increase than in any preceding month this year notwithstand ing the fact that little or no expansion is cus tomary in July. The gain in employment was accompanied by a decline in average working hours and, as a result, the gain in pay rolls was negligible. Ordinarily, however, pay rolls de cline slightly in July. The usual large increase in workers employed at fruit and vegetable can neries took place and moderate gains in em ployment were general among most groups of industries. Aircraft manufacturers reported an increase of 16 percent. Reflecting a sharp ex pansion in activity during the past year the number of workers engaged in aircraft plants in California was more than 200 percent larger than in July 1935. In Oregon, employment and pay rolls were practically unchanged in July. The value of building permits issued in July was approximately the same as in June, a slight decline in 20 large cities being practically offset by an increase in smaller cities and towns. Small reductions occurred in residential and nonresidential classifications, while permits for alterations and repairs were slightly higher. Contracts awarded for engineering construction in the district, excluding buildings, increased from $16,800,000 to $26,700,000. District lumber output declined less than seasonally in July. In the Douglas fir region, production was slightly lower than in June, but the reduction was less than in most other recent years. New orders received by mills in that region also declined and were lower than 59 output for the sixth consecutive month. W hile the volume of new orders was substantially higher than in July 1935, when conditions were disturbed by the strike of mill workers and loggers, it was approximately unchanged from the level reported last fall. A relatively high rate of production has been maintained during recent months largely by reducing unfilled orders, which have declined more than 200 million board feet since the end of January, rather than by adding to mill inventories. The continued excess of production over new busi ness contributed to a decline in prices during June and July. In the western pine area, pro duction was maintained during July at about the June level, although orders declined slightly. Inventories were increased further, as is cus tomary during the summer months but at the end of July were no higher in relation to the volume of new orders than a year earlier. A v erage prices of lumber originating in the pine region have changed little in the past year. Manufacturing activity is subject to more ex treme seasonal influences in the Twelfth Fed eral Reserve District than in many parts of the United States. These fluctuations in total output of district factories result largely from seasonal variations in the supply of raw mate rials for several large food industries, including fruit and vegetable canning, fish canning, and beet sugar refining. The salmon canning in dustry is concentrated principally in Alaska, but supplies, equipment, and workers are ob tained largely from Pacific Coast cities, prin cipally Seattle and San Francisco, and products are marketed through agencies located in those cities. Not only do seasonal changes in these industries contribute to large variations in aggregate industrial output, but they also E m ploym ent— Oregon California--------- \ f----No. of No. of No. ,— Employees— n No. '— Employees— > July July July of July of Firms 1936 1935 1935 Industries Firms 1936 20,963 20,555 All Industries* . . . 1,377 158,118 145,396 105 (+8.7) (+2.0) Stone, Clay, and —■ Glass Products. 69 7,836 ( + 22.1) Lumber and W ood Manufactures .. 112 13,724 ( + 3.4) T e x tile s ................ 16 1,509 (+ 6 .2 ) Clothing, Millinery, and Laundering. 145 9,453 ( + 6.3) Food, Beverages, and Tobacco .. 282 41,986 (— 9.1) Public Utilities .. 50 47,303 ( + 7.5) Other Industries!. 708 70,796 ( + 16.0) Miscellaneous . .. 45 12,814 ( + 56.5) Wholesale and R e ta il................ 422 52,064 ( + 4.5) 6,420 13,277 1,421 8,893 46,178 177 (— 12.4) 11,449 37 ( + 4.6) 8 1,619 (— 2.5) 226 61: ( + 10.8) 2,351 28 (— 19.5) 3 202 10,943 1,661 204 2,922 44,011 61,020 8,187 23 5,141 (+ 1 1 .2 ) 4,623 49,808 *Public utilities, wholesale and retail figures not included in this total, fIncludes the following- industries: Metals, machinery, and conveyances; leather and rubber goods ; oils and paints ; printing and paper goods. JLaundering only. Figures in parentheses indicate percentage change from July 1935. Industry — Indexes of daily average production, adjusted for seasonal variation (1923-1925 daily average=100) ------ 1<>36----- July June General Carloadings— Industrial 76ÎÏ 58 Electric Pwr. Production 18411 178 Manufactures 7iir 66 Refined Mineral O ilsf.. 1491T 153 16517 98 107 107 W ool Consumption!. . . . Slaughter of Livestock. 116 113 Minerals Petroleum ( California) t 8711 88 Lead (United States)!. 69 Silver (United States) %. Building and Construction# Total .............................. 63 54 Building Permits— Value Larger Cities ............ 34 40 Smaller C itie s............ 59 53 Engineering Contracts Awarded— V alue Total ...................... 93 71 Excluding Buildings 137 115 'N ,---------1935- May Apr. July June May 56 178 63 172 56 159 69 153 98 121 94 106 65 147 105 115 91 111 34 50 142 142 106 106 51 49 141r 75r 103 93 87 75 91 87 70 96 85 59 73 40 159 84 55 47 42 154 37 135 117 59 112r 100 75 63 51 52 54 40 40 39 33 53 33 53 23 35 21 30 22 28 65 125 79 144 58 98 63 108 61 116 fN ot adjusted for seasonal variation. ^Prepared by Board of Gov ernors of the Federal Reserve System. #Indexes are for three months ending with the month indicated. ^Preliminary. rRevised. 60 stimulate fluctuations in production of closely related activities such as production of glass containers, wooden boxes, and tin cans. During months of seasonal activity in these industries, substantial gains in physical output and in employment and pay rolls take place, but such gains and subsequent decreases must be dis counted in appraising the trend of industrial conditions. Otherwise marked expansion or re cession in industrial output may be given greater significance than is warranted by changes of an annually recurrent or seasonal character. July is a month in which these distinctly seasonal food industries are in active operation. The pack of California canned apricots, esti mated this year at about 2,750,000 cases com pared with 3,164,000 cases in 1935, was com pleted about the middle of July. The peach pack, which last year exceeded 11,000,000 cases, was started early in the month and peak activity was reached before August 1. In W ashington and Alaska, salmon canning was also at a sea sonal peak. In the Bristol Bay area, where a large proportion of the select quality Alaska red salmon is packed, estimates indicate that approximately 1,400,000 cases were canned dur ing the season which opened on June 25 and closed on July 25. Last year, because of restric tions imposed in the interests of conserving the supply of fish for future years, the pack amounted to less than 250,000 cases. Total Alaskan output of canned salmon this year is estimated at about 7,500,000 cases, compared with 5,133,000 cases last year. Livestock slaughter increased sharply during July to 116 percent o f the 1923-1925 average, and district flour output was higher than in any month in post-war years. Glass container production remained close to the record high level of the two preceding months, and shipments of unassembled wooden boxes, used principally for packaging farm products and foods, were 32 percent higher than in July 1935. Distribution and T ra d e— ,----------- 1936------------x ,-------1935-------- \ July June May Apr. July June May Indexes adjusted for seasonal variation (1923-1925 average=100) 8 7IT 80 77 80 70 62 64 9711 100 95 95 82 82 84 Carloadingst T o t a l .............................. M erchandise.................. Intercoastal Trade T o t a l .............................. 68 79 76 79 47 63 76 Westbound .................. 130 117 110 115 88 89 93 Eastbound .................... 52 66 65 66 37 54 71 Retail Trade Automobile SalesJ Total .......................... 136 142 131 139 105 94 95 P assen ger.................. 129 133 124 131 87 92 87 Commercial .............. 219 228 215 244 198 175 184 Department Store Sales* ......................... 94 94 88 89 83 86 80 Stocks § ...................... 64 64 65 67 62 63 62 Collections# ,------------------ Actual Figures------------------ > R e g u la r ................ 49.3 50.9 49.3 48.8 47.1 48.0 49.0 Installm ent.......... 18.0 18.2 17.3 17.6 18.1 16.9 18.1 $Daily average. §At end of month. #Percent of collections during month to amount outstanding at first of month, flPreliminary. August 193< MONTHLY REVIEW OF BUSINESS CONDITIONS Trade In general, changes in trade and in the distri bution of goods approximated seasonal expecta tions during July. For the district as a whole, the value of de partment store sales declined by the customar} amount in July. An unusually large reductior in sales value was reported by stores in Sali Lake City, and in Los Angeles and other south RETAIL T R AD E —Twelfth District Percentage changes in value of sales and stocks t------------ 1936 compared with 1935-----------,-------- NET SALES-------- x STOCKS Jan. 1 to end July* of July July Department Stores. .. 12.8 ( 84) 10.3 3.2 ( 57 Los A n g e le s.......... 8.4 ( 6) 10.6 2.4 ( 6 Other So. California 5.0 ( 9) 7.8 5.7 ( 7 Oakland .................. 12.3 ( 5) 10.8 4.0 ( 4 San F ra n cisco........ 16.2 ( 8) 10.0 2.0 ( 7 Bay R e g io n ............ 15.7 ( 18) 10.2 2.5 ( 15 Central California .. 15.3 ( 5) 6.1 4.7 ( 5 19.8 ( 9) 16.1 7.7 ( 7 P o r tla n d !................ S eattle...................... 15.6 ( 5) 10.4 1.6 ( 4 Spokane .................. 14.2 ( 6) 9.3 13.1 ( 5 Tacomaf ................ 21.9 ( 8) 12.2 — 0.1 ( 4 7.4 9.2 ( 4 Salt Lake C i t y ___ — 0.3 ( 4) Apparel S t o r e s .......... 20.3 ( 42) 18.1 27.4 ( 28: Furniture S to r e s ........ 29.2 ( 33) 28.2 12.1 ( 21 All Stores .................. 15.7 (159) 13.2 6.5 (106 tIncludes five apparel stores in Portland and six in Tacoma whicl are not included in district department store total. Figures ii parentheses indicate number of stores reporting. *July 1936 had the same number of trading days as July 1935. ern California cities the decline somewhat ex ceeded that for most other recent years. Nearly all other localities, however, reported largei than seasonal gains over the June level. After allowance for seasonal influences th< B ank D ebits* — July Arizona Phoenix ............ $ California Bakersfield........ Berkeley .......... Long Beach . . . . Los Angeles . . . Oakland ............ Pasadena .......... Sacramento . . . . San Bernardino. San Diego ........ San Francisco .. San Jose ............ Santa Barbara .. Santa R o s a ........ S to c k to n ............ Idaho 1936 35,289 July $ 1935 30,586 t— First seven months— 1936 1935 $ 248,901 $ 211,84, 15,292 19,320 24,706 36,425 884,285 98,032 24,174 101,521 10,365 50,650 858,995 24,459 11,833 5,606 20,731 11,142 16,764 20,243 32,128 699,389 71,246 22,463 108,464 7,238 45,386 859,085 19,864 10,332 4,131 16,203 95,481 127,747 163,212 235,321 5,768,774 618,532 173,284 679,719 61,949 324,927 6,085,005 147,989 80,415 30,624 125,660 76,751 104,25! 136,83 201,831 4,525,65; 468,Oli 145,95: 673,581 51,84i 282,25( 5,357,14! 123,56! 66,96! 25,32; 105,66! 17,024 16,040 108,680 98,64' 11,461 9,430 65,362 56,55¿ 6,858 164,116 16,093 5,237 143,837 13,448 40,918 1,077,445 93,106 31,78< 925,92; 78,781 14,882 62,899 13,388 53,629 95,035 418,503 84,86( 359,91Í 6,123 7,494 196,477 45,817 33,275 6,339 12,396 4,842 4,626 151,782 37,531 22,949 5,385 10,363 39,972 49,120 1,278,708 286,083 218,322 34,198 79,189 32,71( 36,58; 1,031,25* 241,29Í 164,09( 30,3673,295 Nevada Oregon Portland ............ Utah Salt Lake C ity.. Washington Bellingham ........ Spokane ............ Walla Walla . . . Total .......... $2,822,937 *In thousands of dollars. $2,467,151 $18,852,181 $15,803,54* August 1936 61 FEDERAL RESERVE AGENT AT SAN FRANCISCO value of sales of a representative group of Twelfth District retail furniture stores in July was higher than in any month since April 1930. Expansion in value of sales during the past three years has reflected mainly increases in the quantity of furniture and household goods sold, although average prices have also advanced somewhat. Sales of district furniture stores declined precipitously during the depres sion, value falling to 39 percent of the 1929 av erage in January 1933. The shrinkage repre sented largely a shift to purchases of less expensive grades of furniture and reductions in prices of identical grades of furniture, al though there was also a considerable reduction in the quantity of furniture sold. Value of furniture sales expanded in April, May, and June and particularly in July of 1933, imme diately prior to the effective date of the Cali fornia retail sales tax. M onthly average sales during that year were, nevertheless, lower in value than in any year since 1923, when comparable data were first collected. A m od erate improvement occurred in 1934, gains in the first three months being well maintained throughout the remainder of the year on a practically unchanged from the June figure, and for the first seven months of the year were 27 percent higher than in 1935 and 54 percent above the January-July total reported in 1929. W HOLESALE T R A D E —Twelfth District Percentage changes in value of sales Agricultural Implements .. Automobile Supplies . . . . Drugs .................................. Dry Goods ........................ Electrical Supplies .......... F urniture............................ Groceries .......................... . H ard w are.......................... Shoes .................................. Paper and Stationery All Lines ............................ July 1936 t----- compared with----- \ June 1936 July 1935 29.3 — 7.1 17.7 3.0 5.4 17.0 13.6 20.6 39.8 3.3 4.7 1.4 18.4 13.2 3.1 29.6 18.1 — 1.5 14.9 9.5 6.7 22.6 Cumulative 1936 compared with 1935 35.8 13.4 10.1 7.2 35.9 5.8 9.4 22.8 11.6 12.5 15.8 District freight carloadings increased m od erately in July, whereas some decline is cus tomary. The contra-seasonal change occurred entirely in the Pacific Northwest, in which section shipments of lumber and forest products and merchandise and miscellaneous com m odi ties increased substantially. Intercoastal shipments through the Panama Canal declined considerably in July, the result entirely of a sharp reduction in eastbound car goes. W estbound shipments were 9 percent above the June level and were higher than in any month in more than six years. W hile west bound traffic was only 16 percent lower than in July 1929, eastbound shipments were 35 per cent lower. Reduction in the latter was the result of a decline of more than 50 percent in lumber and petroleum cargoes. Volum e of other eastbound traffic, consisting almost en tirely of agricultural and food products, totaled slightly more in July 1936 than in July 1929. Prices RETAIL FURNITURE STORE SALES-Twelfth District Indexes of value of sales. (1929 daily average=100.) By months, January 1929 to July 1936 seasonally adjusted basis. During 1935, when material expansion from depression lows first appeared in new residential building, the value of sales reported by district furniture stores increased sharply and in June reached a point only moderately below that reported in July 1933. Follow ing a brief curtailment in sales in August and September 1935, expansion was re sumed and, as is shown in the accompanying chart, has continued practically without inter ruption up to the present time. New automobile registrations declined dur ing July by an amount somewhat larger than in most other recent years, but continued only moderately below the highest levels recorded in 1929. For the first seven months of 1936 reg istrations of new automobiles were 37 percent higher than in the comparable period last year. Sales of commercial vehicles in July remained W holesale com m odity prices as measured by the index prepared by the United States Bureau of Labor Statistics increased moderately be tween May and mid-August. Advances, while general over all groups of commodities, ocW HOLESALE PRICES, BY GROUPS OF COM MODITIES Index of Bureau of Labor Statistics (1926=100) All Other AH Com Farm Com Month or Week modities Products Foods modities 1929 August . . 107.6 102.9 91.7 1933 August . . 49.1 61.8 70.1 1935 August .. . . 80.5 79.3 84.9 77.9 1936— 78.9 . . 79.7 76.7 80.2 75.2 78.0 78.8 J u n e ............ . . 79.2 78.1 79.9 78.8 Week ending,July 4. . . 79.5 80.2 78.9 80.8 Week ending (July 11. .. 80.3 82.5 81.8 79.2 Week ending ’July 18. .. 80.1 80.8 81.3 79.4 Week ending July 25. .. 80.2 81.4 81.0 79.5 Week ending Aug. 1. .. 80.3 81.5 81.0 79.4 Week ending Aug. 8. . . 81.1 83.2 82.9 79.6 82.6 Week ending Aug. 15. .. 81.1 83.6 79.6 curred principally in prices of farm products and foods. The index of farm products increased 10 percent between May 16 and August 15 and the wholesale food price index increased 7 62 August 1936 MONTHLY REVIEW OF BUSINESS CONDITIONS percent. Even with the sharp advances which have occurred since the low point reached in early 1933 the farm products index is still 21 percent lower than in August 1929, and the food index is 20 percent lower. The price index of commodities other than farm products and foods, which fluctuated narrowly with little net change during 1934 and 1935, also tended up ward from M ay to August this year, and in m id-August was higher than at any time since December 1930. Accom panying the increase in wholesale quo tations, retail food prices in principal district cities increased sharply between mid-May and the end of July. The Credit Situation Member banks in the Tw elfth Federal R e serve District generally were in a position to meet the increase in reserve requirements effec tive August 15, which aggregated approxi mately $110,000,000, without disposing of earn ing assets or borrow ing from the Reserve Bank. In mid-July, when the Board of Governors of the Federal Reserve System announced, effec tive August 16, a 50 percent increase in the reserves which member banks are required to carry against their deposit liabilities, a majority of Tw elfth District member banks had excess reserves sufficient to meet the increase. O f the banks which then did not have reserve balances at least 50 percent larger than the old require ments, almost all had balances with corre spondents in excess of operating needs. As a result, between July 15 and August 15, particu larly after August 1, balances reported by dis trict city banks as due from other banks (located principally in the East) were reduced sharply, and substantial amounts of those funds were deposited in the Federal Reserve Bank of San Francisco. Twelfth District country banks also drew upon their balances deposited with city correspondents, which for the most part are in the Twelfth District, and placed the funds in the Federal Reserve Bank of San Francisco. Because of the large amount of excess reserves and correspondent balances, district banks in creased their borrowings from the Federal R e serve Bank of San Francisco only slightly from a daily average of $33,000 during July to $100,000 on August 15. Reflecting in part the return of correspondent balances from eastern cities and an inflow of the proceeds from sales by district banks of a small amount of Government obligations, inter district transfers for the accounts of banks and their customers resulted in a net inflow of $7,600,000 during the five weeks ending August 19. These transactions have usually resulted in a net outflow during recent years. United States Treasury disbursements during the same period, augmented by further pay ments of $20,000,000 to veterans cashing their adjusted service bonds, exceeded local collec tions by $71,400,000. These two factors tended to increase district banking reserves. A sub stantial increase in nonmember deposits at the Federal Reserve Bank of San Francisco in the week ending July 22 absorbed some portion C O N D IT IO N OF F ED ER AL RESERVE BANK OF SAN FR A N C ISCO SOURCES A N D USES OF B AN K IN G RESERVES Twelfth District Changes in millions of dollars during the weeks indicated (Amounts inmillions of dollars) Aug. 19 SOURCES OF FUNDS Week Ending 1936— June June July July July July July Aug. Aug. Aug. 17 ... 24. . . . . 1. . . . . 8 ... . . 1 5 ... . . 22. . , . . 2 9 ... 5 .. . . . 1 2 ... 19.. . Reserve Bank Credit — 3.3 + 1 .3 — 1.5 + .2 — .4 — 1.4 + 3 .1 — .5 — .4 Commercial Operations Treasury Operations + 12.0 — 16.9 — 9.0 — 19.9 — 14.5 + .3 + 3.6 — 14.6 + 13.1 + 5.2 — 41.3 + 67.6 + 27.7 + 27.3 + 20.6 + 18.9 + 11.5 + 12.1 + 14.9 + 14.0 Total Supply -25.8 K47.4 -20.0 - 5.9 - 6.3 -18.8 -13.7 h -6 -27.5 -18.8 Total Bills and Securities. . . Bills D iscou n ted ............ Bills B ou g h t.................... United States Securities. Total R eserves.................... Total D e p osits.................... Reserve Note Circulation. . . Ratio— Reserves to Deposit and Note Liabilities........ . July 15 Aug. 21 1936 214 1936 214 1935 201 212 592 473 319 212 539 418 319 199 365 308 240 Aug. 12 1936 214 212 610 487 320 75.6% 74.8% 73.2% 66.7% CONDITION OF REPORTING MEMBER BANKS Twelfth District (Amounts inmillions of dollars) Aug. 19 Aug. 12July 15 Aug. 21 1936 1936 1936 1935 USES OF FUNDS Week Ending 1936—June June July July July July July Aug-. Aug. Aug. 17........ 24........ 1. . 8 .. 15.. 22. . 2 9 .. 5 .. 12. . 19 .. Demand for Currency + 11.6 +12.3 5.6 + 1.9 — 8.3 — 3.4 — 4.2 + 6.6 — + .4 1.9 *Change less than $50,000. Member Bank Reserve Deposits — 36.2 + 35.1 + 15.1 + 3.4 + 14.9 + 6.4 + 17.7 — 4.2 + 30.4 + 17.4 Other F.R.B. Accounts — 1.2 — + .7 .6 — .3 + 15.8 + .2 — 1.8 — 2.5 — .5 Total Demand — 25.8 + 47.4 --20.0 - 5.9 + 6.3 -1 8 .8 -1 3 .7 + .6 + 27.5 + 18.8 Loans and Investments— T ota l.. 2,156 2,151 2,149 1,967 Loans to Brokers and Dealers.. 14 15 16 10 Loans on Securities to Others (except Banks) ........................ 168 168 168 162 Acceptances and Com’l P a p er... 24 21 21 19 Loans on Real Estate.................. 368 367 367 359 Loans to B an k s............................ 1 1 1 1 Other L o a n s .................................. 362 368 353 334 U . S. Gov. Direct Obligations. .. 690 688 709 617 Obligations Guaranteed by U . S. 171 165 158 112 Other S ecu rities.......................... 358 358 356 353 Reserve with F. R. Bank............ 282 276 250 179 Due from Domestic Banks.......... 247 253 281 207 Demand Deposits— Adjusted . . . 848 838 837 747 Time D e p o sits.............................. 1,022 1,022 1,028 963 U . S. Gov. D e p osits.................... 114 116 117 50 Deposits of Other B a n k s............ 306 306 308 257 B orrow in g s............ .................................................................................. August 1936 FEDERAL RESERVE AGENT AT SAN FRANCISCO of these funds, but member bank reserve balances advanced $67,700,000 during the fiveweek period. Reserves of district banks on August 19 totaled $445,000,000. This amount was about 25 percent in excess of requirements under the new reserve regulations. Total earning assets of reporting member banks increased slightly in the five weeks end ing August 19, a substantial advance in loans more than offsetting a moderate reduction in investments. Loans on securities and on real estate were unchanged, but all other loans in creased considerably. Reports recently made available on the condition of all district member banks indicate that “ all other” loans (largely for commercial purposes) increased from $595,000,000 on December 31, 1935 to $626,000,000 on June 30, 1936. During that period, similar loans of reporting member city banks fluctuated with little net change, indi cating that the increase took place principally among country banks. The same reports show that real estate loans of country banks increased slightly during the six months December 31 to June 30, a small decline in loans on farm prop erty being more than offset by an advance in loans on all other real estate, including loans for new residential construction. A small decline from mid-July to mid-August in the amount of securities held by reporting member banks occurred entirely in investments in direct obligations of the United States Gov 63 ernment. As shown in the June issue of this Review, it is not unusual for district city banks to reduce their holdings of Government securi ties follow ing each major Treasury financing date, the most recent of which was June 15. Adjusted demand deposits of reporting mem ber banks increased in the five weeks ending August 19 to a level substantially higher than at any previous time. Time deposits, however, declined moderately. Turnover of demand de posits was at a somewhat slower rate, while turnover of time deposits increased slightly as is usual in July. Securities Markets Share trading on Pacific Coast stock ex changes increased sharply during the latter part of July and was greater than at any time since March. Daily turnover declined, however, dur ing the first three weeks of August. Stock price averages were fractionally higher on August 20 than on July 20 but were still slightly lower than the peak for the recovery movement reached in February and March. Food stocks continued the strong upward trend which began early in July. Prices of Pacific Coast corporate bonds re mained unchanged at the highest levels on record, while municipal bonds advanced. Offer ings of new securities were negligible but the few small corporate issues which were marketed were for the purpose of providing new capital. 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 Board of Governors of the Federal Reserve System Production, employment, and trade increased further in July, when allowance is made for the usual seasonal changes, and commodity prices continued to advance. M oney rates re mained at extremely low levels. Production and Employment. Industrial pro duction, which usually declines considerably in July, was maintained at the level of the pre ceding three months, and the Board’s seasonally adjusted index advanced to 108 percent of the 1923-1925 average as compared with 103 per cent in June. Output of steel continued at about the June rate, although a sharp decrease is usual, and automobile production declined by less than the usual amount. In the first three weeks of August there was little change in activity at steel mills, while at automobile factories output was curtailed as preparations were made for the production of 1937 models. Output of nondurable products was larger in July than in June, reflecting chiefly a sharp rise in activity at cotton mills and greater than seasonal increases in production at shoe fac tories, silk mills, and flour mills. A t coal mines output increased and crude petroleum contin ued to be produced in large volume. Factory employment increased further in July, contrary to seasonal tendency. The num ber of workers was larger than in June at steel mills, foundry and machine shops, and furniture factories, while at railroad repair shops there was a decline. A m ong the nondurable goods industries employment increased at textile mills and meatpacking plants, and declined less than seasonally at establishments producing wearing apparel. Factory pay rolls decreased by a smaller amount than is usual in July. The value of construction contracts awarded increased considerably from June to July, ac cording to the F. W . Dodge Corporation, with large increases reported for both publiclyfinanced and privately-financed work. Agriculture. Crop prospects declined during July as a result of continued drought, on the basis of August 1 conditions. The corn crop was estimated by the Department of Agriculture at 1,439,000,000 bushels, a reduction of 37 per cent from last season, and estimates for spring 64 MONTHLY REVIEW OF BUSINESS CONDITIONS wheat, oats, hay, and potatoes were also con siderably under the harvests of a year ago. The cotton crop was forecast at 12,481,000 bales as compared with 10,638,000 bales last year and an average of 14,667,000 bales during the five years 1928-1932. Distribution. Retail trade was sustained in July at a higher level than is usual in that month. The Board’s adjusted index of depart ment store sales, which allows for a consider able seasonal decline, increased from 88 percent of the 1923-1925 average in June to 91 percent ments of member banks, which went into effect August 15. This decrease was offset in part by a growth of $360,000,000 in total reserve balances, reflecting principally large disburse ments by the Treasury from its funds held on deposit with Federal reserve banks. After the increase in reserve requirements there re mained a large amount of excess reserves widely distributed among member banks. The money market was not affected by the action, and interest rates remained at extremely low levels. In the week ending August 19 a few scattered F A CTO R Y EM PLOYM ENT IN DU STRIAL PRODUCTION Index of physical volume of production, adjusted for seasonal variation, 1923-1925 average=100. By months, January 1929 to July 1936. in July and mail order variety store sales also showed smaller decreases than are usual for the season. Freight carloadings increased in July. Com m odity Prices. W holesale commodity prices continued to advance between the middle of July and the middle of August. Prices of August 1936 Index of number employed, adjusted for seasonal variation, 1923-1925 average=100. By months, January 1929 to July 1936. banks borrowed at the reserve banks, but the total amount borrowed was negligible and some banks drew upon their balances with other banks in order to meet the increase in require ments. Deposits of domestic banks with report ing member banks in leading cities declined by $210,000,000 in the week. Between July 15 and BILLIONS OF DOLLARS DEPARTM EN T STORE SALES MEMBER BANK REQUIRED A N D EXCESS RESERVES Indexes of value of sales, 1923-1925 average=100. By months, January 1929 to July 1936. Wednesday figures of total member bank reserve balances at Federal Reserve banks, with estimates of required and excess reserves, January 6,1932 to August 19,1936. wheat, flour, feed grains, and dairy products rose considerably, owing primarily to the drought, and livestock prices also advanced while cotton declined. There was a considerable increase in the price of steel scrap. Bank Credit. Excess reserves of member banks decreased from $2,920,000,000 on July 15 to $1,810,000,000 on August 19. About $1,470,000,000 of excess reserves were absorbed by the increase of 50 percent in reserve require- August 19 loans and investments of reporting member banks in leading cities declined by $260,000,000, reflecting reductions of $130,000,000 in loans on securities and of $160,000,000 in holdings of United States Government direct obligations, partly offset by an increase of $60,000,000 in other loans to customers. A d justed demand deposits, which increased to a new high level on July 22, were slightly smaller on August 19.
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