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MONTHLY REVIEW OF B U S IN E S S C O N D IT IO N S ISAAC B. NEW TO N , Chairman of the Board and Federal Reserve Agent Federal Reserve Bank of San Francisco Vol. X V San Francisco, California, February 20,1931 No. 2 S U M M A R Y O F N A T IO N A L C O N D IT IO N S Prepared by the Federal Reserve Board Industrial activity increased in January by slightly less than the usual seasonal amount and factory employment and payrolls declined. M oney rates in the open market declined fur ther from the middle of January to the middle of February. Production and Employment. The Federal Reserve Board’s index of industrial production, which is adjusted for seasonal variations, showed a decrease of less than one per cent in January, compared with declines of 3 per cent in November and December. A ctivity in the steel industry, which was at a low level in D e cember, increased during the follow ing month by considerably more than the usual seasonal amount. Output of automobiles, which had shown an unusual increase in December, in creased less in January than in the correspond ing month of other recent years. The cotton and w ool textile industries were more active in January, while the output of copper, petro leum, and coal declined. The number of wage earners employed at factories was smaller dur ing the payroll period ending nearest the fifteenth of January than in the preceding month, reflecting in part extended year-end shut-downs. There were large declines in em ployment at foundries and at establishments producing hosiery, w om en’s clothing, lumber, brick, cement, and tobacco products. Em ploy ment in the men’s clothing, leather, and agri cultural implement industries increased some what more than usual for the season. Factory payrolls were considerably reduced in January. Value of contracts awarded for residential building continued to decline in January, ac cording to the F. W . Dodge Corporation, while contracts for public works and utilities in creased. In the first half of February the daily average of contracts awarded for residential building increased. Distribution. Contrary to the usual seasonal tendency, the volume of freight carloadings was reduced further in January, reflecting decreases in shipments of coal, merchandise, and miscel laneous freight. Department store sales, which always show a sharp reduction from December to January, declined by less than the estimated seasonal amount. W holesale Prices. The general level of wholesale com m odity prices declined further by 2 per cent in January, according to the Bureau of Labor Statistics. Prices of many leading agricultural products, and of copper and silver decreased substantially, while prices of cotton and silk advanced. In the first half of February the price of cotton continued to rise and in the middle of the month copper also advanced, while the price of silver declined to new low levels and prices of livestock con tinued to decrease. Bank Credit. Volum e of credit at member banks in leading cities showed little change from January 14 to February 11, further dePER CENT !20f f PAY RO L L S (10 100 A r s * / . V/n // '-* ' s - H ¡/•N E M P L O 'i'M E N T 9 0 8 0 V \I---------- - 7 0 6 0 — .... 1927 IN D U S T R IA L P R O D U C T IO N Index numbers of industrial production adjusted for seasonal varia tions (1923-1925 average=100). 1 9 2 8 192 9 FA CTO RY EM PLO YM EN T AND 1930 1931 PA YRO LLS I n d e x e s o f f a c to r y e m p lo y m e n t a n d p a y ro lls w i th o u t a d ju s t m e n t fo r s e a s o n a l v a r i a ti o n s (1923-1925 a v e ra g e = 100). - MONTHLY REVIEW OF BUSINESS CONDITIONS 10 clines of $200,000,000 in loans on securities and of $115,000,000 in all other loans being largely offset by an increase of $310,000,000 in holdings of investments. In the first three weeks of February bank suspensions declined sharply, and a number B IL L IO N S O F circulation, together with an increase of $25,000,000 in the stock of monetary gold. The principal reduction has been in acceptance holdings of the reserve banks. Money Rates. Money rates in the open mar ket continued to decline after the middle of P £ R D O L L A R S 1 February, 1931 C E N T 1 AL L OTHER L O A N S /-^ a / 1 r s / L O A N S (DN S E C U R I " v V V ' y J ' IN^k /E S T M E N T s 1 9 2 7 1 9 2 8 1 9 2 9 1 9 3 0 1931 MEMBER BANK CREDIT Monthly averages of weekly figures for reporting member banks in leading cities. Latest figures are averages of first two weeks in February. MONEY RATES Monthly rates in the open market in NewYork: commercial paper rate on 4- to 6-month paper and acceptance rate on 90-day bankers’ accept ances. Latest figures are averages of first 19 days in February. of banks, previously suspended, resumed oper ations. Volum e of reserve bank credit out standing decreased by $175,000,000 between the weeks ending January 17 and February 14, reflecting a reduction of $70,000,000 in member bank balances and $80,000,000 in money in January and by the middle of February were at new low levels. The prevailing rate on prime commercial paper declined to a range of 2 ^ -2 % per cent and the rate on bankers’ ac ceptances was reduced to 1 % per cent, but sub sequently advanced to V/2 per cent. T W E L F T H F E D E R A L R E S E R V E D IS T R IC T C O N D IT IO N S M ost records of business in the Twelfth Fed eral Reserve District indicate a further reces sion in activity during January. Industrial output continued to decline sharply, distribu tion of commodities was slower than in D e cember, due allowance being made for seasonal influences, and com m odity prices moved dow n ward, although less rapidly than in preceding months. The agricultural situation on the whole, did not change during the month. Credit conditions remained easy with further declines in interest rates reported. Since the beginning of 1931, the agricultural outlook has been benefited by moderate rainfall and fairly even temperatures. Stored stocks have been large for nearly all farm products, however, and market conditions generally have been slightly more unsatisfactory for produc ers than in December. Prices for dairy and poultry products have declined to especially low levels, although decreases in prices of agricultural products as a whole have been smaller during recent weeks than during most of the past year. Output was further curtailed in the lumber, copper, petroleum, and flour industries during January. In most cases these decreases were not accompanied by corresponding declines in demand and inventory reductions predomin ated. The value of building permits fell off sharply, while the value of engineering con tracts awarded increased substantially. Em ployment continued extremely low for this sea son of the year and there have been reports of further wage cuts. Department store sales declined more than is usual in January and sales at wholesale were smaller than in December. Inventories of de partment stores were further reduced during January, contrary to the usual increase which follow s the depletion of stocks during the Christmas season. The number of cars of freight loaded on the District’s railroads de clined slightly more than seasonally during January, and intercoastal traffic in almost all commodities, except lumber shipments which were relatively high, was smaller than in D e cember. No material change has been evident in the credit situation during the past month. Com mercial banks are in an unusually liquid posi tion with surplus funds seeking investment, and Reserve Bank credit in use has declined nearly to the low levels prevailing during most of 1930. Borrowings of member banks have declined to less than half their average in December, while Reserve Bank holdings of acceptances are lower than at any time since February, 1931 FEDERAL RESERVE AGENT AT SAN FRANCISCO November, 1927. There was a sharp drop in security loans of reporting member banks dur ing the four weeks ended February 18, while commercial loans changed little and invest ments continued to expand. Currency in circu lation has contracted seasonally since the be ginning of 1931 in all parts of the District ex cept the Portland and Spokane areas. Agriculture The outlook for crop production during 1931 was improved during January and the first weeks of February by intermittent rainfall in most parts of the District and by both rain and snowfall on important watersheds which fur nish irrigation water supplies. Precipitation, however, is generally below the long time aver age at the present time. Somewhat higher tem peratures during January were also beneficial to livestock ranges and grow ing crops in regions free from snowfall during the winter months. This year, as in 1930, favorable grow ing conditions such as these afford a contrast with marketing conditions for nearly all agri cultural products. Farm products prices did not improve during January and continue at the low levels reached during their decline in the past 18 months. A s is usual during Janu ary and early February, agricultural activity was at relatively low levels, for the larger part of the past season’s crops has been marketed and it is yet too early for most spring planting operations. The latest estimates of the 1930-1931 Navel orange and lemon crops in California, 15,819,- Agricultural Marketing Activity,— Season to Date — » t------January-------> 1930-1931 1929-1930 1931 1930 Carlot Shipments 37,018 50,493 3,876 5,279 A p p le s ................ 10,598 13,674 2,518 4,913 Oranges* .......... 1,295 2,394 395 1,065 Lemons* ............ 26,259 26,204 7,394 7,738 Vegetables (Cal.) Eggs (Cal., Ore., 359 507 Wash.) .......... Exports 711,068 2,193,931 13,756,181 18,167,417 Wheat ( b u . ) f . . . 7,415,064 6,063,458 463,792 496,276 Barley ( b u . ) f . . . Dairy Products (lbs.— San Francisco) __ 1,696,971 2,927,028 Eggs (cases— 160,950 244,193 San Francisco) Receipts 75,035 Cattle! .............. 66,608 186,910 SheepJ .............. 267,276 232,677 HogsJ ................ 239,533 143,373 Eggs (cases) § .. 145,338 Butter (lb s .)§ ... 5,606,606 5,325,420 Storage Holdings (end of the month) Apples (cars— 8,744 Wash.) .......... 10,870 Wheat ( b u . ) . . . . 6,921,000 4,376,000 Beans (bags— Cal.) .............. 1,853,009 1,398,556 Butter (lb s .)$ ... 1,906,267 1,150,139 Eggs (cases)$ . . . 12,006 153 Potatoes (b u .).. .21,847,000 13,884,000 *Season begins November 1. markets. §Three markets. fSeason begins July 1. $Eight 11 000 boxes and 6,300,000 boxes, respectively, approximate the estimates of previous months and show a large increase over the 1929-1930 season when 9,500.000 boxes of Navel oranges and 4,908,000 boxes of lemons were produced. Market prices for both lemons and oranges averaged somewhat lower during November, December, and January than in the correspond ing months in 1929 and 1930. Market conditions for dairy and poultry products continued extremely unsatisfactory during the past month, and storage holdings of butter and eggs remained far above those of a year ago. This factor and the anticipation of the approaching season of heavy production have resulted in drastic recessions in prices of these commodities during the past six weeks. In early February the quotations at the San Francisco market were 18% cents per dozen for United States No. 1 Extra eggs and 27 cents per pound for 92-score butter. In Febru ary, 1930, these products were quoted at 2 8 % cents per dozen and 36 cents per pound, re spectively. The annual inventory of the value and num ber of livestock on farms and ranges in the Dis trict, compiled as of January 1, 1931, by the United States Department of Agriculture, shows a 24 per cent decline in the combined value of cattle, sheep, and hogs, the largest individual decline being a reduction of 32 per cent in the value of sheep and lambs. The numbers of livestock on farms and ranges are shown in the table below. The trends of the past few years continued in all classifications except “ Other Cattle” (chiefly beef) which in creased in number for the first time since 1927. LIVESTOCK ON FARMS AND RANGES—Twelfth District January 1 Dairy Cows* Other Cattle Sheep 1931 ................ 1,875,000 3,681,000 15,268.000 3,530,000 14,621,000 1930 ................ 1,851,000 1929 ................ 1,804,000 3,609,000 14,335,000 1928 ................ 1,753,000 3,791,000 13,673,000 1927 ................ 1,719,000 3,675,000 13,217,000 1926 ................ 1,699,000 3,847,000 12,545,000 1925 . .............. 1,698,000 4,243,000 12,179,000 *Cows and heifers one year old or over kept for milk. Hogs 1,279,000 1,314,000 1,539,000 1,677,000 1,465,000 1,235,000 1,386,000 The absence of storms in the winter live stock grazing areas and the mild weather in the year-round grazing areas of the District have resulted in an improvement in the condi tion of livestock as compared with a year ago. Prices for meat animals continue to be un favorable for producers. Industry Industrial production in the Twelfth District continued to decline during January, although there is usually a slight increase during that month. Output of lumber, petroleum, cop per, and flour decreased as compared with the previous month and, with the exception of flour milling, all were at levels far below those 12 MONTHLY REVIEW OF BUSINESS CONDITIONS of the last several years. The number of indus trial employees continued to be much smaller than in other recent years and further wage reductions ranging up to 10 per cent were re ported. The value of building permits issued in the District during January declined considerably from Decem ber levels and was approximately 37 per cent less than in January, 1930. Large decreases in Seattle and Los Angeles accounted for the greater part of these declines. The magnitude of the decrease over the year period is partly explained by the fact that the value of permits issued during January, 1930, was rela tively large. Engineering contracts awarded, on the contrary, expanded sharply from their value in Decem ber and were slightly higher than in January, 1930. The sharp decline in prices of building materials has contributed substantially to the reduced value of building during recent months. There was a further reduction in output of lumber during January. Operations of a few firms ceased com pletely and output of most firms which continued to produce was further curtailed. Orders for lumber increased during January and shipments increased also, but by less than the usual amount. Both orders and shipments were approximately 20 per cent greater than production, however, resulting in a continuation of the decline in inventories of lumber. This decrease in inventories should not be attributed to significant improvement in the demand for lumber, but rather to the extremely low rate of production, which, after adjustment for seasonal factors, was approximately 40 per cent below the average rate of production from 1925 through 1929. Industry— Indexes of daily average production, adjusted for seasonal variations (1923-1925 daily average“*100) - 1930 --------ï 1931 Jan. Dec. Nov. Jan. General: 82 70 74 75 Carloadings— Industrial # .................. 156 156 153 Electric Power P ro d u ctio n .............. Manufactures: Lumber ................................................ Refined Mineral O ilsf........................ . Flour .................................................... Slaughter of Livestock...................... 63 133 67 157 95 83 79 57 63 155 111 78 99 71 82 180 122 77 78 61 70 75 W ool C onsu m ption!.......................... Minerals: 107 89 92 Petroleum (California) t .................... 82 101 71 75 Copper (United States) $.................... 92 83 92 Lead (United States) %...................... Silver (United States) $.................... . . 68 66 76 91 Building and Construction^ Total .................................................... .. 57 55 63 61 Value of Building Permits Twenty Larger Cities.................... . . 44 46 48 51 Seventy Smaller Cities................ .. . . 47 47 51 57 Value of Engineering Contracts Awarded Total ............................................. 94 117 149 Excluding Buildings ................ . . 117 96 142 117 fN ot adjusted for seasonal variations. ÎPrepared by Federal Reserve Board. § Indexes are for three months ending with the month indicated. February, 1931 The petroleum industry of California has failed to attain the announced objective of an approximate daily average output of 500,000 barrels, but the quantity of crude oil produced during January was reduced considerably as compared with December, the daily average being 535,000 barrels. This figure is- the lowest for any month since January, 1923. A ctivity of refineries declined throughout the month. The average rate of production was about equal to that of early 1928 which was followed by a sharp increase, chiefly in gasoline output, in the latter half of that year. Despite the decline in activity of refineries, stocks of gasoline in creased seasonally during the month, although they were considerably smaller than at the end of January, 1930. Stocks of heavy crude and fuel oil declined substantially during January, however, reflecting probably the increased ap plication to heavy crudes of the cracking proc ess of producing gasoline. Most copper mines of the District operated with skeleton crews throughout January and production continued to decline. Stocks of both refined and blister copper decreased by a com paratively small amount during the month. The decline in inventories of refined copper con tinued the movement begun in the preceding month when the upward trend was checked for the first time in more than a year. Flour milling was also less active during January than in immediately preceding months or a year ago. Demand for export flour is re ported to be practically negligible while do mestic demand has been moderate, although somewhat irregular. Employment f—........ -Oregon- ------^ - California— No. of No. of Employees —% No. -Employees Jan., Jan., Jan., of Jan., 1930 1931 1930 Firms 1931 Industries 20,905 17,547 126.246 158,489 135 All Industries* . . . . (--16.1) (-20.3) Stone, Clay and 151 147 3 7,244 5,166 Glass Products. 46 —2.6) — 28.7) Lumber and W ood 11,418 46 9,145 Manufactures .. 112 13,634 16,530 -19.9) :—17.5) 1,882 1,316 10 2,314 2,137 Textiles ................ 17 -30.1) (— 7.6) Clothing’, Millinery 402 365 7,511 6,647 and Laundering. 87 St —9.2) — 11.5) Food, Beverages, 1,602 39 1,619 and T o b a c c o ... 194 21,706 23,684 (— 8.4) (1.1) Public Utilities .. 32 52,590 57,444 (— 8.4) Other Industriest. 386 70,041 93,729 — 25.3) 4,955 5,450 7,477 29 6,915 Miscellaneous 28 (— 7.5) -9 .1 ) Wholesale and R e ta il................ 103 26,044 27,837 (— 6.4) ((((- (- *Public utilities and wholesale and retail figures not included in this total. JLaundering only, tlncludes the following indus tries : metals, machinery and conveyances; leather and rubber g o o d s; chemicals, oils and paints; printing and paper goods. Figures in parentheses indicate percentage change from Janu ary, 1930. February, 1931 Trade A further falling off in the District’s trade, after allowing for seasonal factors, was re corded in January. The downward drift was not pronounced in any phase of distribution. It was, however, evident in practically all trade measures, there being declines in department store sales, wholesale sales, freight carloadings, and intercoastal traffic. Daily average department store sales de clined more than seasonally from December. In comparison with the same month in the preceding year, sales were more favorable in January than in December, however, largely because of the unusually sharp decline between December, 1929, and January, 1930. Decreases were general throughout the District but were particularly large in Los Angeles and Arizona. Contrary to the usual tendency, inventories of department stores were further reduced dur ing January, accentuating the reduction in D e cember which customarily accompanies the heavy sales of the Christmas season. The value of stocks carried has been declining irregularly since June, 1930, influenced in part at least by a declining price level. The ratio of collections to outstanding charge accounts of department stores was practically the same as in January, 1930, when the collection ratio for that month was lower than in any January since the figures have been collected (1926). RETAIL TRAD E—Twelfth District NET SALES* STOCKS* Jan., 1931 Jan., 1931 compared compared with with Jan.. 1930 Jan., 1930 Department Storesf ........................ — 9.2 ( 66) — 11.7 (48) Apparel Stores ................................ — 12.1 ( 27) — 11.5 (18) Furniture S to r e s .............................. — 7.9 ( 36) — 14.1 (24) All Stor e s .......................................... — 9.2 (129) — 12.0 (90) *Percentage increase or decrease (— ). Figures in parentheses in dicate number of stores reporting, tlncludes dry goods stores. W holesale trade during January was season ally slack. Compared with a year ago declines of more than 20 per cent were reported by dealers in agricultural implements, automobile supplies, dry goods, electrical supplies, furni ture, hardware, and shoes. Sales of drug, grocery, and paper and stationery houses were relatively better than were sales in other lines of whole sale trade. Aggregate sales of all reporting wholesale houses have been declining steadily in value since October, 1929. Intercoastal shipping through the Panama Canal declined more than seasonally during January as a result of reduced tonnage of prac tically all commodities except lumber. Eastbound shipments of lumber increased for the second successive month and were larger than in January, 1930. The increase in lumber ship ments has been an important factor in sustain ing the volume of eastbound intercoastal traffic 13 FEDERAL RESERVE AGENT AT SAN FRANCISCO during recent from southern relation to the modity during P E R months. Petroleum shipments California ports were small in level of shipments of that com the past five years. C E N T 1 3 0 M 120 * V » I 10 IS C E L L A N E O U S *-\ / \ 1 'i s . ' V '^ \ A V ■ • A ív A \ T O Ir A L 100 1 1 1 * I 1 I 9 0 8 0 1 9 2 7 1 9 2 6 1 9 2 9 1 9 3 0 1931 R AILROAD F R E IG H T —CARLOADINGS Car9 of revenue freight loaded in the Twelfth District as reported by the American Railway Association. Index numbers adjusted for seasonal variations, (1923-1925 daily average =100). Carloadings on District railroads declined substantially in January and were fewer both in actual number and after adjustment for sea sonal influences than in any month during the seven years for which records are available. Declines were most pronounced in the miscel laneous and merchandise group. Prices In contrast with a moderate rise in security prices, commodity prices have declined since the beginning of 1931, continuing the trend in evidence since the middle of 1929. Dur ing the past four months, average wholesale prices (United States Bureau of Labor Statis tics’ index) have fallen nearly 9 per cent, while Distribution and Trade— 1931 Jan. Foreign Trade0 ^ — —1930— Dec. Nov. Index Numbers* 90 94 87 Jan. 134 117 143 Inter coastal Trade0 Westbound .................................... Eastbound ...................................... , Carloadingst Merchandise and Miscellaneous. . Retail Trade Automobile SalesJ 86 97 82 88 103 84 88 109 82 103 124 97 92 89 102 85 101 94 105 89 83 148 67 60 148 108 104 155 Passenger C a r s .......................... Commercial Vehicles ................ Department Store . 108 . 93 Stock Turnover||........................ Collections# Regular .................................... . Installment ............................ . 110 111 118 99 103 104 —Actual Figures.25 .44 .25 .24 44.8 15.9 42.8 15.2 43.1 15.4 44.9 16.0 *Adjusted for seasonal variations, 1923-1925 average=100. “ In dexes are for three months ending with month indicated, tExcluding raw silk. tDaily average. j|At end of month. ||Proportion of average stocks sold during month. # P e r cent of collections during month to amount outstanding at first of month. 14 MONTHLY REVIEW OF BUSINESS CONDITIONS the decline in the fourteen months preceding was 14 per cent. The index for January, at 77.0 (1926— 100) was nearly 2 per cent under the figure for Decem ber and only 11 per cent above the 1913 average. From Decem ber 15 to Janu ary 15 there was another sharp drop in retail prices of food in the principal cities of the D is trict. A ccording to generally observed tenden cies, retail prices o f commodities other than food, (there is no composite index of retail com m odity prices) have also been reduced during recent months, thereby lowering the cost o f living. D uring the past tw o months, wheat prices for nearby contracts in the Chicago market have maintained recent advances, reflecting in part substantial purchases by the Federal Farm Board. The present supply of wheat is large and reports indicate little reduction of new crop acreage. On the Pacific Coast, prices have been steady since the first of this year, although at the lowest level reached on the current movement. Visible supplies of wheat on the Pacific Coast (Bradstreet’s figures) have in creased sharply since January 1, whereas they usually decline at this time of year. Despite smaller market receipts, Tw elfth District cattle prices have declined sharply since the begin ning of 1931, thus reversing the upward move ment noted last autumn. In the case of lambs, however, smaller receipts have been accom panied by a slight rise in prices. Butter, eggs, coffee, sugar, and milk have recently declined Bank Debits* — January, 1931 $ 36,522 Arizona P h o e n ix .................................. California Bakersfield ............................ Berkeley ................................ F r e s n o .................................... Long Beach .......................... Los A n g e le s .......................... Oakland ................................ Pasadena .............................. Sacramento .......................... San Bernardino .................. San Diego ............................ San F ra n c isc o ...................... San Jose ................................ Santa B arbara ...................... S to c k t o n ................................ Idaho B o i s e ...................................... Nevada Reno .................................... . January, 1930 $ 46,989 14,526 19,122 26,629 55,457 1,003,465 225,700 37,310 51,424 10,205 62,831 1,148,630 30,131 16,204 21,085 16,150 23,071 45,885 54,838 1,108,476 201,031 38,919 55,044 11,215 63,449 1,293,590 33,333 17,530 29,366 14,394 16,258 10,216 12,093 Oregon Eugene ................................ . Portland ............................... 6,013 143,487 6,704 175,404 Utah Ogden .................................. Salt Lake C i t y .................. . 15,861 72,245 19,257 88,735 7,525 52,287 37,357 14,675 9,175 13,882 251,523 53,815 47,247 14,446 $3,355,560 $3,747,425 Washington Bellingham .......................... Everett ................................ Seattle .................................. Spokane .............................. Tacoma ................................ Yakima ................................ T otal ................................ *In thousands of dollars. .. February, 1931 sharply in price, while bean, potato, and hay prices have been fairly steady. Quotations on raisins were advanced slightly during January and early February. Renewed weakness in w ool prices developed in late January after three weeks of unchanged quotations and northern and southern Cali fornia w ool (scoured) is now quoted on Boston markets at the lowest prices since 1921. Silk and cotton prices have advanced moderately during recent weeks. Despite a small decline in stocks, copper was on February 9 again quoted at the extremely low price of 9J4 cents per pound, delivered Connecticut Valley, but has since recovered to 10*4 cents per pound. Silver production has been substantially curtailed during the past few months, but prices have continued to de cline irregularly, reaching 2 5 ^ cents per fine ounce on February 16, the lowest quotation ever recorded. Quotations for lead were re duced sharply during early January and again during the first week in February to the lowest prices since 1921. Credit Situation W hile larger than during 1930, daily average discount holdings of the Federal Reserve Bank of San Francisco, at 17 million dollars for the four weeks ending February 18, were consid erably lower (10 million dollars) than in D e cember and January. The Bank’s holdings of locally purchased acceptances declined from 26 million dollars at the year-end to nine mil lion dollars in mid-January and to five million dollars on February 18, the decrease more than offsetting a small additional amount of credit extended through participation in the purchase of bills in the New Y ork market. A number of other factors, including the following, have been responsible for the rapid decline in the volume of credit extended by this Bank since the beginning of 1931. (1) M oney in circulation in the Tw elfth District has contracted 45 million dollars, a re duction evident in all but the Portland and Spokane areas where circulation remains at the year-end levels. W hen this money came out of circulation, it was deposited in commercial banks which in turn sent it to the Federal R e serve Bank to reduce their borrowings or to increase their deposits at that Bank. (2) There has been a continued net inflow of surplus banking funds from eastern money markets on a day to day or other short-term basis which funds were available at rates lower than those charged for Reserve Bank funds. This money has helped member banks to main tain necessary reserve deposits with the R e serve Bank while borrowing but little from that institution. February, 1931 FEDERAL RESERVE AGENT AT SAN FRANCISCO (3) A small amount of locally produced gold (about 2 million dollars) has been purchased by the San Francisco Mint. The Mint paid for the gold by checks drawn upon the Treasurer of the United States. These checks were de posited in commercial banks and used by them or their correspondents to increase deposits at the Federal Reserve Bank. These increased de posits were used to repay borrowings. (4) Total loans of reporting member banks have declined, a movement accompanied by a slight reduction in deposit liabilities which thus decreased reserve requirements of mem ber banks. This decrease in the legally required reserves of member banks released funds which tended to displace actual or potential member bank borrowings from the Reserve Bank. Total loans of reporting member banks were reduced between the middle of January and February 18. Commercial loans increased by a small amount, while loans on securities dropped sharply from 404 million dollars on January 21 to 375 million dollars on February 18, the reduction being the result of decreased loans to customers other than brokers. This is the first time since January, 1929, that these loans have been below 400 million dollars. Loans made by Twelfth District banks to brokers and dealers in securities in both the Twelfth District and in the New York market have been declining since the middle of 1930, although there has recently been some ten dency for such loans to increase in the New York market. The reduced volume of total loans was accompanied by little change in de posits. Investments of reporting member banks have expanded during the past month and on February 18 were at approximately the same level as on December 24, just prior to the sale of a large volume of securities by these banks. FEDERAL RESERVE BANK OF SAN FRANCISCO (In millions of dollars) ---- Condition 1— ' Feb. 18, Jan. 21, Dec.31, Feb.19, 1931 1931 1930 1930 Total Bills and Securities.......... 62 72 98 59 Bills D iscou n ted ...................... 17 19 16 13 Bills B o u g h t ............................ 6 14 31 34 United States Securities . . . . 39 39 51 12 Total R e se r v e s............................ 309 300 299 308 Total Deposits .................... .. 186 189 191 182 Federal Reserve Notes in Circu lation .......................................... 167 165 186 162 Ratio of Total Reserves to De posit and Note Liabilities Combined ................................ 87.3 84.8 79.2 89.3 Interest rates in the District’s leading cities have tended downward slightly during the past month, and are now more nearly in line with the rates in other money markets. On Febru ary 19 the acceptance buying rate of the Fed eral Reserve Bank of San Francisco was re duced from 1Ya per cent to 1Yz per cent on 90day bills with corresponding reduction for other maturities. After a period of four weeks 15 during which the New York rates have been one-fourth of one per cent lower than the San Francisco rates, this reduction reestablished the local rates at the same level as that of the buying rates of the Federal Reserve Bank of New York. Rates paid on active checking ac counts of correspondent banks were reduced in Los Angeles on January 2 and in Portland on February 1. These reductions eliminate part of the differential between rates paid on bank ers’ deposits by banks in this District and those paid in New York, where reductions became effective on December 27 of last year and place the return on these accounts upon an approxi mate equality with current yields on other short-term funds in the open market. Rates paid upon savings accounts and time certifi cates of deposit have not been changed in Twelfth District cities during the past two years, notwithstanding successive reductions in other parts of the United States, particu larly in New York where the rate on time certificates of deposit has declined from 3%> per cent a year ago to iy> per cent this month. Rates charged customers of commercial banks have participated in the general decline of in terest rates during the past six weeks. In San Francisco, average rates on commercial loans eligible for rediscount have been reduced onefourth of one per cent during the past 60 days. Other rates have been reduced to a lesser ex tent. Charges by brokers on debit balances of customers have followed the general downward trend of bank rates. REPORTING M EMBER BANKS — Twelfth District (In millions of dollars) '" Condition------------------------- * Feb. 18, Jan.21, Dec.31, Feb.19, 1931 1931 1930 1930 Loans and Investments— T ota l.. 1,943 1,930 1,954 1,944 Loans— T o t a l ................................ 1,277 1,299 1,320 1,371 On Securities............................ 375 404 412 449 All O t h e r .................................. 902 895 908 922 Investments— Total .................... 666 631 634 573 United States Securities.......... 330 319 313 325 Other Securities ...................... 336 312 321 248 Reserve with Reserve Bank........ 107 106 107 110 Net Demand D e p o sits ................ 738 738 751 757 Time D ep o sits .............................. 1,019 1,013 1,037 1,006 Due from B a n k s.......................... 215 224 219 163 Due to B a n k s .............................. 281 275 263 208 Borrowings at Reserve B a n k .. . . 11 14 11 5 Trading on the stock exchanges of the Dis trict during January was greatly reduced in volume as compared with December. Although price averages changed little, their general ten dency was upward during the first month of the year and further moderate advances together with increased share turnover, have been re corded thus far in February. The volume of trading on some of the more recently estab lished security markets in the District has been extremely small for several months, a condi tion which caused the Portland Stock and Bond Exchange to suspend operations at the close of January. February, 1931 MONTHLY REVIEW OF BUSINESS CONDITIONS 16 M a p s h o w i n g t e r r it o r ie s o f H e a d O ffic e a n d Branch e s o f th e F e d e ra l R e se rve B a n k o f S a n F r a n c is c o TW ELFTH FED ERAL RESERVE D IS T R IC T Includes the states of Arizona, except the five Southeastern Counties, California, Idaho, Nevada^Oregon, Utah and Washington. LOSANCrEfcESj
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