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T WE L F T H FEDERAL RE SE RVE DI STRI CT FEDERAL RESERVE BANK January 1958 OF SAN FRANCISCO The Current Business Situation in P ersp ective............................ The Aluminum Industry — Part III: Location Factors and Aluminum in the Pacific Northwest..........................6 The Current Business Situation in Perspective h e sidewise drift of the economy during the summer months has, with the onset of winter, been replaced by a slide downward in economic activity. A ccording to preliminary estimates for the fourth quarter of 1958, Gross National Prod uct— our most comprehensive measure of total output— was down about $6 billion at an annual rate from the third quarter. Thus, we have slipped back to a little below second quarter total output levels in dollar terms and, since prices have risen somewhat, even further below in terms of physical volume. Both consumption and investment appear to have fallen in the fourth quarter, and most individual business indicators have also turned down or continued down. T It is not clear at present whether the decline in business activity is accelerating, and, in fact, there are some areas where such large adjust ments have already occurred that present levels of activity may at least be stable. It may be useful in this unclear situation to compare the changes which have occurred so far in the current adjust ment with those of the two prior postwar reces sions. Such an assessment is best made after a downturn has run its course, all of the data are in, and the objectivity of history may be brought to bear. A quick and necessarily summary review of recent developments does, however, suggest the following tentative conclusion: the current decline is proceeding at a rate roughly similar to the prior two postwar recessions but with sig nificant differences in the behavior of the various sectors of the economy. Plant and equipment ex penditures, for example, which have been at ex tremely high levels for an extended period, may decline longer and farther during the current re cession than in 1948-49 or 1953-54. Inventory investment and government spending appear as somewhat more favorable factors than in the earlier recessions. Consumer spending, the larg est single component of total outlays, continues to be an enigma. If the present decline does turn out to be of roughly the same magnitude as the previous recessions, however, some business in dicators should show improvement before the middle of 1958. M ost indicators dow n in recent months Industrial production, which slumped a little more than 10 percent in each of the two previous postwar recessions, has sagged about 7 percent from its peak 12 months ago. Most of the drop, however, has occurred since A u gu st; and no up turn is yet in sight. The backlog of unfilled orders at manufacturing firms, which are almost entirely for durable goods, continued to fall in October and November, although new orders received did not decline further in November. In addition, THE PRESENT RECESSION COMPARED WITH 1948-49 AND 1953-54 1948-49 G eneral Business Cycle* T otal N onagricultural E m ploym ent U nem ploym en t as a Percent o f the Civilian L abor F orce C ross N ational Product Personal Consum ption Expenditures C ross Private D om estic Investm ent G overnm ent Expenditures Plant and Equipment Expenditures Industrial Production W holesale Prices Consum er Prices Turning point1 Duration o f decline Sept. 1948 13 mos. N o v . 1948 12 m os. July 1948 4th qtr. 1948 rose 16 mos. 4 qtrs. 4th qtr. 1948 1 qtr. 1953-54 Percent change — 4.5 Duration Turning point1 o f decline July 1953 8 m os. June 1953 14 m os. 3.2 to 7.0 — 3.2 A u g. 1953 2nd qtr. 1953 rose 9 mos. 2 qtrs. — 0.9 3rd qtr. 1953 1 qtr. 1957- ? Percent change Decline Turning point1 thus far — 3.5 A u g. 1957 4 m os. 2.1 to 5.4 — 2.7 April 1957 3rd qtr. 1957 has risen 8 m os. 1 qtr. — 0.8 3rd qtr. 1957 1 Qtr. 3rd qtr. 1948 2nd qtr. 1949 5 qtrs. 4 qtrs. — 31.5 — 9.7 2nd qtr. 1953 2nd qtr. 1953 5 qtrs. 6 qtrs. — 12.5 — 13.0 4th qtr. 1948 June 1948 A u g. 1948 A u g. 1948 4 qtrs. 12 m os. 16 mos. 18 m os. — — — — 3rd qtr. 1953 M ay 1953 Sept. 1953 O c t 1953 6 qtrs. 11 mos. 15 m os. 19 mos. — 11.0 — 10.2 — 1.4 — 1.0 3rd qtr. 1957 2 qtrs. D ec. 1956 12 m os. A u g. 1957 4 m os. N o d c d in c * Turning point represents highest peak reached prior to decline. 2 Using turning points determined by the National Bureau o f Economic Research for 1948-49 and 1953-54. 3 Current estimates of unemployment as a percent of the labor force are about 0.4 o f 2 percent higher than under the definition in effect before January 19S7. 4 First quarter 1958 data are estimated b y U. S. Department o f Commerce and Securities and Exchange Commission. N ote: All except price data have been adjusted for seasonal variation. 2 Latest period available (?) 4th qtr. 1956 4 qtrs. R isin g 20.0 10.5 8.0 4.2 Percent change — L7 D ec. 3.9 to 5.2* — 1.4 D ec. 4th qtr. 1957 — 0.4 4th qtr. 1957 — 10.9 4th qtr. 1957 4th qtr. 1957 — 5.9« — 8.0 — 0.2 1st qtr. 195& D ec. D ec. D e c, January 1958 MONTHLY R EV IE W reductions in activity have recently occurred in nondurable goods manufacturing and mineral production so that cutbacks in output now appear to be fairly widespread. The decline in plant and equipment expendi tures, amounting to 6 percent from the realized level in the third quarter of 1957 to the estimated level for the first quarter of 1958, has been another factor tending to reduce aggregate de mand. The slower rate of capital outlays has sharply reduced the flow of orders for machine tools and other types of machinery and equip ment. In addition, contract awards for factory buildings have been declining since early in 1957. The downturn in business activity and produc tion has also occasioned a contraction of employ ment and income. Total nonfarm employment fell 0.6 of 1 percent from November to December, about the same as the October-November de cline. The rise in unemployment continued, but at a reduced rate. In December 5.2 percent of the civilian labor force (including workers on farms as well as those in nonagricultural pursuits) were unemployed compared to 5.1 percent in N o vember and 4.6 in October. Recent developments also included the fourth successive monthly de cline in personal income. The drop from N o vember to December amounted to $2.6 billion at a seasonally adjusted annual rate which was the largest decline that has occurred in recent months. Thus, nearly all measures of business activity indicate that a recession is in progress. The reduction in total demand has not, as yet, been transmitted into declines in the over-all price indexes. A s of mid-December wholesale prices were at approximately the November level, about equal to the high point reached in August. Meanwhile, consumer prices recorded another rise from October to November and then leveled in December. The latest increase resulted primarily from price hikes for new model cars, although all major categories except food and home furnishings showed minor increases. Investment declines most sharply The largest single factor operating to depress statistical measures of business activity in the fourth quarter was a sharp turnabout in business spending for inventories. Inventory investment, which had measured a plus $2 billion at a sea sonally adjusted annual rate in the third quarter, fell, according to preliminary estimates, to a minus $3 billion in the closing period of the year. The drop in inventory investment from the third to the fourth quarter thus amounts to a net change of $5 billion. This reflects in part the in creased pessimism with which the economic out look has been viewed in recent months. The switch from accumulation to liquidation can also be associated with lower requirements for pur chased materials and goods-in-process as indus trial production fell steadily. Business firms also moderately decreased their spending for durable equipment. However, construction outlays, the remaining portion of Gross Private Domestic Investment, rose by about $1 billion to a record level in the fourth quarter. The net result of the changes in inven tory investment, durable equipment expendi tures, and construction outlays was a decline of $4.5 billion— about three-fourths of the drop in Gross National Product from the third to the fourth quarter. The relatively large decline of 11 percent in Gross Private Domestic Investment from its peak in 1956 is due entirely to the fact that in ventory investment during the fourth quarter of that year proceeded at an annual rate of $5 bil lion compared to a disinvestment of $3 billion in the fourth quarter of 1957. With the exception of residential housing and inventories, other com ponents of Gross Private Domestic Investment increased from the fourth quarter of 1956 to the fourth quarter of 1957. Construction activity dipped in the early part of 1957 but reached a record level in the fourth quarter. The gain in construction expenditures partially offset the drop in spending for durable equipment and the reduction in inventory investment. The Department of Commerce estimates that the value of new construction put in place in 1958 will rise 5 percent above the 1957 level. In creases of 4 and 7 percent, respectively, are pre dicted for private and public construction. In addition to the favorable ou tlook for c o n struction, it appears unlikely that further reduc tions in inventory investment will be as large as those which occurred in the 1948-49 recession. 3 FEDERAL R ES E R V E BANK OF SAN F R A N C I S C O Some inventory adjustment occurring in the first quarter of 1957, the moderate rate of accu mulation in the second and third quarters, and the liquidation of inventories in the fourth quar ter probably pave the way for relatively moderate changes in coming months. The decline in plant and equipment expendi tures, calculated from the third quarter of 1957 to the current 1958 quarter (estimated), already measures about 6 percent. Some observers be lieve this decline will continue for a longer period than in the two previous postwar recessions even without a further weakening in business confi dence. In 1948-49 and, to a lesser extent, in 195354 a considerable quantity of fixed investment was still necessary to compensate for replacement not made during war years. Moreover, neither recession was preceded by a bulge in capital out lays comparable to that which has taken place in the recent boom. In other words, we have entered the present recession with a relatively larger amount of capacity than was the case before. In vestment in other industrialized countries has been at record volumes also, and supplies of most raw materials and primary products are more readily available than at any time since W orld W ar II. Consum er exp en d itu res show only a small drop The turndown in retail trade, first apparent in September, has continued; and it is estimated that consumer spending fell at an annual rate of about $1 billion from the third to the fourth quarter. Purchases of nondurables declined more sharply, and spending for durables fell by a smaller amount. These losses outweighed a fur ther advance in spending for consumer services. Preliminary estimates of department store sales for December indicate that buying in the final week of the Christmas season was up sharply— about 30 percent— from the same week in 1956. Although there were large losses from year-ago weeks in late November and the first three weeks in December, Christmas trade at department stores over the two months was only a little below the record volume of 1956. New automobiles, on the other hand, are m ov ing at a rate considerably below expectations. The news that major producers began cutting 4 production in mid-December and that dealers’ stocks rose during the month suggests that auto mobile sales in December were down from levels reached during the earlier model clean-up period and slightly lower than those of December 1956. The drop in personal consumption expendi tures that took place from the third to the fourth quarter was small compared to the brief con sumption declines in either the 1948-49 or the 1953-54 adjustments. However, there is no rea son to believe that consumer spending will im mediately begin to increase. In the absence of a pent-up demand for durable goods that is said to have existed in the years following W orld W ar II, and to a lesser extent in the period after the Korean W ar, it is quite possible that consumer spending will show less stability for the duration of the current recession than it has during most of the postwar period. Although fluctuations in consumer spending are usually small in percent age terms, they can be important in terms of dol lars, for consumer purchases of goods and serv ices ordinarily represent at least two-thirds of total G N P. In each of the two previous postwar recessions the growth of consumer spending for services has slowed but not halted. N o consistent pattern, however, has occurred in the movement of spend ing for durables and nondurables. W hile pur chases of durables recorded percentage declines that were larger than those for nondurables in both previous postwar downturns, the drop for durables in 1948-49 was smaller in dollar terms than that which took place for nondurables. In 1953-54, however, durable expenditures showed a larger dollar drop than spending for nondur ables. W hile no such unusual factor as a large backlog of unsatisfied demand for durables can be said to exist at the present time, it is possible that the expected improvement in residential housing activity will provide some lift to sales of home appliances during 1958. The future trend of automobile sales, which is of crucial impor tance, cannot be foreseen with any degree of ac curacy ; but the industry already is lowering its estimates for 1958 which were set just a month or two ago. In the two previous postwar recessions, sav ings as a percent of disposable income fell as January 1958 MONTHLY R E V I E W consumers strove to maintain living standards even though income declined. A t the same time, there occurred reductions in personal income tax rates in 1948 and 1954 which also helped to sus tain high consumption levels. Another factor which sustained consumption, particularly in the 1953-54 recession, was a substantial liberaliza tion of consumer credit terms. W hile there may be room again for some reduction in the rate of saving, there appears now to be a smaller possi bility of further liberalization of terms or of an early cut in taxes. C hanges in governm ent spendin g have been im portant in other recessions State and local government purchases of goods and services jumped nearly $1 billion at an annual rate in the fourth quarter of 1957, but this gain was partly offset by a drop of about $600 million in outlays of the Federal govern ment. The cutback in spending by the Defense Department was a significant minus factor affect ing durable goods manufacturing industries in the last half of 1957 and may also have played a significant role in the inventory adjustment evi dent in the fourth quarter. Contract cancellations, production stretch-outs, and a curtailed flow of orders for military hardware led to widespread employment cutbacks particularly in aircraft and supporting industries. Fluctuations in total government spending and in the fiscal operations of the Federal govern ment have played complex roles in each of the past post-W orld W ar II recessions. State and local government expenditures have trended steadily upward with the exception of a minor drop in the second quarter of 1953. All declines occurring in government spending have been centered in spending of the Federal government. Federal government outlays for goods and services continued to rise in 1948 and did not turn down until after the second quarter of 1949 — well after the recession had begun. A ccom panying the change in outlays was a cash sur plus of about $8 billion in fiscal 1948— a signifi cant deflationary development. In the year be ginning July 1949, however, fiscal operations re sulted in a net deficit of about $2 billion. By contrast, the drop in Federal outlays for goods and services in 1953 occurred just before the turndown in general business activity— in the second quarter of that year— and was largely centered in national security expenditures as a result of the Korean armistice. However, cash receipts from the public were $6 billion less than cash outlays in calendar year 1953. Another deficit of $1 billion was incurred in 1954. In the present readjustment, cutbacks in de fense expenditures have lowered total Federal government disbursements from an annual rate of $51.1 billion in the second quarter of 1957 to about $50 billion in the fourth quarter. The cash budget surplus in calendar year 1957 is presently reported to be less than $2 billion. It is expected that defense spending wrill increase in 1958 and that only minor offsetting cuts will be made in nondefense spending. At the same time, tax receipts may fall short of previous estimates so that a deficit may result. Considering that state and local government expenditures are almost certain to continue to trend upward as outlays for education and public construction record further gains, it appears likely that government will represent an expansionary force in the econ omy in 1958. It is not possible to tell at present, however, whether the impact of the increased de fense expenditures will be felt early in 1958. Foreign dem and less likely to offer additional support in the months a h ea d The surplus of our exports over imports and grants has shrunk this year from $4.1 billion in the first quarter to an estimated $2.5 billion in the fourth quarter. The earlier figure was not only unusually high because of Suez but also car ried with it the prospects of the present decline because of the reductions which occurred at that time in the gold and dollar reserves of foreign countries. Output abroad in most countries ap pears to be leveling off, and in some important countries actually declining. Little lift, then, can be expected from foreign demand in the months ahead as compared with a year ago. W hile a larger decline occurred in the 1948-49 recession, it took longer to develop. In the 1953-54 reces sion, on the other hand, foreign demand was a strong supporting factor as booming foreign economies drew upon our resources. 5 FE DERAL RE SE RV E BANK OF SAN F R A N C I S C O Location Factors and Aluminum in the Pacific Northwest bids fair to become one of man kind’s most important and useful primary products. An industry born less than a century ago, it has already assumed m ajor importance in the daily lives of consumers in its myriad uses. It provides employment for well over 100,000 workers, and in output it ranks ahead of all other metals produced except steel. The Pacific North west region has been of key importance in the de velopment of aluminum in the United States, particularly during W orld W ar II. This article, the third in a series1, will be concerned mainly in an analysis of factors important to location of the industry, with particular reference to their bearing on the aluminum industry in the Twelfth District. A l u m in u m Since broad economic factors strongly influ ence the location of any particular stage of alu minum production, the location of no one stage can be considered in isolation from the others. The economic goal of integrated production is to minimize the total cost of producing and deliv ering aluminum to consumers, not to minimize cost at each stage. O f course, political, military, and institutional factors do not always allow the unhampered resolution of economic forces. Fur thermore, since it takes time for economic forces to work themselves out, the spatial distribution of plants at any particular time is not always the optimum. P ro d u ctio n o f A lu m in a fro m B a u x it e The relative ability of a locality to produce aluminum competitively starts with its access to bauxite of commercial grade. Of the major alu minum consuming nations, only France has do mestic bauxite deposits sufficient to supply its aluminum industry. In recent years, almost 80 percent of the bauxite used in the United States 1For the first two articles, see "T he Aluminum Industry— Part I: Development of Production,” this Review, August 1957, pp. 97-109. “ The Aluminum Industry— Part I I : Growth of the Market,” this Review, October 1957, pp. 145-152. The help and cooperation in the preparation of these articles of Aluminum Company of America, Reynolds Metals Company, Kaiser Aluminum and Chemical Corporation, Bonneville Power Administra tion, and the Federal Power Commission, among others, is grate fully acknowledged. 6 has been imported from South America and Ja maica. At present, principal bauxite sources for the United States in order of importance are Surinam (Dutch Guiana), Jamaica, Arkansas, and British Guiana. Thus, with the exception of the bauxite produced in Arkansas, sizable trans portation costs are incurred by American alumi num producers in bringing bauxite to their alu mina plants. Although users of domestic bauxite save on the transportation cost, this is largely offset by the greater expense in refining the rela tively low-grade bauxite mined in Arkansas. Bauxite consists essentially of aluminum in chem ical combination with oxygen and water plus other materials regarded as impurities. The grade of bauxite depends on the alumina (aluminum oxide) content and the type of impurities present. The Bayer process of refining requires bauxite with a low silica content. A maximum of 7 per cent silica can be handled, but anything over 3 percent is not considered desirable because silica combines with alumina and soda which are thus lost. F or each pound of silica in the bauxite, ap proximately 1 pound of soda and 1 pound of alumina are lost in red mud residue. A modified Bayer process handles bauxite with up to 15 per cent silica, but it is more expensive. No bauxite is shipped to the Pacific North west for conversion to alumina. O f the five alu mina plants in the country which refine bauxite, three are located on the Gulf Coast and two in Arkansas. Three additional plants on the Gulf Coast are currently under construction. All of the alumina used by aluminum smelting plants in the United States is presently produced at these five plants in this country. H owever, some alumina will be imported directly from Japan for the Harvey Machine Company plant that is near ing completion at The Dalles in Oregon. Inspection of their principal raw materials indicates why alumina plants would be most likely to locate in the Gulf region. For every ton of alumina produced from high grade Surinam bauxite, for example, 4,000 pounds of bauxite, 160 pounds of soda ash, 120 pounds of lime, and January 1958 MONTHL Y R EV IE W 9,000 cubic feet of natural gas or about 0.7 tons of coal are needed.1 Location of alumina plants in this region capitalizes on the shortest water transportation of bauxite from foreign sources as well as ready availability of all other principal raw materials, including large reserves of natu ral gas. Although bauxite could be delivered to Northwest ports, the other raw materials are not available in sufficient volume to allow refining to compete in this area. these raw materials in plants throughout the country would yield accurate comparisons of direct production costs by producing region. Unfortunately, the paucity of cost data available from the aluminum industry precludes a com plete discussion of these items, so comparisons must of necessity be restricted to rather general qualitative terms. The alumina plants in Arkansas, in towns called Hurricane Creek and Bauxite, utilize the bauxite ore found in Arkansas and are also able to draw on lime and gas supplies in the region. Northwest aluminum plants must therefore im port their alumina supplies from this region and from the Gulf Coast either by rail or water carrier. The main activity in aluminum production in the Pacific Northwest is in the smelting of alu minum oxide to aluminum ingot. Although the integrated producers also operate major facili ties in the area to process aluminum into sheet, plate, rod, wire, cable, extrusions, and alloyed fabricating ingot, about one-half of the ingot pro duced in the region in 1956 was shipped to Cali fornia or Eastern industrial centers for further processing. Power costs have traditionally been the major factor determining the location of smelting plants. Aluminum, in the early days particularly, was tied to hydroelectric sites because of their rela tively cheap power. The aluminum industry in the United States has migrated from the North east to Tennessee and North Carolina and to the Pacific Northwest seeking low-cost hydro electric power. Since W orld W ar II, a new move has been made to the gas fields of the Texas Gulf region and the lignite fields of Texas and now, most recently, to the coal producing regions of the Ohio Valley. W hat iron and coal are to steel, bauxite and electricity are to aluminum at the smelting stage. The consumption of power by the aluminum industry in 1955 in the United States, for example, was in excess of 30 billion kilowatt hours. This was almost 5 percent of the total electricity generated within the United States. Although electricity is used in alumina and fab ricating plants, smelting plants are much heavier users. The relative importance of electricity in the production of aluminum, however, is under stated by expressing power costs as a proportion of total costs. Power rates vary widely from one region to another, and most aluminum plants are already located near sources of relatively lowcost power. For the other inputs, price differen tials among areas are based on transportation costs. Such differentials can also be quite high, but large differences in power costs probably are the more important element in the location of aluminum smelting plants. A lu m in u m S m e ltin g in th e P a cific N o rth w e s t Three main cost categories stand out in the location of aluminum smelting facilities: trans portation costs incurred in bringing needed raw materials to the plants, electric power costs at the plant sites, and, finally, transportation costs in curred in delivering aluminum to the consumers. For every pound of aluminum metal produced, the following main ingredients are needed :2 1.91 pounds of alumina .60 pounds of carbon paste .03 pounds of cryolite 8-10 kwh of electric energy Because of the fact that the proportions of these inputs are held constant in the production of aluminum, a comparison of the delivered costs of 5 United States Department of Commerce and the Business and De fense Services Administration, compiled for the Office of Defense Mobilization, Materials Suruey— Aluminum, Nov. 1956, p. v-5, Table v-1. a Ibid., pp. v-6 through v-8. Relative pow er costs Just as bauxite mines are tied to bauxite de posits, electrical power plants are tied to hydro electric sites or to large deposits of primary energy like coal or natural gas. The radius around a generating plant to which electricity can be delivered is limited by the heavy transmission 7 F EDERAL R ES E R V E BA NK OF SAN F R A N C I S C O losses suffered beyond certain distances. Coalfueled steam plants are limited in their spatial distribution by the transport costs of shipping coal, especially by rail. The result is that power costs vary considerably from region to region. Although precise data are not available for power costs in all the aluminum producing re gions, some crude comparisons may be made. The Pacific Northwest probably provides the largest block of low-cost electric power to the aluminum industry in the United States. The average cost per kwh for firm power to the alu minum industry in the Northwest for 1955 was slightly in excess of 0.21 cents. Rates close to 0.4 cents per kwh have been reported in the Tennesee Valley and Texas Gulf area. Trade reports on the new facilities being erected in the Ohio Valley place electric power costs from 0.31 cents to 0.4 cents per kwh. Calculated at 9 kwh per pound of aluminum, a rate of 0.21 cents per kwh, the prevailing rate in the Pacific Northwest, would amount to a power cost of 1.89 cents per pound. W ith a cost of 0.4 cents elsewhere there would be a differential in favor of the Northwest of close to 2 cents per pound. Recent trade reports indicate that the new coal-fueled steam plants in the Ohio Valley can produce as cheaply as 0.31 cents per kwh. This would constitute a differential of 0.9 cents per pound in favor of the Northwest. These sketchy comparisons of power cost figures indi cate a considerable present advantage for the Northwest. W ith the increase in efficiency of coal-fueled steam plants and the limitations on hydro expansion, however, a tendency is aris ing to narrow power cost differentials among several regions, with the result that more points have a reasonable potential as aluminum smelt ing sites. pounds of carbon paste must be assembled along with small amounts of cryolite and aluminum fluoride. The Bonneville Pow er Administration estimates that the freight cost on alumina alone to the Northwest amounts to slightly over 1 cent per pound for each pound of aluminum. Freight costs incurred in assembling carbon paste, alu minum fluoride, and cryolite would add approxi mately another 0.4 cents per pound to the cost of producing aluminum in the Pacific Northwest. The location of fabricating plants in relation to markets and smelting plants is also to the dis advantage of the Pacific Northwest. The bulk of the non-integrated fabricators and users of alu minum in this country are concentrated in the populous New England, Middle Atlantic, and North Central states, and freight rates for ship ping ingot to the East amount to over 1 cent per pound. Results o f com bining costs Transportation cost differen ces Tennessee Valley plants appear to have the most economical cost for assembly of raw mate rials and some advantage relative to the Pacific Northwest in shipping aluminum to fabricating plants. Power costs of Tennessee Valley produc ers may be sufficiently greater than for Pacific Northwest plants so that on balance the Pacific Northwest still has a slight net advantage in total delivered cost of aluminum. Ohio plants appear to be better off on assembly costs than the Pacific Northwest because of cheaper transportation for alumina. They also save on transporting alu minum to fabricating points. However, their higher power costs partly offset their other cost advantages. Texas Gulf area plants have a prom inent advantage in the assembly of raw materials because of low alumina transportation cost. De livery costs for aluminum approximate those for Pacific Northwest plants. Pow er charges vary widely from plant to plant. Although transportation costs on any specific input may not exceed the importance of power costs, the aggregate of transportation costs in curred in assembling raw material inputs and in the marketing of the aluminum ingot is a very significant element in the location of aluminum smelting plants. F or every pound of aluminum produced, 2 pounds of alumina and 0.58 to 0.65 These relationships are based on inferential analysis. Firm reliance upon them could be mis leading. Perhaps the most valid statement that can be made is that the Pacific Northwest advan tage has narrowed if not disappeared. Power costs in areas outside of the Pacific Northwest may still be sufficiently higher so that even for those plants with the largest assembly and deliv 8 January 1958 MONTHLY R E V I E W ery advantage, total costs may fall only slightly below the delivered cost of Northwest aluminum. In any event differentials are probably not so large as to induce established plants in the Pacific Northwest to leave. T o do so, a firm would have to demonstrate that the average total cost in the new plants was lower than the average out-ofpocket cost in the old plants. Slightly lower total costs in new plants will only affect the location of additional capacity. Changing technology could modify the present situation, however, just as it has reduced the importance of power in deter mining smelting plant location by narrowing the spreads between power rates throughout the country. Prospects for Changes in Relative Costs Regardless of how valid comparisons are on a current basis, technological changes in both the field of electricity generation and aluminum smelting are rapidly changing the economic structure and locational relationships within the industry. Changes in the demand for aluminum inputs, primarily from competing industries, also upset the feasibility of the current geographic distribution of the processes in aluminum produc tion. Finally, military, foreign policy, and politi cal considerations preclude exact measurement of these factors because of the unpredictability of developments and the inaccessibility of available data. Recent developments, however, provide some rough guide to the future. Possible bauxite substitutes Bauxite is the only source of aluminum that is considered economically feasible at present. Prac tically all of the bauxite mined in the United States comes from two counties in Arkansas. These deposits are rapidly running toward lower grade ore and depletion. As a result, the bulk of our bauxite supplies must come from Surinam, Jamaica, and British Guiana. This development may be viewed with some concern because our shipping links could be cut in time of war. In addition, the considerable transport cost substan tially increases the cost of bauxite. The current methods of producing aluminum from bauxite date back to the late 1880’s. In creased use of aluminum and the pressure of war fears and needs have caused other ores to be investigated. Other aluminum-bearing materials are available in large supply. Although the only plants constructed to use these materials have been of pilot-plant size, the rate of technical prog ress, particularly in the last 17 years, suggests that these ores can be future sources of alumi num. Aluminous clays in one form or another occur practically everywhere in the world. The Pacific Northwest, for example, is well endowed with aluminum-bearing clays. The Bureau of Mines has estimated that there is a minimum of 10 million tons and a maximum of 20 million tons of laterite in northwest Oregon. Laterite ore samples have averaged about 31 percent alumina, 23 percent iron, and 11 percent silica. Washing ton also possesses large deposits of laterite. The Bureau of Mines estimates there are 71 million tons of clay containing 24 percent alumina at Olson, Idaho ; 15 million tons of 30 percent alu mina at Castle Rock, Washington ; and 103 mil lion tons of 25 and 27 percent grade in Oregon. In addition, in W yom ing along the Union Pacific Railroad anorthosite deposits with 28 percent alumina amount to billions of tons. Although the use of these deposits is not economic currently, technological improvements or wartime necessity could make these deposits useful. Assembly costs of alumina would be substantially reduced for the Northwest if these ores could be refined to alu mina economically. However, over fifteen other states also possess large deposits of aluminous clays, and some of these deposits exist in areas that already have smelting capacity. It is cur rently impossible to say whether an aluminum in dustry based on these clays would locate in the Pacific Northwest or in another area. As long as the United States has access to high-grade bauxite deposits containing up to 59 percent alumina in South America and the Caribbean Islands, these clay deposits are not likely to be of much importance in the foreseeable future. Prospects fo r changing pow er costs Electric power generation has been doubling about every ten years. The point is now being reached where additional expansion must be based on more expensive processes than were available in the past. The number of extremely 9 FE DERAL R ES E R V E BA NK OF S AN F R A N C I S C O low-cost hydro power sites is now near exhaus tion, with a consequent trend toward thermal power generation based on petroleum, natural gas, and coal. It is also possible that Federal agencies will raise the power costs at multi-pur pose dams, as power demands may warrant this move. Despite improvements in the efficiency of thermal plants, the cost of providing more power has been increasing. Meanwhile, however, the amount of electricity used per pound of alu minum has been reduced from 14 kwh to an in dustry average of 8.5 kwh per pound. This huge reduction in the need for power tends to compen sate for the increasing cost of electric power. G en eration from co a l Improvements in the efficiency of coal-fueled steam plants have lowered considerably the cost of power in coal-producing areas. The coal re quirement per kwh has dropped from 3.20 pounds in 1919 to under 0.95 pounds in 1955. Increased demands for electricity and lower cost due to improved efficiency have resulted in a 250 per cent increase in coal consumption by electric utilities during the past 30 years, from 40 to 140 million tons. The increase from 1950 to 1955 alone was 59 percent. Only recently has the aluminum industry joined this trend to coal-fueled steam plants in the generation of electricity. Three new plants with a combined annual capacity of 550,000 tons are planned or nearing completion in the Ohio River Valley region that will use power gen erated from coal-fueled steam plants located prac tically on the mine mouths. Alcoa started its lig nite plant at Rockdale, Texas in 1951. Some re ports indicate that the long-run average cost of electricity to the aluminum producers will be about 0.40 cents per kwh. This compares with 0.21 cents per kwh currently charged in the Northwest. The relevant comparison, however, is with the cost of additional electricity in the Pacific Northwest. According to studies made by the Federal Power Commission for the Arm y Corps of Engineers, the cost of providing addiional power in the Northwest will increase aver age power rates considerably.1 1Army Corps of Engineers, Department of the Army, Revision to House Document 531, Columbia River (Unpublished). 10 Lignite coal The first stage in the metamorphosis of vege table matter to coal is peat. Lignite in turn is the coalified product of peat and in the United States is the lowest rank of combustible matter that is used for burning, gasifying, and coking— the normal large scale outlets for coal. Lignite con tains 30 to 40 percent water. Lignite deposits in the United States are of tremendous size with the principal concentrations in the Northern Great Plains, the Rocky Mountains, and the Gulf and Pacific areas. Industrial exploitation of lig nite as a fuel in the United States has been lim ited because of the abundance of higher rank coals close to points of usage and a lack of in dustry and markets in the area of lignite deposits. Active development has been underway by Alcoa at its Rockdale plant in Texas, however, with electric generation based on lignite as a power source for a 150,000-ton annual capacity alumi num plant. Chemical by-products from the lignite process developed by Alcoa may reduce power costs as markets are developed for them. Lignite is tied rather closely to its region of production because of its low heat content per unit volume and its tendency to deteriorate in storage and transit. One of the features of lignite that has served as a barrier to its use could conceivably become an asset in the case of aluminum smelt ing, and that is its location in areas of limited industrial activity. The Gulf Coast, which is con veniently located to the source of bauxite, has huge lignite deposits that could well attract an industry that cannot afford to bid competitively for power with other industries that use relatively much less power. H ow realistic this assumption is can only be known in light of what the costs really are. Aluminum Company of Am erica’s decision to expand the original capacity of its Texas plant by 50 percent indicates some success with lignite. Possible impact o f atomic en ergy The whole spatial distribution and organiza tion of the United States aluminum industry could be radically altered by the advent of lowcost atomic energy; but, as in the case of other changes, the adjustment would not be instanta neous. One of the features of atomic energy will January 1958 MONTHLY R EV IE W be the insignificance of uranium transport costs since a pound of uranium possesses the B.T.U. equivalent of 1,500 tons of coal. In essence, this means that atomic energy can be utilized any where. Therefore, atomic energy could be used in the Northwest as economically as anywhere else. What would then determine the actual loca tion of aluminum plants would be factors other than power costs. N o longer would industries be attracted to an area because of relatively low power costs despite other disadvantages. A t present, electric power based on atomic energy is not competitive with electricity generated from traditional energy sources in most power con suming areas throughout the world. Review of the Aluminum Position in the Pacific Northwest The aluminum industry developed in the Pa cific Northwest largely in response to military needs for the metal and the availability of un sold or uncommitted power from the newly com pleted Federal hydroelectric projects in the areas. Almost overnight the Pacific Northwest became the leading center of aluminum production in the United States. In 1939, no aluminum was pro duced in the region; by 1941, 22 percent of the national output came from the Pacific Northwest. National production quadrupled from 1939 to 1943 after which it began to decline. Aluminum production in the Northwest continued to in crease through 1944 when it accounted for 36 percent of the national output. W hen the war was ended military needs for aluminum were sharp ly reduced with the result that aluminum produc tion contracted in both the Pacific Northwest and the United States. Since production declined less in the Pacific Northwest, its relative share of the national output increased to a new high of 41 percent in 1945. By 1947 civilian demand for aluminum began to increase in literally hundreds of uses. Produc tion was stepped up in the converted war plants throughout the country. The Pacific Northwest increased its production faster than the rest of the country as the wartime aluminum plants there were reactivated by Kaiser and Reynolds. By 1948 the Pacific Northwest had not only exceeded its wartime peak production but had T able 1 U P r im a j r y A l u m i n u m P r o d u c t io n S t a t e s a n d P a c if ic N o r t h w e s t (000 tons) „ n it e d ... P acific N orth w est Year 1933 ................... 1940 1941 _____ 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 ................. 1953 1954 1955 1956 United States 163.5 206.3 309.1 521.1 920.2 776.4 495.1 409.6 571.8 623.5 603.5 718.6 836.9 937.3 1,252.0 1,460.6 1,554.3 1,679.0 Pacific Northwest as percent o f U .S . S.O 67.0 148.0 252.0 281.0 203.0 148.0 265.0 295.0 311.4 343.0 364.1 350.0 480.8 512.0 546.5 623.6 2 22 28 27 36 41 36 46 47 52 48 44 37 38 35 35 37 Source: United States Department of Interior, Bonneville Power Ad ministration, Columbia River Power and the Aluminum Industry, July 1953, p. 20. raised its relative share of aluminum production to 47 percent. In 1949 its relative share actually rose to 52 percent. (See Table 1) Production continued to expand in the Pacific Northwest with only a slight setback in 1952 due to power curtailment by the Bonneville Power Admin istration because of low water flow in the Colum bia River. National output since 1949, however, has increased even faster than that in the Pa cific Northwest. Upon the outbreak of the Korean W ar, national production of aluminum was approaching the wartime peak of 1943. But even more new ca pacity was needed to satisfy the sudden spurt in military needs in addition to the large and rapidly growing civilian demand. Although it was felt that the Pacific Northwest would have surplus power after W orld W ar II, it soon became evi dent with the increase in residential and indus trial needs that it would be difficult to satisfy the demands of existing aluminum capacity without curtailing the expansion of other demands. As a result there was no power surplus to draw upon when the need for new aluminum capacity arose. The Southwest with its large gas supplies and proximity to bauxite from the Caribbean area was the most satisfactory alternative. O f all the electric power contracts negotiated for aluminum production by the Bonneville Pow er Administration after W orld W ar II, only three 11 F EDERAL R ES E R V E BA NK OF S A N F R A N C I S C O were for new aluminum plants; namely, a 108,500-ton plant at Wenatchee completed in 1952, a 60,000-ton plant at Columbia Falls, Montana, and a 60,000-ton plant yet to be completed at The Dalles in Oregon. (Table 2) T able 2 A l u m in u m I ndu stry P B o n n e v il l e P P ow er a c if ic Plant and location A lcoa V ancouver1 ................ W enatchee1 .............. Anaconda Columbia Falls Reynolds Troutdale ................... L on gview .................. . Kaiser Spokane ..................... Tacom a ....................... T rentw ood (rollin g) . . ow er A R e q u ir e m e n t s d m in is t r a t io n N orth w est— (000 kw h) in F rom the 1957 C o n Normal tract interrupt- Date of ible* execution firm 59 10/30/51 136 120 65 5 /2 2 /5 1 Date of termina tion 1 0 /31/71 5 /2 2 /7 1 111 16 6 /1 4 /5 5 2 /2 1 /7 5 142 60 45 65 10/ 2 /5 0 1 0 / 2/50 1 0 / 2/70 1 0 / 2 /7 0 189 50 35 178 35 11 1 / 7/54 1 / 7/54 1 /7 /5 4 9 /3 0 /7 3 9 /3 0 /7 3 9 /3 0 /7 3 Total ....................... . 843 474 9 /1 3 /5 5 9 /1 3 /7 5 Requirem ents 1958: H arvey— T he D alles. . 41 82 1 In addition, at each plant— Vancouver and Wenatchee— Alcoa pur chases 15,000 kw from the City of Seattle. The Vancouver plant in cludes rod, wire, cable, and extrusions. 2 Not included in contracts. Refers only to amounts normally used. Source: Bonneville P o w e r Administration, Power Sales and Related Contracts in Effect July 1, 1956. These contracts supplied electric power to the aluminum companies at rates lower than any where else in the country. The unavailability of more low-cost power in the Pacific Northwest caused aluminum producers to locate new capac ity in higher cost power areas that had other cost advantages. In view of power cost advantages in the Pacific Northwest, however, aluminum capacity and output will not be likely to decline there as long as the rates prevailing under the contracts currently in effect continue. If alumi num producers should feel it advisable to cut uti lization of capacity from time to time because of temporary overexpansion, the Northwest prob ably would not be affected more than other areas. The aluminum companies would be prone pos sibly to cut their large consumption of interruptible power which is more costly to use than firm power. Prospects fo r expan sion in the Pacific N orthwest If, on the other hand, the demand for alumi num continues to expand, it is not likely that the 12 Pacific Northwest will share as much as other areas in expanding capacity. This is based on ris ing marginal costs of new electric power in the Pacific Northwest and a narrowing of the power cost advantage for the Pacific Northwest as im provements continue in coal-fueled steam plants. Increases in freight rates also tend to lower the Pacific Northwest advantage. The increase in western markets has expanded nearby markets for Northwest ingot, but the bulk of the output must still be shipped to the industrial centers of the Midwest and East so little reduction in freight costs incurred in marketing the ingot can be ex pected for the Pacific Northwest. The prospects for new capacity in the Pacific Northwest will depend on the availability of markets and on the relationship of the cost of producing and getting the product to customers as compared to other locations. Although there are eight Federal dams in the process of construction in the Pacific Northwest which, when completed, will add 6,515,000 kilo watts of capacity to an existing Federal capacity of 3,589,000 kilowatts, the share the aluminum industry will get from the expansion of generat ing facilities will depend on other requirements for electricity in the area, cost of developing new hydro sites, and Government policy with respect to specific industries. Only crude estimates may be made of future power needs in the Northwest, but it is clear that the cost of developing new hydro power will be higher than it was in the past. W ith a probable increase in local demand for electric energy combined with an increasing cost of supply, it is doubtful whether the aluminum industry can count on large new blocks of power at the current low rates as a basis for any large expansion of productive capacity in the North west. There has been considerable speculation about the impact that natural gas will have on Northwest power rates in the near future, but most indications are that the price of this natural gas will be too high for electrical generation. Natural gas will most likely be priced competi tively with petroleum rather than with hydro electric power, at least initially. This new energy source, then, does not promise to affect mark edly the immediate supply or cost of electric pow er in the Pacific Northwest. MONTH LY R EV IE W January 1958 T ABLE 3 P r im a r y A in U l u m in u m S tates a n d C a n ad a (I n Short T ons) n it e d Company and plant site Aluminum Co. of Am erica : A lcoa, T en n ...................... Badin, N. C ...................... Evansville, In d................ Massena, N. Y ................. Pt. Com fort, Texas . . . Rockdale, Texas ........... V ancouver, W ash........... W enatchee, W ash........... Totals ........................... Reynolds Metals C om p a n y: Arkadelphia, A rk. . . . . Tones Mills, A rk ............. Listerhill, A la.................. Longview , W ash ............. Massena, N. Y ................ San Patricio, T exas . .. Troutdale, Ore. .............. Totals I ngot C a p a c it y Dee. 31, 1957 157,100 47,150 37,500 20,000 792,500 207,500 55,000 109,000 77.500 60.500 95,666 91.500 488,500 247,500 176,000 36,000 38,500 Anaconda Aluminum C o .: Columbia Falls, M on t.. H arvey Aluminum C o .: The Dalles, O re............... Orm et Inc. (O lin-R evere) Omal, Ohio .................... 112,500 ioo '.ooo ........................... ......... ................. 150,006 112,250 120,000 150,000 97,500 108,500 Kaiser Aluminum & Chemical C orporation: Chalmette, La.................. Mead, W ash...................... Ravenswood, W . V a .. . Tacom a, W ash ................. T otals Under con struction 498,000 212,500 Total 1958-59 157,100 47,150 150.000 149,750 140.000 150.000 97,500 108,500 1,000,000 55.000 109.000 190.000 60.500 100.000 95.000 91.500 701,000 2,500 247,500 176.000 145.000 41,000 111,500 609,500 io 9’,66 o 60,000 60,000 54,000 54,000 180,000 180,000 Total others ................ 60,000 234,000 294,000 U . S. totals ................ 1,839,000 765,500 2,604,500 Aluminum Co. of Canada : Arvida, Que. .................. Beauharnois, Q u e........... Isle M aligne. Que. . . . Kitimat, B. C................... Shawinigan Falls, Q ue.. 367.000 38.000 115.000 186.000 70.000 Totals ........................... Canadian British Aluminium, Ltd. : Bate Comeau, Q ue......... Canada totals .............. Total United States and Canada . . . . 776,000 90,666 90,000* 367.000 38.000 115.000 276.000 70.000 866,000 45,000 45,000 90,000 821,000 135,000 956,000 2,660,000 900,500 3,560,000 Data represents actual installed capacity without regard to state of power supply, additional capacity in various stages of construc tion, and, with exception of Alcan, projected operable capacity by end of 1959. 'Partially constructed; completion date deferred. Source: American Metal Market Company, American Metal Market, Vol. LXV, No. 3 (January 4, 1958), p. 8. The outlook The Pacific Northwest has been losing its rela tive importance in the aluminum industry since 1950 when a movement took place to the South west where aluminum firms could draw on natu ral gas and lignite supplies. In 1955 the Pacific Northwest produced 35 percent of national out put as compared with 48 percent in 1950. This trend is continuing with the recent shift to the Ohio Valley. Alcoa and Kaiser are completing construction of two large plants in that region where they will utilize coal-fueled steam plants as the source of power. Ormet Corporation, a company newly organized by Olin Mathieson, has also announced plans to build a plant in the area. Upon the completion of these plants by 1958, the Ohio Valley will have 475,000 tons of capacity as compared with approximately 629,000 tons capacity in the Pacific Northwest. (T a ble 3) A combination of factors, most of which were mentioned earlier, have been responsible for the move to the Ohio Valley. Although the power costs in the Ohio Valley are considerably higher than those existing in the Pacific Northwest, the cost of acquiring additional electricity in the Northwest sufficient to supply the huge current expansion of the United States aluminum indus try would probably be higher still. In addition, there is much more uncertainty about future pow er rates in the Pacific Northwest because rates to some extent are determined by government policy. One projection about the future of the alumi num industry in the Pacific Northwest can be made with relative certainty. As total aluminum smelting capacity continues to expand, the Pacific Northwest will not share proportionately in its increase. Although present low power rates com pensate for a good part of the other cost disad vantages of location in the Pacific Northwest, additions to capacity in this area can only be sup plied by higher cost power that will make them higher cost plants than those located more advan tageously with respect to assembling raw mate rials or marketing the finished product. The Pa cific Northwest will, however, continue to supply an impressive fraction of the national aluminum output in the foreseeable future. 13 FE DER AL RE SE RV E BA NK OF SAN F R A N C I S C O BUSINESS INDEXES — TWELFTH DISTRICT* (1 9 4 7 -4 9 BTBrajie = Industrial production (physical volume)* Year and month Lumber 1929 1933 1939 1948 1949 1950 1951 1952 1053 1954 1955 1956 95 40 71 104 100 113 113 116 118 116 124 119 87 52 67 101 99 98 106 107 109 106 106 105 78 50 63 100 103 103 112 116 122 119 122 129 54 27 .56 104 100 112 128 124 130 133 145 156 1956 November December 111 112 104 103 135 132 108 115 115 111 111 114 109 102 102 101 101 101 101 101 101 102 101 101 131 130 132 132 138 131 133 137 135 132 131 1957 January February March April M ay June July A ugust September October November • • • ... Petroleum* Refined Crude 100) Total nonagri cultural employ ment Total mf’g employ ment Car loadings (num ber)* Waterborne foreign trade*' s Dep't store sales (value)* Retail food prices 30 18 31 103r 98 107r 112r 120r 122r 122r 132r 141r 64 42 47 103 100 100 113 115 113 113 112 114 190 110 163 86 85 91 186 171 140 131 164 195 124 72 95 98 121 137 157 200 308 260 308 443 Copper* Electric power 165 72 93 105 101 109 89 87 77 71 75 77 105 17 80 101 93 113 115 112 111 101 117 118 29 26 40 101 108 119 136 144 161 172 192 210 102 99 103 112 118 121 120 127 134 ' '55 102 97 105 120 130 137 134 143 152 102 52 77 100 94 97 100 101 100 96 104 104 146 139 79 72 123 123 216 210 137 137r 156 159 100 106 143r 144r 116 116 242 231 401 436 120 127 140 154 157 152 162 160 169 161 79 88 88 78 82 75 68 74 74 75 125 138 133 135 126 130 113r 116r 127r 126r 125 220 211 221 228 229 239 238 233 217 223 138r 138 138 138 138 139 138 138 138 138 137 160 159 159 159 159 160 159 156 155 153 152 105 96 100 103 99 100 94 97 93 91 95 137r 141r 146r 137r 141r 148r 141r 144r 141r 134r 139 116 117 116 117 117 118 118 118 119 119 119 237 269 267 298 283 252 188 210 173 421 417 489 534 698 511 770 572r 607 Lead' Cement ■. < Exports .... Imports .... ------ BANKING AND CREDIT STATISTICS — TWELFTH DISTRICT ( a m o u n t s In m i l l i o n * o f rio ll ar n) Condition Items of all member banks* Year and month Loans and discounts U.S. Gov't securities Demand deposits adjusted’ Total time deposits Member bank reserves and related items Bank rates on short-term business loans' 1929 1933 1939 1950 1951 1952 1953 1954 1955 1956 1957 2,239 1,486 1,967 7,093 7,866 8,839 9,220 9,418 11,124 12,613 13,236 495 720 1,450 6,415 6,463 6.619 6,639 7,942 7,239 6,452 6,595 1,234 951 1,983 9,254 9,937 10,520 10,515 11,196 11,864 12,169 11,682 1,790 1,609 2.267 6,302 6,777 7,502 7,997 8,699 9,120 9.424 10,530 3.35 3.66 3 95 4 14 4.09 4.10 4.50 4.97 1956 December 12,804 6,383 12,078 9,356 4.65 1957 January February March April M ay June July August September October November December 12,488 12,556 12,576 12,649 12,694 12,911 12,912 12,945 13,178 13,064 13,185 13,236 6 505 6,356 6.177 6,520 6,315 6,249 6,319 6,313 6,293 6,433 6,357 6,595 11,812 11,279 11,129 11,622 11,210 11,310 11,407 11,329 11,561 11,570 11,770 11,862 9,587 9,690 9,794 9,839 9,995 10,155 10,188 10,220 10.301 10,417 10,304 10,530 Factors affecting reserves' Reserve bank credit* Treasury!® Money in circu lation* a 175 185 584 2,026 2,269 2,514 2,551 2,505 2,530 2,654 2,686 42 18 30 115 132 140 150 154 172 189 203 38 2,654 200 144 139 9 31 54 20 6 39 30 8 37 23 2,548 2,517 2,495 2,560 2,526 2,483 2,457 2,592 2,581 2,517 2,652 2,686 206 200 199 202 200 203 205 197 204 200 202 217 + 0 110 192 -1 ,1 4 1 -1 ,5 8 2 -1 ,9 1 2 -3 ,0 7 3 -2 ,4 4 8 -2 ,6 8 5 -3 ,2 5 9 -4 ,1 6 4 23 + + 150 + 245 + 1 198 + 1 983 + 2 265 + 3 158 + 2 328 + 2 757 + 3 274 + 3 903 — 17 - 303 + 451 + + + 33 41 37 35 56 29 49 50 109 76 14 18 — 558 816 170 445 261 374 426 145 434 322r 298 454 + + + + + + + + + + + + 249 494 170 430 209 402 320 292 480 159r 447 480 — + + + + + 4.74 — + 4.81 — + 5.21 + + Reserves11 18 31 14 189 + 132 + 39 + 30 100 + 96 — 83 34 2 2 39 21 7 14 2 38 52 31 — 5.13 Commer cial10 Bank debits Index 31 cities*'1* (1947-49 = 100)* — + — — f + + + — + 1 Adjusted for seasonal variation, except where indicated. Except for department store statistics, all indexes are based upon data from outside sources, as follows: lumber, California Redwood Association and U.S. Bureau of the Census; petroleum, cement, copper, and lead, U.S. Bureau of Mines; electric power, Federal Power Commission; nonagricultural and manufacturing employment, U.S. Bureau of Labor Statistics and cooperating state agencies; retail food prices, U.S. Bureau of Labor Statistics; carloadings, various railroads and railroad associations; and foreign trade, U.S. Bureau of the Census. ! D aily average. * Not adjusted for seasonal variation. ' Los Angeles, San Francisco, and Seattle indexes combined. ‘ Commercial cargo only, in physical volume, for Los Angeles, San Francisco, San Diego, Oregon, and Washington customs districts; starting with July 1950, "spe cial category” exports are excluded because of security reasons. ' Annual figures are as of end of year, monthly figures as o f last Wednesday in month. ’ Demand deposits, excluding interbank and U.S. G ov’t deposits, less cash items in process of collection. M onthly data partly esti mated. * Average rates on loans made in five major cities. » Changes from end of previous month or year. 10 Minus sign indicates flow of funds out of the District in the case of commercial operations, and excess of receipts over disbursements in the case of Treasury operations. 11 End of year and end of month figures. u Debits to total deposits except interbank prior to 1942. D ebits to demand deposits except U.S. Government and interbank deposits from 1942. p— Preliminary. r— Revised. 14
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