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MONTHLY REVIEW B U S IN E S S C O N D IT IO N S IN T H E T W E L F T H F E D E R A L R E SE R V E Federal Reserve Bank of San Francisco ising consumer incomes in urban areas since the late R summer were reflected in a general expansion in retail trade in the Twelfth District during November. In creases were evident in almost all lines for which data are available, the most marked gain taking place in new auto mobile sales which, for several months, have been increas ing considerably more than is customary at this season. Expansion in production, employment, and payrolls in district industry, which had been stimulated considerably by the wave of buying that followed the outbreak of war in Europe, continued in November. Gains were more widespread than in the preceding two months, although the increases were smaller on a percentage basis than in September and October. Residential building, which has fluctuated narrowly with little net change since late last winter, seasonal influences considered, increased sharply. Value of contracts awarded for nonresidential private construction which fluctuates widely from month to month, was below the unusually large total reported in October, but contracts during October and November combined were considerably in excess of the total for those two months a year ago. I ndustry Activity in the local steel and wood pulp industries, which had expanded considerably in September and Oc tober, was well maintained in November. Operations in the pulp and paper industries have approached closely enough to capacity to bring a number of long idle plants into production and to promote the renovation and expan sion of several others. Steel ingot output in California during October and November is estimated to have ap proximated the high levels reached in 1936-1937, when output averaged about 80 percent of rated capacity. Un filled orders held by both steel mills and steel fabricating plants continue large and are reported to be sufficient to maintain the current rate of activity for several months. Lumber production declined considerably less than is usual in November and on a seasonally adjusted basis was only 7 percent under the peak attained in 1937. The inland pine areas have enjoyed an unusually open fall and early winter and the well sustained output in those sections largely explains the advance during November in the sea sonally adjusted index for the district as a whole. Orders received by district mills declined further in November and on a daily average basis totaled 31,000,000 board feet, compared with a low for the year of 29,000,000 in Feb ruary. Although unfilled orders continued to decline dur ing the month, the total on November 30 was equal to the June 30 figure. Early in November, average prices of Douglas fir items at the mill declined somewhat from the peak October levels, but remained higher than in midSeptember. Activity in the district aircraft industry continued to expand in November, employment in California plants increasing 17 percent from the preceding month. Despite D IS T R IC T January 1,1940 this increase unfilled orders remain high and the industry continues to add to capacity. The petroleum industry experienced but little imme diate stimulus from the outbreak of the war in Septem ber, and output of crude oil remained unchanged in N o vember and early December at the levels of the preceding two months. Refinery operations declined somewhat more than seasonally, following a substantial gain earlier in the fall, owing to increased gasoline production. Local automobile assembly plants expanded their op erations in November in response to continued active demand for new model cars. Output of rubber tires and tubes has likewise expanded. New residential building, measured by value of permits issued, rose contra-seasonally in November. Part of the advance was accounted for by issuance of permits, total ing $2,242,000, for construction of two low-rent housing projects sponsored by the United States Housing Author ity. Actual value of permits issued during the month was almost as large as the peak for recent years attained last spring, despite the fact that November permits are usually about 20 percent lower. As a result the seasonally adjusted index advanced to 61 percent of the 1923-1925 level com pared with 51 in October and an average of 53 last spring. E mployment Factory employment in November remained close to the October level, although a decline is customary. In California, an actual increase took place during the month, while seasonal lay-offs in the Pacific Northwest states were not as large as in other recent years. As a result, the adjusted index for the three states combined advanced 4 points to 118 percent of the 1923-1925 average, where it was only 8 percent lower than the record month in 1937. Factory payrolls also resisted the customary seasonal decline in November. Particularly marked gains have taken place in California since September, and on a sea sonally adjusted basis industrial payrolls in that state were higher in November than in any previous month. R etail Commodity Sales Total retail trade in the Twelfth District advanced in November with most lines for which information is avail able sharing in the upturn, exceptions being apparel and restaurant sales. Data covering total district retail trade are not complete but it appears probable that the aggregate dollar value of consumer purchases during November was between 5 and 10 percent lower than the peak 1937 months on a seasonally adjusted basis. Since prices of most commodities are currently lower than they were at that time, the physical movement of goods from distrib utor to consumer equalled or exceeded 1937 levels. The chart on the next page shows changes in value of trade by various classes of retailers over the past three years. The figures have been adjusted for seasonal vari ation. Sales of independent grocers are somewhat lower 2 January 1, 1940 FEDERAL RESERVE B A N K OF S A N FR A N C ISCO than in 1937, but much if not all of the decrease is ac counted for by lower food prices. Value of department store sales, 60 to 70 percent of which consists of sales of apparel and house furnishings, advanced slightly in N o vember and, on a seasonally adjusted basis, was almost as large as in late 1937 when prices were moderately higher. Data covering the first three weeks of December point to further expansion in that month, after allowance for the customary large seasonal gain. Apparel store sales have displayed some decline since July, but the current level remains only 3 percent below the high 1937 average. Drug store sales, which have been more stable in recent years than any other type of trade for which information is available, increased in November by the estimated seaPER CENT PERCENT tendency for total sales to expand, and the upward move ment has gained momentum this fall. A g r ic u l t u r e The continued lack of normal precipitation throughout most of the district during the fall months has lowered the prospects for crop production next year. Grain crops have been sown in dry soil and all crops were badly in need of rain in mid-December. Pastures and livestock ranges deteriorated during the past month and the short age o f range feed became acute in some areas. At present rain or snow is also urgently needed to replenish stock water. Supplemental feed is estimated to be adequate to carry stock through an average winter; numbers of live stock in the worst drought areas having been reduced. Cattle, sheep, and new-born lambs are entering the winter in only fair condition, and winter kill may be unusually heavy if weather conditions during the winter are severe. The mild and dry weather of recent months has been favorable, however, for the maturing and harvesting of most late crops and for the pruning and spraying of vine yards and orchards. Harvesting of most of these crops was completed by the middle of December with only small losses from inclement weather. Gaining in economic importance as an aid to district agriculturists is the Stamp Plan method of distributing surplus agricultural commodities to persons on relief. The plan was extended to San Francisco on December 19, after having been in effect in Seattle, Salt Lake City, and a number of other large cities elsewhere in the United States for several months, and will be inaugurated throughout California as rapidly as possible. O f the 16 items now in the list of surplus commodities, twelve are produced by district farmers. The movement of crops to market expanded seasonally Production and Employment— Index numbers, 1923-1925 average=100 With Seasonal r - Adjustment —> * ,— 1939— s 1938 R E T A I L T R A D E — Twelfth District Indexes of sales, adjusted for seasonal variation. 1937 daily average=100. Value figures, except automobile sales. By months, January 1937 to November 1939. sonal amount, and the adjusted index remained close to the levels of early 1937. Gasoline consumption appeared in November to have maintained the nearly continuous upward trend in evidence since 1933. Furniture store sales have expanded only slightly since the sharp downturn in mid-1937, but November trade was higher than at any time during the past two years on a seasonally adjusted basis. Sales of new automobiles in creased sharply in October and November. Deliveries were considerably larger than in the corresponding months a year ago, but were somewhat below the totals reported in 1936 and 1937. In an effort to show the broad movements in total retail sales, a weighted composite index of the eight lines discussed has been prepared. It indicates that the decline in sales which started in the fall o f 1937 was reversed in the late summer of 1938. Some of that rise was lost early in 1939, but since last spring there has been a persistent Industrial Production* Manufactures (physical volume) Lumber ................................................ Refined oils......................................... Cement ............................. ................... W heat flour......................................... Minerals (physical volume) Petroleum ........................................... Lead (U . S . ) t .................................... , Silver ( U . S . ) t .................................. Construction (value) Residential building permits! Twelfth D istrict......... ................ , Southern California.............. . Northern California.............. , Oregon ....................................... W ashington ............................. Intermountain states............, Public works contracts................. Miscellaneous Electric power production............ Factory Employment and Payrolls! Employment Pacific Coast...................................... , California ...................................... . Oregon ......................................... ., W ashington ................................. . Payrolls Pacific C oast.................................... . California .................................... Oregon ........................................ .. W ashington ............................... . N ov. Oct. Nov. 95 — 122 91 90 — 107 97 71 — 108 105 — — 70 91 66 51 61 64 50 52 56 108 — 51 51 46 43 55 97 — 212 Without Seasonal r-A d ju stm ent-\ ✓ — 1939— s 1938 N ov. Oct. N ov. 93 161 122 91 96 169 124 116 70 163 108 116 93 86 93 72 90 100 69 55 48 51 47 25 29 76 — 58 65 44 41 49 95 204 51 53 45 45 46 98 267 46 52 41 20 25 67 221 208 211 201 208 119 118 130 110 96 114 125 107 95 103 115 94 85 119 133 109 96 120 132 112 99 104 117 93 85 119 133 106 98 116 129 105 94 99 111 89 79 119 133 104 98 123 135 112 101 99 112 88 79 — 83 * Daily average. tPrepared by Board of Governors of Federal Reserve System. ¿Includes figures from 197 cities and Los Angeles County, unincorporated. ^Revised series. Excludes fish, fruit, and vegetable canning. N O T E : Index of meat production, usually published in this table, is in process of revision. January 1, 1940 during September and October and, reflecting higher prices, total farm cash income increased more than usual in October to a total 11 percent higher than in 1938. Pre liminary estimates indicate the year-period gain in No vember was somewhat smaller than the 11 percent re ported for October. Federal Government benefit pay ments to farmers and livestock men were almost double the amounts disbursed a year ago. Available data indicate that total farm income for 1939 should approximate $965,000,000, compared with $932,000,000 received last year. A major portion of this increase has been due to larger government payments to growers cooperating with the various farm programs of the Federal Government. Total farm cash income was $1,160,000,000 in 1937, and $956,000,000 in 1936. Prune growers appear to have shared in the rise in agri cultural income this year. Satisfactory estimates of cash farm income from this crop are not yet available for 1939, but it seems probable that by the end of the marketing year returns to growers will be larger than the $11,200,000 received in 1938. Returns during the 1920’s ranged from $15,000,000 to $22,000,000 per year. This year’s prune crop of 213,000 tons was smaller than the 238,000 tons harvested last season. (Total crop grown in 1938 was estimated at 302,000 tons, but a con siderable part was not harvested owing to poor market conditions.) Growers have received somewhat higher prices for their crop this season than last, however, and this factor may offset the reduced production. Quotations surged upward early in September, following the out break of war, and, although they have since declined, prices continue above 1938 levels. The sharp rise in prices in September reflected expectations o f increased foreign demand. Exports of prunes have not yet increased, how ever, and, in fact, have been reduced considerably owing to shipping and exchange difficulties. This curtailment has seriously reduced the market for prunes, since more than 40 percent of district output has been exported in recent years. Consequently, although domestic sales of prunes have been moderately active at prices higher than Distribution and Trade— Index numbers, 1923-1925 average=100 Retail Trade Department store sales (value)* Twelfth D istrict................................ California ............................................ Los A n geles.................................... Bay R egion.................................... San Francisco............................... Oakland ......................................... Pacific N orthw est............................. Portland ......................................... S e a t tle ............ ................................. Spokane ........................................... Salt Lake C ity.................................. Department store stocks (value) t Furniture store sales ( value)* $ . . . Furniture store stocks (value) Automobile sales (num ber)* Total ................... ................................. Passenger ....................................... Commercial .................................. Carloadings (num ber)* Total .......................................................... Merchandise and misc................... O t h e r ..................................................... Intercoastal Traffic (volume) Total .......................................................... E a stb o u n d ........................................... W estbound ......................................... *Daily average. 3 M O N T H L Y R E V IE W OF B U S IN E S S C O N D IT IO N S With Seasonal /— Adjustment-^ ,— 1939— n 1938 Nov. Oct. N ov. f A t end of month. 103 105 99 110 103 131 100 107 96 93 86 66 76 67 Without Seasonal , — Adjustment—% ,— 1939— -, 1938 Nov. Oct. N ov. 100 100 92 107 99 131 101 105 101 92 86 66 82 73 99 98 88 106 99 124 99 98 101 96 95 r62 80 76 105 rl03 105 r99 95 92 115 rl0 4 96 108 136 125 104 110 107 105 107 105 92 137 93 102 74 r68 83 85 77 77 108 111 102 118 113 137 104 109 102 93 93 74 79 71 — — — — — — 105 102 134 99 96 128 95 96 85 — — — 71 103 77 88 97 77 85 98 68 97 103 79 104 118 86 85 98 70 75 56 142 72 66 91 58 49 90 76 60 131 80 75 94 60 53 83 $1929 average:= 10(i. r Revised. a year ago, it is difficult to estimate total value of sales during the current marketing season until more is known of the export movement. Inasmuch as Pacific Coast or chards supply over 80 percent of the world’s consumption of prunes, any increase in demand for that food by bel ligerent countries will be reflected in larger exports from this district. Credit and B anking Adjusted demand deposits of district city member banks continued to expand during November and at the month-end were more than $100,000,000 larger than a year earlier, an increase of about 10 percent. Not much change has occurred recently in the volume of time de posits, which are moderately larger than a year ago. Expansion in demand deposits, which has extended to banks and branches in smaller cities as well as in the principal centers, has been substantial since last June. Most of this growth has come as a result of United States S ele c te d I t e m s o f C o n d it io n of R e p o r t in g M e m b e r B a n k s — T w elfth D is t r ic t (in millions of dollars) D ec. 20 1939 Loans and investments— total. . . . . . 2,287 Loans— total ......................................... 976 Commercial, industrial, and agricultural loans........................... Real estate loans.................................. U . S. Government ob lig a tio n s... Other securities.................................... Demand deposits— adjusted............ Tim e deposits......................................... . . 327 386 263 985 326 1,040 1,067 Change from June 28 Dec. 21 1939 1938 + 96 + 97 + 31 — 16 8 N ov. 29 1939 +42 + + 5 0 + 3 + 30 + 4 — 15 + 30 +24 + 2 + 5 +62 + 3 + 93 0 — 14 + 3 — 5 + 105 + 8 + 111 + 13 Treasury operations, the Federal Government having continued to pay out substantially more in this district than it has collected locally. From June 30 to November 30 of this year the excess Treasury disbursements in this district totaled $140,900,000. Another important factor adding to district bank deposits since last summer has been the expansion in local loans of banks, particularly loans for commercial and industrial purposes. Because of partially offsetting factors, deposits have actually risen by less than the amount of net Treasury disbursements and increases in bank loans since last June. The two most important factors tending to reduce deposits have been (a) net payments of funds by local depositors to firms located in other districts and (b ) withdrawals of currency by the public. The increase in demand for currency from the end of June to November 30 totaled $15,800,000, and this cash was obtained by the public by drawing upon their bank deposits. The increase over the period as a whole was largely seasonal in character, much of the large sum of currency withdrawn immediately prior to the November 7 special election in California having been redeposited after defeat of the Retirement Life Payments initiative proposal. During the first three weeks of December, deposits at city banks declined somewhat. Seasonal shopping require ments occasioned a considerable increase in demand for currency, and United States Treasury collections were unusually large owing to fourth quarter income tax col lections and large Treasury receipts from the sale of a new issue of Government bonds dated December 8. In addition, commercial payments to other districts continued larger than the inward movement of funds, thus tending to reduce deposits at banks in the Twelfth District. January 1, 1940 FEDERAL RESERVE B A N K OF S A N F R A N C ISCO S u m m a ry o f N a tio n a l B u sin e ss C o n d it io n s Prepared by the Board of Governors of the Federal Reserve System a rapid rise after the outbreak of the European W ar industrial activity continued at a high level in November and the first half of December. There was a considerable increase in distribution of commodities to consumers while prices of basic commodities, which had been steady during November, rose somewhat in the first two weeks of December. F o llo w in g P r o d u c t io n IN D U S T R IA L P R O D U C T IO N Index of physical volume of production, adjusted for seasonal variation, 1923-1925 average=100. By months, January 1934 to November 1939. F R E I G H T -C A R L O A D I N G S Index of total loadings of revenue freight, adjusted for seasonal variation, 1923-1925 average=100. By months, January 1934 to November 1939. The Board’s seasonally adjusted index of industrial production advanced from 121 to 124 percent in November, reflecting sustained activity at a period of the year when a decline is usual. Production of durable goods, which had advanced rapidly for several months, showed a further expansion. Record production of steel ingots continued in November and was followed by a less than seasonal decline in the first half of December. Automobile production increased in November, notwith standing the fact that plants of one important company remained closed pending settlement of an industrial dispute. After this was settled at the end of November assemblies rose sharply. Retail sales of new automobiles were in large volume in November and at the end of the month dealers’ stocks of new cars apparently were smaller than at the corresponding time in other recent years. Lumber production declined less than seasonally in November but plate glass production, which had reached a high level in October, showed a reduction. Output of nondurable goods continued at a high level in November. A t cotton and woolen mills activity increased somewhat further and was close to the record levels reached three years ago. Rayon production advanced to new high levels but at silk mills there was a sharp decline following substantial increases earlier this fall. Output of flour and sugar declined further from the levels reached in September while changes in activity at shoe factories and meat-packing establish ments were largely seasonal in character. Coal production in November declined somewhat from the high level reached in October. Output of crude petroleum increased further and iron ore shipments continued in exceptionally large volume until the Great Lakes’ shipping season closed in the latter part of the month. Value of construction contracts, as reported by the F. W . Dodge Corporation, increased in November following a sharp decline in October. In both months changes in total awards reflected principally fluctuations in the volume of con tracts for public construction. Private residential awards declined somewhat less than seasonally in November, while awards for other private projects showed little change. Contracts for private work, both residential and nonresidential, were larger than a year ago, while those for public projects were below the high level of that time when contracts under the Public Works Administration program were being awarded in large volume. E mploym ent Factory employment and payrolls continued to increase in November, reflecting chiefly further sharp advances in industries producing steel, machinery, and other durable goods. D is t r ib u t io n D E P A R T M E N T S T O R E S A L E S A N D ST O C K S Indexes of value of sales and stocks, adjusted for seasonal variation, 1923-1925 average=100. By months, January 1934 to November 1939. In November distribution of commodities to consumers increased considerably. The Board’s seasonally adjusted index of department store sales, which had been around 90 in the three preceding months, advanced to 94, a level about the same as at the peak in 1937 when prices of commodities sold at department stores were generally somewhat higher than at present. Freight-car loadings showed less than the usual seasonal decrease from Octo ber to November and the Board’s adjusted index increased from 80 to 82, which was only slightly under the recovery peak reached in the early part of 1937. Ship ments of ore and miscellaneous freight declined less than is usual in November, while loadings of coal decreased more than seasonally from the relatively high October level. C o m m o d i t y P r ic e s Prices of both industrial materials and foodstuffs advanced from the latter part of November to the middle of December. Wheat and silk prices rose con siderably and there were smaller increases in cotton and hides. Prices of steel scrap and nonferrous metals, on the other hand, showed declines. G o v e r n m e n t S e c u r it y M a r k e t Prices of United States Treasury bonds advanced sharply during the last half of November to a level not far below the all-time high point of last June and remained steady during the first half of December. Bank M O N E Y R A T E S IN N E W Y O R K C IT Y For weeks ending January 6, 1934 to December 16, 1939. C r e d it Total loans and investments at reporting member banks in 101 leading cities rose substantially during November and the first half of December, reflecting largely purchases of new United States Government securities. Commercial loans, which had been increasing since August, continued to rise until the third week in November. Deposits increased further.
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