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MONTHLY REVIEW B U S IN E S S F ederal R eserve Bank C O N D IT IO N S o f San IN T H E T W E L F T H n d u s t r ia l R E SE R V E F r a n c isc o production in the Twelfth District con tinued to expand during November and early Decem ber, and further large gains were reported in factory employment and payrolls. To some extent the increased industrial activity was made possible by recently com pleted additions to plants and by the adaptation of exist ing facilities to the manufacture of products required in the national defense program or in demand for export to Great Britain. Utilization of facilities of smaller fac tories not previously drawn into the defense effort was also of some importance, particularly in connection with the production of aircraft. Construction of further addi tions to plants was pressed forward during the past month, particularly for the production of aircraft and of naval and merchant vessels, the two major direct con tributions of this district toward national defense, and new contracts for still further additions to facilities have been announced. To a certain extent it may be said that emphasis under the defense program in the Twelfth Dis trict has shifted from the phase of contract negotiation and the like to that of actual output of armament and equipment and the construction of facilities at an increas ing rate. The volume of commitments placed with local firms for aircraft and ships during the past month was smaller than the huge awards made earlier in the fall. Except in the field of construction, however, it is doubt ful whether Army, Navy, and British orders in addition to those placed in October would have induced a larger increase in output in November and early December, since aircraft plants and shipyards were already operat ing approximately at capacity. Output and factory em ployment and payrolls may, of course, be expected to increase in the immediate future as new plants and ship building ways now planned or being built are placed in production. While the impetus to expansion in the district aircraft and shipbuilding industries and in satellite lines has been most marked in recent months, defense spending has also stimulated activity in a number of other local industries. The mining and smelting of copper were close to capacity in November and early December, while output of both lead and zinc continued at high levels. The local steel in dustry, which produces only a portion of the district's needs, has been operating at practical capacity for months. Although a number of lumber mills in the Douglas fir area were closed by strikes in November and early De cember, district lumber production declined less than seasonally and the adjusted index advanced further to 98 percent of the 1923-1925 average compared with 95 in October. Cement production in November likewise de clined less than seasonally. Automobile assemblies ad vanced sharply, and the increase was apparently in excess of seasonal expectations even after allowance for the earlier introduction of new models this year. Pulp and paper production continued at the near-capacity levels at tained shortly after the outbreak of the European war. I F E D E R A L D IS T R IC T J a n u a ry 1 ,1 9 4 1 Value of private residential building undertaken in November was smaller than in the preceding fall and late summer months, but remained at a level substantially higher than in 1939. Government contracts for the con struction of housing of a permanent type to be occupied by married defense workers and enlisted men again added to total residential building. In that month and in October contracts of this character were awarded for 3800 dwell ing units in California and Washington, to cost $12,352,000. Nonresidential building initiated in November con tinued at the high levels of other recent months, with de fense construction again accounting for much of the new work. During the six months ending November 30, apMILLIONS OF DOLLARS NEW BUILDING CONSTRUCTION—Twelfth District Monthly value of new construction, January 1939 to November 1940 proximately $239,000,000 of nonresidential building has been undertaken, of which 19 percent has been for ex pansion of plants in the aircraft and shipbuilding indus tries. Army facilities have accounted for an additional 26 percent while those for the Navy have approximated 28 percent. Not included in the building figures has been some $17,000,000 of defense engineering construction for which contracts were awarded during the period. T rade Available information on a number of lines of trade suggests that the dollar volume of district retail sales, which had tended to lag somewhat in relation to the ex pansion in industrial activity and consumer incomes, advanced sharply in November and, allowing for sea sonal influences, was at the highest level in more than a decade. With retail prices averaging appreciably below those of 1929 and under those prevailing during the pe riod of peak prices for recent years in mid-1937, the phys ical volume of goods purchased by consumers in the district is indicated to be well above that for any prior month in the past ten years, seasonal influences considered. Value of department store sales showed but little net change from January through October, after allowance for the customary seasonal changes. Paralleling a sim- 2 January 1,1941 FEDERAL RESERVE B A N K OF S A N FR A N C ISCO ilar development in the country as a whole, however, sales of these stores in the Twelfth District advanced marked ly in November. Sales of both apparel and of furniture stores likewise advanced more than seasonally. New pas senger automobile registrations, as indicated on the acNUMBER OF VEHICLES N E W M OTO R V E H IC L E S SALES—Twelfth District Daily average registrations, by months, January 1934 to November 1940. Not adjusted for seasonal variation. Logarithmic vertical scale; that is, equal vertical distances measure equal percentage changes rather than absolute amounts. companying chart, expanded sharply in October and increased further in November. In other lines of trade for which information is available, gains in sales were general in November. A g r ic u l t u r e Although foreign markets which formerly provided important outlets for a number of locally grown crops have been severely curtailed, district farm cash income during the fall months has been slightly larger than in the like period of 1939. Prices of farm products have averaged somewhat higher than a year earlier and total domestic marketings have been in somewhat larger vol ume, in part reflecting the increased disposition of food stuffs through various forms of subsidized consumption and heavy purchases by the Army and Navy, particularly of foods and cotton and woolen textile products. The farm commodity loan program of the Federal Govern ment has also been a factor in the increased farm income this fall as compared with a year ago. These Government loans have been used more this year than last, and the proceeds of the loans are included in farm cash income. Expanding use of the farm commodity loan program has also tended to maintain prices for some commodities such as cotton and wheat which might otherwise have reached lower levels. Growers of a number of important district agricul tural products would have felt keenly the loss of export markets had not Federal Government aid been forthcom ing. In the Pacific Northwest, a large portion of the wheat crop which, on the average, returned growers about $52,300,000 in the years 1935 to 1939, is moving under Federal loan. Out of an estimated production of 83,000,000 bushels in the three states of Idaho, Oregon, and Washington, 22,544,000 bushels were under loan on December 10. Wars in Europe and in the Orient have severely curtailed exports of wheat and flour from the Pacific Northwest in recent months, and prices at the farm early in December were around 64 cents per bushel, compared with 72 cents per bushel a year earlier and 51 cents in December 1938. Production of raisins in California this season is esti mated to be about 164,000 tons, compared with 245,000 tons dried last year and an average of 212,600 tons dur ing the previous five years. Exports from this country during the four months July through October were only 4,933 tons, compared with the unusually large total of 42,921 tons exported during the same period last year and an average of 27,182 tons in the like months of 19341938. Exports averaged 65,840 tons annually (30 per cent of the crop) during the five years 1934-1938. Under the prorate program for the 1940 crop, each grower transfers 20 percent of his crop to a “ surplus’' pool. An additional 50 percent is transferred to a “stabilization” pool, and it is planned to dispose of this tonnage on the regular commercial market later in the year. Raisins in the “ surplus” pool will be diverted to non-competitive domestic markets and uses. These measures were effec tive in maintaining prices paid growers for their “ free” tonnage. During the past five years California raisin growers have received from $12,000,000 to $15,000,000 annually for their crops. Practically the entire domestic production of prunes is grown in the three Pacific Coast states, and exports from this country during the years 1934-1938 averaged 94,587 tons, or over 40 percent of total production. In the first four months of the current crop year, July through October, only 6,470 tons have been shipped to foreign markets, compared with 28,230 tons during the like pe riod last season, and an average of 33,070 tons during these months in the preceding five years. A prune market ing program similar to that described for raisins has been made effective and probably has prevented a sharp decline in the price of prunes which might have occurred had the entire output been released on the domestic mar ket. After advancing during the summer and fall months, prune prices in mid-December were still about 1 % cents per pound lower than the relatively high prices of a year Distribution and Trade— Index numbers, 1923-1925 average=100 Retail Trade Department store sales (value)* Twelfth District.......................... California .................................... Los Angeles.............................. Bay Region.............................. San Francisco.......................... Oakland .................................. Pacific Northwest........................ Portland .................................. S eattle...................................... Spokane .................................. Salt Lake City...................... Department store stocks (value) t. Furniture store sales (value)*§$. Furniture store stocks (value)t§. . Automobile sales (number)* Passenger ................................ Commercial.............................. Carloadings (number)* With Seasonal Adjustment-^ f— 1940 — > 1939 Nov. Oct. Nov. 110 100 99 118 109 143 114 115 120 98 102 63 93 71 99 97 86 106 98 127 100 97 108 90 93 62 84 74 100 100 92 107 99 131 101 105 101 92 85 66 85 74 116 114 102 126 119 148 118 118 127 98 110 70 96 75 103 98 90 104 95 129 111 104 112 129 99 68 90 76 105 105 95 115 108 136 104 107 107 92 92 73 88 77 — — — — — — — — 146 144 169 141 138 176 106 103 138 90 97 81 92 103 78 98 106 87 106 118 91 92 103 79 66 54 107 75 56 142 68 50 131 73 61 112 76 60 131 — 97 Merchandise and misc................ 106 85 Intercoastal Traffic (volume) 68 46 Eastbound .................................. 142 Westbound .................................. *Daily average. Í Revised series. fA t end of month. Without Seasonal ^-Adjustment—> ,— 1940— s 1939 Nov. Oct. Nov. §1929 average =: 100. earlier but were above th prevailing in either Decem ber 1938 or December 193/. In the crop year ended October 31, 1940, returns to district growers of citrus fruits were on the whole some what higher than in either of the two preceding years. Marketings of fruit grown in Arizona and California exceeded in volume those of any previous year and prices averaged slightly higher than in 1938 or 1939. It is esti mated that cash farm receipts from grapefruit, lemons, and oranges approximated $62,000,000 in the twelve months ending with October 1940, compared with $53,602,000 a year earlier and $58,045,000 two years ago. In both the 1936 and 1937 crop years income of district citrus fruit growers exceeded $80,000,000. With a further increase in bearing acreage and favor able growing conditions to date (except for low tempera tures in a few localities in mid-December which occa sioned some crop damage), estimates point to a record Citrus F ruit P roduction*—T welfth D istrict (in thousands of boxes) Grapefruit .......................... Lemons .............................. Oranges— total .................. Naval and Misc.............. Valencia ........................ Average 1929-1938 1938 2,892 4,693 8,233 9,360 35,170 46,264 15,340 17,030 19,830 29,234 1939 4,624 11,106 41,850 18,400 23,450 1940 4,875 11,963 44,924 18,041 26,883 Indicated 1941 4,364 13,430 48,887 20,105 28,782 *For citrus years ending October 31 of years shown. output of oranges and lemons in Arizona and California during the current citrus year. Grapefruit production, however, is expected to be below that of last season. The accompanying table shows the estimated production of grapefruit, lemons, and oranges for the current season together with the output in recent crop years. Production and Employment— Index numbers, 1923-1925 average=100 Industrial Production.* Manufactures (physical volume) L u m b e r........................................ Refined oils.................................. Cement ........................................ Wheat flour.................................. Minerals (physical volume) Petroleum .................................... Lead (U. S . ) t .............................. Silver (U. S . ) f ............................ Copper (U . S .) t .......................... Construction (value) Residential building permits? Twelfth District...................... Southern California............ Northern California............ Oregon ................................ Washington ........................ Intermountain states.......... Public works contracts.............. Miscellaneous Electric power production........ Factory Employment and Payrol!s§ Employment Pacific Coast................................ California ................................ Oregon .................................... Washington ............................ Payrolls Pacific Coast................................ California ................................ Oregon .................................... Washington ............................ With Seasonal r-Adjustment—\ r-1 9 4 0 -> 1939 Nov. Oct. Nov. 98 — 132 121 95 — 117 117 94 — 122 87 — 140 — 119 113 140 79 62 96 42 167 90 — Without Seasonal t—Adjustment—\ f— 1940— N 1939 Nov. Oct. Nov. 96 — 132 133 101 165 135 139 91 171 122 96 — 109 109 — 146 93 117 115 145 93 116 108 — 94 98 102 37 67 105 — 60 63 50 50 57 115 — 74 63 85 34 146 79 487 95 103 100 38 55 106 576 57 64 44 40 49 101 204 251 241 230 237 240 217 138 161 112 104 132 153 111 103 118 130 111 99 139 164 111 104 139 160 115 107 120 133 110 99 144 170 112 107 139 162 111 106 120 133 107 100 144 171 109 106 147 170 118 113 120 133 105 99 * Daily average. f Prepared by Board of Governors of Federal Reserve System. ( 1935-1939 —100.) Jlncludes figures from 197 cities and Los' Angeles County, unincorporated. §Excludes fish, fruit, and vegetable canning. 3 M O N T H L Y R E V IE W OF B U S IN E S S CO N D IT IO N S January 1,1941 The livestock industry of this district is entering the winter months with above average range and pasture conditions. Supplies of relatively low-priced hay, grains, and concentrates are plentiful and prices for meat ani mals and of such related products as wool, eggs, and dairy products are higher than a year ago. Encouraged by these developments and by a more active consumer de mand for meat, cattle and lamb feeders have expanded their operations in the Twelfth District. The number of cattle on feed and destined for local markets during the late winter and spring months approximated 510,000 head on December 1, compared with 445,000 on feed a year earlier, and 360,000 two years ago. Local feeding operations now more nearly satisfy market demands in this area than in the past. At the same time, shipments of feed cattle from states east of the Continental Divide to Twelfth District markets during the first five months of the year have declined from over 76,000 head in 1932 to 17.000 head in 1939 and 24,000 in 1940. Cattle prices are now about equal to those of 1937 when the record high level for the post-depression period was reached. Good grade steers weighing from 900 to 1100 pounds have been selling at a range of $9.50 to $10.25 per hun dred pounds in San Francisco compared with $8.75 to $9.50 in December 1939. Over 840,000 lambs are now on feed in the seven far western states, compared with 825.000 on December 1, 1939, and 800,000 two years ago. Small reductions in lamb feeding took place this year in Oregon, Idaho, and California, while increases were reported in Nevada, Utah, and Washington. Good to choice fat slaughter lambs were being marketed in San Francisco in December at $8.50 to $9.25 per hundred pounds, about 50 cents higher than a year earlier. B a n k in g a n d C r e d it Total loans of district reporting member banks in creased further in the four weeks ending December 18. As in recent months, the gain was accounted for princi pally by expansion in loans for commercial and industrial purposes. On December 18, loans of that character out standing at district city banks totaled $368,000,000, a gain of $40,000,000 over a year earlier. Almost this en tire increase has taken place since the mid-year. Ad vances of these same banks in the miscellaneous “other” loan classification, which includes personal and consumer installment loans, increased slightly further. They to taled $180,000,000 on December 18, an increase of more than $10,000,000 since the mid-year. Loans to finance transactions in securities and in real estate continued to fluctuate narrowly at levels unchanged from those of the past several months. While there was a further expansion of bank credit in the form of loans during the four weeks ending De cember 18, investments held by district city banks were unchanged during the period. This stability stands in some contrast to the rather pronounced increases in hold ings of both Government and other securities from the end of June through mid-November. Deposits of local city banks, both in demand and time accounts, continued to expand in late November and the first three weeks of December. Total adjusted demand and time deposits exceeded $2,370,000,000 on December 18. This represents a gain of approximately $200,000,000 since the mid-year and of about $270,000,000 since midDecember 1939. 4 FEDERAL RESERVE B A N K OF S A N F R A N C ISCO January 1, 194 S u m m a ry o f N a tio n a l B u sin e ss C o n d itio n s Prepared by the Board of Governors of the Federal Reserve System I ndustrial activity continued at a high rate in November and the first half ( December and distribution of commodities increased considerably. Commodil prices generally showed little change following earlier advances. IN DU STRIAL PRODUCTION Index of physical volume of production, adjusted for sea« sonal variation, 1935-1939 average=100. By months, January 1934 to November 1940. POINTS IN TOTAL INDEX POINTS IN TOTAL INDEX F R E IG H T -C A R LOADIN GS Index of total loadings of revenue freight, adjusted for sea sonal variation, 1923-1925 average = 100. Miscellaneous, coal, and all other expressed in terms of points in the total index. By months, January 1934 to November 1940. P roduction Volume of industrial production, which usually declines at this season, show« little change from October to November, and the Board’s seasonally adjust« index rose 3 points further to 132 percent of the 1935-1939 average. Reflecting work on a large volume of orders for national defense purpos« and for civilian needs, activity in the machinery and textile industries continm to increase sharply. At machinery plants and at cotton textile mills activr reached new high levels and at woolen mills output was close to the previoi peak reached early in 1937. Steel ingot production, which had been at about 94 percent of capacity October, increased somewhat further in November and the first half of Decen ber. Automobile production continued in unusually large volume, amounting November to around 500,000 cars and trucks. Retail sales of new cars have be< large this autumn and production has been maintained at high levels in order supply this demand and to build up dealers’ stocks. Lumber production declined less than seasonally from October to Novembe New orders for lumber continued somewhat above the current rate of productio although below the high level of the three preceding months when large orde were placed for cantonment construction. Lumber stocks at mills continued decline and were smaller than at any time in recent years. Bituminous coal pr duction increased considerably in November, following a sharp decline in tl previous month, while output of crude petroleum was maintained at about tl October rate. Production of most metals continued in large volume. Value of total construction contract awards declined less than seasonally November. In the 37 eastern states for which F. W. Dodge Corporation data a available total contracts showed little change; awards for public constructs increased further and those for private work declined by somewhat less th; the usual seasonal amount. In the far western states contract awards showed decline from the unusually high level reached in October. D istribution Distribution of commodities to consumers increased considerably in Nover ber. Sales at department stores and mail-order houses rose sharply, while varie store sales increased by about the usual seasonal amount. In the first half < December there was the customary large expansion in retail sales. Total freight-car loadings showed considerably less than the usual season decline in November and the early part of December. Loadings of coal, whii had been curtailed in October, increased sharply and shipments of ore and miscellaneous merchandise declined much less than is usual at this time of the ye« C ON STRU CTION CON TRACTS AW ARDED Three-month moving averages of F. W. Dodge Corporation data for value of contracts awarded in 37 Eastern States, ad justed for seasonal variation. Latest figures based on data for October and November and estimate for December. W holesale Commodity P rices Prices of basic commodities, which had risen substantially since Augu generally showed little change from the middle of November to the middle December. Prices of a few imported commodities, particularly cocoa, burlap, a: shellac, increased considerably and there were small advances in steel scrap a: some other domestic commodities, while moderate declines were reported f such varied commodities as lead, grains, and lard. MEMBER BANKS IN 101 LEAD ING CITIES Wednesday figures, September 5,1934, to December 12,1940. Commercial loans based on new classification beginning May 19, 1937. Bank Credit Total loans and investments at reporting member banks in 101 leading citi have increased sharply since the beginning of October. Commercial loans cc tinued to increase in November and the first half of December, and holdings United States Government obligations at New York City banks rose sharp Principally as a result of the expansion of bank loans and investments, Cover ment expenditures, and foreign disbursements financed by additional gold ii ports, bank deposits increased to new high levels. At the same time there h been a considerable increase in currency in circulation partly in response to se sonal trade demands. U nited States Government Security P rices Prices of United States Government securities continued to rise during t latter half of November and the early part of December, and the 1960-65 bon advanced to successive new high levels, with a peak of about 111^ on Decemfc 10. The yield on this issue declined to a low point of 2.03 percent on the latl date, but increased slightly toward the middle of the month, reflecting some easi in prices.
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