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Monthly, ßewleur FEDERAL RESERVE B A N K OF S A N JANUARY F R A N C ISC O 1944 Review of Business Conditions— Twelfth District Production, Employment and Trade n d u s tr ia l production in the Twelfth District is still I increasing, and during the fourth quarter of 1943 was higher than in any previous comparable period. The rate of growth is levelling off, however, indicating the ap proach of peak output in existing war plant facilities, par ticularly in shipyards and aircraft plants. Additional fa cilities, including aviation gasoline refineries and chemical plants, are scheduled for completion in 1944, but these will not be of major importance in the District industrial structure. Production in the older established industries, including lumbering and metal mining and smelting, has been restricted by labor shortages for some time, and can not be expected to rise markedly higher. Recent increases in output at District war production plants have chiefly reflected expansion in output per man hour. Employment itself has not increased since July. The effects of this flattening out in factory employment are becoming evident in other economic activities of the District. Retail trade no longer displays the continuous and substantial advances characteristic of the past two years. During the fourth quarter of 1943, aircraft production in the Twelfth District was higher than in any other three-month period. Total shipyard work performed, in cluding repairs and conversions which are becoming im portant in the Pacific area, undoubtedly also attained a new peak during the fourth quarter. Deliveries of ships to the Maritime Commission, however, showed little overall change from levels of the two preceding quarters. Employment The number of wage-earners employed in District manufacturing establishments ( excluding canneries ) was 1,232,000 in November, about the same as the 1,236,000 level in September and October. The November total was 20,000 workers, or 2 percent, below the July peak. Most of the July-November decline reflected inability of war production plants to replace workers who quit rather than planned reductions in the working force. Complete Twelfth District figures of factory employment in De cember are not yet available. In California, however, em ployment receded from 859,000 in November to 849,000 in December. O f the 10,000 net severances, about 60 per cent represented quits in the transportation equipment in dustries, and the balance was largely a seasonal reduction in lumbering and beet sugar refining. Overall employment in nonagricultural activities other than manufacturing is considerably more stable than in manufacturing. Since mid-1942, employment (total, not wage-earner) in the nonmanufacturing classification as a whole has fluctuated narrowly about 2,600,000. Employ ment in wholesale and retail trade, construction, and min ing has declined since mid-1942, but has been offset by increased employment in government services, chiefly civilian employment at military yards and depots, and in public utilities. Department Store Sales and Stocks The flattening out of employment and payrolls helps to explain the reduced rate of increase in consumer com modity purchases indicated by the behavior of depart ment store sales. Seasonal influences considered, the value of department store sales was only 2 percent larger during the last half of 1943 than during the first half. The increase was 12 percent in the first half of 1943 over the last half of 1942. Similar previous increases since mid1940 ranged from 6 to 14 percent. Part of the reduced rate of increase in the last half over the first half of 1943 reflected the failure of prices to advance significantly further and, to a smaller degree, a slackening of in-migration. To a considerable extent, however, it also reflected a tapering off in the rate of increase of the physical vol ume of sales per capita. Fourth quarter trade at District department stores was unprecedented in volume. Christmas buying began early in the fourth quarter of 1943. As shown in the chart on the next page, this bank’s seasonally adjusted index for the three months combined advanced to 214 percent of the 1935-39 average, compared with 188 percent in the corresponding 1942 period, and a previous high of 210 percent in the first quarter of 1943. Preliminary data for January 1944 indicate that the index for that month will be in the neighborhood of 204 percent, unchanged from the average of the two preceding quarters. Despite shortages of many commodities, receipts of merchandise by District department stores exceeded sales during most months of 1943, with the result that the dol lar value of inventories was built up by October 31 to a level only 4 percent lower than the record peak of July ★ Jßet!i AU ßach Uve Attach. ★ ß u y 'li/ab ßotuJU. ★ January 1944 FEDERAL RESERVE BANK OF SAN FRANCISCO 1942. These stocks were reduced 25 percent by Christmas buying, and on December 31 were not far above the sea sonally low levels reached in early 1942 and 1943. Since the changes shown above are in terms of total dollar value, they reveal nothing of the disappearance of some low-cost articles or of deterioration in quality. grown on lands to which they are best adapted and as much livestock and livestock products produced as pres ent and expected feed supplies can support. No drastic shift from last year’s pattern of production is visualized, but output of some livestock products is expected to be reduced. Specific Production Goals To utilize feed supplies most effectively, Twelfth Dis trict goals emphasize milk and egg production but call for reductions in hog production, sheep, beef cattle, turkeys, and commercial broilers. Substantially higher goals for milk and egg production would have been es tablished except for their inconsistency with available feed supplies. D E P A R T M E N T S T O R E S A L E S — Twelfth District Indexes of value of sales, 1935-39=100, adjusted for seasonal varia tion. By quarters, January 1935 - December 1943. The composition of department store stocks at the end of 1943 differed considerably from that of a year and two years earlier. Men’s and boys’ apparel and durable goods such as furniture and major household equipment have declined in importance, while women’s and misses’ ap parel has advanced. These changes are shown in the fol lowing table : Piece goo d s.............................................. Small w ares.............................................. W om en ’s and misses’ a p p a r e l.... M en’s and boys’ apparel................... H om e furnishings.................................. Miscellaneous ....................................... ----------- -Percent of Total------------Dec. 31, 1942 Dec. 31, 1943 4 4 13 14 35 44 17 14 26 18 6 5 100 100 T o ta l. Agricultural G o als în 1944 Plans for 1944 agricultural production, as embodied in 1944 food production goals of the State US DA War Boards, call for maintenance of the high levels of out put attained in 1942 and 1943. To meet both increasing requirements of the armed forces and lend-lease, and continuing large civilian demands, needed crops must be 1943 F arm P r o d u c tio n a n d 1944 The relative shortage of feed indicates the urgency of meeting feed grain and hay goals. Acreages of most feed grains were above the 1937-41 average last year, and goals are not raised markedly except that for wheat which represents a 17 percent increase over 1943, although it re mains below the 1937-41 average. Wheat, although pri marily a food crop, is being used to an increasing extent as a feed grain. In hay production, the major emphasis is placed upon the expansion of legume hay, especially alfalfa, which can be used as a partial substitute for pro tein concentrates. Emphasis among food crops continues to be placed on high protein yielding products. Nationally, a greater increase has been set for beans than for any other food crop, and the District goal is 13 percent above the 1943 acreage. Potato acreage in the District has been greatly expanded in recent years and further increases are not requested. The District goal for sugar beets is more than 60 percent above last year’s small acreage, both to make reasonable use of existing production and processing facilities and because of the importance of the use of sugar beet by-products for feed. It is expected that the overall vegetable acreage will be maintained or expanded. Requirements are especially heavy for snap beans, beets, carrots, cabbage, peas, toma toes, onions and spinach and broccoli. The need for oil and fiber crops continues to be great, but in this District the goals call for some reduction in F arm G o a ls — T w e l f t h / ----- California----- > Livestock and Livestock Products M ilk (million pounds) .................... E g gs (million d o ze n )............ Turkeys raised (th o u s .)...................... Cattle and calves (thous. D ec. 31) . Sheep and lambs (thous. Dec. 3 1 ) . Sows to farrow (th o u s .).................... D is t r ic t Arizona, (—N ev., Utah—x 1944 1943 1943 1944 5,033 177 15,695 3,704 2,500 2,800 202 5,062 177 16,637 3,445 2,400 2,700 181 988 37 3,421 1,468 1,832 3,935 77 1,602 74 1,813 485 526 452 1,700 80 1,740 470 700 500 Idaho, Twelfth t— Ore., W ash.— ^ t----- District----- N 1943 1944 1943 1944 1,057 41 4,002 1,355 1,784 3,886 56 4,872 145 13,583 3,521 2,953 3,506 322 4,822 141 14,519 3,263 2,765 3,300 261 10,893 359 32,699 8,693 7,285 10,241 601 10,941 359 35,158 8,063 6,949 9,886 498 293 69 972 88 279 26 299 74 997 75 320 38 1,011 116 2,888 812 3,562 170 676 302 65 934 150 2,927 840 4,100 193 758 281 96 2,906 259 5,673 1,385 4,367 648 676 420 188 489 339 2,933 304 5,664 1,385 5,120 731 758 402 306 445 310 M ajor Field Crops (thous. of acres) B a r l e y ................. Corn ................... H ay, tame Oats .................... W h e a t ................. Beans, dry Peas, dry Potatoes, Irish Sugar beets . . . Cotton ............... Flaxseed ............ Source': United States Department of Agriculture. — — — — 88 88 287 308 90 160 265 280 30 35 202 23 31 50 180 23 —- — 8 7 January 1944 both flaxseed and cotton acreage. It has been suggested by the California U SD A W ar Board that some Imperial Valley acreage be shifted from flax to alfalfa and that some of the high yield land used for cotton be shifted to food crops. Even so, the flaxseed goal is about 250 percent of the 1937-41 average. Feed, M achinery , and Labor Feed supplies in the country as a whole are limited be cause the number of livestock has increased more rapidly than feed production in recent years. The supply situa tion is less favorable for protein concentrates, such as copra, soybean, and cottonseed meal, than for feed grains. Shipments of feed into deficit producing areas such as California have been increased in recent years, but are limited by shortages of transportation facilities, which may become more severe in the near future. Most feed raised in the current crop year will not be available for use until late in 1944. Even though the 1944 feed goals are achieved, current feed supplies and range forage resources will have to be utilized in the most effi cient manner possible. The Department of Agriculture has therefore suggested the lighter feeding of meat ani mals and the adjustments in livestock numbers indicated in 1944 goals. Farm machinery shortages should be considerably al leviated this year. Manufacture of about 80 percent of the 1940-41 output has been approved, compared with 40 percent in 1943. Rationing of farm machinery is being reduced from 91 items last year to 31 in 1944. The most serious shortage will be in crawler type tractors which are needed for military purposes. Military needs and needs of civilian non-farm activities will also seriously limit the availability of trucks for farm use. Although, in general, demands for farm labor were met in 1943 to a more satisfactory degree than had been ex pected, the labor situation remains stringent. Year-round labor is especially limited and this deficiency cannot be wholly offset by short term emergency labor however suc cessful the latter may be in particular situations. gram of the War Food Administration. Support prices for 34 principal farm products were announced on Janu ary 26. This year’s program involves higher prices for several commodities including a 10 cent per bushel in crease in flaxseed, barley, and grain sorghums, and an in crease in sugar beet prices of $1.50 per ton. A decrease of $1.00 per hundred pounds in hog prices had been previ ously announced. Some support prices already announced are above O P A ceilings, and the financing of the program will depend upon Congressional action. Existing author ity for the Commodity Credit Corporation, which has been handling most subsidies, expires February 17. Government Finance and Bank Deposits Federal budget estimates for the fiscal year ending June 30, 1945 indicate that total expenditures are ex pected to amount to 100 billion dollars, slightly more than estimated expenditures for the current fiscal year and 20 billion above those made in the fiscal year 1943. With out allowance for new tax legislation, net receipts are estimated at 41 billion dollars, about the same as in the fiscal year 1944 and 18.5 billion above receipts in the fiscal year 1943. War expenditures accounted for 75 billion dollars in the fiscal year 1943. They are estimated at 92 billion for the current year and, tentatively, at 90 billion for the year ending June 30, 1945. The annual rate for the next six months, however, is estimated at 97 billion dollars. From June 1940 through December 1943, war expenditures totaled 153 billion dollars, and on the basis of these esti mates will amount to 292 billion by the end of June 1945. Changes in war requirements are indicated by the distri bution of war expenditures during the period December 1941-October 1942, characterized in the budget message as the period of defensive war, and the estimated distri bution in the six months from January through June 1944. In the earlier period, 56 percent of all war expendi tures was spent for munitions, 22 percent for pay and subsistence, and 22 percent for war construction; in the Production and Employment— Support Prices Production of commodities most urgently needed will be encouraged by placing them in relatively favorable price positions through the price support and loan proDistribution and Trade— Index numbers, 1935-39 daily average=100 W ith Seasonal ,------- Adjustment-------s ,---------1943-------- \ 1942 Nov. Oct. Sept. N ov. Department Store Sales (value) Twelfth D istrict................. 243 Southern C alifornia.......... 250 Northern C aliforn ia.......... 208 Portland ............................... 241 W estern W a sh in g to n .. . . 310 Eastern W ashington and Northe'rn I d a h o .. . 213 Phoenix ................................ 233 Carloadings (number)1 Total ....................................... 110 Merchandise and M is c .. 123 Other ............................... 94 1 1923-25 daily average = 3 MONTHLY REVIEW 100. Without Seasonal /------- Adjustment------- > ,--------- 1943-------- N 1942 N ov. Oct. Sept. N ov. 210 218 188 216 255 189 191 178 178 211 210 194 184 228 282 253 255 226 250 320 219 220 193 228 268 197 196 177 202 236 162 211 182 245 208 203 213 266 220 230 207 215 217 232 101 107 94 108 113 102 106 120 87 111 123 96 119 130 105 124 132 113 120 89 219 205 200 237 291 Index numbers, 1935-39 average=100 Industrial Production1 Lumber2 ............................... Refined oils3 ........................ Cement3 .................................. W heat flour3 ........................ Petroleum3 ........................... Electric power3................... With Seasonal ,•------ Adjustment —8— * ,-------- 1943-------- > 1942 N ov. Oct. Sept. N ov. 152 129 131 141 — — — — 119 139 148 119 133 113 108 114 — — — — 470 436 419 354 Factory Employment and Payrolls24 Employment Twelfth D istrict...................... 307 California ................... 365 362 Pacific N orthw est............... 239 Oregon ............................. 220 W a s h i n g t o n ................... 250 I n te rm o u n ta in ................... 155 Payrolls Twelfth D istrict...................... 606 California ................... 748 708 Pacific N orthw est............... 469 Oregon ............................. 346 W a s h i n g t o n ................... 541 In te r m o u n ta in ................... 315 Without Seasonal / ------- Adjustment------- >> ---------- 1943--------- > 1942 N ov. Oct. Sept. N ov. 144 140 152 134 196 198 197 196 197 161 157 197 146 134 128 125 120 119 118 110 444 434 439 334 307 364 234 217 244 158 276 319 228 209 239 154 .. 366 .. .. .. .. 311 365 343 224 254 166 311 366 242 225 251 163 278 320 230 209 242 166 635 747 483 408 526 331 531 585 484 427 517 284 .. 750 .. .. .. .. 617 715 489 366 560 325 640 749 494 394 552 336 534 589 479 423 511 258 106 1 Daily average. 2 Revised series. Back figures will be supplied on request. 3 1923-25 average = 100. 4 Excludes fish, fruit, and vegetable canning. 4 next half year, the corresponding percentages are esti mated to be 64, 30, and 6. The total public debt, direct and guaranteed, amounted to 141 billion dollars at the end of June 1943, and to 170 billion on December 31, 1943. It is expected to in crease to 199 billion dollars by June 30, 1944 and to 258 billion a year later. Demand deposits and money in circulation have in creased during the war period primarily because of in creased deposit credit extended through the purchase of Government securities by the banking system. According to the President’s budget message, the amount borrowed from the public, which was defined as including banks, was 61 billion dollars in the fiscal year ending June 30, 1943 and is expected to be 54 billion and 53 billion in the fiscal years 1944 and 1945, on the basis of present tax legislation. Such borrowings were 70 percent of ex penditures in the fiscal year 1943, and on the basis of the above estimates will be about 54 percent in 1944 and 1945. Although the ratio of borrowings to total pay ments is expected to be smaller, the magnitude of an ticipated borrowings in the next year and a half empha sizes again the necessity of maximizing tax revenues and of borrowing as much as possible from non-deposit creat ing sources. Recent Growth in District Deposits and Currency in Circulation In early September, just prior to the Third War Loan Drive, adjusted demand deposits of member banks in the Twelfth District are estimated to have amounted to about 5,570 million dollars and time deposits to 3,000 million. Sales of Government securities during the drive amounted January 1944 FEDERAL RESERVE BANK OF SAN FRANCISCO to 1,370 million dollars. Subsequent disbursements by the Treasury have included not only the proceeds of District security sales to non-bank buyers and District tax collec tions— which would do no more than maintain the money supply in the hands of the public— but also funds ob tained from the sale of securities to District banks and funds shifted to this District from other parts of the country. As a result primarily of Treasury expenditures, by mid-January when the Fourth W ar Loan Drive opened there was an increase over early September of about 460 million dollars in adjusted demand deposits, of some 260 million in time deposits, and of about 225 million in coin and currency in circulation. The increase in the District money supply has slowed up to some degree in recent months, but the means are present with which to equal or exceed, in the Fourth W ar Loan Drive, the Twelfth District total of Government security purchases in the previous drive. Banking and Credit— Averages of Wednesday figures (millions of dollars) Condition Item s of W eek ly Reporting Member Banks Total l o a n s ................................................ C om ’l, ind., & agric. loans............ Loans to finance securities transactions .................................... Real estate loans.................................. A ll other loans.................................... Total investments .................................. U . S. G ov’t securities...................... A ll other securities............................. Adjusted demand deposits................. Tim e d eposits............................................ United States G ov't deposits............ 1943 Dec. 994 525 v^nange rrom — r ■\ t -------- m .5 ---------<s 1942 N ov. 58 8 — + 81 5 — 42 — 7 — 1 — 37 — 26 — 11 + 143 + 21 — 278 — — — + + — + + — 71 10 5 53 192 139 259 44 361 Coin and Currency in Circulation Total (changes o n ly )............................. Fed. Res. notes of F . R. B. of S. F. 1,917 + + 77 80 Member Bank R eserv es........................... + 66 51 312 106 3,866 3,561 305 2,689 1,323 676 — 1,441 — — Oct. Dec. _ 23 47 + + + + + + + 11 49 32 1,520 1,518 2 619 219 524 + 164 + 167 + + 733 669 + 118 + 171 + — 4A January 1944 FEDERAL RESERVE BANK OF SAN FRANCISCO Summary of National Business Conditions Released December 27, 1943— Board of Governors of the Federal Reserve System n d u str ia l activity was maintained at a high level in November and the early part of I December. Value of retail sales during the Christmas buying season has been larger than last year’s record sales. I n d u s t r i a l P r o d u c t io n IN C O M E P A Y M E N T S T O IN D IV ID U A L S Based on Department of Commerce estimates. Wages and salaries include military pay. Monthly figures seasonally adjusted and raised to annual rates, latest shown are for October. I N D U S T R I A L P R O D U C T IO N Federal Reserve monthly index of physical volume of production, adjusted for seasonal variation, 1935-39 average = 100 for total. Groups are ex pressed in terms of points in the total index. Monthly figures, latest shown are for November. Industrial production in November was at 247 percent of the 1935-39 average, the same as in October and 2 points higher than in September according to the Board’s sea sonally adjusted index. Further increases in munitions production in November were offset in the total index by smaller output of coal and steel. The reduction in steel output from the high October rate was small and reflected partly a decline in war orders for some types of steel products. Activity in the machinery and transportation equipment industries continued to rise in November. The Board’s machinery index, which had been stable from April to August, advanced 5 percent in the past three months as a result of increases in output of electrical equipment and other machinery, which includes aircraft engines. Total output of nondurable goods in November continued at the level of recent months. Activity in woolen mills showed little change as increased production of civilian fabrics, resulting from the lifting of restrictions on the use of wool, offset reduced out put of military fabrics. Production of manufactured food products continued at a high level. Federally inspected meat production in November was one-fourth larger than a year ago. Newsprint consumption in November declined to a level 15 percent below the same month last year. Output in the rubber products and petroleum refining industries continued to increase. Coal production increased sharply in the latter part of November but for the month as a whole bituminous coal output was down 9 percent from, October and anthracite 19 percent. In the early part of December output of bituminous coal was at the highest rate in many years. D is t r ib u t io n Notwithstanding a reduced selection of merchandise, department store sales in No vember were about 10 percent greater than the large volume of sales in November 1942, and in the first three weeks of December sales were about the same as a year ago. Value of department store stocks at the end of October was reported to be 9 percent smaller than a year ago and it is estimated that, contrary to the usual seasonal movement, stocks declined in November. Freight carloadings were maintained in large volume in November and in the first half of December. Loadings of coal during the four weeks ending December 11 were at the highest rate in many years, following a sharp drop in the first half of November. Shipments of grain and livestock were in unusually large volume for this time of year. C o m m o d it y M E M B E R B A N K R ESER VES A N D R E L A T E D IT E M S Wednesday figures, latest shown are for December 15 P r ic e s Grain prices continued to advance from mid-November to mid-December and reached levels more than one-fourth higher than a year ago. Wholesale prices of other farm and food products showed little change, while prices of various industrial commodities, in cluding coal, were increased somewhat. The cost of living, which had increased .4 percent in October, declined .2 percent in November, according to the Bureau of Labor Statistics index. B a n k C r e d it Excess reserves at all member banks fluctuated around one billion dollars in Novem ber and December, maintaining an average level slightly below that which prevailed during the previous month. During the five weeks ending December 22, reserve funds were absorbed by a pre-holiday rise in money in circulation of about 800 million dollars, and required reserves continued to increase as Treasury expenditures transferred funds from Government accounts to private deposits. Needed reserves were supplied to member banks through an increase of 1.7 billion dollars in Government security holdings at Re serve Banks. Additions to Treasury bill holdings accounted for the larger part of the in crease, but certificate holdings also rose substantially. M E M B E R B A N K S IN L E A D I N G C IT IE S Demand deposits (adjusted) exclude U . S. G o v ernment and interbank deposits and collection items. Government securities include direct and guaranteed issues. Wednesday figures, latest shown are for December 15. During November and the first half of December, loans and investments at reporting member banks in 101 leading cities declined by around 2.5 billion dollars, after increasing by 6.25 billion in September and October. Holdings of all types of Government securities decreased. Bill holdings, mainly because of sales to the Reserve Banks, showed the largest decline. Loans for purchasing or carrying securities continued to decline over the period.
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