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MONTHLY REVIEW T WE L FT H FED E RAL RESERVE DIST RI CT Fe d e r a l FEBRUARY 1 9 5 4 reserve Ba n k of S a n Fr a n c i s c o ECONOMIC READJUSTMENT activity in both the Twelfth District and the United States reached an all-time high in 1953. Nearly all the expansion occurred in the first half of the year. The economy hesitated in early summer and then declined, both in this District and in the nation. Nation ally, total spending on goods and services for the year as a whole exceeded that in 1952 by 5 percent. Consumer spending, government outlays, and private investment averaged higher in 1953 than in 1952. Industrial produc tion also increased for the year as a whole, and consumer and industrial prices were relatively stable throughout 1953. The annual totals, however, conceal the rapid up surge in the first half of the year and the subsequent re treat of most measures from their highs. Annual figures also fail to reveal some significant aspects of consumer spending. In the first half of the year consumers increased their total spending at a slightly faster rate than the in crease of their income, but a substantial part of the in crease— 40 percent— was for services. The increase in spending on goods was not sufficient to absorb the rapid rise in output. The decline after midyear, though small, was distinct and steady. To a degree the Twelfth District adjustment appeared somewhat later and proceeded more slowly. The slide in activity stemmed from a drop in the rate of business spending on inventories, lower Federal outlays, and reduced spending on goods by consumers. B u s in e s s Inventory adjustment not offset by other factors Efforts of business organizations to avoid further growth of inventories, or to reduce them, appeared to be the immediate cause for a major part of the decline in economic activity. There are, however, substantial differ ences between this “ inventory adjustment’’ and the in ventory adjustment of 1948-49. During the earlier period Federal spending rose, residential building expanded after early 1949, and the automobile industry was still in a sellers’ market. In 1953 Federal spending turned down after midyear. Residential construction added no expansionary offset and the number of units started ran below 1952 after June. Automobiles, although produced and sold in near record quantities, contributed to the in ventory difficulties. Federal spending began to decline Federal expenditures for goods and services continued the expansion of the past several years during the first half of 1953, but at a somewhat retarded rate. There was some actual decline late in the year, however. For the year as a whole the increase over 1952 amounted to $5.5 billion, compared with increases of $13 billion in 1952 and $19 billion in 1951. In relative terms, Federal ex penditures for goods and services were 86 percent higher in 1951 than the year before, which stands in sharp con trast to the gain of only 10 percent in 1953. The restricted growth of such expenditures in 1953 and their actual de cline toward the end of the year diminished the role of the Federal Government in contributing to an increase in the demand for goods and services. Expenditure figures alone do not portray the full role played by the Federal Government in the economy since mid-1950. After the outbreak of hostilities in Korea em ployment and output rose sharply. To some extent the rise anticipated the effects of increased Government de mand. As contracts were allotted by Federal agencies further stimulus appeared as industry tooled its plants and increased its raw material stocks to meet military re quirements. The expansion during these periods added a sharp stimulus to economic activity and tended to re inforce favorable expectations in the private sector. By mid-1952 the defense program showed signs of entering a new phase. A large part of the build-up in defense facili- A n n u a l R eview , 1953 Twelfth District Industrial Expansion Slows D o w n ............................ . 19 Retail Sales Reach a Record High ........................ During 1953 . 30 Foreign Trade: A Long Beat to the W i n d w a r d ............................ . 32 Banking and Credit in a Year of Changing Monetary Policy . . . . 35 Production Up, Income Down in District A g r i c u l t u r e ................ . 39 18 FEDERAL RESERVE BAN K OF SAN FRANCISCO ties and inventories had been completed or was well underway. In early 1953 as a result of continuous reap praisal of the Federal budget and the defense program further restraints on Federal expenditures were intro duced. Some economies were effected and some outlays were cut after the Korean truce, although total expendi tures continued to expand in early 1953. Activity at Fed eral military establishments began to decline and some civilian functions were eliminated or consolidated. In this District the decline in Federal employment during 1953 had a marked impact in several states but contract revi sions were much less important than in the country as a whole. The net effect of these changes was a significantly dif ferent economic environment in 1953 than in earlier years. The impact from Federal Government demand for goods and services changed from one of expansion to one of at least mild contraction. Production in defense industries tended to decline and Federal pay rolls were reduced. Furthermore, Federal contract awards for construction and authorizations for public housing also dropped in volume. Even though the change in expenditures was small, the roll of the Federal Government had changed sufficiently so that the private sector could no longer look to Government demand for an expansionary stimulus. Consumer spending did not take up slack Some evidence of an easing in expansionary forces ap peared in early 1953 when average hours worked per factory employee began to decline from the peak reached after the steel strike. The economy continued to move ahead, however, on the momentum gathered in late 1952. Construction activity, retail sales, transportation and utility sales, state and local government spending, and production in the first half of the year continued to grow or were maintained at a high level. These factors along with a continued growth in Federal expenditures and a sharp rise in inventories during the second quarter raised total economic activity to an all-time high in the first half. The further rise in stocks of goods during the second quarter proved to be the problem which attracted the most attention in business quarters. A large part of the inventory accumulation (70 percent in the second quar ter) occurred at the manufacturing level and mostly in producers’ stocks of durable goods. The principal indus tries affected included primary metals, electrical equip ment, and automobiles. Some of the accumulation in cluded products suitable for the defense program, but a considerable volume of consumer durable goods was also involved. Automobiles and many household durables piled up not only at the manufacturers’ level but at the retail level as well. Much of the accumulation was un intended and stemmed from an over-estimate of demand. The failure of consumers to expand spending more rapidly than they did was one factor in the inventory build-up. At the same time a substantial part of the in crease in consumer expenditures which did take place February 1954 during the first half of the year was for services and there fore did not contribute directly to the demand for com modities. In addition, the economic environment, though still favorable in the first half, contained some threats to stability in the form of shorter hours, announced layoffs by the Federal Government, contract cancellations, and prospective cuts in Federal spending. Such factors as these, together with the restraining influence of a record volume of durable goods in consumer hands, were not conducive to a rapid expansion in spending. In the third quarter consumer expenditures for goods fell by almost $1 billion even though disposable income increased. In contrast, in the fourth quarter disposable income declined slightly ($0.5 billion). A drop of more than $2 billion in purchases of goods more than offset an increase of over $1 billion in outlays for services so that total consumer spending fell $1 billion. Economy showed some strength despite change in setting Even in such an unfavorable setting as this the econ omy demonstrated a fair degree of strength. New con struction declined only moderately from its peak in the first quarter; corporate profits in the third quarter were at a seasonally adjusted annual rate above the total of $39 billion for all of 1952; and total personal income held up much better than employment. Moreover, business men seemed to maintain a reasonably optimistic outlook as indicated by the fact that their planned expenditures for plant and equipment in 1954 are only slightly lower than expenditures in 1953. Yet the imprint of a basic change in the setting of the economy could not be missed. Expansionary forces wrere conspicuous by their absence and the sectors of the econ omy demonstrating the most favorable behavior rarely had more than a minor increase. The problem at year end: How to stabilize? Although the decline in the latter part of 1953 centered primarily in the industrial sector of the economy and pro gressed slowly, considerable concern existed in some quarters that it might become cumulative and severe. One of the fundamental forces behind the decline— the reversal of the upward course of Federal expenditures— was widely recognized,. Whether the economy would find ways and means of offsetting the adverse effects of this reversal without serious unemployment of manpower and other resources was recognized as the crucial ques tion. The drop in Federal expenditures was accompanied by serious efforts to adjust inventories in line with changing conditions. Sharply decreasing rates of inven tory accumulation or actually declining inventories, to gether with small increases in unemployment, induced some fears of a possible cumulative fall in consumer spending which would create still further need of inven tory reduction. It was felt that this chain of events might restrict profits and thus retard private investment in plant and equipment. February 1954 M O N TH LY REVIEW Formidable disagreement with these views, which seemed to embrace the thought that the United States economy could not prosper without defense spending, was voiced. Those expressing disagreement, while not seeking to minimize the problem of readjustment in prospect, asserted that the readjustment need not be severe if proper measures were taken to facilitate the expansion of business activity in the private sector to offset the decline in Government activity. Some reduction in Federal taxes was regarded as one of the principal methods for stimulating private business activity. Much of the discussion therefore came to center on how much of an added tax cut there should be, when it should go into effect, and how it should be distributed between corporations, individuals, and among different personal income groups. The issue involved more than reducing tax revenues by the same amount as Govern ment expenditures. Many participants felt that the pri vate sector might not choose to spend a large enough por tion of the tax remission to make any great difference in business activity unless the reductions in taxes were given directly to those sectors which would spend rapidly. As the events of early 1954 unfolded the impact point of tax cuts became the focus of much attention. Timing and size of possible tax cuts as well as the possibility that the economy would stabilize at a desirable level without further immediate tax reductions continued under active discussion. Other considerations were also introduced to support the view that the prospective readjustment in the econ 19 omy need not be too severe. Although Federal expendi tures are scheduled to decline in 1954, the level of Gov ernment demand will still require a large volume of out put. Moreover, present indications suggest that private investment, other than in inventories, is scheduled in a near record amount for 1954. According to this view the employment and income that these two forces will gen erate, even if consumer spending in relation to disposable personal income continues at present levels, do not justify the pessimism implied by those who predict cumulative decline. Some people would also cite in support of this general view the fact that 1953 had neither seen the de velopment of highly speculative positions in any sector of the economy nor the overextension of bank credit such as have often precipitated and accentuated recessions in the past. No matter which side of the question we may prefer, the crux of the problem is one of stabilizing the economy while shifting more of the initiative to the private sector. In 1954 the environment in which this adjustment must be made is quite different from that existing at the end of World W ar II. The backlogs of consumer and business demand that offset the 1945-46 decline in Federal spend ing no longer exist. Yet there is still visible a sufficient demand for goods and services so that there is a good possibility of minimizing stresses in making the transi tion. Even though the private sector will play an increas ingly important role, Government policy adapted to com pensate for the decline in Federal spending wTill be an im portant factor in determining the degree of adjustment that the economy must make. TWELFTH DISTRICT INDUSTRIAL EXPANSION SLOWS DO W N ndustry and trade in the Twelfth District established I many new production and sales records in 1953. Nev ertheless, there was a marked slowdown in District eco nomic activity during the year. From 1950 to 1951, Dis trict nonagricultural employment had grown by 7.4 per cent; from 1951 to 1952, by 6.4 percent; from 1952 to 1953, by only 3.2 percent. Furthermore, the seasonally ad justed index of nonagricultural employment fell 3 percent from September, the peak month of 1953, to December. Two factors in the slowdown stand out in the reviews of District industries. One is the approach to the peak level of post-Korean defense needs, and the other is the general economic adjustment which spread over much of the economy toward the end of the year. The two factors cannot be separated completely, but in most industries which participated in the slowdown— and there were a few, such as food processing and paper and pulp, which showed no signs of weakness— one or the other factor pre dominates. The approach to the maximum level of defense needs was clearly the cause of the decreasing rate of ex pansion of aircraft production during the year. The same force was at work in the ordnance, instruments, and elec trical' machinery industries, all of which had been among the fastest growing in the District. The steel and alumi num industries, on the other hand, were still in the most rapid phase of their post-Korean growth of capacity in 1953. The weakness in the steel market during the last quarter was part of the general economic adjustment. It was this adjustment, also, which was important in the mo tor vehicle and furniture industries and in the decline in retail sales. The construction decline was another impor tant part of the over-all adjustment, but it was heavily affected by the special circumstance of tight credit condi tions in the residential mortgage market. Conditions in the construction industry, in turn, were the principal cause of the fall in lumber production and prices. In general, the economic behavior of the Twelfth Dis trict in 1953 paralleled more closely that of the nation as a whole than it has for several years past. The postKorean industrial expansion had stimulated the District more than the rest of the nation; its slowdown narrowed the margin by which District economic growth exceeded national economic growth. The economic adjustment of the last half of the year affected in approximately the same degree both the District and the nation. Employment sta tistics provide evidence of the parallelism. From 1952 to 1953, United States nonagricultural employment grew by 2.4 percent, compared with the District’s 3.2 percent. The 20 February 1954 FEDERAL RESERVE B A N K OF SA N FRANCISCO I ndexes of I ndustrial P roduction— T welfth D istrict (1947-49-100) Industrial Production 1939 1946 1947 1948 Copper ......................... 80 71 106 101 Lead ............................. 93 70 94 105 Zinc ............................... 47 81 98 100 Silver............... . ........... 167 64 100 105 Gold............................... 234 71 101 100 Iron ore ....................... 9 49 100 102 Steel ingots ................. 24 60 95 107 Aluminum............................. 51 90 102 Petroleum..................... 67 94 100 101 Refined oils................... 63 91 98 100 Natural gas................... 63 88 101 103 Cement ......................... 56 81 96 104 Lumber ....................... 72 85 97 104 Wood pulp................... 67 82 96 103 Paper............................. 65 88 96 102 Douglas fir plywood___ 53 78 91 104 Wooden boxes..................... 124 115 98 Canned fruits............... 74 125 101 99 Canned vegetables........ 43 123 109 92 Meat ............................. 63 101 102 94 Sugar ........................... 97 90 119 89 Flour............................. 91 108 113 98 Butter........................... 178 69 105 92 Cheese........................... 71 99 103 98 Icecream..................... 46 131 113 96 Canned fish ................. 87 83 93 98 1949 93 101 102 95 99 97 98 108 99 103 97 100 99 101 102 105 87 100 99 103 93 88 103 99 91 109 1950 113 109 101 122 117 119 126 119 98 103 100 112 112 120 109 142 94 96 110 103 105 86 99 104 94 122 1951 115 93 95 114 99 178 147 126 106 112 98 128 113 140 120 160 96 121 172 108 98 95 76 105 99 95 19521953p 112 111 86 74 88 73 111 105 88 89 162 204 139 158 121 164 107 109 116 122 94 101 124 130 107 110 148** 157 122 128 170' 195 92 87 103* 110 162r 143 116 128 95 113 96r 96 65' 90 106 . . . 113 . . . 85 67 pPreliminary. 'Revised. Note: Data given above supersede all previously published annual indexes. difference w as appreciably sm aller than it had been in other recent years. W it h in the m onths o f 1953 both em ploym en t series, after a d ju stm en t fo r norm al seasonal variation, show ed a rise and then a decline, w ith the a m plitude o f the sw in gs being approxim ately the sam e for to-year gains during the closing months of the year. Other indicators reflecting a slackening in employment growth were rising unemployment and a decline in average week ly hours worked by manufacturing production workers. After July, District unemployment was above the 1952 level. However, for the year the ratio of unemployment to civilian labor force remained at the same level as in 1952— 3.8 percent. As has been typical for the past several years, the Twelfth District again fared better than the nation with respect to employment growth from 1952 to 1953. In all major sectors of the economy the District experienced a higher rate of growth than did the nation. Whereas aver age monthly nonfarm employment increased by 3.2 per cent from 1952 to 1953 in the District, it rose by 2.4 per cent in the nation. Population growth, new investment programs, and con tinued demand for defense related goods and services pro vided stimuli for the rising level of employment in the Dis trict. However, several developments were of sufficient import to slow down the expansion of District employ ment toward the end of the year. Even though defense activity continued to bolster the District economy during 1953, it did so with less intensity than during 1951 and the D istrict and the nation. C hart T h e m a jo r difference betw een the D istrict and the na tion w as that the y ea r’s peak em ploym en t m onths (o n a (Adjusted for seasonal variation) seasonally adju sted b a sis) w ere slightly later fo r the D is trict than fo r the nation. T h e early decline in apparel and 1 T H E G A P B E T W E E N 1952 A N D 1953 E M P L O Y M E N T L E V E L S N A R R O W S — T W E L F T H D IS T R I C T Thousand* of parsons employed NONAGRICULTURAL EMPLOYMENT autom obile sales w as felt in both the nation and the D is trict— the record of large stores in selected F a r W e s te r n m etropolitan areas, in fact, indicates that the dow nturn in retail sales began earlier in the D istrict. T h e industrial effects o f the sales decline, how ever, w ere felt principally outside the D istrict at first, since the textile and autom o bile industries are relatively unim portant in the F a r W e s t . T h e later decline in construction, in the production of m an y types o f durable g oo d s, and, to a lesser degree, in total retail sales affected all sections o f the nation. D istrict dependence on national m arkets has m ad e it certain that any u pw ard or dow n w ard trend in national dem and w ill affect the D istrict econom y. T h e years fro m 1950 to 1952, like the years of the second W o r ld W a r , dem onstrated that the D istrict rate o f g row th could di verge significantly fro m the national ra te ; 1953, in con Aircraft Strike trast, show ed the underlying interdependence o f the F a r W e s t and the rest of the nation. Employment growth slackens toward end of year A s the year 1953 progressed Aircraft Strike the em ploym ent picture in the T w e lfth D istrict weakened. D u rin g the first half o f 1953 1952 em ploym en t g rew rapidly, but by m idyear signs of faltering gro w th appeared in alm ost all m a jo r sectors o f Lumber Strike 1250 the D istrict econom y. H o w e v e r , fo r the year as a w hole 1953 average m on thly n on farm em ploym ent w as 3.2 per cent above y ear-ag o levels in spite o f the narrow ing y ea r- 1200 J ____ L J F m a m Source: Cooperating state agencies. j February 1954 1952. Furthermore, the review of Federal defense policies resulting in the curtailment of some defense contracts and the stretch-out of the production period for other defense items dampened the expansion of such defense-related industries as aircraft, electrical machinery, ordnance, and metals during the latter part of the year. The reduction of civilian personnel at military installations and at Federal agencies also contributed to the leveling off of employ ment growth. Market difficulties in the lumber industry as well as some decrease in residential construction activ ity during the latter part of 1953 are a further explanation of this slackening employment growth. Twelfth District nonagricultural employment, as meas ured by the annual monthly average, rose by 3.2 percent or 179,000 persons between 1952 and 1953. The major sector contributing to the year’s gains was manufacturing which increased its number of jobs by 5.2 percent. Mod erate increases occurred in the other major employment classifications, except government. During the first quar ter of 1953 average monthly employment in the con struction industry rose 11 percent above the comparable period of 1952 due to a combination of forces— good weather and a large volume of residential and nonresidential building. By year end, however, employment gains over year-ago levels were slight as authorized residential and, to a lesser extent, nonresidential building declined. Moderate year-to-year employment increases in the transportation, trade, service, and finance lines, ranging from 2 to 5 percent, stemmed from continued growth of population and its dispersion to new areas, resulting in in creasing demands for additional trade outlets, services, transportation facilities, and banking services. Government employment for the year 1953 remained at approximately the 1952 level. A reduction in personnel at Federal Government establishments from 1952 to 1953 was offset by an increased number of jobs with the state and local governments. Mining employment rose only slightly during the year as the gains in petroleum extrac tion and copper mining employment were partially reC h a r t 2 N O N A G R I C U L T U R A L E M P L O Y M E N T IN S E L E C T E D M A J O R G R O U P S — T W E L F T H D IS T R IC T (Percent change in average monthly employment, 1952-53) Manufacturing Finance Construction Service TOTAL N O NAGRICULTURE Trade Transportation and Public Utilities Mining Government 0 +2 Percent change Source: Cooperating state agencies. 21 M O N TH LY REVIEW __ L +6 C h ar t 3 M A N U F A C T U R I N G E M P L O Y M E N T IN S E L E C T E D I N D U S T R IE S — P A C IF IC C O A S T (Percent change in average monthly employment, 1952-53) O rd n a n ce M otor Vehicles Electrical M a ch in e ry Instruments A ircraft M etals Rubber Paper Textiles M a ch in e ry Food Processing Furniture Lumber J_ —5 0 Percent change _______ ____________ +10 +20 +30 Source: Cooperating state agencies. duced by the contraction of employment in the lead and zinc mining industry. In the manufacturing sector not all industries shared equally the employment gains between 1952 and 1953. The fastest growing industries were principally those re lated to defense activity. As indicated in the accompany ing chart, the following industries had the highest rela tive increases in average monthly employment: ordnance, motor vehicles, electrical machinery, instruments, and aircraft. In terms of absolute increases the aircraft indus try made the largest gains. By December the year-to-year gains in each of these industries, except ordnance, were relatively minor, reflecting the tapering off of the defense program and, in the case of the motor vehicle industry, a reduction in force at auto assembly plants due to rising inventories. The metals and machinery industries also added workers to their pay rolls during 1953. Metals em ployment increased by 6 percent between 1952 and 1953 but machinery employment rose only 1 percent as a result of declining demand for agricultural and lumber machin ery. Running counter to other durable goods industries, lumber and furniture industries decreased the number they employed during 1953. The causes of the decrease were a decline in residential construction authorized, the entrance of Canadian lumber upon the market, and some decline in the demand for lumber abroad. Average month ly employment dropped less than 1 percent between 1952 and 1953. However, the year-to-year decline would have been much greater had it not been for a major work stop page in 1952 and a particularly harsh winter in contrast to mild weather in early 1953. Also, California’s rise in lumber employment offset in part the employment losses in Oregon’s and Washington’s lumber industries. Substantial employment gains of approximately 4 per cent occurred in most nondurable goods industries— tex tiles and apparel, paper, printing, chemicals, rubber, and 22 FEDERAL RESERVE BA N K OF SAN FRANCISCO leather. However, a major District industry— food proc essing— showed an increase of less than 1 percent in em ployment over the year. Construction activity at high but declining level Construction activity in the Twelfth District was at a high level in 1953. District contract construction employ ment during the year averaged 374,600, 4 percent above the 1952 figure. The value of building construction author ized in urban areas in the District, which reflects the plans and expectations of builders somewhat in advance of ac tual building operations, was also high for the year as a whole, totaling 7 percent more than in 1952. These summary figures, however, conceal many con trasts and uncertainties within the construction industry. The most striking contrast is that between the beginning and the end of the year. At the beginning of 1953, con struction activity was increasing at more than its normal seasonal rate, and in March the adjusted level of con struction employment reached an all-time high 25 percent above the 1947-49 average. During June and July, labormanagement disputes in several District states interrupted the rise in construction employment, but August was again a moderately good month. After August, on the other hand, the adjusted employment index declined to a low of only 117 percent of the 1947-49 average in October. In the last two months of the year, employment declined slightly less than seasonally, but the adjusted employment level remained more than 5 percent below its March peak. Construction authorizations began a decline as early as April and showed no revival in the last quarter. These de clines made the construction industry a weak area in the District economy towards the end of the year, in spite of its record for the year as a whole. Another contrast hidden by the over-all statistics is that between residential and nonresidential construction. The value of residential building authorized reached a very high peak in March and declined afterwards, falling below its year-ago level for seven of the eight months after April. The twelve-month total for 1953 was 2 per cent above the 1952 total. Nonresidential construction authorized in the District in 1953, on the other hand, ran 14 percent above its 1952 level. It also reached a March C O N S T R U C T IO N E M P LO YM E N T—TW E L F T H D IS T R IC T , 1951-1953 (Adjusted for seasonal variation, 1947-49 “ 100) Percent February 1954 peak, but maintained a fairly steady, rather than a declin ing, level after March. Commercial building authoriza tions were unusually high during the whole year, and especially during the last quarter. For the first half of the year, industrial authorizations were also high, and during the third quarter, a relatively large amount of educational construction was authorized. The rise in these categories more than balanced the fall in Federal contract awards from 1952. The weakness in the construction industry toward the end of the year, therefore, was essentially a weakness in the residential building sector. The three major areas in the Twelfth District— Cali fornia, the Pacific Northwest (Washington, Oregon, and Idaho) and the Intermountain states (Utah, Nevada, and Arizona) provided a third contrast in construction activ ity. The Pacific Northwest construction industry fared worse in relation to previous years than did the construc tion industry in the rest of the District. Residential au thorizations in the area were about 6 percent below the 1952 level, a high first quarter not compensating for a low level during the last three quarters. Nonresidential authorizations in urban areas were slightly above the 1952 level in the first half of the year, but dropped to 16 percent below in the last quarter. Some of the large non residential projects planned were: power plant facilities at The Dalles Dam in Oregon; a nickel smelter in Reddell, Oregon; the $75 million oil refinery at Anacortes, Wash ington ; the oil pipe-line from Billings, Montana, to Spo kane ; and the chemical-processing plant at the Hanford atomic energy center in Washington. California construction was similar to construction in the District as a whole, comprising as it does more than three-fourths of the District total. Some of the large non residential projects planned in California were: an oil refinery at El Segundo; steam-electric generating plants at San Luis Obispo and El Segundo; and an automobile assembly plant at Milpitas. Construction authorizations were relatively higher in the three Intermountain states than in the rest of the Dis trict, especially during the first and third quarters. Ne vada and Arizona were responsible for most of the unusu ally high level, although Utah also had a fairly high third quarter. In Nevada, both residential and nonresidential authorizations were above previous levels. In Arizona, nonresidential authorizations were consistently high, with residential spurts during March and July. In Utah an in crease in nonresidential authorizations during the third quarter was responsible for the high level. Builders generally explained the residential building slowdown in most of the District during the summer and fall of the year as a consequence of the tight mortgage market. Nonfarm mortgage recordings of $20,000 or less showed a decrease in the District from April through August, instead of the usual seasonal increase. The nation as a whole, which had a construction record very similar to the District’s, also had a summer decline in the number of nonfarm mortgage recordings. A strong demand for February 1954 M O N T H L Y REVIEW long-term funds by nearly all users during the first half of 1953 forced interest rates up and made mortgages less attractive to lenders, especially commercial bankers, than other types of loans. Government-guaranteed mortgages became particularly unattractive because their interest rates were fixed at levels which were low relative to alter native investments. In May, their rates were raised, but at the same time the V A prohibited the sale below par of V A mortgages. Not until the end of June was this prohibition ended and Government-guaranteed mortgages allowed to compete freely with other loans. Until the end of June, therefore, mortgage commitments were increasing less than seasonally, and the low volume of commitments con tinued to depress the value of mortgages recorded for several months after June. After the middle of the year, money markets began to ease, and mortgages recovered some of their attractive ness. From August to October, nonfarm mortgage re cordings of $20,000 or less rose somewhat, and the decline in the next month was approximately a normal seasonal one. Lagging behind the change in mortgage activity, the value of new construction activity showed some signs of revival during the last quarter by declining less than sea sonally. Even after seasonal adjustment, however, both national construction activity and District construction employment revived appreciably less than they had de clined earlier in the year. Lumber market weak Production, prices, and employment in the Twelfth Dis trict lumber industry fell during 1953. For the year as a whole, production was 4 percent above 1952 and 2 percent below 1951. For the second half of the year, however, pro duction was 2.5 percent less than production during the second half of 1952. Output fell fairly steadily, apart from normal seasonal variation, from March through Septem ber ; and the recovery in the last quarter was very small in comparison with the earlier decline. The Bureau of Labor Statistics lumber price index dropped from 120 percent of the 1947-49 average in January to 116 percent in Novem ber, when it began to firm at the new, low level. By De cember 1953, employment in the lumber industry in Ore gon was 21 percent below the employment level during the peak month of July. The same measure yields a figure of 19 percent in December 1952, 14 percent in December 1951, and 14 percent in the recession month of December 1949. The slowdown in residential building was the principal cause of the weak lumber market. Residential construc tion needs constitute the principal demand for softwood lumber, and housing starts in the United States during 1953 were 2 percent below the number in 1952. Further more, housing starts, like lumber production, were declin ing during the year; for the period from January to June starts were 3 percent higher in 1953 than the year before, whereas from July to December they were 7 percent lower in 1953. 23 Developments in international lumber trade also con tributed to the cutbacks in the Twelfth District lumber industry. United Kingdom demand for lumber, especially Canadian lumber, fell sharply in 1953 and caused Cana dian producers to compete more heavily in United States markets. As a result, United States imports of softwoods in the first eleven months of 1953 were 15 percent above those of the first eleven months of 1952, and the increase in this segment of the total supply intensified the down ward pressure on prices. There were indications that Ca nadian competition was lessening as Britain’s demand picked up in the last two months of the year. The im portance of the import situation should not be exagger ated ; total United States imports were only 7 percent of domestic production during the first eleven months of 1953, and the increase in imports over the previous year was only 1 percent of production. Such marginal supply can be important in influencing prices, but in this case was probably much less important than the housing weakness as a cause of changes in lumber prices. The Douglas fir region, largest of the three lumberproducing regions in the District, was affected during 1953 by continuous, severe price cuts until November. The price of dimension #1 common 2 " x 4 " Douglas fir fell from $84.67 per thousand board feet in January to $73.12 per thousand board feet in November, when a very slight recovery began. During 1952 the price had reached as high as $86.58 per thousand board feet, so that the total decline from the 1952 peak to the 1953 low was 16 per cent. Inventories averaged higher in 1953 than in 1952, but they showed no rising trend during the year. Orders received did decline after April, so that in spite of a 20 percent drop in production from March to December, the volume of unfilled orders was 9 percent lower at the end of 1953 than at the end of 1952. The western pine region of eastern Oregon and Wash ington had a different price experience from the Douglas fir region. Prices increased early in the year, reaching a level in May some 3 percent above January. Production also increased during the first five months of the year, and the volume of orders received was at a fairly high, though fluctuating, level. After May, however, prices began to fall, first slowly and then very sharply, so that the No vember price of #3 common 1" x 8" ponderosa pine boards was 18 percent below the May price. Until the last quarter, orders continued at about the May level but failed to keep up with the increase in production from May to August which was primarily seasonal in character. As a result, not only prices but also the level of unfilled orders began to fall during the summer. After August, production was cut, and by the end of the year orders were falling also, so that the volume of unfilled orders was 46 percent lower and the level of inventories 6 percent higher on December 31, 1953 than on December 31, 1952. The redwood region of California was not so hard hit as the rest of the District lumber industry. Redwood de mand depends on neither residential construction activity 24 FEDERAL RESERVE B A N K OF SAN FRANCISCO nor foreign lumber prices so much as do fir and pine de mand ; even in its housing uses, redwood is largely a specialty product. Redwood prices remained fairly stable throughout the year. Orders received fell after April, and a production drop after June was not sharp enough to prevent some inventory accumulation and some drop in the volume of unfilled orders. The level of inventories was 9 percent higher in December than in January 1953, but demand had been strong enough until April so that the volume of unfilled orders was higher at the end than at the beginning of the year. Plywood has record year despite setback in second half District plywood production in 1953 reached a new high level, due primarily to an unprecedentedly large output in the first half of the year. For the year as a whole output reached 3.5 billion square feet, a gain of 15 percent over production during 1952. This substantial rise in activity reflected principally the record high rate of new construc tion activity in the nation, the source of more than half the demand for the output of District producers. The gen erally high levels of industrial production, especially in the first half of the year, and expanded consumer expendi tures also contributed significantly to increased plywood demand. In addition the trend toward an increased de gree of utilization of plywood in construction and in a wide variety of other uses has been intensified and is an im portant factor in the expanded consumption of this major District product. Although 1953 will be characterized as a year of ex tremely high activity, the plywood industry was beset dur ing part of the year with severe fluctuations in new orders, production, and prices. During the first quarter new orders were received at the record rate of 80 million board feet, production was sustained at capacity levels, and prices rose moderately. In the second quarter, however, new orders declined to a level about one half the earlier peak, while production was generally maintained at near capacity. By midyear this maintenance of production in the face of the sharply reduced ordering by processors and dealers had cut order backlogs to an unusually low level. In late August the pressure of excess production and slackened demand led to a sharp break in prices which subsequently carried them to their lowest level in seven years. Industry operations were cut substantially in the third quarter with widespread reductions in the number of days worked by mills and in hours worked per day. In some cases mills were closed completely during all or part of the month of September. A recovery in demand early in October, partly in response to the lowered price schedule as well as to the unseasonal rise in residential construction activity nationally, raised new orders to a point roughly comparable to the level reached earlier in the year. Production recovered quickly and full operations were resumed early in the fourth quarter. Prices remained relatively weak throughout most of the last quarter of the year, although considerable firming very late in the February 1954 year, according to press reports, raised prices to approxi mately the level which prevailed in the first half. A pattern of industry behavior with similar results has recurred in each of the past three years. The fluctuations in 1953 were considerably more severe than in other years, however. Not only were demand changes unsettling but the industry’s capacity made it more sensitive to declines than in other years. Expansion of productive facilities has proceeded more rapidly than the growth in total demand. The formerly tight supply situation has given way to one of balance as long as demand remains very high. Any drop in demand, however, instead of merely easing the pressure on suppliers (as used to be the case) gives them a substantial margin of idle capacity. It is estimated by industry sources that the annual capacity at the close of 1953 was approximately 3.7 billion square feet, calculated on the basis of a five-day work week. Capacity would be substantially greater on a six-day basis, a work week not unusual for many firms in the industry today. Further more, capacity is expected to expand further in 1954 as several mills under construction are completed and an nounced conversion of other facilities to plywood produc tion takes place. In the absence of significant gains in con struction and general industrial activity, any further net expansion of the industry’s facilities beyond the level in dicated for 1954 appears doubtful, and, in fact, should the current weakness in over-all business continue, it may prove difficult to utilize fully existing plant capacity. District paper production reaches new high level The output of paper and paperboard in both the District and the nation reached new record levels in 1953. District production rose more than 4 percent in 1953 above the previous year, reaching a level 28 percent above the aver age annual production in the 1947-49 period. Nationally, output increased 9 percent above 1952, or more than twice as much as in the District. This better record reflects the recovery of the paper industry outside the District from unfavorable developments in 1952. Output in the nation in 1952 was some 8 percent below 1951, mostly as the result of the major inventory adjustment that occurred during that year, a development that had only minor re percussions upon the District industry. The record outpouring of paper and paperboard was substantially absorbed by the major users of these prod ucts. Stocks of paper and paperboard in the hands of mills and their principal customers at the end of 1953 were in a very favorable relationship to sales, and the absolute rise in inventory over the year was quite moderate. This situ ation contrasts sharply with many other segments of in dustry, especially in the durable goods sector where in ventories were burdensomely high. The over-all balance between supply and demand for paper and paperboard products is illustrated by the general stability in prices that prevailed throughout 1953. Paper prices fluctuated within very narrow limits during the year and for the year as a whole prices averaged just over 1 percent higher February 1954 M O N T H L Y REVIEW 25 than in 1952. Paperboard prices behaved similarly but for the year averaged slightly lower than in 1952 despite considerable strengthening in the late part of 1953. District productive capacity was utilized somewhat more fully during 1953 than in the previous year and some further moderate new additions were made to existing facilities during the period. Average utilization of facili ties rose to 96.5 percent in 1953 compared with an average utilization of 94.3 percent in 1952. Expansion in produc tive capacity, while still on the upgrade, slowed down quite sharply in the past year from earlier periods. In 1953 capacity increased just a little more than 2 percent compared with gains of 20 percent in 1951 and more than 7 percent in 1952. gaged principally in modification work on existing air craft, operations have been sharply curtailed from earlier peak levels. Starting late in 1952 the modification pro gram has been rather sharply curtailed and employment in the industry in Arizona has fallen to a point 50 percent below the earlier peak. Aircraft production was also re strained by a labor-management dispute that closed a ma jor southern California airframe producer for almost two months during the fourth quarter of the year. The strike affected upwards of 20,000 workers during most of the shutdown period. Continued shortages of highly skilled craftsmen and engineers remained a major industry prob lem, although training programs and recruitment activi ties have reduced its severity in the past year. Aircraft expansion slows Private shipbuilding levels out The District aircraft and parts industry continued to expand during 1953 although at a rate much lower than in the preceding several years. Aircraft and parts manu facturers added nearly 18,000 new workers to their pay rolls during the year compared with 38,000 added in 1952 and some 70,000 in 1951. This tapering off in aircraft em ployment expansion reflects the approach of industry oper ating rates to the maximum level provided for within existing procurement policies of the Federal Government. Some moderate further growth may be expected in the first half of 1954 when the industry is expected to stabilize, although individual producers may advance further or contract as national defense requirements for particular types of aircraft shift. Current defense planning contemplates an air force of 137 wings by June 1957, a further stretchout of earlier goals. At the start of 1953 official planning called for 143 wings by January 1956. This pushing of goals farther into the future has tempered the rate of expansion of the Dis trict aircraft industry, but it will have the further effect of maintaining production at a high level for some time to come. Air Force expenditures for aircraft and related pro curement totaled $5.8 billion in the fiscal year ended last June. Expenditures are expected to reach $6.9 billion in fiscal 1954 with a modest decline to around $6.7 billion in fiscal 1955. As total defense spending is scheduled to de cline in the next several years, the planned expenditures on aircraft represent a somewhat larger proportion of the total military budget. This shift in emphasis has obvious favorable implications for District aircraft and parts pro ducers. District aircraft firms, which received approxi mately $14.5 billion in prime contracts in the first three years following Korea, had some $7 billion in unfilled orders on hand at year end. This would appear to be suf ficient at current production rates to keep the industry operating for several years. In addition to the order back log, a large share of the new money for aircraft and related procurement provided for in the Federal budget may be expected to flow to District producers. Despite the generally favorable situation and outlook, some segments of the industry have encountered difficulty in the past year. In Arizona, where the industry is en-. Private shipbuilding activity, after a sharp buildup in the first 2y2 years following Korea, leveled out in 1953. Aside from occasional fluctuations, operations at District yards remained substantially unchanged throughout the year. Average monthly employment increased only a little more than 1 percent above 1952 levels. While the industry remains only a fraction of its World War II size, it did employ 75 percent more workers on the average during 1953 than in the immediate pre-Korean period. With the exception of the work on several new maritime hulls that got underway just at the start of the year, operations at private District shipyards are still confined to small craft construction and general ship repair. Activity at Federal Government shipyards provides a sharp contrast to the stability that has prevailed at private establishments. Cutbacks in employment have been heavy at naval shipyards, reflecting both the reduction in Fed eral Government employment generally as Federal ex penditures have been reduced and the effects of lower operations as a result of the end of active hostilities in Korea. While over-all totals of this type of employment are not available, it has been estimated that employment in the naval shipyards in the San Francisco Bay Area, for example, was off nearly 20 percent at year end compared with the same time in 1952. Production of crude petroleum passes the million-barrel-per-day mark Among other notable developments in the Pacific Coast petroleum industry in 1953 was the attainment of a million-barrel-per-day rate of production of crude oil. This high level of operations together with an unprecedented volume of imports of foreign crude, averaging about 78,000 barrels per day, led to an oversupply problem causing some concern among oil men. A record rate of exploratory and drilling activity in California accompanied this situa tion. About 2,600 new oil and gas wells were completed in California in 1953. Despite the shutting-in of several hun dred low-volume producers of heavy crude in the Kern River district in October, there were more than 31,000 active producing wells in operation in California at the end of the year, a record year-end number. 26 FEDERAL RESERVE B A N K OF SAN FRANCISCO The crude oil situation in the Pacific Northwest was significantly altered by the completion and initial opera tion of the new Trans Mountain Pipe Line extending from Edmonton, Alberta, to Vancouver, British Columbia. This line is designed to permit delivery at tidewater of ap proximately 200,000 barrels of crude per day. To take ad vantage of the new supplies thus made possible, construc tion was started on two modern refineries in the Puget Sound area of western Washington by major California companies. Early in the year crude oil prices advanced by 10 cents to 50 cents per barrel, accompanied by corresponding advances for gasoline and other products. However, the industry was beset during the year with rapidly mounting inventories, both of gasoline and heating oils, as a result of high level refinery operations and a large carry-over of heating oil stocks from the mild winter of 1952-53. Con siderable apprehension in the trade has developed as to the industry’s ability to maintain the price advances which followed the demise of price controls. Iron and steel pass expansion crest in 1953 The nation’s steel industry reached an historic peak during the past calendar year. In March 1953 steel ingot production exceeded 10 million tons, nearly 102 percent of total rated capacity. A preliminary estimate by the American Iron and Steel Institute indicates that for the year as a whole the industry produced a total of nearly 112 million tons, almost 7 million tons more than in 1951, the next highest year. The high level of production was a reflection of the “ coming in” of the bulk of the new facili ties created in the post-Korean expansion plus the fact that operations were largely uninterrupted by labor dis putes. The nation’s steel ingot capacity increased 6.8 mil lion tons in 1953. Twelfth District producers participated in this growth and prosperity, some of them breaking their previous pro duction records by wide margins. For the first time in history the District had two producers who manufactured more than 1 million tons of finished steel products. Total steel ingot production in the seven western states was 5,154,000 net tons, representing 92.4 percent of capacity. According to the weekly report on steel operations pub lished by the magazine Iron A ge, western steel producers1 operated at a higher percent of capacity than the industry average in every week but one. Although Twelfth District ingot capacity did not grow as rapidly as that of the na tion as a whole, large expenditures were made in expand ing and diversifying other facilities, most notably finishing capacity. Despite the over-all appearance of prosperity and growth that the annual statistics present, during 1953 steel men in the West and throughout the world felt in creasing pressure upon their markets from the vast in crease in production at a time that the high Korea-induced demand began to ebb. Until June the nation’s steel opera1 The western region used in the Iron Age series includes eleven western states. February 1954 tions as reported in Iron Age remained above 95 percent of capacity; in that month the rate dropped slightly and seemed to remain stable at a lower level until late in N o vember when the rate dropped sharply to 87 percent and continued to fall quite steadily until the year’s low point of 65 percent was reached in the third week of December. Since then the rate has recovered moderately but the com plexion of the market has changed markedly in the past half year and there appear to be no forces strong enough to bring back a level of operations over 90 percent in the immediate future.1 This decline in demand has meant a gradual collapse of the market for the high-cost producer who could ask and get premium prices for all the steel he could produce a year ago. In July, cancellations began to appear on high priced “ conversion deals” in which a mill operator buys ingots or billets in the open market and shapes them for resale to a steel consumer. By late September some alloy steel plants were reporting cutbacks in operations by as much as 70 percent. In October, electric furnaces2 were cut back to 56.3 percent of capacity over-all. The signifi cance of this situation to steel production in the Pacific Northwest is indicated by the fact that over 50 percent of the ingot capacity of Washington and Oregon is in elec tric furnace equipment. By December even the larger scale operators were cut ting back output. Virtually every large tonnage producer announced cutbacks in open hearth operations during the fourth quarter. In the Twelfth District two open hearths were cut back by Bethlehem Pacific in Seattle and two by Kaiser at Fontana. Similar cutbacks or slowdowns were reported in most other mills. The average production rate in eleven western states during December was 82 percent. Quoted prices of steel varied only slightly during 1953. For three months during the year— May, June, and July — the average price of finished steel rose moderately, the largest rise being slightly less than 3 percent— in June. Much has been said in the past six or seven months about mills “ meeting competition” in distant markets by absorb ing freight charges, that is, quoting prices f.o.b. mill plus only as much freight charge as the best situated compet itor would charge. In this way an increasing number of eastern sellers of steel have been coming into competition for Far Western buyers. The average effective price of steel products in the Twelfth District has moved down ward as a result of that competitive pressure. The prices of scrap steel, which are regarded as a bellwether for the steel industry, moved sharply downward after reaching a peak in July. By December the average of scrap prices in the major steel centers had fallen more than $13 per ton, a drop of nearly 30 percent. This situation was most acutely felt on the Pacific Coast where scrap sales had fallen below 50 percent of capacity for many dealers by ‘T h e measure of steel operations as a percent of capacity is an index of the rate of utilization of ingot capacity as that capacity is reported to the American Iron and Steel Institute on January 1 of the year being con sidered. 2 M any smaller tonnage producers, particularly alloy steel producers, make their steel in electric furnaces. February 1954 M O N T H L Y REVIEW the end of the year and had not improved at the end of January 1954. High Pacific Northwest power production supports record aluminum production The primary aluminum industry in the District experi enced its greatest year in 1953 in terms of physical pro duction and in terms of profits. That period was also a year of climax in terms of national growth in the industry, for nearly full realization of the Government’s “ second round” of stimulation to the industry’s growth was achieved. It is interesting to note that in the aluminum industry, as well as in the steel industry, growth of per manent capacity has been greater since the start of the Korean war than it was during the expansion period of W orld War II. By the end of 1953 national aluminum ingot capacity had risen to an estimated 1,500,000 tons. The peak of this upsurge of growth has passed. Barring some unforeseen impetus to further expansion, expendi ture on plant and equipment for aluminum production in the coming year will be less than half the $285 million expended during 1953. Government-induced expansion is planned to carry capacity only 250,000 tons higher at most. Furthermore, much of the planning for further expansion is still in the conjectural stage. The Twelfth District accounts for about 40 percent of the nation’s primary aluminum capacity and in 1953 it produced almost one-third of total industry production. All of this capacity is located in Oregon and Washington. All primary aluminum production in 1953 came from the plants of three producers. The nation’s primary produc tion in 1953 was more than one-third higher than in 1952. In large part this was due to the “ coming in” of much new capacity. However, the increase was greatly facili tated by a plentiful water supply in the fall season in the Pacific Northwest. The aluminum industry in that region is based largely on interruptible hydroelectric power. Since approximately 10 kilowatt hours are needed to produce each pound of aluminum, any very substantial curtailment of cheap power necessitates a cutback in operations. The significance of this dependence on water-flow is illustrated by the fact that in the state of Washington total primary production during the low water period from September through November 1952 was less than 60 percent of pro duction for the same period in 1953. The water supply in this last fall-winter season has been sufficient for full capacity operation. However, that was a wetter than aver age season. The risk to aluminum producers of inadequate power supplies has been significantly reduced in the past year by the coming into production of the Hungry Horse hy droelectric project in western Montana. This project adds 285,000 kw. to the power resources administered by the Bonneville Power Administration. More important than that, its 2 million acre-foot storage capacity has made it possible to mitigate fluctuations in the cycle of water-flow down the rivers on which power is generated in the area. The steadier flow of water from year to year and from 27 season to season will reduce the likelihood of interruption of power generation. The Bonneville Power Administra tion (B P A ) has signed contracts with the primary alumi num producers which allow them to buy power that is generated by drawing down the Hungry Horse reservoir below the volume that a median-year water supply would replace. In the event that the reservoir fails to refill in the subsequent refill season, Bonneville has the right to order the aluminum companies to replace power to the system in proportion to their responsibility for the excessive draw-down. This assures BPA that no firm power com mitments are jeopardized by such draw-down. Thus, in years of median or better water flow no interruption of power to the aluminum companies will occur, and in ab normally dry years no more than an amount proportionate to the shortage will have to be replaced by the companies.1 Market conditions in the aluminum industry were good throughout the year despite a slight decline in military purchases from the 1952 level. Civilian demand rose rap idly enough to take up much more than the amount of the curtailment in military demand. The price of alumi num ingot rose 1 cents per pound during 1953 (reach ing 22Yz cents in the month of August), but a favorable price position was retained relative to its most important competitors.2 High inventories at the fabrication level and at higher levels of processing led to some decline in demand late in the year as production brought supply into equality with current needs. This slowdown was reflected more strong ly in the shipments of various types of fabricated alumi num than in manufacture of ingot. Monthly primary pro duction declined 2.4 percent nationally in November while larger declines occurred in shipments of several important categories of aluminum products. While the decline in shipments of products is of great concern to all of the aluminum producers, the geographic structure of the in dustry is of such a nature that the Pacific Northwest con cerns itself mainly with primary production.3 Therefore, the level of production in the Pacific Northwest was not greatly affected by the year-end decline in shipments. A drop in employment of some 200 workers at the large Trentwood rolling mill is a notable exception, however. The decline is widely regarded as mainly an inventory adjustment. Spokesmen for the industry are taking great pains to assure the public that the great increase in ca pacity that has taken place is not excessive. Copper tonnage output down slightly; value of production up The decline in business activity hit earlier and harder at the copper, lead, and zinc mining, smelting, and refin1Replacement may be made by purchase of steam-generated power or by foregoing consumption of Bonneville power. The former alternative is very expensive since steam-generated power from the private utility companies is approximately three times as high in price as the hydroelectric powei which they would be replacing. The latter alternative means shutting down a part of the companies’ operations. 2 For example, copper rose 25 percent in price while the aluminum price increase was only 7.5 percent. 3 There have been important moves lately to increase the capacity of'the D is trict for production of aluminum extrusions and rolled products but the greater part of the primary aluminum produced in Washington and Oregon is shipped elsewhere for further processing. 28 FEDERAL RESERVE BA N K OF SAN FRANCISCO ing industries in 1953 than was the case with steel and aluminum. Primary production of copper in the United States declined slightly from the 1952 total and fell be hind aluminum, the nation’s new No. 2 metal in terms of tonnage produced. The decline in copper production was slight, however, amounting to about one half of 1 percent in the nation and to 1.6 percent in the Twelfth District. Owing to the fact that the price of refined copper rose more than 5 cents per pound after the removal of ceiling prices, value of production increased substantially. In the seven western states about 730,500 tons of recoverable copper were mined, valued at nearly $418 million.1 The largest part of the tonnage decrease occurred in Utah as the monthly production rate was curtailed somewhat in the Bingham district, the location of the nation’s largest individual copper producer. In Arizona, the nation’s lead ing producing state, the tonnage decline was very slight and was more than offset by rising mine output in Ne vada. Variations of a smaller order that virtually canceled each other out occurred in Idaho, Washington, and Cali fornia. The value of production increased in all states but California. The largest value increase occurred in Ari zona ($32.9 million) because of its high physical output. The total of $224 million represents the greatest annual value of copper production in Arizona history. Declining quality of ore continued to be a major factor for consideration in the copper industry. The quantity of ore treated increased in 1953 compared with 1952 but recoverable copper tonnage decreased. Large new invest ments are being made by the major mining firms for the open-pit mining of low-grade ores. For example, in No vember, the opening of a $33 million project at Yerington, Nevada was announced. It will process an estimated 35 million tons of less than 1 percent ore. Annual copper out put capacity at Yerington is reported to be 32,500 tons. The condition of the copper market has been somewhat precarious since mid-year 1953 despite the appearance of soundness given by the high-level stability of the price. In February the 24^4 cent ceiling price was removed and the price shot almost immediately to about 32 cents per pound. It settled down shortly to the 30-cent level and has remained there into February of 1954. By mid-year 1953 supply appeared tenuously balanced with demand only by virtue of the fact that the Chilean government, which must rely heavily on revenue from copper sales, refused to lower its administered price of 36 cents per pound. Late in December Chilean copper re-entered the market at competitive prices, bringing an additional potential sup ply of 30,000 tons per month back to the world copper scene. During a five-month period in which no Chilean copper was sold in the United States, Chilean stocks of more than 130,000 tons accumulated. This stockpile is po tentially a heavy market depressant. Late in 1953 and early in 1954 virtually all of the important domestic cop per producers announced partial reductions in operations. *Based on the area reports of the regional offices of the Department of the Interior, Bureau of M ines. The 1953 totals are preliminary estimates based on mine reports. February 1954 Lead and zinc decline continued in 1953 Lead and zinc producers fared less well in 1953 than did copper producers. Prices of both lead and zinc fell below their ceiling prices before mid-year in 1952 and the decline continued until April 1953 in the case of lead and until September in the case of zinc. The lead price re covered somewhat in the summer months, settled at 13J4 cents a pound in September, and remained fixed beyond the year’s end. The price of zinc declined in late summer to 10 cents per pound and has followed the same pattern as the lead price since that time. Production, sales, and profit have declined with prices causing producers’ or ganizations and Congressional representatives of the leadzinc states to speak publicly for Governmental assistance and protection. The two metals are produced together in most impor tant lead-zinc mining operations and they suffer from common market difficulties. The price stimulation brought on by the Korean war rather quickly brought about an up surge of world supply that became a condition of oversup ply in 1952. Imports, until late in 1953, were an increas ingly severe depressing factor in the market and, although European demand firmed later in the year to take some of the pressure from the domestic market, imports of both lead and zinc established new annual records. In Idaho, the Twelfth District’s leading lead-zinc pro ducing state, operations were curtailed in many mines as lead mine output for the year dropped by 4 percent and zinc mine output by 14 percent. The most notable cutback was the permanent closing of the Morning Mine in the Coeur d’ Alene region in October. This mine had been a con tinuous producer since 1889 and was said to be the world’s deepest lead-zinc mine. Reductions in production were of larger proportion, though of lesser absolute magnitude in Utah, Arizona, and Nevada, the District’s other important lead-zinc produc ing states. Throughout the District lead-zinc operations were characterized by declining output, income, and em ployment. Over-all, the District showed production de clines of 15 percent for lead and 19 percent for zinc. Due to the decline in prices, value of production plunged 30 percent and 47 percent, respectively. G old and silver Annual output of gold and silver varied little in the Twelfth District from 1952 to 1953. Gold production in 1953 increased by less than 1 percent above the 1952 out put, reflecting mainly increased gold content of Utah cop per ores. The Utah increase was largely counterbalanced by the fact that an antimony-gold mine in Valley County, Idaho, was idle throughout the year. In California, gold slipped from its historic position as the state’s most im portant metal as the value of both tungsten and iron ore mined in the state exceeded the value of the yellow metal. Total gold output in the District amounted to 1,019,440 fine ounces valued at $35,680,400. February 1954 M O N TH LY REVIEW Silver production reflected the decline in production of lead and zinc with which it is often mined. Output in 1953 was 6 percent below that of 1952. In Shoshone County, Idaho, the location of the nation’s largest single source of silver, slightly lower production was forthcoming in 1953 due to mechanical failure and some technical reorganiza tion. Total silver output in the seven western states amounted to 27,402,670 fine ounces, its value being $24,800,800. Canned fruit and vegetable pack declines District canners of fruits and vegetables were faced with relatively minor adjustments during 1953. A pru dent attitude by packers toward the cost of raw materials was present at the beginning of the packing season. The unsettled business outlook was considered to be the prin cipal reason for this attitude. However, a smaller than ex pected decline in business activity along with the develop ment of export markets for some District packed fruits and lower freight rates may have somewhat modified the basis for this attitude. Generally, the industry continued to face many of the problems evident in 1952. The increas ing consumer preference for a smaller container and the declining number of distributors may present some pack ing and merchandising problems. The 1953 District pack of canned fruits and vegetables of about 63 million cases was above the average of the 1948-50 period but considerably less than the 1952 pack of 73 million cases. Tomatoes and tomato products proc essed for canning were over 11 million cases less than the 1952 pack and were primarily responsible for the smaller total pack. Carry-over stocks of most canned tomato prod ucts have been increasing during the last few years despite reduced tomato acreage. Progressively higher yields of to matoes have partially offset the reduced acreage. A re duction in 1953 California acreage of about 30,000 acres, 28 percent, from the 1952 level may halt further accumu lation of carry-over stocks. In the Pacific Northwest, the volume of fruits and vegetables canned in 1953 was slight ly larger than the 1952 pack. Corn and beans accounted for sizable increases in the vegetable pack while pears, apples, and dark sweet cherries were the only fruits with larger packs than in 1952. Movement from California canneries of cling peaches, tomatoes, and tomato products was considerably behind the 1952 rate during the period June 1 to December 1. An increase in carry-over stocks of these packs may occur un less a more rapid rate of movement should develop. Re cent evidence indicates that the rate of movement is pick ing up and with the possibility of considerable cling peach exports to England under Section 550 of the Foreign Assistance Act, the carry-over situation may not be so disturbing. Margins and profits of the District canning industry appear to have been less in 1953 than during the previous year. Since tomatoes and cling peaches are the raw ma terials for about three-fourths of California’s canned fruit 29 and vegetable pack, changes related to these two items will roughly indicate what has happened to the industry as a whole. Raw material costs of cling peach and tomato canners were lower in 1953 than in 1952, but this ad vantage was largely offset by the lower prices which canners received for the canned product and by the higher cost of cannery labor. In addition, the large unsold carry over from the 1952 pack, composed principally of toma toes and tomato products, represented a relatively high cost investment. The cling peach pack was larger in 1953 than in 1952 and, consequently, the increased volume may largely offset the lower profit margins of cling peach can ners if sales increase as anticipated. Tomato canners and processors are in a less favorable position as both volume and margins appear lower. Also, from the standpoint of the industry as a whole, with a smaller combined pack of tomatoes and cling peaches and lower profit margins per unit, total canner profits for the season may fail to equal those earned in 1952. Some informed sources feel that the continued trend of consumer preference for smaller sized containers was per haps the most significant phase of the 1953 season. The principal difficulty that this suggests is the problem of packing economically a continued high volume of raw material in the smaller units with existing canning facili ties. Changes in the structure and practices of the market ing institutions which distribute cannery products also have been recognized and are being scrutinized by the canning industry. Among such changes is the trend toward fewer and larger distributors and the tendency for these distributors to operate with a smaller inventory. The practice of operating on such a basis may be shifting a larger part of the burden of financing inventories to the canner level. A relative decrease in distributors’ inven tories has tended to increase the frequency and reduce the size of shipments from the canner to distributors. Various actions have been taken by canning firms to strengthen their position. Some firms have taken the course of greater product diversification to minimize their dependency on any one raw product and others have ex panded into other fields of food processing, such as frozen food, which are closely allied with the canning industry. Despite the problems imposed on the canning industry by changes in consumer preference and distributor organ ization, some developments were beneficial. The sale of western canned goods in eastern markets has been con tracting due to increasing freight rates since the end of World War II. However, a reduction in rates became effective for transcontinental lines on November 12, 1953 and on February 12, 1954 for eastern lines. The effect of these announcements would be to expand the domestic market in which District canned goods can compete. The development of the export market for prunes under Sec tion 550 of the Foreign Assistance Act has bolstered prune prices, and the possibility of a sizable market under the same program for District canned peaches must also be considered as a favorable prospect. 30 FEDERAL RESERVE B A N K OF SAN FRANCISCO Frozen food pack continues to expand The District pack of frozen fruits and vegetables appar ently continued to increase in 1953. Although data are not available for the Pacific Northwest, the California pack of frozen fruits was 143.7 million pounds, 49.1 million pounds larger than in 1952, while the frozen vegetable pack increased 39.2 million pounds to 282.3 million pounds. Contributing materially to the increase of the California frozen fruit pack was the larger pack of straw berries and melon balls. The 60 percent production in crease of frozen strawberries in California was of partic ular intra-district interest as the Pacific Northwest has been the major frozen strawberry producing area. Beans, brussel sprouts, and spinach showed large increases in the California frozen vegetable pack. Though increases pre dominated, there were several declines. Peas and broccoli had the dubious distinction of being the only two major California frozen vegetable packs that were smaller in 1953 than in 1952, while apples and blackberries held this distinction in the frozen fruit field. In the frozen fruit juice category, frozen lemonade production increased sharply to 9.2 million gallons during the past season from 5.8 mil lion gallons.1 Nationally, the 1953 pack of frozen fruits, berries, and fruit juices established a new record of 1,150 million Reason ends October 31. February 1954 pounds, 14 percent larger than for the preceding year. Individual packs of strawberries, cherries, orange juice concentrates, and lemonade concentrates were also at rec ord levels. In addition to the total pack being 14 percent larger than in 1952, stocks of these frozen fruit products on December 31, 1953 were 27 percent larger than on the same date a year before. Based on available data, the United States pack of frozen vegetables also was a record pack, and stocks of frozen vegetables at the end of the year were 30 percent larger than at the close of 1952. The frozen food industry is not only at a new peak of production but also may be on the brink of a situation similar to that which existed in 1946-47. During this pe riod, practices such as under-selling and conditions such as low quality products and large inventories forced many processors to terminate operations. The industry made further adjustments by improving the quality of the prod uct and changing its merchandising policy. Since that time, the industry has again expanded rapidly and prices of frozen fruit and vegetable products have declined rela tive to fresh and canned prices. Most of the increase in the pack has been accomplished by an expansion in the output of firms already in the industry rather than by entry of new firms, and economies of operation associated with in creased volume could be expected to partially justify the relative price decline. RETAIL SALES REACH A RECORD HIGH DURING 1953 n co u r ag ed by an increase in disposable income and a general stability of prices, consumers in both the E Twelfth District and the nation increased their dollar pur chases from retail outlets to an all-time high during 1953. Despite a downward trend in seasonally adjusted sales of both durable and nondurable goods during the second half of the year, retail buying remained high over each of the twelve months of 1953. Estimated total retail sales in the nation for the year were $171 billion, a 4 percent in crease above the previous record high figure of 1952. This 4 percent increase in retail purchases accompanied by an over-all stability of retail prices during the year meant that consumers had experienced a rise in the real as well as the monetary value of their consumption. From avail able regional indicators it appears that the trend in Twelfth District retail sales was much the same as in the country as a whole. Consumer expectations were realized during the year While retailers in the beginning of 1953 spoke of im pending downturns and minor recessions, consumers con templated increasing their current-year buying above their record volume purchases of 1952. The results of the Federal Reserve Board Survey of Consumer Finances, taken early in the year, indicated that buyers were appar ently optimistic about their durable goods purchases dur ing 1953. Their strong buying outlook for the year was based in part upon an optimistic anticipation of a rise (or constancy) in personal income and a general stability (or lowering) of prices, expectations which were on the whole realized. Personal income, despite a decline during the final quarter, climbed to $284.6 billion for the year, a 5.5 percent increase above 1952. Retail prices showed only minor fluctuations, with the consumer price index rising less than 1 point over the entire year. As shown by the Federal Reserve Board study, con sumers also felt confident about their personal finances at the beginning of the year. This initial confidence together with continued rising income over most of the year en couraged buyers to extend their credit purchases. By the end of 1953 total short- and intermediate-term consumer credit climbed to $28.9 billion, a $3 billion rise during the year. Total retail sales reach new high in 7953 In contrast to a low volume of trade in early 1952, the nation’s retailers rang up large dollar sales during the first quarter of 1953. Total retail sales during the first quarter of 1953 were 8 percent larger than in the corresponding period of 1952. Consumer buying continued high through the second quarter but, owing in part to large sales in the spring months of the previous year, showed only a 4 per cent gain over year-ago sales. The sales momentum in the early part of the year continued into the third quarter, but it came to a halt in August. Despite the drop in buying February 1954 31 M O N T H L Y REVIEW SA L E S O F A L L R E T A I L S T O R E S — U N I T E D S T A T E S , 1952 and 1953 (Adjusted for seasonal variation) Billions of dollars percentage rise was not larger was that apparel sales fell into a third-quarter slump, owing in part to mild weather during the autumn. A weak recovery occurring during the final quarter was not sufficient to bring the total ap parel sales figure up to that of 1952. In all, total sales by apparel stores for the twelve months showed a 3 percent decline from 1952. Retailers increase inventories during 1953 over the latter months of the year, however, the nation’s retail sales continued high. As shown in the chart, October and December were the only months during the year in which sales fell below the corresponding month figure of 1952, and then the drops were only minor. In all, total retail trade in the nation during 1953 climbed 4 percent above the previous year’s total. The large volume of durable goods purchases and the continued rise in consumer credit buying during the year were probably a reflection of consumer optimism. In line with the expectations indicated in the Federal Reserve Board study, durable goods sales remained high over the year as a whole. Despite the slight tapering off during the second half of 1953, durable goods purchases for the year increased 9.6 percent above 1952. Automobile dealers had the largest percent gains. For 1953, automobile sales were 18 percent larger than in 1952. The resulting large in crease in automobile paper accounted for most of the rise in total consumer credit. Over the calendar year dollar financing through automobile paper increased by $2.2 bil lion and accounted for approximately 71 percent of the rise in total consumer credit outstanding. In general, retailers in nondurable goods lines also shared in the high level of consumer spending. Except for a slower rate of decline during the latter half of the year, nondurable goods sales paralleled those of the durable goods sector. For the year as a whole nondurable goods buying increased 1.3 percent over 1952. One reason this p e r c en ta g e a n d c h a n g e in sales of g r o u p District retail trade parallels that of the nation Although there exists no available estimate of total re tail sales on the District level, Twelfth District depart ment store data published by this bank and the Retail Trade Report of the Department of Commerce give some indication as to the movements of regional trade during the year. A comparison of sales of selected commodities seems to indicate that Twelfth District retail sales during 1953 paralleled sales in the country as a whole. District p e r c en ta g e appar el —u n i t e d 1953 C O M P A R E D W I T H 1952 f u r n it u r e The trend of inventories held by the nation’s retailers during the past year was in marked contrast to the per sistent decline during 1952. Total retail inventories after adjusting for seasonal factors rose during the first 9 months of 1953 and then declined in the final 3 months. Thus the decline in inventories late in the year lagged about 3 months behind the drop in retail sales. In so far as large year-end inventories represent involuntary accu mulations, the nation’s retailers— and in particular auto mobile dealers— had reason for concern. Total retail stocks at the end of the year were $1 billion above 1952, with approximately 58 percent of the total increase held by the nation’s automobile dealers. Automobile dealers’ inventories in December equalled about 1.5 months of sales at the latest sales rate. The fourth-quarter decline in inventories throws some light on the business downturn during the closing months of the year. The decrease in retail inventories together with the production cutbacks and rising unemployment indicates that retailers met the high level of consumer de mand by dipping into stocks. Following the earlier invol untary accumulation of inventories, the nation’s retailers were apparently undertaking an inventory adjustment late in 1953. stores states F U R N IT U R E S T O R E S A PPA REL STORES + 1 0 1 ---------------------------------------------------------------------------------------------------------------------------------------- in sales of appar el (N o adjustment for seasonal variation) (N o adjustment for seasonal variation) Percent change c h a n g e A N D F U R N I T U R E G R O U P ST O R E S — T W E L F T H D IS T R IC T , 1953 C O M P A R E D W I T H 1952 , Percent change F U R N IT U R E S T O R E S A P P A R EL STO RES + 10 +5 0 —5 —10 —10— 15 1 1st Q __________________________________________________________________________ 2nd Q 3rd Q 4th Q Year IstQ 2nd Q 3rd Q 4th Q Year — 15 1st Q 2nd Q 3rd Q 4th Q Year IstQ 2nd Q 3rd Q 4th Q Year 32 FEDERAL RESERVE BA N K OF SAN FRANCISCO I N D E X O F D E P A R T M E N T ST O R E S A L E S -T W E L F T H 1952 and 1953 D IS T R IC T , (Adjusted for seasonal variation, 1947-49=100) sales apparently climbed during the early months and then began to lag over the latter part of the year. The de cline in retail trade of selected District cities, however, seems to have preceded that of the nation. “ Large” stores reporting to the Department of Commerce in selected met ropolitan areas of the District began to show a downturn about May. Despite this drop, this source reported that retail sales in 1953 were higher than in 1952. In the nondurable goods sector, sales by apparel stores in the District declined from 1952 levels, paralleling the experience in the country as a whole. Sales of both District department stores and “ large” apparel stores in selected cities in the District bear out this change. Twelfth District department store sales in the men’s and women’s apparel departments were down 2 percent relative to 1952 apparel sales. Similarly, the large apparel stores in the Los Angeles and the San Francisco-Oakland metropoli tan areas registered year-to-year declines. In the durable goods sector, sales of furniture stores in the District appeared to be somewhat in contrast to the February 1954 national trend. Over the nine-month period— April through December — sales by District furniture stores were down 4.4 percent below the corresponding period of 1952. Year-ago comparisons for each of the last nine months of the year showed relative declines. In all, total sales in 1953 by District furniture stores were 4.4 percent below 1952. As indicated by the Department of Com merce trade report, sales in 1953 by the “ large” home fur niture and appliance stores in Seattle, Los Angeles, and San Francisco-Oakland also declined below 1952. Automotive group stores in the District apparently rang up the largest percentage gains. The number of new passenger cars sold in California in 1953 was 451,000, a 29 percent rise above 1952. Similarily, new passenger car registrations in Washington were 21 percent larger and in Oregon 19 percent larger than during 1952. Thus, from all indications total District sales by automobile dealers paralleled those of the country as a whole. Because department stores do not handle certain im portant durable and nondurable goods, their sales cannot be expected to indicate changes in total retail trade. H ow ever, a comparison of District department store sales and national department store sales published by the Board also points to a similarity in the time pattern of sales be tween the District and the country as a whole. The na tion’s total department store sales, after accounting for seasonal variations, followed much the same pattern as the District series charted herewith— both showing a de creasing trend after May of the year. This earlier decline in total department store sales compared to total retail sales in the nation is explained in large part by the mer chandise they sell. The major items— apparel and home furnishings— sold by department stores suffered the largest and earliest declines in sales during 1953. FOREIGN TRADE: A LONG BEAT TO THE W IN D W A RD h e total foreign trade of our nation in 1953 registered Ta modest gain of 2.7 percent over 1952. This small gain, however, was not realized without considerable tack ing back and forth across the track line followed to reach this point. Furthermore, if military aid shipments are ex cluded, there was no gain at all, but instead a decline of 3.4 percent. United States imports in 1953 totaled $10,874 million, only slightly above the $10,718 million received in 1952. In spite of the small net change for the year as a whole, there were significant fluctuations during the course of the year. For the first three quarters imports were above comparable quarters in 1952 but a relatively sharp drop (7 percent below the year-ago level) during the last quar ter reduced the total for the year. This last quarter de crease becomes more significant when it is realized that normally there is a seasonal increase during this quarter. Total United States exports in 1953 were $15,747 mil lion, about 4 percent above the $15,191 million shipped in 1952. However, if military aid shipments of $3,504 million in 1953 and $1,988 million in 1952 are excluded from the export totals, there was a decline of more than 7 percent. This latter comparison is a more realistic meas ure of the condition of our export trade since the inclusion of military aid shipments disguises the decline which took place in the civilian or commercial sector of our export trade. The trend of exports during the course of 1953 was the opposite of that of imports. While imports were rela tively high during the first part of the year and turned downward during the late months of the year, exports were down during the first half of the year and turned up moderately during the last half. Comparative trends in Pacific Coast foreign trade Pacific Coast exports for 1953 amounted to $1,129 million, which was 14 percent below the $1,314 million shipped in 1952. Exports were below 1952 levels for every month in 1953, with the exception of July, N o vember, and December, and thus the trend of Pacific February 1954 33 M O N T H L Y REVIEW V A L U E O F F O R E I G N T R A D E - P A C I F I C C O A S T , 1951-53 Pacific Coast commodity trends— exports The relatively poor showing of Pacific Coast exports compared with the nation reflects the greater relative im portance of agricultural exports to this District. Most of the decline in United States nonmilitary exports consisted of a decline in agricultural exports; exports of finished manufactures were well maintained. In the late months of the year, however, there was some recovery in agricultural exports and a small contraction in finished manufactures. Within the agricultural group those exports which were most vulnerable during the year were commodities which are of major importance to the Pacific Coast, in particular wheat and cotton. These two commodities, and to a much lesser extent rice, accounted for most of the decline in Pacific Coast exports for the first ten months of the year, compared with the corresponding period of 1952. Coast exports compared unfavorably with that of the country as a whole. United States exports in 1953 were up 4 percent compared with 1952, and even if military aid shipments are excluded from the national totals the resulting 7 percent decline was much less than the de cline in total exports1 from the Pacific Coast. Further more, the recovery of United States exports, which began in July 1953, did not occur on the Pacific Coast. While the trend of Pacific Coast exports compared un favorably with that of the nation, the opposite was true in the case of imports. Pacific Coast imports of $912 million in 1953 were 9 percent above 1952. This was consider ably more than the national increase of 2 percent for the same period. In the direction of change during the year the Pacific Coast followed the national trend, although the magnitudes of the changes were greater. During the first three quarters of the year Pacific Coast imports were 16 percent above 1952 compared to a national increase of 5 percent. For the last quarter, however, Pacific Coast imports were down 7.1 percent below the fourth quarter of 1952, approximately the same as the 7.4 percent de crease for the country as a whole. l Data on military aid shipments are not available for individual customs districts. Wheat: Data are available on the volume of wheat ex ports from the Pacific Coast for the entire year 1953. Wheat exports for the year were 28 percent below those of 1952 and for the last quarter of the year were 44 per cent below the last quarter of the prior year. This reduc tion in wheat exports was largely responsible for the 31 percent decline in the value of exports of the Oregon cus toms district for the year, and also for the 14 percent decline in the exports of the Washington customs district. Cotton: For the period from January through October 1953 Pacific Coast cotton exports of $71.2 million were 58 percent below the $168.3 million shipped during the same period in 1952. On a weight basis the decline was 48 percent. For the Los Angeles customs district, through which most of the cotton moved, the value of cotton ship ments dropped 49 percent, or from $105.6 million to $53.7 million. Lower cotton shipments were entirely responsible for the 15 percent decline in the total exports of Los An geles during this period, and, in fact, other exports on balance offset more than a fourth of the decline caused by the contraction in cotton shipments. In the case of the San Francisco customs district, through which the rest of Twelfth District offshore exports of cotton moved, the percentage decline in cotton exports was even greater than that of Los Angeles. Cotton exports were down over 72 percent from $62.8 million to $17.5 million. San Fran- V a l u e o f P a c i f i c C o a s t F o r e i g n T r a d e , 1947-53 (in millions of dollars) Customs district Total Pacific Coast . Total United States 1947 34.5 258.6 397.5 156.1 224.7 1,071.4 14,429.7 1948 34.4 183.1 262.9 63.0 185.6 729.0 12,653.1 1949 35.0 254.3 307.4 69.6 147.1 813.4 12,051.1 1950 40.7 249.1 271.4 75.7 116.3 753.2 10,275.1 1951 60.4 348.7 371.8 237.2 246.4 1,264.6 15,032.4 1952 64.7 307.3 400.6 250.6 290.4 1,313.6 15,191.3 15,747.0 Imports : San D i e g o ............ .. Los A n g e l e s .................... San Francisco ............... Oregon ............................. Washington .................... Total Pacific Coast . Total United States . 8.8 112.2 174.6 19.4 101.1 416.1 5,643.3 13.5 144.8 184.1 18.1 146.7 507.2 7,092.0 11.3 151.4 211.4 16.8 141.0 531.9 6,591.6 13.0 214.3 269.5 25.9 185.0 707.7 8,743.1 16.9 282.9 345.4 33.9 220.1 899.2 10,967.3 31.7 234.3 320.2 29.4 217.6 833.2 10,717.5 17.2 261.8 376.3 33.2 223.1 911.6 10,873.7 Exports : San Diego ...................... Los A n g e l e s .................... San F ra n cisco ................. Oregon ............................. Washington .................... N o t e : This table includes trade by all methods of transportation, excluding military shipments. Source: United States Department of Commerce, Bureau of the Census, F T 970, Trade by Customs District. 1953 68.2 269.2 368.2 173.5 249.5 1,128.6 34 February 1954 FEDERAL RESERVE B A N K OF SAN FRANCISCO cisco’s total exports were down 13 percent for the tenmonth period, and, as in the case of Los Angeles, cotton was the major factor. The $45 million decline in cotton shipments exceeded the decline in all exports of $43 million. Rice: Pacific Coast exports of rice, all of which moved through the San Francisco customs district, declined from $20.7 million for the January-October period in 1952 to $16.7 million in 1953, a 24 percent decrease. During the last two months of 1953, however, the tonnage of rice shipments apparently increased and as a result the yearend value figures may show a much smaller decline than indicated by the first ten months of the year. Pacific Coast commodity trends— imports The increase in Pacific Coast imports during 1953 was a general one; every customs district, except San Diego which accounted for less than 2 percent of the total, showed a gain over 1952. The increase was also fairly gen eral with regard to commodities, but the increases in coffee and crude petroleum imports were the most sig nificant. Coffee: For the period January-October 1953 coffee imports amounted to $189 million, 16 percent above the same period a year earlier. The only customs district to show a decline was Los Angeles and there the drop was small. Out of the total increase in coffee imports of $26 million the San Francisco customs district accounted for $23 million, and this was a major factor in the total in crease in this district’s imports. The increase in San Fran cisco’s total imports was the largest of any Pacific Coast customs district and amounted to $54 million, or 21 per cent more than in 1952. Crude Petroleum: The value of crude petroleum im ported through the Los Angeles customs district increased 147 percent from $8.1 million for the first ten months of 1952 to $20 million for the comparable period in 1953. For the same months the increase through the San Fran cisco district was 152 percent, from $9.5 million to $24 million. There were no crude petroleum receipts at other Pacific Coast ports. For the entire year it is estimated that the value of crude petroleum imports totaled $52 million, about two-and-a-half times the 1952 value. In terms of actual barrels imported there was a 138 percent increase over 1952 for the whole year 1953, or an increase from 11.9 million barrels to 28.4 million barrels. Physical volume of foreign trade In contrast to the unfavorable trend relative to that of the nation in the value of Pacific Coast foreign trade, in tonnage terms the Pacific Coast fared comparatively well. For some purposes the actual tonnages of cargo handled are more significant than the value figures. Moreover, the use of weight rather than value data permits at least a partial elimination of the influence of price changes. The tonnage of the total waterborne foreign trade of the Pacific Coast was up almost 3 percent over the com parable 1952 period compared with a 5 percent decrease for the United States. As was true in the case of the value comparisons made earlier, decreases in the tonnage of ex ports were partly offset:, or completely offset, by increases in import tonnage, both for the Pacific Coast and for the nation. On the Pacific Coast the decrease in export ton nage was 21 percent and the increase in import tonnage was 61 percent. For the United States the comparable changes were a 23 percent decrease in exports and a 13 percent increase in imports. Ship movements For those who are interested in the amount of port activity the number of ship arrivals and departures is a useful measure. During 1953 ship arrivals at major Pa cific Coast ports, including both domestic and foreign trades, numbered 14,697, a 4 percent increase over the number arriving in 1952. The aggregate net tonnage of the ships was 7 percent higher in 1953. The only port to show a decrease in ship arrivals was Portland, where ar rivals numbering 1,438 were about 8 percent below 1952. Both the largest number of arrivals and the largest per centage increase over the earlier year was shown by the Los Angeles-Long Beach port area, with 5,907 arrivals and a 10 percent increase. San Francisco Bay ports berthed 5,099 ships, a 3 percent increase, while Seattle arrivals of 2,253 were virtually the same as a year earlier. V o l u m e o f P a c i f i c C o a s t W a t e r b o r n e F o r e i g n T r a d e , 1947-53 (shipping weight in millions of pounds) Customs district Exports : San D i e g o ................................................ Los A n g e l e s ............................................ San F r a n cisco ......................................... Oregon ..................................................... W a s h in g to n .............................................. 1947 3.9 7,775.8 5,449.8 4,495.9 2,960.0 20,685.4 248,636.5 1948 6.2 6,167.4 4,238.0 1,397.8 2,037.1 13,846.4 176,623.1 ............... Los A n g e l e s ............................................ ............... ............... ............... ............... ............... 20.5 1,297.2 1,469.9 181.5 1,730.0 4,699.1 ............... 118,130.6 19.7 1,540.6 1,546.3 123.2 2,425.6 5,655.4 134,832.3 ............... ............... ............... ............... ............... Total Pacific C o a s t ........................ ............... Total United S t a t e s ...................... ............... 1952 143,729.2 1.0 7,805.8 3,480.0 1,850.9 1,371.0 14,508.7 125,350.5 1951 0.6 14,155.7 5,836.6 6,371.4 3,436.7 29,801.0 231,173.0 1.5 9,924.6 7,580.2 6,356.5 3,547.6 27,410.5 205,373.5 27.1 2,233.9 1,990.2 112.5 2,593.8 6,957.5 154,741.8 30.0 2,536.5 2,032.4 '208.2 3,116.4 7,923.6 193,379.7 27.9 2,770.6 3,138.5 272.2 2,835.8 9,045.0 201,089.9 61.9 3,761.1 4,446.1 279.9 2,983.3 11,532.4 214,746.9 1949 2.4 6,807.0 3,809.0 1,473.2 1,466.6 13,558.2 1950 Jan.-O ct. 1953 4.5 7,321.7 5,020.1 4,107.3 2,179.3 18,633.0 136,616.7 Imports : N o te : This table includes only nonmilitary vessel shipments. „ w ™ » r, .. ^ „ Source: United States Department of Commerce, Bureau of the Census, F T 972 and F T 985, Waterborne Trade by United States Port. 43.2 5,769.0 5,902.3 316.2 3,150.9 15,181.7 197,461.8 February 1954 M O N T H L Y REVIEW The outlook for foreign trade in 7 954 It is difficult to predict the course of foreign trade. So far in 1954 the slump in imports has continued, reflecting, in part at least, the lower level of business activity in re cent months. If business activity continues to remain at a reduced level, a lower level of imports can also be ex pected. The level of our imports is likely to be one of the more important determinants of the volume of our ex ports in 1954. However, with the growth of offshore pro curement under the millitary aid program, sources of dollar payments other than through our purchases of for eign merchandise for import into the United States should remain at or about the 1953 level, and some foreign coun tries, particularly in Europe, would be able to maintain purchases from the United States without drawing down their reserves of dollars and gold. Increasing production abroad has diminished dependence upon this country as a source of supply, as compared with earlier years, but it is not clear whether this factor will have any greater effect in 1954 than in 1953. Some countries believe that their hope of achieving convertibility with the aid of ade quate reserves seems nearer attainment, and restrictions on imports from the United States have been relaxed in some cases. 35 The somewhat lower level of United States foreign trade which is indicated for the present year can be ex pected to be reflected on the Pacific Coast. There are additional factors, however, which perhaps make the outlook for Pacific Coast trade more unfavorable than for the country as a whole. W orld production of wheat and cotton is substantially above indicated world demand, and with large stocks both here and abroad, the outlook for the export of these very important commodities in Pacific Coast export trade is not favorable. Some assistance, how ever, may come from Government programs for the ex port of surplus agricultural products. It is also doubtful that the gains in Pacific Coast im ports during the past year can be maintained. While cof fee imports will probably continue at a relatively high level, it is unlikely that the record set in 1953 will be re peated because of recent sharp price increases and the large imports during the last month of 1953. Similarly, the high level of crude petroleum imports in 1953 cannot be expected to continue. During the last quarter of 1953 crude petroleum imports were considerably below the pre ceding two quarters, and recent statements from the petro leum industry indicate that a cut of as much as 45 percent can be anticipated during the first half of 1954. BAN K IN G AN D CREDIT IN A YEAR OF CHANGING MONETARY POLICY developments of 1953 offered the best opportunity since the Treasury-Federal Reserve System “ accord” of 1951 to test the role of a flexible monetary policy as a stabilizing influence in the economy. During most of the first half of the year it was considered desirable to restrict the supply of bank credit in order to contribute toward restraint of the continuing inflationary pressures result ing from strong demands for credit. To accomplish this, steps were taken to increase the cost of member bank bor rowing and to keep the excess reserves of member banks at a relatively low level. The Federal Reserve Banks in creased the re-discount rate from 1¿4 percent to 2 percent in mid-January and during the first quarter sold Gov ernment securities in the open market. A continued active demand for credit was accompanied by a rapid tightening in the money market as spring pro gressed. This demand impinged heavily not only upon the banks but upon the capital markets as well. Interest rates rose sharply, especially in May. A growing concern that later on the supply of credit might be inadequate to satisfy the demand led to some additional borrowing in the first half of the year. About this time the inflationary threat subsided and was replaced by considerable evidence that credit restraints had become unduly restrictive in the changing situation. In response to these developments and in anticipation of the usual seasonal expansion in private credit require ments as well as heavy Treasury borrowings in the sec ond half, the Federal Reserve System began to follow a policy of easing the money market. About mid-May the h e T System started to increase its holdings of Treasury bills through purchases in the open market, thereby increasing member bank reserves approximately $1,157 million by the middle of July. The situation was also eased by the freeing of about $1,156 million of member bank reserves through a reduction early in July of required reserves of member banks by the Board of Governors. Later in the year the System further increased member bank reserves by additional purchases of Treasury bills. Partly as a re flection of these actions by the Federal Reserve System, the average monthly volume of member bank borrowings was considerably lower in the last half of the year than it was in the first half. As in the case of any single economic factor, it is diffi cult to evaluate the actual results of the flexible monetary policy followed during the year. Nevertheless, some in dications can be given. There seems little question but that the moderately restrictive monetary policy in the first half of the year, when total demand for credit was un usually strong, contributed to economic stability. Had the System made bank reserves available in sufficient quantity to permit all demands to be filled, it is likely that undesirable inflationary pressures would have been cre ated. As it was, not all credit demands were met in full and the danger of inflationary pressures was lessened as a consequence. In recognition of a change in the economic and credit situation and in view of the anticipated seasonal increase in private credit needs and the Treasury’s greater needs in the second half of the year, steps were taken to ease 36 FEDERAL RESERVE B A N K OF SAN FRANCISCO the money market. However, a variety of factors, some of which are discussed in the first article in this issue of the Review, led to some tapering off in business activity in the second half. As a result, total loans outstanding at member banks increased by much less than the usual sea sonal amount. Commercial and industrial loans outstand ing at member banks, both in the Twelfth District and in the nation, declined in the last six months of 1953, in con trast to the marked seasonal expansion that usually oc curs. The rate of growth in consumer loans also slowed down substantially after midyear. While the policy of easier money did not prevent the decline in business ac tivity, it is clear that the decline was not accentuated by the lack of bank credit. Economic stability depends not only on monetary pol icy, but also upon a proper coordination between it, fiscal policy, and the economic behavior of the business com munity generally. Monetary policy is more effective in checking inflation than deflation. It can exercise a re straining influence upon the granting of too much bank credit in times of inflation, but it cannot force business firms and individuals to borrow in times of recession. Twelfth District loan expansion Total loans of Twelfth District member banks rose by $380 million in 1953 compared with increases of $973 million in 1952, $773 million in 1951, and $1.2 billion in 1950. More than four-fifths of this increase occurred in the first half of the year, reflecting a continuation of the upward movement of loans that began in the last six months of 1952. The small increase in total loans out standing during the last half of the year occurred entirely in the third quarter, since during the last quarter there was a small decline. Real estate loans accounted for 57 percent of the in crease in total loans in 1953; consumer loans, 42 percent; and non-real estate loans to farmers, 14 percent. Com mercial and industrial loans decreased 16 percent. This marks a considerable change from 1952 when real estate loans accounted for only 28 percent and business loans for 20 percent of the total increase. Consumer loans ac counted for about the same share of the increase in both years. The dollar amount of the increase in real estate loans outstanding, while somewhat under that of 1952, reflects the continued high level of construction activity in the District during 1953. F H A residential mortgages made up the major part of the growth in total real estate loans held by District member banks, although conventional mortgages on residential property and commercial and industrial mortgages also contributed to the increase. Partly offsetting the growth in these mortgage holdings was a decrease in holdings of Veterans’ Administration mortgages and mortgages on farm lands. By the end of April farm mortgages outstanding had reached $111 mil lion, the highest they have been since World War II. During the second and third quarters farm mortgages fell February 1954 slightly from this high point, but in the fourth quarter the decline was very sharp. Toward the end of 1953 commercial banks in the United States and in the Twelfth District reduced their portfolios of consumer instalment loans. Automobile in stalment paper, repair and modernization loans, personal instalment cash loans, and other retail instalment loans outstanding dropped during the fourth quarter. This re flects the tapering off in business activity since all types of consumer instalment credit ordinarily show a growth during the last three months of the year. However, on a yearly basis Twelfth District consumer instalment credit outstanding at commercial banks increased by $156 mil lion in 1953. Approximately 85 percent of this growth occurred in automobile instalment paper. All other types of consumer instalment paper outstanding increased mod erately with the exception of cash loans to individuals which showed a slight reduction from 1952. Member banks in the Twelfth District and United States made substantial increases in their non-real estate loans to farmers in the last six months of the year, partly as a result of large purchases of Commodity Credit Cor poration Certificates of Indebtedness bearing percent interest which were classified as loans. Falling farm prices necessitated the expansion of Commodity Credit Corpo ration-guaranteed loans in the last half and apparently made farmers more cautious in their borrowing from banks for other purposes. While in the last half of the year there tends to be some reduction in the amount of non-real estate loans (excluding CCC loans) outstanding to farmers, the decline in the last half of 1953 was very substantial, offsetting the relatively small increase in such loans in the first half. For the year as a whole the total outstanding loans of this type fell by more than $56 million. Business loans outstanding at Twelfth District mem ber banks fell by approximately $61 million during the year, which is the first yearly decline since 1949. AlL O A N S O U T S T A N D I N G A T T W E L F T H D IS T R IC T M E M B E R B A N K S (End of June and December, 1950*53) Billions of dollars February 1954 though business borrowing usually increases in the latter half of the year, nearly two-fifths of the yearly decline occurred in the last six months of 1953. This marks the first postwar year in which a decline in the last half has occurred and reflects the slackening pace of business ac tivity. The evidence furnished by weekly reports from banks classifying their major loans by industry indicates that the last-half decline was due mainly to substantial net repayments by sales finance companies and wholesale and retail traders. Sales finance companies paid off a large portion of their outstanding debt at commercial banks as a result of financing received from non-bank sources. Contributing to the general reduction in business loans outstanding wTas the fact that those industries which did increase their borrowings, such as commodity deal ers and food, liquor, and tobacco manufacturers, did so at a slower rate than in previous years. On a year-to-year basis only a few industries expanded their borrowings. Public utilities and transportation firms had the largest net increase in borrowing, reflecting cur rent expansion and possibly the postponement of longerterm security financing in the expectation that later in terest rates would be more favorable. During the early months of 1953, the net borrowings of public utilities and transportation lines were relatively small. In the second quarter, however, their bank borrowings were sufficiently large to offset the minor decline that occurred late in the year. All other groups reported either a less than seasonal expansion or a contraseasonal decline in outstandings. Security holdings All banks, as well as all member banks, in the United States increased their holdings of Government securities during the year but at a much slower rate than in 1952. In the last half of the year banks continually added to their holdings, while in the earlier part of the year they had sold securities in order to obtain funds to meet the relatively strong demand for bank loans. With the acqui sition of additional reserves and the reduction of their debt at the Federal Reserve Banks, member banks found Government securities more attractive than previously. Consequently their holdings of Governments were in creased in the latter part of the year sufficiently to more than offset the sales made in the earlier part of the year. This last-half increase was also possibly a result of the failure of loans to expand by the usual seasonal amounts, so that banks turned to Governments to supplement their earnings. Twelfth District member banks increased their Gov ernment security holdings by more than $100 million during 1953. This is sharply different from the total in crease of $25 million reported for all member banks in the country as a whole and is much larger than the in crease recorded by the .member banks in any other Dis trict. However, the growth in the Twelfth District hold ings was less than it was in either 1951 or 1952. The year 1953 also differed from the two previous years in that the dollar increase in Government securities held ex- 37 M O N T H L Y REVIEW M o n e y R a t e s a n d Y ie l d s 1 (percent per year) 195 0 : 1951: 195 2 : 1953 : Prime commerUnited States Government C orcial t--------------Securities (taxable)--------------^---porate paper, 3-month 9- to 12- 3- to 5- Longbonds 4 - to 6- Treasury month year term (highmonths bills* issues issues issues grade)3 1.174 1.23 1.47 2.33 2.62 J u n e ...................... ....1.31 December ____ __1.72 1.367 1.46 1.64 2.39 2.67 March ................. ....2.06 1.422 1.79 1.86 2.47 2.78 June ........................2.31 1.499 1.79 2.00 2.65 2.94 1.646 1.71 1.93 2.56 2.95 September ____ __2.19 December ____ __2.31 1.731 1.77 2.09 2.70 2.97 March ................... 2.38 1.658 1.69 2.02 2.70 3.12 June ........................2.31 1.700 1.74 2.04 2.61 3.40 1.786 1.95 2.28 2.71 3.29 September ____ __2.31 D e c e m b e r ..............2.31 2.126 2.03 2.30 2.75 2.97 2.082 2.04 2.46 2.89 3.12 March ................... 2.36 June ................... ....2.75 2.231 2.46 2.92 3.09 3.40 September ____ __2.74 1.876 2.17 2.69 2.97 3.29 D e c e m b e r ..............2.25 1.630 1.61 2.20 2.79 3.13 1 M onthly averages. 2 Rate on new issues. 3 M oody’s Aaa. Source: Board of Governors of the Federal Reserve System and United States Treasury Department. ceeded the increase in corporate and municipal security holdings. The maturity structure of the United States Govern ment securities portfolio held by member banks in the Twelfth District also changed over the past year, pri marily in that certificates and notes increased substan tially while bills and bonds decreased. This reflects in part the change in the composition of the public debt. During the year the Treasury moved away from Treas ury bills, preferring to increase certificates of indebted ness and longer-term issues such as notes and bonds. Also accounting for part of the reduction in Treasury bill hold ings was the purchase during the year of these securities by the Federal Reserve System on the open market. Yields reflected a changing monetary policy in 1953 Yields on United States Government securities in the national money market continued the rise experienced in 1952 through the first half of 1953. This reflects mainly a relatively tight money market and heavy demands for credit in the first part of the year. After early June, how ever, the easing of the money market caused the rates to decline. The sharpest drop in monthly average yields on Government securities was in the nine- to twelve-month issues which dropped from an average of 2.46 percent in June to an average of 1.53 percent in November. The new issue rate on three-month Treasury bills also showed a large drop from the high of 2.231 percent in June to a low of 1.402 percent in October. Average monthly yields on three- to five-year bonds and long-term bonds also dropped from a high in June to a low in December. Only the long-term bonds showed an increase in their yield when compared with the average rate during December 1952. On a yearly average basis, however, yields in 1953 were all above the previous year’s average as a result of the high yields in the first half of the year. The three- to five-year issues showed the largest increase— 21 percent above the average for 1952. Treasury bills had the small est increase— only 10 percent— while the average yearly yields of nine- to twelve-month issues and long-term 38 FEDERAL RESERVE BA N K OF SAN FRANCISCO issues were 14 percent and 9 percent above those of 1952, respectively. Prime commercial and high grade corporate securities reacted much as did Government securities, reaching an average high in April through June and then declining to a low in the last quarter of 1953. Movements in the rate of interest on short-term loans at commercial banks did not duplicate the fluctuations in Government and corporate securities in 1953. Rates charged by banks on short-term business loans increased steadily throughout the year. The yearly average interest rate on these loans of reporting banks in the United States reached 3.7 percent which is the highest it has been during the postwar period. In the Twelfth District the average rate of interest on short-term business loans fol lowed the national movement, rising by 13 percent. The largest increases were concentrated in the larger loans, rates on smaller loans already being relatively high. Mem ber bank reserves The relationship between reserves, deposits, and bank credit provides the underlying mechanism through which monetary policy works. The cost and availability of bank reserves influences the lending policy of banks. Reflecting in part the implementation of the restrictive monetary policy, monthly average reserves held by member banks declined in the first half of 1953, reaching a low in May both in the United States and in the Twelfth District. The level of reserves later in the year was affected by the re duction in reserve requirements in early July. The re quired reserves of all member banks in the United States S o u r c e s a n d U se 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 R ese r v e s (in millions o f dollars) Sources of member bank reserves (factors which when positive increase reserves) 1936-40 (average) 1 Reserve bank c r e d it ................. + Change in credit extended to member banks in the District by the Federal R e serve Bank of San Fran cisco. Commercial op era tio n s..........— 180 N et payments from other Districts to banks and the public in the Twelfth D is trict (net Twelfth District payments to other D is tricts — ). United States Treasury o p e r a tio n s ................................+ 311 N et payments from the Treasurer’ s account at the Federal Reserve Bank of San Francisco to banks and the public (net payments to the Treasurer’s account— ) . + . + 132 Total 1950 39 1951 21 - 1952 + 7 1953 — 14 -1141 -1 5 8 2 — 1912 — 3073 + 1198 +1983 +2265 +3158 + + + + 96 380 360 71 (factors which when positive reduce reserves) Total .................................... + Change in member bank reserves ............................. .+ fell $1.1 billion during 1953. Owing to the decline in re quired reserves and a growth in actual reserves, member banks at the end of the year found themselves with fairly large excess reserves for the expansion of loans and in vestments, although their average borrowings from Re serve Banks were substantially less than at the end of 1952. Total reserves of Twelfth District member banks also increased somewhat, reaching a new high of $2,551 mil lion by the end of 1953. The increase of $37 million was considerably less than that in each of the three years prior to 1953, as is shown in the accompanying chart. Member banks in the Twelfth District, as in the nation, had rela tively large excess reserves at the end of the year and had reduced their borrowings from the Reserve Bank sub stantially during the year. Several factors account for the relatively small increase in Twelfth District member bank reserves during 1953. The lowering of reserve requirements in July diminished the need for increasing reserves to cover the growth in deposits. The growth of reserves was also affected by net transfers of funds in and out of the District. The Twelfth District normally gains reserves from an excess of Treasury expenditures over Treasury receipts within its area. In 1953 this excess was the largest it has been since 1945. This net transfer of funds into the District by the Treasury is typically offset in large degree by a net transfer of funds out of the District on commercial account, that is, in payment for goods, services, and se curities. In 1953 this outflow of funds was also larger than it has been in other recent years. The amount by which the net transfer of Treasury funds into the District exceeded the net outflow of funds on commercial account was less than it has been for several years, thereby re straining the growth of reserves in 1953. In contrast, the net demand for currency in the Twelfth District was less in 1953 than in 1952 and 1951, so that there was some what less pressure upon reserves from this source than in those two years. The amount of Reserve Bank credit outstanding in the Twelfth District, which is the principal remaining factor affecting District member bank reserves, declined slightly from December 31,1952 to December 31,1953. However, year-end figures do not tend to be representative of aver age conditions for a longer period of time such as a month. On a monthly average basis, there was a sharp reduction during 1953 in the volume of Reserve Bank credit out standing in the Twelfth District. Member bank borrowing Uses of member bank reserves Demand for currency............ + Change in holdings of coin and currency by banks and the public. Change in nonmember de posits and other Federal Re serve A c c o u n t s ...................... + February 1954 36 — 3 + 39 93 + 14 + 189 + 132 + 39 8 53 — 16 — 5 6 + 136 + 116 + 34 + + 244 + 37 102 244 Since borrowing from Federal Reserve Banks is one of the ways through which banks may obtain additional re serves, it would be expected that in a period of tight money they would borrow substantial amounts. In order to restrict such borrowing the Federal Reserve Banks increased the rediscount rate in January 1953. Never theless, the demand for commercial bank credit was so great in the first half of the year that the monthly average February 1954 39 M O N T H L Y REVIEW of daily member bank borrowing remained relatively high through May, both in the Twelfth District and in the nation. The reserves supplied through open market pur chases starting in mid-May and the reduction in required reserves in early July permitted member banks to reduce their average borrowings substantially. The average amount of borrowing of all member banks in the second half of the year was less than half as large as in the first half. The reduction in the Twelfth District was relatively less, with average borrowing in the second half running at about 78 percent of the first-half level. Average bor rowing of all member banks for the year as a whole was only slightly under that of 1952, whereas in the Twelfth District the 1953 average was about 40 percent less than in 1952. M oney supply increased in 7953 The total money supply1 in the United States rose by approximately $4.8 billion in 1953, less than one half the increase of $10.8 billion that occurred in 1952. This is the smallest increase since 1949, when it was approxi mately $1.2 billion. United States Government balances declined during 1953, so that the increase in the total money supply was due solely to an increase in private holdings. The privately-held money supply rose by $6.5 billion or 3 percent which was less than in 1952 when the increase amounted to $8.8 billion or 5 percent. Though the increase in the money supply was wholly in privately-held deposits and currency, the origin of the increase resulted from both private and public borrow ing. A large part of the increase in the money supply originated in bank loans, which rose by $5.7 billion in 1953. Other contributing factors were an increase in hold ings of United States Government securities by the Fed eral Reserve Banks of $1.2 billion, an increase in Gov ernment security holdings by commercial and savings banks of $40 million, and a reduction in Treasury cash holdings of $470 million during the year. These changes, with the exception of the growth in Federal Reserve Sys tem Government security holdings and the reduction in ^ h e total money supply includes currency outside banks, privately-held demand and time deposits, and United States Government balances, in cluding its balances at Federal Reserve Banks. M em ber B a n k D e p o s it s a n d D E a r n in g A ssets — T w e lfth is t r ic t (in millions, as of D ecem ber 31) Demand deposits of individuals, partnerships, and corp oration s... Tim e deposits1 ......................................... United States Government deposits. Loans ............................................................ United States Government securities Other securities ....................................... 1941 $2,778 2,390 144 2,451 1,738 542 1951 $9,744 6,672 291 7,866 6,471 1,473 1952 1953p $ 1 0 ,2 3 2 7 ,3 7 0 4 75 8 ,8 3 9 6 ,6 1 9 1 ,7 1 3 $ 1 0 ,2 6 0 7 ,8 6 2 429 9 ,2 3 5 6 ,7 2 1 1 ,7 8 4 Preliminary. 1 Excluding interbank and United States Government deposits. p cash holdings of the Treasury, were smaller than they were in 1952. Partly offsetting these increases in the money supply was a reduction in the gold holdings of the United States by $1.2 billion. This was due mainly to large movements of gold to the United Kingdom during the first three months of 1953. The rate of use of money as measured by the turnover of demand deposits— the medium through which most transactions are effected — increased throughout the United States during 1953, rising to an average rate of nearly 19 times a year in reporting cities exclusive of the large financial centers of the country. The increased rate of turnover does not apply to the entire money supply, however. About one-third of the total money supply con sists of time deposits, which are much less active than de mand deposits, and time deposits constituted nearly twothirds of the 1953 increase in the privately-held money supply. In the United States and the Twelfth District total de posits held by the public increased, but at a much slower rate than they did in 1952. The rate of growth in 1953 was less in the District than in the country as a whole. Privately-held time deposits continued to expand faster than demand deposits, especially in the Twelfth District. During the year commercial banks and mutual savings banks showed the greatest gains in time deposits in the United States, while postal savings deposits declined. Government time and demand deposits at commercial banks, which increased in 1950, 1951, and 1952, declined substantially during 1953 both in the United States and in the Twelfth District, reflecting the large cash expend itures in relation to receipts. PRODUCTION UP, INCOME DO W N IN DISTRICT AGRICULTURE u r in g 1953 agriculturalists of the District, as well as D of the nation, have been adjusting their operations to changed conditions represented by lower prices, in creased production, and a smaller foreign demand for farm products. Aggregate production of crops as well as livestock increased in 1953 and for many commodities production reached or maintained record levels. Farm prices, however, continued to fall but at a slower rate than in 1952. In the meantime, farm costs of production remained high or decreased only slightly. Since aggre gate domestic demand for food and fiber remained rela tively constant during the year, the decline in prices more than offset production increases. The result is that the total value of farm production and cash incomes was lower in 1953 than in the preceding year. The aggregate value of livestock on District farms also is down signifi cantly. In addition, farm land values have fallen and are continuing downward while the dollar volume of District mortgages has increased and continues upward. Despite reverses in 1953, as set forth in the following report on the financial status of District agriculture, most farmers are in a relatively good financial position. Aided by the Government price support program, District pro ducers appear to be maintaining their gross incomes at 40 February 1954 FEDERAL RESERVE B A N K OF SAN FRANCISCO C h art 1 T able 1 C h a n g e s in P r ic e s R e c e iv e d b y F a r m e r s w i t h U n ite d S ta te s , 1952 and — 8 — 19 — 15 4*1 — 8 — 5 I N D E X E S O F P R IC E S R E C E IV E D B Y F A R M E R S U N I T E D S T A T E S , 1952-19541 Percent change in price indexes between ,—Jan. and D ec.-> 1952 1953 (1910-14=100) 1953 Percent change in United States f— average annual prices— 1951-53 1951-52 1952-53 All c r o p s ....................................... A ll livestock and products.. A ll farm p r o d u c ts .................... C o m p a r is o n s — — 9 — 11 — 10 — 6 — 14 — 5 —4 — 10 —5 Source : United States Department of Agriculture, Agricultural Marketing Service, Agricultural Prices. relatively high levels. In 1954 a relatively stable level of farm prices is expected to be accompanied by some re duction in costs and prices paid by farmers. But with a smaller total agricultural output expected for 1954, gross and net farm incomes may continue to recede from re cent high levels. Changes in District Farm Income and Value of District Farm Assets The assets of District agriculture at any particular time depend upon the receipts retained from sale of products produced on the farm and the value of physical assets on hand such as livestock, livestock products, crops, farm real estate, machinery, and equipment. The value of crops and livestock products on hand is determined largely by the volume of production, the structure of prices received by farmers, and the pattern of crop and livestock market ings. The number and kinds of livestock on hand also are related to the pattern of marketing, and the value of livestock at any time is determined by applying average market prices to total numbers of the various classes of livestock on hand. Cash receipts of farmers represent the flow to agriculture of income produced by physical assets of farmers. Source : United States Department of Agriculture, Bureau of Agricultural Economics, Agricultural Prices. Complete data for construction of a balance sheet of District agriculture are not available but there is sufficient evidence at hand to indicate that the assets of District agriculture have declined considerably in value in the last year or so. These downward changes in valuations ap parently have resulted from reductions in prices received by farmers rather than from a smaller volume of produc tion or contraction in the land and capital resources of agriculture. Prices received by farmers On January 1, 1954 District as well as national agri cultural prices were lower than a year earlier as a result C h a rt 2 R E L A T I V E C H A N G E S IN P R IC E S R E C E IV E D B Y F A R M E R S F O R V A R IO U S C L A S S E S O F F A R M C O M M O D I T IE S , U N I T E D S T A T E S R A T IO S O F 1953 T O 1952 M I D -M O N T H P R IC E S (1952 levels of prices ■» 100) Ratio o f 1953 to 1952 prices Source : United States Department of Agriculture, Bureau of Agricultural Economics, Agricultural Prices. Ratio o f 1953 to 1952 prices February 1954 T T o ta l H a rv ested 41 M O N T H L Y REVIEW able A crea ge o f 2 P r in c ip a l C o m p a r is o n s — T w e l f t h D is tr ic t, 1953 (in thousands) Idaho .......................................................... Arizona ..................................................... Utah ............................................................ Nevada ....................................................... Washington .............................................. Oregon ....................................................... California .................................................. 3,824 1,285 1,307 434 4,322 3,015 7,391 Twelfth District .................................... 21,578 C rop s1 w ith 1953 Percent change (--------------- from--------------- s 1942-51 1952 average + 4 .8 + 1 1 .4 + 3 .0 + 4 5 .2 + 3 .0 + 8.6 — 2.5 — 5.7 + 2 .5 + 5.2 + 2 .2 + 4.8 + 1 .1 + 1 2 .7 + 2 .3 + 1 0 .5 1 Nearly all crops other than fruit. Source: United States Department of Agriculture, Agricultural Marketing Service, Crop Production, 1953 Annual Summary. of continued high production and softened export demand for some farm products. Average prices received by farm ers were about 10 percent lower in 1953 than in 1952. Comparisons of average annual prices received by farm ers, as shown in the first three columns of Table 1, seem to indicate that farm prices fell more in 1953 than in 1952. However, as indicated in the last two columns of Table 1 and in Chart 1, such an impression is erroneous. In 1952 farm prices of crops, livestock, and livestock prod ucts averaged relatively high but they fell precipitously between August and December of that year. Farm prices continued to fall in 1953 but they fell at a much more gentle rate than during the third and fourth quarters of 1952. Between October 1953 and February 1954 substan tial increases were scored ( Chart 1). Apparently, either much of the weakness in farm prices has been dissipated or Government price supports and purchases in 1953 were effective. Indications are that both factors are im portant. During the past year farm prices, although gen erally lower, have varied considerably from the 1952 pat tern (Chart 2). C h art 3 R E L A T IV E C H A N G E S IN I N D E X E S O F T O T A L V A L U E O F C R O P P R O D U C T IO N A N D IN T O T A L C R O P A C R E A G E T W E L F T H D IS T R IC T , 1947-1953 (1945-49=* 100) District acreage and production of crops Lower crop prices notwithstanding, total harvested acreage of principal crops in the Twelfth District in creased more than 2 percent in 1953 over 1952 to a new all-time high level. Harvested crop acreage in each Dis trict state, except Nevada, also reached new record levels (Table 2). Most District states, but particularly Arizona, California, and Idaho, have expanded their cropland acre ages rapidly in the last decade (Table 2). Despite an increase in the amount of land devoted to crops, total District production of crops probably in creased only slightly in 1953 from 1952. A larger aggre gate production of field crops and of citrus was accompa nied last year by smaller total crops of deciduous fruit, nuts, vegetables, and seeds. Larger crops of each of the grains except oats were produced and the District hay crop wTas slightly larger. Increases also were scored for sugar beets, potatoes, dry edible beans, and peas. Reduced yields, on the other hand, resulted in a smaller District cotton crop. The removal in 1952 of price supports on seed crops of alfalfa and clover caused District producers to reduce output sharply in 1953. A striking reduction in production of hops also occurred (Table 11). Even though the District output of lemons was slightly lower in 1953 than in the previous year, total production of citrus fruits was more than 15 percent greater. PecuT a b le 3 V a l u e o f P r o d u c tio n o f P r in c ip a l C rops w i t h P e r c e n ta g e C o m p a r i s o n s 1— T w e l f t h D i s t r i c t , 1952 a n d 1953 Value of t---------production-------- ^ Percent 1952 1953 change (in thousands o f dollars) 1952-53 642,838 614,765 — 4.4 Production increases more than offset by price decreases. Cotton and c o tto n s e e d ............ 535,727 512,224 — 4.4 Smaller yield and lower prices. All hay and sorghum fo ra g e .. 405,575 295,840 — 27.1 Large price reductions. Vegetables, all commercial .......... 454,897 421,384 — 7.4 Lower prices, also smaller output of to matoes. Citrus f r u i t s ............ 130,721 122,752 — 6.1 Lower prices more than offset produc tion increases. Deciduous fruits and other ............ 435,689 465,516 + 6.8 Price increases more than offset smaller production. N u t s ............................. 53,685 41,751 — 22.2 Price increases failed to offset smaller pro duction. Seed crops3 ............... 35,785 21,821 — 40.0 Prices and production both down. Lower potato prices and smaller hop production mainly. Percent Other4 ........................ Total Service, Agricultural Prices, annual summaries 1947-1953, and Crop Produc * tion, annual summaries 1947-1953. Principal reason for change A ll grain2 ................. ...................... 220,519 — «31.8 ---------------- 323,345 ----------- 1— ------------ 3,018,262 2,716,572 — 10.0 1 Changes in value of individual crops are indicated in Table 11. 2 Includes corn, oats, all wheat, rice, barley, rye, and sorghum grains. 3 Includes alfalfa seed, red clover seed, and alsike seed. ♦Includes flaxseed, hops, dry edible beans and peas, sweet potatoes and potatoes. Although value data for sugar beets not available, increases are indicated. Source : United States Department of Agriculture, Agricultural Marketing Service, Annual Summaries of Season Average Prices and Value of Pro duction, 1952. 42 February 1954 FEDERAL RESERVE B A N K OF SA N FRANCISCO liar climatic conditions last year, however, caused wide spread damage to fruit and nut crops of District states, particularly Utah. Warm January and February weather hastened early development of many fruits and nuts leav ing them vulnerable to killing frosts in March, which were followed by growth-retarding cool weather as late as June. As a result, the District nut crop in 1953 was about 25 percent under the 1952 output although the national nut crop was large. The total harvested tonnage of deciduous fruits was down about 7 percent compared with a year earlier. Each District state, other than California, harvested a greater tonnage of commercial vegetables in 1953 than in 1952. A 6 percent decline in California’s harvested ton nage was sufficient, however, to reduce total District pro duction of vegetables about 3 percent. A contraction in acreage devoted to tomatoes largely accounted for the decline in California. District value of crop production With prices lower and production only slightly in creased, the farm value of 1953 production (harvested production multiplied by average farm prices) fell below the value of the 1952 crop output. Estimates based upon data of the United States Department of Agriculture in dicate that the gross value of District crop production1 in 1 The gross value of production is an estimate of gross farm income on a crop season basis and should not be confused with income from actual sales on a calendar year basis. 4 T a b le V a lu e o f L iv e s to c k on F arm s C o m p a r is o n s — T w e l f t h on J a n u a ry D is tr ic t an d 1, 1954 U n it e d w ith S ta te s Twelfth District -U nited States— Percent change Percent change from from January 1, 1954 ,----- January 1,----- N ,----- January 1,----1943-52 (in thousands) 1943-52 1953 average o f dollars) 1953 average +- 7.7 — 1.9 — 22.7 All cattle and calves. . . . 8,746,058 — 27.1 + -1 2 .0 M ilk cows1 ................. . 3,614,427s — 25.7 — 7.2 — 18.8 + 5.7 — 24.5 5 ,131,631s — 28.1 Other cattle2 .............. ,. + 2.1 1,763,714 + 25.1 — 10.1 — 36.7 A ll hogs and p i g s ......... — 1.8 — 12.4 431,963 — 14.8 — 22.2 — 11.0 A ll sheep and la m b s .. . — 40.9 167,568 — 6.6 — 61.1 — 6.0 Horses and colts .......... — 56.3 98,402 — 14.0 — 70.5 M ules and c o l t s ............ — 3.6 + - 9.4 629,024 + 3.6 — 3.7 + 4.4 A ll chickens ................... — 20.6 33,594 + 2.8 — 8.6 — 0.4 A ll turkeys ...................... . . 11,870,323 — 20.1 — 6.7 — 19.7 + 1953 was $2.7 billion compared to $3.0 billion in 1952, a drop of about 10 percent. Reductions occurred in the farm value of all major classes of crops except deciduous fruits (Table 3 and Chart 3). Production of livestock products and number and value of livestock on farms Total numbers of livestock on District farms changed very little in the year ending January 1,1954. A 2 percent increase in numbers of cattle and calves on farms and a C hart 4 P E R C E N T A G E C H A N G E S T O J A N U A R Y 1, 1954 I N N U M B E R S O F L I V E S T O C K O N F A R M S A N D A V E R A G E V A L U E PER H E A D T W E L F T H D IS T R IC T A N D U N I T E D S T A T E S A v e ra g e Value Per Head Livestock Num bers on Farms (Percent change January 1,1954 from January 1, 1953) (Percent change January 1, 1954 (Percent change January 1, 1954 from January 1, 1943-52 average) from January 1, 1953) TWELFTH DISTRICT UNITED STATES All Cattle Beef Cattle Dairy Cattle i* Hogs and Pigs Sheep and Lambs Horses Mules lAilU All Chickens Turkeys — 60 -4 0 —20 J 0 Percent change +20 L-2 0 0 Percent change +20 — 40 — 20 Percent change * N o change. S o u rce: United States Department of Agriculture, Bureau of Agricultural Economics, Livestock Slaughter by States and Livestock on Farms. 1.9 1 M ilk cows two years old and older. 2 M ainly beef cattle and calves. * Included in the value figure for all cattle and calves. Source: United States Department of Agriculture, Agricultural Marketing Service, Livestock and Poultry on Farms and Ranches, January 1, 1954. February 1954 T C o m m e r c ia l T L 43 M O N T H L Y REVIEW iv e s t o c k w e lfth D S able is t r ic t T able 6 5 la u g h ter a n d Slaughter in 1953 U n it e d Cattle and c a lv e s ____ Sheep and l a m b s . .. . Hog's ............................... Twelfth District 3,372.0 271.8 751.7 Total ........................... 4,395.5 S C o m p a r is o n s r --------- 1948-52 1952--------- s r------- average------- \ United Twelfth United Twelfth United States District States District States 24,787.1 + 20 + -3 0 + -3 6 +30 1,511.6 +11 +12 +16 +16 15,687.7 — 22 — 15 — 14 — 7 41,986.4 + 9 + 8 +23 +13 Source: United States Department of Agriculture, Agricultural Marketing Service, Livestock Slaughter B y States. 4 percent increase in numbers of chickens on District farms in the last year were offset by a large drop in the number of hogs and pigs and a continued decline in the farm population of horses and mules. District percentage increases in numbers of cattle, including calves, exceeded similar increases for the nation as a whole. On the other hand, the hog population decreased significantly more percentagewise in the District than in the United States (Chart 4 ). Since the long down trend of cattle and sheep prices continued throughout 1953 and since large increases in farm prices of hogs were nearly offset in 1953 by reduc tions in numbers of hogs on farms, the total value of live stock on farms fell significantly. On January 1, 1954, the total value of livestock on District farms was about $1.2 billion compared to about $1.5 billion a year earlier, a drop of 20 percent. The total farm values of District hogs and chickens increased while the District totals for all other classes of livestock declined (Table 4 ). However, the January 1, 1954 inventory values of all cattle and chickens and the total of all livestock on farms compare favorably with the average of similar values in the period 1943-52. A persistent decline in the total numbers of hogs and pigs on farms of the District since World War II is significant. It may be indicative of a permanent change in farmers' preferences concerning enterprise combinations. Recent increases in dairy cattle numbers also are impor tant in view of limitations to expansion of fresh milk out lets, large national surpluses of butter and cheese, and prospective reductions in price supports for dairy prod ucts. Total numbers of livestock on District farms probably would have increased markedly in 1953 had not District farmers maintained marketings of livestock, particularly cattle and sheep, at high levels throughout the year. Sal able receipts of all classes of livestock at the seven major public markets of the District1 were about 12 percent greater in 1953 than in 1952 despite smaller salable re ceipts of hogs at these markets. Commercial slaughter of livestock in the District during 1953 was about 9 percent greater than during the previous year with cattle and calf slaughter up about 20 percent compared to 30 per cent for the United States (Table 5). Although the out put of red meat was greater in 1953 than in the preceding JThe major public markets of the District are located at Los Angeles, Stockton, South San Francisco, Portland, North Salt Lake City, Ogden, and Spokane. P r o d u c t io n C tates ,------ Percent change 1953 from------ n ,-----------1953---------- N (in millions o f pounds) w it h of o m p a r is o n s S elected — T L w e lfth iv e s t o c k D P is t r ic t in 1953 n it e d S roducts a n d U w it h tates t-----------------Percent change from-----------------% 1942-51 ,---------- — 1953------------- \ (in thousands) r— -------1952-----------N<-------- average-------- n Twelfth United Twelfth United Twelfth United District States District States District States Eggs (no.) . . 5,815 61,962 + 2.1 + 1.6 — 7.0 — 20.0 Milk (lb.) . . . 11,297 120,198 + 5.0 + 3.0 + 5.0 + 5.0 Butter ( l b . ) . . 92,805 1,424,940 + 3 7 .8 + 1 8 .2 — 14.6 + 1.8 Cheese1 ( l b . ) . . 60,720 974,240 + 1 4 .9 + 1 1 .9 — 3.6 + 1 2 .0 1 American cheese only. Source : United States Department of Agriculture. year, supplies of white meat produced in the District in 1953 appear to have been smaller. Pounds of Districtproduced broilers were about the same in 1953 as in 1952. However, fewer farm chickens other than broilers were raised on District farms in 1953 than in 1952, and inven tories of chickens in the District were greater on January 1, 1954, than on the same date a year earlier, indicating that fewer chickens have been marketed in the last year than in 1952. Turkey production also was down in 1953. Among livestock products more eggs and milk and sig nificantly greater quantities of butter and cheese were produced in the District last year than in 1952 (Table 6). Apparently most of the increase in milk production in the District as well as in the United States as a whole was channeled into production of butter and cheese. District farm income from marketing Data on cash receipts from marketings of farm prod ucts as recently revised by the Department of Agriculture show reductions for 1953 from a year earlier of 3.8 percent for the District compared with 4.3 percent for the United States. District proceeds from sale of crops dropped only 1.5 percent while such proceeds from sale of livestock and livestock products, despite a large volume of marketC hart 5 P E R C E N T A G E C H A N G E S IN V O L U M E O F F A R M M A R K E T IN G S , P R IC E S R E C E IV E D B Y F A R M E R S , A N D C A S H R E C E IP T S F R O M F A R M M A R K E T IN G S IN E A C H M O N T H O F 1953 F R O M T H E C O R R E S P O N D IN G P E R IO D S IN 1952— U N I T E D S T A T E S Percent change r-sumaicu. Source: United States Department of Agriculture, Bureau of Agricultural Economics, Agricultural Prices. 44 February 1954 FEDERAL RESERVE B A N K OF SAN FRANCISCO T Cash R e c e ip t s f r o m C o m p a r is o n s — T D w elfth volume of District farm marketings was affected signifi cantly. 7 able F arm M 1953 a r k e t in g s i n is t r ic t a n d U n it e d w it h S tates f-------------- Percent change from-------------- > Cash receipts ,------------- 1953------------- N 1947.51 (in millions of dollars) r----------1952---------- s f---------average---------N Twelfth District A ll crops ...................... 2,755 A ll livestock and products ................... 1,731 T o t a l ...................... 4,486 United States 13,796 Twelfth District — 1.5 United States — 1.6 Twelfth District + 1 4 .8 United States + 1.7 17,178 — 7.3 — 6.4 + 6.6 + 7.0 30,974 — 3.8 — 4.3 + 1 1 .5 + 4.0 Source : United States Department of Agriculture, Agricultural Marketing Service, Farm Income Situation. ings, fell more than 7 percent (Table 7). The reduction in crop proceeds of less than 2 percent is surprisingly small in view of a 10 percent drop from 1952 in the farm value of crops produced. However, reference to Chart 3 and examination of District crop proceeds on a monthly basis help explain this difference. The District pattern of crop marketings and of income from crops follows fairly closely the pattern shown in Chart 5 for all farm products of the United States. With farm prices of farm crops remaining relatively stable during 1953, cash receipts from sale of crops tended to vary month by month according to changes in the vol ume of crop marketings. During the first quarter and the last one-third of 1953 the volume of farm marketings and cash receipts from sale of crops increased significantly over the comparable periods of a year earlier. Increases in District cash receipts from crop marketings approxi mated 12 percent for the first three months of 1953 and 2 percent for the last four months of the year compared to a 13 percent drop for the intervening period April through August. Greater use, primarily by producers of cotton and wheat, of non-recourse loan features of the price support program largely explains increases in volume of District crop marketings after August last year. Movement of farm commodities into the Government crop loan pro gram show up in statistics of the Department of Agri culture as crop marketings. Therefore, the proceeds of such’marketings are included in cash receipts from crop marketings. Consequently, with about one half the Dis trict wheat crop and about 20 percent of the District crop of cotton moving into the price support program by Janu ary 1954, cash farm income of the District as well as the Although reductions in farm income were relatively small for the District as a whole, they were large in cer tain District states (Table 8). Compared with 1952, cash farm receipts for 1953 were down 40 percent in Nevada, 20 percent in Utah, and 8 percent in Oregon. Unfavor able growing conditions during the late summer and fall combined with the low level of livestock prices were con tributing factors to conditions in these states but particu larly in Utah and Nevada. Oregon, along with Washing ton and Idaho, benefited from the price support program on wheat. Washington was favored with an exceptionally good fruit crop. Change in value of fixed assets Per acre values of District farm real estate fell about 8 percent during the year ending in November 1953 com pared with a drop of about 6.2 percent for the country as a whole. The greatest reductions of the District in values of farm land occurred in Idaho and Utah (Table 9 ). District farm land values declined about 3 percent between July and November 1953. In addition, the vol ume of voluntary transfers of farm land in 1953 confirms earlier expectations of a continued downward trend in sales activity that has prevailed every year since 1947 except 1950. Farm real estate accounts for a large pro portion of the total assets of District agriculture. For the United States as a whole this proportion approximates 50 percent. The value of machinery and motor vehicles on District farms probably was about the same at the beginning of 1954 as at the beginning of 1953. Market prices of these commodities appear not to have changed greatly in the past year and, for the United States, a reduced level of farm purchases of machinery and vehicles in 1953 little more than offset depreciation and obsolescence of these commodities. The United States Department of Agriculture indi cated late in October 1953 that total liquid assets of farm era b l e I ndex N u m b e r s of I m pro vem en ts— T N T T otal 1 Ca sh Incom e from able C o m p a r is o n s — T ^ a r k e t in g s i n w elfth D Cash income in 1953 Un m illio n s o f dollars) I d a h o ................................................................. A r iz o n a ............................................................ Utah ................................................................. Nevada ............................................................ Washington ................................................... Oregon ............................................................ California ....................................................... Twelfth District ......................................... 342.5 399.0 150.9 38.1 589.1 390.9 2,575.4 4,486.3 1953 w it h is t r ic t Percent change t-------------- trom--------------- n 1952 1951 — 5.8 — 6.9 + 4.4 + 1 0 .9 — 14.1 — 20.4 — 25.9 — 39.1 + 3.9 0.0 — 4.2 — 10.7 — 5.2 — 5.7 — 3.8 — o vem ber P er A is t r ic t a n d 1952 and cre U I n c l u d in g n it e d S tates 1953 Index numbers of value (---------- per acre---------->> N ov. N ov. 1952 1953 Idaho ............................................................ 106 94 Arizona ..................................................... 125 113 Utah .................................... ......................... 116 102 N e v a d a ..................................................... 114 105 W a s h in g t o n ........................................... .... 106 98 O r e g o n ..................................................... 104 98 C a lifo rn ia ................................................ 99 92 Percent change 1952-53 — 11.3 — 9.6 — 12.1 — 7.9 — ■ 7.5 — 5.8 — 7.1 Twelfth District ....................................... 103 99 — 7.8 United States ........................................... 129 121 — 6.2 5.3 Source: United States Department of Agriculture, Agricultural Marketing Service, Farm Income Situation. D w elfth 9 alu e (1947-49=100) 8 F arm M F arm V Source: United States Department of Agriculture, Agricultural Research Service, Current Developments in the Farm Real Estate Market, Novem ber 1953. February 1954 ers on January 1, 1954 were expected to be about the same as a year earlier.1 However, the composition of these assets was expected to change; a decline in currency and demand deposits was expected to be about equal to the increase in time deposits and United States Savings Bonds. They also indicated that increases in time deposits and Government bonds held by farmers appeared to be widespread. Expenses of Production and Liabilities of District Agriculture The claims against income and assets of agriculture consist mainly of real estate and non-real estate debt. In addition to costs of items used directly in production, costs of agricultural production include taxes, interest charges, insurance, and depreciation. Some of these, particularly taxes and interest charges, constitute claims or liabilities. District farm mortgage debt District farm mortgage debt increased in 1953 for the seventh consecutive year. The real estate debt of farmers increased 8 percent in the year ending January 1, 1953. In the first nine months of 1953, the volume of farm mort gages in western areas continued to increase but at a faster rate than in 1952 (Table 10). For the United States the dollar volume of loans made by Federal Land Banks and by miscellaneous lenders in the third quarter of 1953 were both up 15 percent from a year earlier— a larger relative increase than for the other lenders. Loan volumes of insurance companies increased about 10 percent in the same period. Commercial banks have increased their real estate loan volumes very little and member banks of the Twelfth District reduced their holdings of such loans by about 2.6 percent in the year ending December 31, 1953. It appears that an increasing proportion of the loans are made for purposes other than to finance the purchase of land. Reductions may be noted (Table 10) in the num ber of new mortgages written along with substantial in creases in the average size of loans. Apparently, most of the increase in mortgage loan volumes is accounted for by the refinancing of existing mortgages and the conver sion and consolidation of short-term debts into longerterm real estate mortgages. District non-real estate debt Excluding non-recourse Commodity Credit Corpora tion loans which have increased phenomenally in the last year, general reductions in non-real estate farm debts in 1953 marked the first major break in the upward trend that has been under way during the entire postwar period. In the West,2 non-real estate loans held by banks and Federally sponsored agencies on July 1, 1953 were 2.8 times the amount of such loans on July 1, 1945. But in 1 United States Department of Agriculture, Bureau of Agricultural E c o nomics, Agricultural Finance Review, Volum e 15, Supplement I I , October 1953. *This geographic area includes Montana, W yom in g, Colorado, and N ew Mexico in addition to the seven Tw elfth District states. 45 M O N T H L Y REVIEW T a b l e 10 E s t im a t e d N u m b e r a n d V a l u e of F a r m M o r t g a g e s R eco rd ed D u r i n g t h e F i r s t N i n e M o n t h s o f 1953 w i t h C o m p a r is o n s , S p o k a n e a n d B e r k e l e y F a r m C r e d it D i s t r i c t s and U n it e d S t a t e s 1953 f----------(first 9 months)----------N Percent change Total Average from first 9 months amount size (--------------- of 1952-------------- N (in thousands (in NumNumber o f dollars) dollars) ber Amount Size Berkeley District . . . 15,987 Spokane D istrict___ 8,620 United States .......... 231,952 158,155 9,890 71,601 8,310 1,396,247 6,020 1 —7 —2 +13 +12 + 5 +13 +20 +7 1 Less than 0.5 percent. Source: United States Department of Agriculture, Farm Credit Adminis tration, Farm Mortgages Recorded, Third Quarter 1953. the year beginning July 1, 1952 reductions in the vol ume of non-real estate debts occurred in most western states including all District states except Washington, Idaho, and Arizona. In the same period the volume of production credit association loans dropped in each Dis trict state to account for an average District reduction of 8 percent. After July 1953 the decline in non-real estate loans appears to have become widespread. Non-real es tate loans of Twelfth District member banks decreased 13 percent in 1953. Three factors appear principally responsible for the reduction in the short-term debt of District farmers. These are (1 ) the drop in cattle prices, (2 ) the change in attitude of farmers concerning the outlook for agricul ture, and (3 ) lender restriction of credit. Costs of live stock replacements and of feeder cattle are lower and some producers are carrying fewer head. Also farmers appear to be more careful in watching day-to-day expend itures. After several years of relatively prosperous agri cultural conditions, many farmers are in a position to postpone certain types of expenditures. In addition, lend ers in some instances have become more selective and have discouraged the use of credit for expansion of live stock and other farm enterprises. However, most lenders report that they are still actively looking for sound farm loans. Taxes, interest, insurance, and other production costs Interest charges on farm mortgage debt on January 1, 1954 is estimated nationally to have been about 9 percent higher than on the same date a year earlier. Since the volume of farm mortgages has increased relatively more in the District than in the United States, increases for the District probably exceeded 9 percent. Increases in interest charges on farm mortgages are partly offset, how ever, by reductions in interest charges on non-real estate debt of farmers.1 Property taxes paid by farmers in nearly all states con tinue to rise. The national average increases of 5 percent in 1952 and 3 percent in 1953 appear to be at least roughly 1 Reductions in interest charges on non-real estate debt stem principally from reductions in volume of short-term debt. In addition, the United States Department of Agriculture has announced that rates of interest to be charged producers and others on price support loans will be reduced from the present 4 percent to 3 percent effective with the 1954 pricesupport loan programs. 46 FEDERAL RESERVE B A N K OF SA N FRANCISCO February 1954 representative of conditions in this District. General in creases also have occurred over the United States in in surance costs of farmers, but this change appears related to increases in insurance carried rather than to increases in rates charged. The average level of prices paid by farmers for items used in farm production declined about 8 percent between 1952 and 1953. Nearly all of this reduction, however, is accounted for by lower prices of farm-produced items used in production such as feed, seed, and livestock for feeding or breeding. Prices of motor supplies, fertilizer, building and fencing materials, and other farm supplies, on the other hand, have increased in the last year. T a b l e 11 Total assets of District agriculture fell considerably during 1953. The value of District farm real estate, by far the largest asset of farmers, dropped about 8 percent. The farm value of District crop production was about 8.5 percent smaller in 1953 than in 1952. Since the beginning of the 1953 harvest season farmers apparently have dis posed of farm commodities produced by them in 1953, either through actual sales or through request for a Gov ernment price support loan, at a higher rate than in 1952. This means that the value of farm crops held by farmers was less on January 1, 1954 than on the same date a year earlier. A reduction of nearly 20 percent in the total value of livestock on farms occurred in the year ending January 1, 1954. Other assets of District farmers such as liquid financial assets and the value of machinery and motor ve hicles appear to have changed little in the last year. P r o d u c t io n a n d V a l u e o f P r i n c i p a l C r o p s, T w e l f t h D is t r ic t 1953 w it h C o m p a r is o n s /-----------— Production------------- N /—-Gross farm valuc-^ r - Percent change—> 1953 Field and seed crops (in thousands) 93,617 Barley (bu.) ................. 6,966 Beans, dry (100# bag) 9,945 Corn (bu.) ................... Cotton, lint (bale) . . . 2,756 1,102 Cottonseed (ton) . . . . Flaxseed (bu.) ............ 732 6,044 Crain sorghums (bu.) H ay, all (ton) ............ 14,648 H ops (lb .) ................... 41,803 31,325 Oats (bu .) ................... Peas, dry (100# b a g ). 2,672 Potatoes (bu.) . . . . . 123,136 11,948 Rice (100# b a g ) .......... Sugar beets (ton) . . . 6,239 W h ea t, all (bu.) . . . . 186,228 80,005 Alfalfa seed (lb .) . . . . Alsike clover seed (lb.) 8,452 Red clover seed (lb .) . 10,453 19521953 + + + — — — + + — — + + + + + — — — 1942-51 avg.-1953 2 5 2 2 3 51 9 1 32 6 19 10 2 33 7 7 12 3 + io — 3 + 58 + 153 +232 — 85 — 4 + 5 — 18 — 5 — 51 + 18 + 55 + 37 + 31 + 176 + 30 4 (in m illions) Percent change 1952-53 $115.0 65.5 17.8 452.5 59.7 2.8 9.2 295.6 20.5 26.4 14.2 111.1 60.9 3 — 16.0 + 11.7 — 3.4 — 1.6 — 21.4 — 55.8 — 10.6 — ‘27.0 — -15.6 — 21.1 + 30.6 — 49.0 — 17.6 s 383.6 17.6 1.4 2.8 + 4.2 — 40.0 — 45.4 — 26.8 128.2 28.4 8.5 22.0 2.1 3. 6 1.1 110.4 5.4 52.4 52.9 12.6 36.1 6.3 44.9 71.6 16.5 1.8 23.5 + + + + + — — + — — + — — — + — — + — — + — — — 1 12 48 5 9 17 32 16 4 63 12 + — — 1 8 4 1953 Fruit and nut crops Apples (bu.) ................. Apricots (ton) ............ Avocados (ton) .......... Cherries (ton) ............ Dates (ton) ................. Figs, dried (ton) . . . . Figs, fresh (ton) . . . . Grapes (ton) ............... Olives (ton) ................. Peaches (bu .) ............ Pears (bu.) .................... Plums (ton) ................. Prunes, fresh (to n )1. Grapefruit (to n )2 . . . . Lemons (to n )2 .......... Oranges (to n )2 ............. Alm onds (ton) ............ Filberts (ton) ............ W alnuts (ton) .......... .. 35,028 240 24 83 14 23 10 2,490 30 36,068 24,761 86 444 180 497 1,788 36 5 58 Truck crops for fresh market Asparagus (30# cr.) . . 2,366 1,935 Beans, snap (30# bu.) 148 Cabbage (ton) ............ 10,246 Cantaloupes (70# cr.) 16,246 Carrots (50# bu.) . . . . Cauliflower (37# c r .). 7,266 Celery (65# cr.) . . . . 12,926 Corn, sweet (un its)3. . 4,195 33,245 Lettuce (70# cr.) . . . . 17,829 Onions (50# sack) . . . Peas, green (30# bu.) 843 1,889 Strawberries (36# cr.) 9,572 Tomatoes (53# bu.) . . 16,369 W aterm elons (no.) . . . Truck crops for processing Asparagus (ton) . . . . Beans, green lima (ton) ........................... Beans, snap (ton) . . Corn, sweet (ton) . . Peas, green (ton) . . . Strawberries (ton) . . . Tomatoes (ton) .......... 58 41 79 258 171 90 1,526 13.9 39.9 17.4 19.7 41.4 10.0 50.0 1.2 8.0 7.6 15.0 3.7 4.5 — 5 + 36 + 5 — 7 — 15 — 19 — 33 — 17 — 47 + 7 — 8 +62 + 5 + 27 — 2 + 19 — 1 — 60 — 31 —' + + — — — — — — + — + — — — — 16 6 26 8 7 29 34 9 37 1 2 5 22 10 1 2 — — 30 19 + 1 + 3 — 1 + 6 — 10 — 1 + 6 + 16 7 1 10 5 4 + 24 — 31 + 3 + 5 + 2 + + + + + + + + + + — + + — 15 30 8 22 53 44 11 4 8.7 6.1 4.9 36.4 37.8 7.1 20.1 8.1 101.7 12.0 2.1 16.4 35.1 7.3 — — 15 10.5 — 10 + 39 — 4 + 73 + 17 + 123 + 3 6.3 10.1 7.2 15.0 28.9 35.2 + + + + + — 23 17 14 4 44 26 4 5 +22 + 11 + 16 + 2 +39 — 20 4 6 4 — 6.0 — 6.6 — 2.5 — 49.7 — 29.3 1 This is a combined estimate of fresh and dry on a fresh weight basis. 2 Figures are for crop year beginning in October of previous year. 3 Unit consists of 5 dozen ears. 4 Less than 0.5 percent. 5 N o t available. Source : United States Department of Agriculture, Agricultural Marketing Service, Annual Summaries of Production and Value of Production. Summary of District farm financial conditions Debts of District farmers, on the other hand, increased in 1953. Farm real estate mortgages, the larger debt item of District farmers, continued upward in 1953 but at a more rapid rate than earlier. Farm loans guaranteed by the Commodity Credit Corporation increased strikingly in the last half of 1953 but are expected to drop at least seasonally during the first half of 1954. The volume of other non-real estate loans of District farmers dropped in 1953, but the decline was not sufficiently great to offset increases in longer-term loans. The United States De partment of Agriculture expected the total assets of American agriculture to be 5 percent less on January 1, 1954 than a year earlier. They anticipated an increase by the same date of 5 percent in debts of United States farm ers. Changes in debts and assets of District agriculture ap pear to have been in the same directions, and at least as great, as those for the nation. Lower levels of farm prices are primarily responsible not only for the lower level of income received in 1953 but also for the somewhat less favorable equity position of District farmers. The cost-price squeeze in agriculture of the District and the nation, occasioned by falling prices and relatively stable production costs, is producing a changed economic situation for farmers. This change is having a psychological impact not only upon farmers but also upon lenders and industries associated with or de pendent upon agriculture. Farmers and investors are un willing to pay as much for land. Agricultural enterprisers exhibit a greater hesitancy toward investment in equip ment and improvements. They are attempting to main tain cash reserves and are curtailing their use of credit. Farmers and marketers are being called upon to adjust agricultural production to prospective markets and to ad February 1954 M O N T H L Y REVIEW just farm and family living expenses— and in some cases farm debts— to reduced income. Basically, however, agriculture over most of the nation still is in a strong position. When compared with farm real estate values, the farm mortgage debt is relatively low. Most lenders report that delinquencies on scheduled loan repayments are few and not a problem. Most rela tively efficient farm operators are finding returns to capi tal invested and labor fully satisfactory. Implications for the Future Farmers and distributive agencies for farm products probably will find it necessary in 1954 to continue ad justing to changed agricultural economic conditions. Farm prices are not expected to improve and marketing quotas will tend to hold down production of major crops. The production of a number of other crops such as hay, sugar beets, rice, oats, and barley may be increased since output will not be involuntarily limited.1 If so, prices of these products may be expected to adjust accordingly. Beef and lamb production appears likely to continue high in 1954 but at a level moderately below that of the last year. At the same time little if any increase in beef prices is expected. These conditions all point toward some further reduc tion of gross incomes of farmers both in and out of the District. Some commodities and some areas may be more 1 According to planting intentions of farmers as reported to the United States Department of Agriculture, 1954 acreage increases for these United States farm crops are as follo w s: hay, 2 percent; sugar beets, 19 percent; rice, 8 percent; oats, 7 percent; and barley, 47 percent. 47 seriously affected than others, but barring continued drought conditions in some parts of the District, the out look generally is for few extreme changes from last year. More favorable spring and summer growing conditions may result in increases in gross farm incomes in Utah and possibly in Idaho and Oregon. Net incomes of District farmers may not be much lower in 1954 than in 1953. Labor costs and prices of some farm supplies may be lower. Also, farmers appear to be making strides toward reductions in costs of production and mar keting through increased efficiency. On the other hand, prices of fertilizer, interest charges, and taxes may re main relatively stable in 1954. The net result is that further declines in farm assets and farmers’ equities may occur in 1954. It is too early to know anything concerning the trend in crop and live stock inventories for 1954, but land values seem destined to continue their adjustment to the lower farm income that now prevails. Farmers probably will continue to re strict investment in farm and home improvements. The liquid savings accumulated by farm people are not ex pected to show any considerable change. Short-term debts of farmers probably will decline further in 1954 since pro duction costs may be lower this year than last. Real estate mortgages, on the other hand, are expected to increase. Nevertheless, the 1954 outlook is for a financial condition of agriculture that is still good by most past standards. Also, many opportunities still exist, even with the present high state of farm mechanization, to cut costs and to re duce the labor used in farm operations. February 1954 FEDERAL RESERVE B A N K OF SA N FRAN CISCO BUSINESS INDEXES— TWELFTH DISTRICT1 (1947-49 average=100) Year and month Total nonagri Total CarRetail Dep’t cultural m f’g loadings store food Wheat Electric employ employ (num sales prices Copper* flour* power ber)* ment ment4 (value)3 i* i Waterborne foreign trade8» 8 Industrial production (physical volume)1 Petroleum* Lumber Crude Refined Cement Lead* 1929 1931 1933 1935 1937 1938 1939 1940 1911 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 97 51 41 54 74 58 72 79 93 93 90 90 72 85 97 104 99 112 114 107 111 87 57 52 62 71 75 67 67 69 74 85 93 97 94 100 101 99 98 106 107 109 78 55 50 56 65 64 63 63 68 71 83 93 98 91 98 100 103 103 112 116 123 54 36 27 33 56 45 56 61 81 96 79 63 65 81 96 104 100 112 128 124 130 165 100 72 86 114 92 93 108 109 114 100 90 78 70 94 105 101 109 89 86 74 105 49 17 37 88 58 80 94 107 123 125 112 90 71 106 101 93 115 115 112 111 90 86 75 87 84 81 91 87 87 88 98 101 112 108 113 98 88 86 95 96 96 29 29 26 30 38 36 40 43 49 60 76 82 78 78 90 101 108 119 136 144 161 1952 December 109 108 114 126 78 111 96 1953 January February March Apri! May June July August September October November December 118 117 121 119 112 110 112 108 100 106 105 108 107 108 109 108 109 110 110 109 109 109 110 109 115 117 123 122 127 121 125 124 126 125 121 125 105 131 126 132 142 134 140 134 133 137 128 120 77 85 85 82 75 77 64 69 73 69 69 67 109 113 116 114 115 105 106 110 111 112 112r 104 99 92 96 96 91 99 96 92 101 99 98 96 ‘ ÌÓÓ 101 96 95 99 102 99 103 111a 118a 122a ‘ *47 60 51 55 63 83 121 164 158 122 97 100 102 97 105 122 132a 139a 102 68 52 66 81 72 77 82 95 102 99 105 100 101 106 100 94 97 100 101 100 30 25 18 24 30 28 31 33 40 49 59 65 72 91 99 104 98 105 109 114 116 64 50 42 48 50 48 47 47 52 63 69 68 70 80 96 103 100 100 113 115 113 138 121a 138a 102 116 141 154 142 165 167 179 172 168 166 163 157 158 121a 121a 122a 121a 122a 122a 121a 122a 124a 123a 121a 121a 138a 138a 139a 139a 140a 141a 142a 139a 140a 141a 137a 138a 100 103 103 102 102 103 98 99 98 95 97 102 116 117 120 116 124 121 117 114 no 111 112 109 Exports Imports 190 138 110 135 170 164 163 132 124 80 72 109 119 87 95 101 * 89 129 86 85 91 186 171 * *57 81 98 121 137 157 200 311p 115 148 232 114 112 113 113 113 113 113 113 114 114 113 113 151 158 179 164 118 114 123 127 129 133 139 195 187 336 336 384 372 356 337 368 316 287 256 BANKING AND CREDIT STATISTICS— TWELFTH DISTRICT (amounts in millions of dollars) Year and month Condition items of all member banksr Bank Member bank reserves and related items10 r a X 9 9 O il Loans U.S. Demand Total short-term and deposits Gov’t time business discounts securities adjusted* deposits loans* 2,239 1,898 1,486 1,537 1,871 1,869 1,967 2,130 2,451 2,170 2,106 2,254 2,663 4,068 5,358 6,032 5,925 7,093 7,866 8,839 9,235 495 547 720 1,275 1,270 1,323 1,450 1,482 1,738 3,630 6,235 8,263 10,450 8,426 7,247 6,366 7,016 6,415 6,463 6,619 6,721 1,234 984 951 1,389 1,740 1,781 1,983 2,390 2,893 4,356 5,998 6,950 8,203 8,821 8,922 8,655 8,536 9,254 9,937 10,520 10,260 1,790 1,727 1,609 2,064 2,187 2,221 2,267 2,360 2,425 2,609 3,226 4,144 5,211 5,797 6,006 6,087 6,255 6,302 6,777 7,502 7,862 1953 January February March April May June July August September October November December 8,816 8,838 8,983 9,054 9,092 9,156 9,167 9,229 9,241 9,255 9,248 9,235 6,633 6,474 6,299 6,173 6,020 5,997 6,675 6,589 6,481 6,556 6,693 6,721 10,390 9,911 9,937 10,011 9,843 9,899 10,005 9,950 10,018 10,248 10,255 10,575 7,490 7,551 7,560 7,597 7,627 7,703 7,729 7,749 7,794 7,854 7,815 7,978 1954 January 9,198 6,844 10,540 7,995 1929 1931 1933 1935 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 Reserve bank credit11 + + + + + + + + + + + + - 34 21 2 2 1 3 2 2 4 107 214 98 76 9 302 17 13 39 21 7 14 0 - 154 - 110 - 163 90 - 240 - 192 - 148 - 596 -1,980 -3,751 -3,534 -3,743 -1,607 - 510 4- 472 - 930 -1,141 -1,582 -1,912 -3,073 4- 23 4- 154 4- 150 4- 219 + 157 4- 276 4- 245 4- 420 4-1,000 4-2,826 +4,486 4-4,483 +4,682 +1,329 + 698 - 482 + 378 +1,198 +1,983 +2,265 +3,158 + + + + + 4+ 138 83 220 16 12 39 75 100 113 19 137 50 - 263 119 147 277 174 531 184 98 308 391 149 432 + h h h 136 13 240 239 293 435 275 176 217 394 330 438 4- 1 - 308 + 125 + - 3.20 3.35 3.66 3.95 4.14 4.01 ................. 4.18 4.17 4.19 Coin and Commercial Treasury currency in operations12 operations13 circulation11 _ + + + + + + + + + + — — — — + + + — + + + + + + + + — Reserves Bank debits Index 31 cities** ï» (1947-49=100)3 6 48 18 14 3 20 31 96 227 643 708 789 545 326 206 209 65 14 189 132 39 175 147 185 287 549 565 584 754 930 1,232 1,462 1,706 2,033 2,094 2,202 2,420 1,924 2,026 2,269 2,514 2,551 42 28 18 25 32 29 30 32 39 48 60 66 72 86 95 103 102 115 132 140 150 77 22 18 11 22 39 3 36 4 7 23 26 2,565 2,491 2,394 2,378 2,463 2,274 2,452 2,397 2,425 2,449 2,476 2,551 146 150 164 153 150 155 148 142 149 142 149 158 86 2,468 146 1 Adjusted for seasonal variation, except where indicated. Except for department store statistics, all indexes are based upon data from outside sources, as follows: lumber, various lumber trade associations; petroleum, cement, copper, and lead, U.S. Bureau of Mines; wheat flour, U.S. Bureau of the Census; electric power, Federal Power Commission; nonagricultural and manufacturing employment, U.S. Bureau of Labor Statistics and cooperating state agencies; retail food prices, U.S. Bureau of Labor Statistics* earloadings, various railroads and railroad associations; and foreign trade, U.S. Bureau of the Census. * Daily average. * Not adjusted for seasonal variation. * Excludes fish, fruit, and vegetable canning. * Los Angeles, San Francisco, and Seattle indexes combined. • Commercial cargo only, in physical volume, for Los Angeles, San Francisco, San Diego, Oregon, and Washington customs districts; starting with July 1950, “ special category” exports are excluded because of security reasons. 7 Annual figures are as of end of year, monthly figures as of last Wednesday in month or, where applicable, as of call report date. • Demand deposits, excluding interbank and U.S. Gov’t deposits, less cash items in process of collection. Monthly data partly estimated. •Average rates on loans made in five major cities during the first 15 days of the month. End of year and end of month figures. 11 Changes from end of previous month or year. 12 Minus sign indicates flow of funds out of the District in the case of commercial operations, and excess of receipts over disbursements in’the case of Treasury operations. 18 Debits to total deposits except interbank prior to 1942. Debits to demand deposits except Federal Government and interbank deposits from 1942. a— New revised series, p— Preliminary, r— Revised.
@FedFRASER