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IDAHO ALASKA /ASHIMGTON Q an u ah L ^ 7967 5Aue Review of Business Conditions UTAH The Auction of Treasury Bills in the Twelfth District . . EGON CALIFO RN IA I ^ I ' *» - - J ARIZONA NEVADA Review of Business Conditions general easing in national business conditions continued during November. F or the first time since early 1960, personal income failed to show a gain over the previous month. Rising income payments from other sources were no longer sufficient to more than offset the m onth-to-month decline in factory payroll payments which has persisted since May. The decline in factory payrolls reflects the downward trend in industrial pro duction since July. The curtailment of indus trial production in November to 105 percent of the 1957 average represented the sharpest month-to-m onth decline of 1960. A reduc tion in auto assemblies and other consumer durable goods, such as appliances and tele vision sets, contributed heavily to the decline. During August, September, and October, the rising level of automobile production had exerted a supporting influence on industrial production. Nonfarm employment declined further in November with reductions general for all major employment categories except for service industries and state and local gov ernment. The recent course of personal in come and nonfarm employment has been associated with a more cautious attitude on the part of consumers toward purchases that can be delayed. This is suggested by a decline in seasonally adjusted sales by both depart ment stores and durable goods stores between October and November and by increasingly modest increases in instalment credit expan sion during recent months. With fewer funds flowing to individuals and businesses (corpo rate profits declined in the third quarter of 1960), the revenue of the Federal Govern ment is not expected to be so great as earlier anticipated. Re-evaluation by the Bureau of the Budget of budget estimates for fiscal 1961 indicates that a small deficit is now a distinct possibility whereas earlier estimates indicated a surplus in excess of $1 billion. h e T District em ployment and unem ploy ment at high levels in November Nonfarm employment in the District rose slightly between October and November after seasonal adjustment. The largest increase, 0.7 percent, was registered in the construction industry. There were smaller increases in finance, services, and government; no change in manufacturing; and slight declines in min ing and trade. Although manufacturing em ployment remained unchanged, this overall stability resulted from diverse movements in particular industries. Small increases in em ployment in lumber and wood products, fabricated metals, electrical machinery, and ordnance were offset by declines in aircraft, automobile assembling, and primary metals. Total civilian employment in Pacific Coast States rose to a record high of 7.8 million workers in November. Nevertheless, the actual number of persons unemployed, while rising less than seasonally, was at the highest level for any November since 1949. O n a seasonally adjusted basis, there were 546,000 workers without jobs, a decline of 3.8 percent from October but 45 percent more than in November 1959. Since the labor force in creased only slightly, the rate of unemploy ment on the Pacific Coast fell from 6.8 per cent of the labor force in October to 6.6 percent. The Hawaiian labor market, recently a bright spot in the Twelfth District, has been relatively sluggish in recent months. In N o vember, the rate of unemployment was 3.4 percent (unadjusted for seasonal variation), compared with 3.0 percent in 1959 and has been higher than year-ago rates since May. As 1960 came to a close, there were three major labor market areas in the District that had been designated as having substantial la bor surpluses (6 to 9 percent unemployed) by the United States Bureau of Employment Security. Two of these, San Bernardino-Riv- January 1961 MONTHLY REVIEW ersid e - O n ta rio , C a lifo rn ia and S pokane, Washington, were so designated in Novem ber, while San Diego had been reclassified in September. Sacramento, with no significant labor surplus since M arch 1959, was reclassi fied in November to a moderate labor surplus category (3 to 6 percent unem ploym ent). Nine other smaller areas in the District not large enough to be included in the Bureau’s regular classification program were also re ported to have substantial labor surpluses; five of these were in Washington. Most of the re maining major and minor labor market areas in the District are presumably areas of mod erate labor surplus. Honolulu where no sig nificant surplus is yet reported is an excep tion. The most important factors affecting the reduction of job openings in the areas most recently reclassified have been the cutbacks in local aircraft, lumber, construction, and primary metals employment. Steel producers still a w a it increase in orders District steel production, at very nearly the lowest rate for 1960 in November, improved slightly in December despite some curtailment of operations late in the month. In contrast, the operating rate for the nation continued to fall in December, and several mills shut down for the Christmas to New Year period as the flow of orders has not been sufficient to sup port high rates of production. Since, as was pointed out last month, reduced 1960 levels of production cannot be adequately ex plained by inventory adjustments of steel con sumers, a strong recovery of the industry must await the expansion of output by in dustries that purchase steel for fabrication. refined copper remained at 30 cents. Inven tories of refined copper also climbed again during November, the bulk of the accumula tion taking place in the United States. The existence of large stocks and price competition from foreign sellers were respon sible for the decline of lead prices by 1 cent from 12 cents, a level which had prevailed since April 1959 and of zinc prices which were cut by 1 cent from 13 cents, the price since January 1960. Lumber production sinks to new low Softwoods lumber production in the Doug las Fir region in November was down 4 per cent from O ctober and 16 percent under a year ago; the daily average output was the lowest in any November during the postWorld W ar II period. Although new orders were up slightly from October, November orders were less than those of any other month of 1960, except for January, and were 7 percent below November 1959. The volume of unfilled orders turned up a little but con tinued, as in recent months, to be well below 1959. Inventories held steady at 14 percent District lum ber production continues to decline* Copper inventories accum ulate Copper prices held relatively firm through the middle of December. At that time, custom smelters cut by Vi cent their buying price for scrap, but the major producer price for new q n I J F '______ I______ I______ 1 M A M J I______ I______ I______ I------------- 1----------- 1------------- 1— J A S 0 N D * D aily average o u tp u t, seasonally adjusted. Source: N ational L um ber M an u fac tu rers’ Association, W est Coast L u m berm an’s Association, and W estern P in e Association; index by Federal R eserve B ank of San Francisco. FEDERAL RESERVE B A N K OF S A N F R A N C I S C O above the same month of 1959. The greater than seasonal cutback in production appears to have had some effect on prices. During November, green fir prices, which had been falling for several months, rose a bit; how ever, prices were still about 14 percent under 1959. Dry fir prices declined slightly. A t the end of November, the fir plywood industry was operating at about 60 percent of capacity. Curtailments in production have been concentrated in plywood sheathing, the price of which has been declining for some time. The average price of Va inch sanded plywood remained steady at $68 per thousand square feet. Contract a w a rd s in November rise above year-ago The total value of construction, as meas ured by contract awards in the Twelfth Dis trict, fell from October to November on a seasonally adjusted basis. However, the total volume in November was 7 percent above the year-ago level as a consequence of a 42 per cent increase in the value of awards for public works and utilities; contract awards for both highways and public utilities were above the November 1959 level. Contracts for nonresidential construction of other types were 5 percent above the year-ago figure, owing chiefly to increased contracts for m anufactur ing, religious, and hospital buildings. Awards for commercial and public buildings declined slightly from last year. Residential contracts in November were 5 percent below a yearago, somewhat less than in recent months. For the first 11 months of the year, they were 15 percent less than in the comparable period of 1959. Some further easing in the District m ort gage m arket occurred in November as the average price for FH A -insured mortgages with a standard downpayment, maturity, and interest rate rose from 97 on November 1 to 97.2 on December 1. Farm income continues to ease Receipts of District farmers in O ctober dipped below the year-ago level for the third consecutive month. These declines have largely offset the sizable gains in cash receipts which occurred during the first five months of 1960, so that returns from marketings for the period January-O ctober are only slightly ahead of the pace in 1959, Slower m arket ings of cotton in California contributed to the year-to-year decline in O ctober crop receipts in the state. Cotton marketings in Arizona, however, were sharply ahead of last year with three-fourths of the state’s crop ginned by December 1, com pared with twothirds of the crop in 1959. The increased ginnings are reflected in Arizona cash receipts which were almost one-third higher in O cto ber than a year earlier. A recent referendum for rice producers indicated that California farmers are less willing to “go along” with national acreage restrictions than producers in other states. In the referendum held December 13, only 71 percent of the California rice producers voted for marketing quotas on the 1961 crop. Although this is above the two-thirds majority required for approval, it is substantially less than the 91 percent favorable vote received nationally. Department store sales show gains for last part of December The final seasonally adjusted Twelfth Dis trict department store sales index for the month of November fell 5 percent from the O ctober level and was down 2 percent from November 1959. This downward trend was continued during the first two weeks of De cember. However, in the last half of Decem ber sales were sufficiently large to reverse the trend with the result that for the five weeks ended December 31 sales were 3 percent above the like period a year ago. In the Christmas week of 1960 there were two January 1961 MONTHLY REVIEW more shopping days preceding Christmas Day than a year ago, which accounts for the reduced sales volume earlier in December when compared with the year-ago period. New passenger car registrations in Cali fornia in November were 11 percent above the year-ago volume. The daily average sales were slightly above those for October. The latest available data indicated a de cline of 0.5 percent in October in the volume of consumer instalment credit held by com mercial banks in the Twelfth District. This was the first decline since M arch and was only the second decrease in two years. Of the four categories of bank-held consumer credit, only repair and modernization loans remained at the September level. District banks add to security holdings as loan volume eases* Billions of Dollars Banks’ reserve positions remain easier than year ago Beginning November 24, member banks were permitted to count all of their vault cash in meeting the reserves they are required to hold with the Federal Reserve Bank. In the case of country banks, this liberalization was partly offset by a 1 percent increase in the reserves required against net demand de posits. As a result of these changes, District banks were in a more flexible position to meet credit demands than a year ago when their reserve position was generally tight. In November, District member banks add ed another $65 million to their holdings of securities, but total loans declined slightly from the October level, contrary to the usual seasonal upturn in November. Thus far in 1960, total loans outstanding at District banks have remained substantially above the corresponding period a year ago, although since June, the difference has been narrow ing so that by the end of November the margin was reduced to about $650 million, or 4 percent. Extensive additions of United States Government securities to District mem ber bank portfolios in recent months have * D istrict w eekly reporting m em ber banks. D a ta prior to Ju ly 1, 1959 are p a rtly estim ated. Source: F ederal Reserve B ank of San Francisco. brought these holdings to approximately $50 million higher than in November 1959. This is in sharp contrast to the first six months of 1960 when District bank holdings were more than $1 billion under the level of the corre sponding period in 1959. Holdings of secu rities other than United States Governments, however, are still $107 million below those of November 1959. Demand deposits adjusted at District member banks increased in N o vember but by less than the usual seasonal amount. The reduction in total time deposits, on the other hand, was far less than seasonal, dipping only slightly in spite of large payouts of Christmas Club savings during the month. Weekly reporting member banks provide more recent data on Twelfth District credit developments. In December, total bank credit outstanding at District weekly reporting mem ber banks rose $593 million, a record for any four-week period in 1960. Bank credit ad justed, which excludes loans to domestic commercial banks and valuation reserves, FEDERAL RESERVE B A N K OF S A N F R A N C I S C O C H A N G ES IN S E L E C T E D B A L A N C E S H E E T IT E M S O F W E E K L Y R E P O R T IN G M E M B E R B A N K S IN LE A D IN G C IT IE S (dollar amounts in m illions) Tw elfth D istrict From Nov. 30, 1960 From Dec. 30, 1959 to Dec. 28. 1960 to Dec. 28,1960 Dollars Percent Dollars Percent ASSETS: Total loans and investments Loans and investments adjusted1 Loans adjusted1 Commercial and industrial loans Real estate loans Agricultural loans 2.62 2.57 1.37 2.18 0.19 0.91 + + + + — + 736 791 485 276 163 87 + 3.27 + 3.54 + 3.31 + 5.44 — 3.08 + 15.40 + 3,781 + 3,088 + 1,729 + 182 — 16 + 15 + + + + — + 3.50 2.88 2.53 0.57 0.13 1.40 + + + + — + 5,214 5,053 2,105 1,466 144 154 25 + 15.34 + 45 + 31.47 + 796 + 25.42 + 11 + 0.28 + 45 + 5.88 + 55 + 7.28 + 604 + 11.35 — 260 — 4.20 + 14 + 14.29 — 55 — 32.93 + 13 + 22 + 252 + 123 6.99 0.73 4.44 6.26 — 56 + 262 + 270 + 36 — 21.96 + 9.41 + 4.77 + 1.76 + + + + + 693 66 47 853 506 + 94.67 + + + + + 131 + 387 + 139 + + + 1.18 3.48 1.49 — 327 — + 477 + + 50' + + + + + — — 593 579 204 114 10 6 Loans for purchasing and carrying securities + Loans to nonbank financial institutions Loans to domeslic commercial banks Loans to foreign banks Other loans U. S. Government securities Other securities LIABILITIES: Demand deposits adjusted Tim e deposits Savings accounts + + + + — — United States From Nov. 30, 1960 From Dec. 30, 1959 to Dec. 28, 1960 to Dec. 28, 1960 Dollars Percent Dollars Percent 2.82 4.33 0.53 r + 1,728 + 676 n.a. + 4.89 + 4.80 + 3.09 + 4.81 — 1.14 + 16.56 + + + + 9.66 0.31 2.91 5.29 + 161 — 60 + 986 + 2,697 + 251 + 12.74 — 7.42 + 6.83 + 0.98 + 2.55 + + 2.89 1.99 n.a. — 1,714 + 2,871 n.a. — + 2.71 9.02 n.a. r C hanges based on revised data, n .a . N o t available. i E xclusive of loans to dom estic com m ercial banks an d a fte r deduction of v alu atio n reserves; individual loan item s are show n gross. Source: B oard of G overnors of th e F ederal R eserve System and Federal R eserve B ank of San Francisco. also had a record increase. Loans adjusted climbed $204 million with most of the b o r rowing occurring in mid-month as business firms sought bank credit to meet December quarterly tax payments. Public utilities were particularly heavy borrowers, and petroleum and chemical companies and commodity dealers also increased their bank indebtedness. Increased bank borrowing by sales finance companies during this period may also reflect, in part, the effects of the December corporate tax date as business firms normally reduce their holdings of finance Company paper at such times. Consumer loans continued to move up seasonally, but the amount of in crease was only one-half that in November and also less than in December 1959. District weekly reporting member banks added $252 million to their portfolios of United States Government securities in D e cember. Most of the increase was in short term holdings, Treasury bills and certificates of indebtedness, although additions were also made in short-and intermediate-bond hold ings. District banks continued to increase their holdings of other securities in December. Both demand deposits adjusted and time deposits rose in December at weekly report ing member banks. Savings deposits ac counted for about one-third of the $387 mil lion rise in time deposits; the remainder of the increase was accounted for by growth in time deposits of states and political sub divisions. MONTHLY REVIEW January 1961 Interest rates on business loans decline in fourth quarter The quarterly interest rate survey con ducted by the Federal Reserve Bank of San Francisco among a sample of commercial banking offices showed that business firms paid lower rates of interest on short-term funds borrowed from Twelfth District banks in December than in September. The average unweighted interest rate on short-term busi ness loans was 5.32 percent in December, compared with 5.40 percent in September and 5.57 percent in December 1959. The decline of 8 basis points in the rate in December was not so great as in September (22 basis points) which reflected the prime rate re duction of August 23. However, one-third of the total dollar amount of loans covered in the December survey was made at the 4.5 percent prime rate, compared with only onefourth in the September survey. Reductions in rates occurred on loans in excess of $100,000, but rates charged on loans under that am ount remained practically unchanged. Rates paid on business loans of over oneyear maturity also declined from an average of 5.45 percent in September to 5.28 per cent in December. This was substantially below the year-ago average interest charge of 5.62 percent. Long-term loans constituted less than 2 percent of the dollar volume of all loans reported in the survey, a drop of about 1 percent from the September survey. Revised Indexes of Employment The Twelfth District indexes for Total Nonagricultural Employment and Total M anufacturing Employ ment for 1960 have been revised according to M arch 1960 benchmarks. 7 The Auction of Treasury Bills in the Twelfth District of the most active of the many m ar kets in our economy is the “money m ar ket” where short-term evidences of debt, both public and private, are issued and traded. The function of the money m arket is to pro vide close money substitutes to investors who temporarily have idle funds and desire to earn interest on them and yet retain a high level of liquidity. “Liquid” debt instruments are those that can readily be sold without much risk of loss because their maturities are short enough to prevent wide price fluctuations and because there is little or no doubt of their ultimate payment. Over the years, there have been many such money m arket instruments and their character has changed as the structure and function of financing practices have changed. Chief among these obligations in the postw ar period are short-term U nited States Government securities (Table 1). The Treasury issues two types of securities tailored specifically to the short-term market: certificates and bills. Certificates are sold by the Treasury at a fixed price, carry a fixed rate of interest, and usually have a maturity of one year or less. Treasury bills, which also have a maturity of one year or less, are the more im portant short-term security and are sold at auction every M onday morning for Thursday delivery on a discount basis and redeemed at par, the difference between the purchase price and par determining the yield. When Monday n e O T a ble 1 OUTSTANDING PRIVATELY HELD MARKETABLE UNITED STATES GOVERNMENT SECURITIES, August 31, I9 6 0 (millions of dollars) B o n d s ...................................................................................................... 74,676 N o t e s .......................................................... ...........................................32,817 C e r t i f i c a t e s ................................................................................ 10,925 B i l l s ............................................................................................................. 33,047 T o t a l ................................................................................151,465 Source: U n ited S tates T reasury D ep artm en t. is a generally observed legal holiday, the auc tion is held on the preceding Friday instead. Bills represent a large proportion of the m ar ketable United States Government securities traded and held by investors. Of the $151 billion of marketable Governments held by non-Government investors at the end of A u gust 1960, over $36 billion, or about onefourth, were in the form of bills, while about $17.6 billion of certificates were outstanding. Over a period of time, the short-term debt structure has come to be arranged so that there is a regular pattern for the maturities of most short-term Government securities. A t the shortest end of the scale are the 91 -day or 3 -m onth bills. The 91-day bill, first intro duced in 1929, is today the principal bill maturity issued by the Treasury. While this bill maturity serves the needs of many invest ors, there is also a demand for weekly bills of a somewhat longer maturity. The Treasury had sold 6-month or 182-day bills for a time in the 1930’s, and this practice was revived in December 1958 when 182-day bills were added to the weekly bill auction. The 91-day bills are issued in lots of approximately $1 billion and the longer maturities in lots of about $500 million. In December 1960, there were $13.6 billion of 3-month bills and $12.3 billion of 6-month bills outstanding. An additional element in the short-term Government debt structure is the 1-year bill cycle. This cycle now consists of three issues of $1.5 billion and one of $2 billion, each with a year to run and scheduled to mature in January, April, July, and October. Still an other type of Treasury bill is the tax anticipa tion bill. This is not a continuously replaced issue with a fixed maturity schedule but is an occasional issue designed to raise money in advance of tax dates. It may be issued with various maturities and usually bears a ma January 1961 MONTHLY REVIEW turity date one week after one of the quarterly Federal tax dates. In addition to their func tion as an advance on tax receipts, their use in payment of taxes helps minimize fluctua tions in bank reserves that might attend large inflows of cash to the Treasury at those times. The Twelfth District market for Treasury bills Some insight into the pattern of demand for Treasury bills by Twelfth District invest ors is furnished by data on subscriptions to Treasury bills associated with the Monday auctions of those securities. This analysis focuses attention on the sale of new issues on one day of the week as opposed to the trading of outstanding issues on every business day. However, since the decision to purchase new bills at auction and the price to be tendered are made against the backdrop of market rates for outstanding bills, the trend over time in the yields on new bills follows the same general direction as do yields on out standing issues. Changes over time in bill purchases at auction by various investor groups will reflect, therefore, the reaction of investors to Treasury bills as a form of invest ment, compared with the alternative uses of funds which are available to them. The w eekly auction It is estimated that virtually all Treasury bills purchased by Twelfth District investors at auction are processed through the Federal Reserve Bank of San Francisco.1 The me chanics of the auction are simple and routine. O n each W ednesday, the Secretary of the Treasury issues an announcement through the Reserve Banks inviting tenders for a specified amount of bills, usually about $1 billion of 91-day bills and about $500 million of the 182-day issue. These bids are normally made the following M onday, w hen each F ederal ’ T w e lfth D istric t investors m ay subm it bids th ro u g h o th er F ed eral Reserve B anks, b u t the volum e is estim ated to be sm all. C onversely, som e of the bids received at the F ederal Reserve Bank of San F rancisco are for investors located outside the T w elfth D istrict. Reserve Bank, acting as fiscal agent for the United States Treasury, receives bids for bills dated and to be delivered the following Thurs day. Investors are permitted to submit sealed bids from announcem ent tim e until 1:30 P.M ., New York time. N onbank investors typically submit their bids through commer cial banks. The Federal Reserve System, an im portant holder of Treasury bills in its Open M arket Account, submits its bids at the Fed eral Reserve Bank of New York. The majority of bids are tendered close to the deadline on M onday since bidders attem pt to obtain last minute impressions of the “feel” of the money market and of their own needs. Bid prices are on a discount basis calculated to three deci mal places. A n investor, having in mind the rate that he wants to obtain, can determine the price to be bid by the following rule: Multiply the discount rate by the face value of the bill, divide the product by 360 (the number of days in a year used in computing “bank” discount), then multiply by the actual number of days to maturity, then subtract the resulting figure from the maturity value of the bill. If, for example, an investor wishes to p ur chase bills yielding 2.25 percent on a 91-day maturity, the bid price is calculated in the following way: .0225 x 100 x 91 = .569 360 Face value 100.000 Less discount .569 Equals bid or purchase price 99.431 The investment yield on this bill is actu ally somewhat higher, 2.29 percent, because bills are sold on a discount basis rather than at par. The $5.69 earned on the $994.31 in vested in this bill represents a return of 2.29 percent on a 365-day basis, which is the pe riod used in calculating the yield on the cou pon-bearing T reasury securities. Investors also have the option of bidding for limited amounts of bills on a “noncompetitive” basis, FEDERAL RESERVE B A N K OF S A N F R A N C I S C O 10 C hart 1 which m eans th a t they are w illing to pay the Short-term interest rates reached postw ar peaks average price determined in late 1959 and then receded rapidly by the competitive bids. Percent per annum After the window where bids are received is closed at each Federal Reserve Bank office, bank officials open the sealed bids and arrange them in descend ing order according to the price contained in the bid. Noncompetitive bids are h a n d le d sep a ra te ly . A ta b u la tio n fo r all th e offices of each Reserve B a n k is w ire d to th e Treasury Department. As soon as the Treasury De Source: Board of G overnors of the F ederal Reserve System . p a r tm e n t has th e b ids of what they had been returning six months from all twelve Reserve Banks, it repeats the earlier. process of ranking bids from the highest to The demand for Treasury bills is condi the lowest price. The bills are allotted in de tioned by the supply of idle funds seeking scending order until the cumulative total, in tem porary investment. Since the Treasury bill cluding the total amount of noncompetitive serves this purpose by providing a return on bids submitted, equals the amount of the issue funds while minimizing the risk of invest offered. ment, it might be expected that investors Bill yields have varied w ould be q u ite sen sitiv e to th e m ark ed over a w id e range changes in bill yields that have occurred in The period covered in this study, July 1959 the past year and a half. The motives that through mid-December 1960, is of particular impel investors to buy bills are almost as interest because the yields on Treasury bills varied as the classes of investors. Table 2 have risen sharply above and fallen below the indicates the estim ated d istrib u tio n of the yields offered on certain alternative forms of holdings of bills according to the Treasury short-term investments (C hart 1). In Decem survey of ownership for August 1960. ber 1959 and January 1960, the return on Since comparable data are not published bills re a c h e d the h ighest level since the as to the ownership of outstanding bills in the 1920’s. Yields on both 3-month and 6-month Twelfth District, the analysis will be pursued on the basis of subscriptions to bills for the bills rose steadily throughout 1959, starting District as compiled by the Federal Reserve from about 3 percent and reaching to above 5 percent at the end of the year for 6-month Bank of San Francisco. This imposes certain limitations upon the study, for it does not bills and to 4 Vi percent for 3-month bills. consider the trading of outstanding bills in From the highs reached in January 1960, bill yields fell sharply in the first half of 1960 the secondary market. In many cases, buyers of bills resort to the secondary market. For and by mid-year were returning about a half MONTHLY REVIEW January 1961 T able 2 OWNERSHIP OF TREASURY BILLS, August 31, 1960 (m illions of dollars) Commercial b a n k s .........................................................................4,344 Mutual savings b a n k s .................................................................. 246 Insurance c o m p a n ie s .................................................................. 263 Savings and loan a s s o c ia t io n s ............................................ 156 C o r p o r a t io n s ................................................................................ 4,983 U. S. Government investment accounts . . . . 636 Federal Reserve b a n k s .......................................................... 2,753 All other investors1 .................................................................. 23,057 T o t a l ................................................................................ 36,436 1 Included w ith all o ther investors are those banks, insurance com panies, savings and loan associations, and corporations n o t reporting in the T reasury Survey. N o te : From T reasury Survey of Ow nership, A ugust 31, 1960. D etails m ay n ot add to to tals d u e to rounding. Source: U nited States T reasu ry D ep artm en t an d Board of Gover nors of the Federal Reserve System. exam ple, investors who underestim ate the total demand for bills on the part of all sub scribers and consequently bid too low in the auction may then buy bills in the secondary market. In addition, some investors who are not regular bidders in the weekly auction may wish for specific maturities so that their bills will run off at a certain date, returning their funds when they are needed. These investors will buy bills to suit their specific require ments in the secondary market. However, an analysis of the behavior of the most impor tant investor groups in the District provides an indication of the pattern of demand for a specific type of money m arket instrum ent against a background of a given structure of interest rates. Moreover, because of the ab sence of tenders by Government securities dealers, subscriptions in the Twelfth District probably reflect more accurately the pattern of buying by final investors than do the sub scriptions at the Federal Reserve Bank of New York, for example. In the New York City money market, Government securities dealers account for a large percentage of the total bids tendered and retail the bills they obtain in the secondary market. It is custom ary for these dealers to submit an array of bids at different prices which ensures that the amount offered at auction will be completely sold. Since New York City is the principal national money market, bids by dealers and by New York banks for large customers play a major role in setting the auction rate. F or eign banks are also large bidders in this m ar ket. Over the period covered by this study, subscriptions entered at the Federal Reserve Bank of New York amounted to nearly threequarters of the total tenders in the nation for 91-day bills. The pattern of subscriptions in the District In examining the subscriptions to Treas ury bills, it is apparent that four groups of investors are of particular interest in the Twelfth District. In descending order of their volume of subscriptions, these are: commer cial banks, state and local governments, cor porations, and individuals and personal trust accounts. Since these investors may be moti vated by different reasons in their bill pur chases, it is helpful to investigate the behavior of each of the groups separately. Although this study is not intended to examine in detail the short-term investment alternatives open to the various investor classes, it is useful to indicate the returns on certain of these alter natives as they compare with the yields on Treasury bills. In this way, some of the factors affecting the decision to invest in Treasury bills may be taken into consideration. Commercial banks hold bills as a form of reserves The investment policy of commercial banks with respect to Treasury bills is of interest as an example of banking practice as well as one of the determinants of the pattern of bill pur chases. Treasury bills are the most prominent among the “secondary reserves” of banks. Although not a legal reserve, they are a highly liquid asset which may be sold quickly and easily to meet the need for funds, yet an asset that will earn a return. The demand for bills FEDERAL RESERVE B A N K OF S A N F R A N C I S C O 12 C hart 2 on the part of banks is determ ined first by the Com m ercial bank subscriptions to Treasury bills presence of free or un rose as the bill rate exceeded Federal funds rate utilized reserves, and sec Pvrctnt ond, by the returns on alternative forms of short term investments. These are illustrated in C hart 2. The general shape of the time series represent ing total commercial bank subscriptions for 3-month bills indicates the im por tance of the differential between the m arket yield on bills and the effective ra te on F e d e r a l fu n d s transactions.1 In Decem ber 1959 and early Jan uary 1960, the yield on 3 -m onth bills had risen above 4.50 percent, 0.5 p e rc e n t above th e d is Source: Federal Reserve B ank of San Francisco an d B oard of G overnors of th e F ederal R eserve System . count rate, which serves From the December 1959 peak, bank sub as the custom ary ceiling for the Federal funds scriptions fell quite steadily until the first part rate. C hart 2 indicates that there was a pro of June, at which time they started an irregu n o u n ced rise in D istric t b a n k su b sc rip tions during this period. The fact that the lar upward trend. During the period Decem am ount of tenders reached a peak in the week b e r 1 9 5 9 -S e p te m b e r 1960, th e yield on of December 17, 1959, only to recede as rap 3-month bills was successively falling, below, idly as they had risen, may be accounted for or rising relative to the rate on Federal funds by the fact that these bills matured in the week transactions. Thus, the pattern of bill tenders of M arch 15, 1960 and could have been held, by District banks was roughly inverse to the let run off, or sold by the holders to meet differential between the bill rate and the Fed corporate Federal income tax payments. A n eral funds rate. The fact that District member other reason for the sharp decline in bank banks as a group were no longer net debtors subscriptions may be seen in the free reserve to the Reserve Bank after July undoubtedly position of D istrict m em ber banks, which strengthened their dem and for bills. turned rather sharply downward during Jan It should be stressed that rate differentials uary 1960. between alternative forms of short-term in 1 F ed eral fu n ds are claim s to balances h eld a t the F ederal Re serve B anks. C om m ercial banks hav in g excess reserves m ay sell vestment are not of themselves sufficient con claim s to these balances to o th er banks needing funds to cover a reserve deficiency in w h a t am ounts to an o v ernight lo an . T h e ditions for determining the direction of bank rate on F ederal fu n d s tran sactio n s is determ ined by th e supply of excess reserves in the banking system an d th e dem and for investment in secondary reserves. The m an such fu n d s, w ith a m axim um o rd in arily set by the discount rate, th e rate a t w h ich m em ber banks m ay b orrow from the R e ager of the money desk of a commercial bank serve B an k s, A n analysis of the n atu re of F ederal funds tra n s actions in the T w e lfth D istric t w ill ap p ear in a forthcom ing m ust consider first his present reserve posiissue of th is R eview , January 1961 MONTHLY REVIEW tion and what will happen to it in coming weeks or months. A bank’s reserve position changes constantly, as the bank acquires or loses deposits, as loans are made or repaid, and as it purchases or sells securities. The manager must make decisions as to how to invest excess funds or how to obtain funds when he is faced with a deficiency. If a large deposit comes in as, for example, a corpora tion prepares to pay dividends and it is ex pected that it will remain with the bank for only a few days, the manager would probably sell Federal funds since the funds invested go out on an overnight basis and can be brought back when withdrawals are expected. In this case, the convenience of Federal funds trans actions might be the deciding factor. How ever, if the deposits of the bank increase and it expects to have excess reserves for longer than just a very few days, there are other alternatives open to the manager. He may then compare the expected yields on sales of Federal funds with the anticipated returns from possible purchases of Treasury bills or other money market instruments. Conversely, if a bank faces a reserve deficit, it may elect to purchase Federal funds if the deficiency is thought to be of short duration; or, in the longer run, it may either sell bills or let them run off at maturity without tendering bids for additional bills in the auction. If the rate on Federal funds is below the market rate on bills, it would be more advantageous for the bank to hold onto bills and buy Federal funds. If the bill rate is below the Federal funds rate, it would be cheaper to liquidate bills. Commercial banks in the aggregate show a definite response to changes in the relation between the rate on Federal funds transac tions and on Treasury bills, since these two choices define their principal investment posi tions in the short-term market. The presence of a large volume of uncommitted reserves in the banking system will act to shift the banks’ preference to bills for, unless the ex cess reserves are spread thinly throughout the country banks, the Federal funds rate will decline absolutely and relatively to the bill rate as the supply of reserves in the banking system increases and the need for funds to cover reserve deficiencies decreases. But at the same time, banks will wish to invest excess funds in short-term instruments and might be expected to increase their bids for bills, and the increasing demand on the part of banks will act to push down the bill rate but not as low as the Federal funds rate. The demand for Treasury bills on the part of banks in the Twelfth District must be con sidered in the light of the fact that the rates on both Treasury bills and Federal funds transactions are made in a national market. However, banks in the District cannot be treated in isolation from banks in the rest of the country. District banks may either gain funds from or lose funds to banks outside the District; the reserves of the banking system are not uniformly distributed. As deposits (and reserves) flow into the District, banks in the District might be expected to increase their demand for bills while the demand de clines in areas where banks are losing funds in' the clearings. In this way, District banks might subscribe for larger amounts of bills relative to banks elsewhere, depending, of course, upon the relation between the Federal funds rate and the bill rate. The subscriptions for Treasury bills on the part of the commercial banks does not neces sarily mean that the banks entering bids will hold the bills they receive until they mature. They may buy bills in the auction and then sell them in the secondary market. Thus, a bank can easily alter its bill position by pur chasing or selling bills in the secondary m ar k et as well as buying bills in the w eekly auction and holding them to maturity. How ever, a comparison of District bank bill sub scriptions and the level of bills held by District weekly reporting member banks indicates that FEDERAL RESERVE B A N K OF S A N F R A N C I S C O there is some degree of correspondence between the two items. C hart 3 demonstrates that as Dis trict banks increase their dem and for bills in the weekly auction, they are also in the process of in creasing their total hold ings; conversely, as their b id s in th e a u c ti o n slacken, their holdings of bills d eclin e. A lthough an analysis of the sub scriptions of banks p ro v id e s o n ly a p a r t i a l p ic tu re of b a n k policy w ith re g a rd to bills, it nevertheless appears to afford an accurate indi cator of such policies. C M illions of Dollars I960 i T w elfth D istric t w eekly reporting m em ber banks. Source: F ederal Reserve B ank of San Francisco. In the Twelfth District, state and local gov ernments formed the second largest individual group of subscribers for Treasury bills in the period examined. On the average, this in vestor group accounted for about 27 percent of total subscriptions tendered. In C hart 4, a trend is suggested when subscriptions reached a peak in April 1960 and fell off in succeeding months. The April date was probably domi nated by the receipt of income taxes in Cali fornia, some of which was invested in bills. The other and lesser peaks might be inter preted as the investment of tax receipts by various governm ental units in the D istrict which, after the tax date, invest the funds received in bills in the next week’s auction. In the main, there are two investment alter natives for state and local governm ents: either time deposits in commercial banks or Treasury bills. 3 Com m ercial bank subscriptions to Treasury bills move parallel to their level of bill holdings State and local governments are second largest buyers of bills in District 14 hart The behavior of changes in time deposits of state and local political subdivisions at the weekly reporting banks indicates that in most cases a large rise in subscriptions for Treas ury bills is accompanied by a rise in time deposits, and declines in subscriptions accom pany a reduction in time deposits. In only two instances were there months in which subscriptions rose while time deposits fell off. One of these cases was in September 1959, when bill yields were rising rapidly, and the other was in lanuary 1960, when bill yields had started to turn down from their peak. On the other hand, time deposits rose in Novem b er 1959 w hile s u b sc rip tio n s show ed a decline. Aside from these exceptions, sub scriptions and changes in time deposit bal ances show a ro u g h ly p a ra llel co u rse of movement which is particularly evident from February on in 1960. The behavior of these two series suggests that state and local gov ernm ents follow a practice of m aintaining given proportions of their funds in time de posits and investing receipts over and above January 1961 MONTHLY REVIEW C hart 4 these amounts in Treas ury bills. The yield on State and local governm ents subscriptions to Treasury bills was con Treasury bills less responsive to changes in bill rates sisten tly above the 2.5 Mi I lions of Dollars Porcont p«r annum percent ceiling1 on time deposits until July 1960. T he fa c t th a t su b sc rip tions and changes in time d ep o sits m oved in the same direction both be fore and after the interest d ifferen tia l in fav o r of bills was eliminated indi cates th at factors other than the rate of retu rn also influenced the invest ment of these funds. There are a number of *4 week moving average. l H eld by sta te and local governm ents a t T w elfth D istrict w eekly reporting m em ber banks. reasons why local govern Source: F ederal Reserve B ank of San Francisco and Board of G overnors of th e F ederal Reserve System . ments enter the bill m ar ket. After property tax dates, these units find ket frequently to finance new capital outlays. themselves temporarily with large idle bal Unless the bill rate should fall to very low ances. The range of possible investments for levels and remain there for a period of time, these funds is often limited by law, and Treas it may be expected that they will continue to ury bills along with time deposits in banks be major purchasers of Treasury bills. constitute the chief investm ent outlets for Corporations less important holders these funds. When state and local govern in District than in nation ments enter the capital market to sell bonds Although corporations have been the larg for the purpose of financing capital projects, est single holders of Treasury bills as a group they generally make a practice of selling in the nation, they run behind state and local enough bonds to cover the costs of construc governments in the magnitude of their bill tion for six months or a year in advance. The tenders in this District. Over the period cov bond sale receipts may be invested in bills, ered in this study, co rp o ratio n s have ac with maturities arranged to run off when the counted for about 19 percent of the total funds are needed to meet progress payments. subscriptions for bills. Perhaps this stems The fact that California political units alone from the fact that many of the major corpo account for more than one-eighth of all sales rations in the country have their head offices of state and local issues in the nation ensures in the East and are more likely to enter bids that there will be large and temporarily idle through their head offices than through their balances seeking investm ent in short-term b ra n c h in sta lla tio n s sca tte re d a b o u t the instruments. country. The rapid growth of population of the Dis trict means that such units will be in the marThe reasons that corporations buy bills are quite different from those of the other major 1 D u rin g th e period covered in this study, banks w h ich are m em bers of the F ederal Reserve System w ere not perm itted to pay subscribers in the District. Detailed balance m ore th an 2.5 percent on tim e deposits hav in g a m atu rity of less th a n 6 m o n th s a n d n ot less th a n 90 days — a m atu rity sheet data are not available for corporations sch ed u le co m p arab le to th a t for T reasury bills. FEDERAL RESERVE B A N K OF S A N F R A N C I S C O C hart 5 Corporate holdings of G o vern ment securities move with tax liabilities B illio n s of Dollars S ource: F ederal T rad e Com m ission and Securities and Exchange Com m ission. in the District, but an examination of the compilation of the income statements and balance sheets of manufacturing corporations in the nation prepared by the Federal Trade Commission and the Securities and Exchange Commission affords the best source of infor mation concerning the factors that are appar ently m ost im p o rta n t in influencin g the purchase of bills. C hart 5 indicates that hold ings of Treasury securities (which are chiefly bills) vary directly with profits before taxes and provision for corporate Federal income taxes but vary inversely with cash holdings. When business is booming, profits are on the rise and cash flows into corporate coffers. At the same time the income tax liabilities of corporations increase and they must set funds aside to meet these taxes. During such a period, interest rates in the money market are on the upswing and corporations attempt to hold down their cash balances and put idle funds into the money market to earn a return on these funds. Corporations try to minimize cash balances in a relative sense, holding them down but turning them over more rap idly, as the scale of their operations increases. The chief form of short-term investment of corporate funds over and above needs for current operations is, as noted above, T reas ury bills.1 As funds are needed to settle tax liabilities or outlays for plant and equipm ent, bills are sold or allowed to run off. Although the principal determ inant of cor porate holdings of Governments is evidently the level of accrued tax liabilities, corporate treasurers might be expected to be sensitive to changes in the level of rates in the money m arket and to respond to the differential be tween the Federal funds rate and bill yields. If the Federal funds rate is above the m arket return on Treasury bills, corporations may arrange repurchase agreements with Govern ment securities dealers. Repurchase agree ments are a special form of loan, wherein the lender enters into a contract to buy securities at a specified price and sell them back at some future date at a higher price, the differ ence in the buying and selling price of the securities determining the rate of interest on the loan. This type of transaction may be mutually advantageous to both parties in that the securities dealer may borrow at a lower rate than he might from a bank while the corporation obtains a more favorable return than it might from the purchase of bills. A l though corporations do not trade in the Fed eral funds market on a day-to-day basis on a scale comparable to the volume of com m er cial banks, they do enter the market via re purchase agreements. Repurchase agreements may be tailored to specific maturities and serve as a means by which corporations may meet obligations, such as dividend or tax pay ments, that will fall due on a given date. Re purchase agreements represent an alternative use of idle corporate funds, compared to short-term money m arket instruments or time deposits. The advantage of these arrange ments lies in the fashion in which the m aturity 1F or an interesting an d inform ative description of corp o rate p a r ticip atio n in th e G overnm ent securities m arket, see th e M o n t h l y R e v ie w of the F ederal R eserve B ank of K ansas C ity, D ecem ber I960. January 1961 MONTHLY REVIEW C hart 6 of the agreement may be made to correspond to Corporations buy bills in anticipation of coming the need for the funds to tax payments be retu rn ed to the co r poration. There are also other alternatives for the investment of short-term funds: corporations may find it desirable to p u r chase commercial paper or finance company paper if the rates on these in struments are higher than th e y ie ld on b ills . If money market rates fall below 2.5 p e rc e n t, the range of investment op F ederal Reserve B ank of San F rancisco an d Board of G overnors of th e Federal Reserve portunities widens to in Source: System . clude tim e d ep o sits in commercial banks, for this is the maximum Individuals less responsive rate payable on such deposits with maturities to bill yields of 90 days to 6 months. The types of investors discussed thus far District corporation subscriptions for 3tend to follow the money m arket closely from day to day, and their purchases and sales of month bills are examined against a back securities are based on a high degree of famil ground of yields on various types of short iarity with the factors th a t determ ine the term instruments in Chart 6. The high point structure of market rates. By contrast, indi in September 1960 suggests that corporations vidual investors (w hich includes business were buying bills that would run off just in partnerships and personal trust account hold time to meet the December 15 tax date. After ings) do not ordinarily regard the bill market this peak, there is no clearly discernible pat as a major outlet for idle funds. Individual te rn o th e r th an a g ra d u a lly rising tren d investors are the smallest group in the Dis through the fourth quarter of 1959 and the trict in terms of the dollar volume of sub first quarter of 1960, followed by an equally scriptions, accounting for about 10 percent gradual declining trend in the second quarter of total subscriptions in the period under of 1960, which grew somewhat more pro study. nounced in the third quarter. The rate on There are certain institutional and other Federal funds transactions was above the bill factors that make the response of individuals yield in this period (C hart 2 ), which might to changes in bill rates fairly sluggish. First, indicate that some corporate funds were be there is a reluctance to shift funds out of sav ing channeled into this market and out of the ings accounts until the end of an interest purchase of Treasury bills. A more likely period. This is evident from Chart 7 which explanation lies in the fact that profits were indicates that although yields on bills had declining and hence there was less need to been rising steadily throughout the second make provision for tax liabilities. half of 1959, individuals did not withdraw FEDERAL RESERVE B A N K OF S A N F R A N C I S C O C hart 7 funds from time deposits in com m ercial banks in Ind ivid uals’ subscriptions to Treasury bills any volume until January respond slightly and with a lag to changes in bill rate 1960, w hen the largest in c re ase in bill te n d ers fro m in d iv id u a ls o c c u rre d . H o w ev e r, th e w ith d ra w a ls of savings d e p o sits by in d iv id u a ls c a n n o t be asc rib e d e n tirely to participation in the G overnm ent securi ties market. O n January 1, 1960, savings and loan associations in California raised their dividend rate from 4 to 4Vi percent, and it must be presumed 1 T w elfth D istrict w eekly rep o rtin g m em ber banks. F ederal R eserve B ank of San Francisco and B oard of G overnors of th e F ederal Reserve that a large part of the Source: System . w ithdraw als from com mercial bank time accounts went into savings yields had been declining for several weeks and loan shares. Secondly, there seems to be that the average volume of individual sub scriptions declined further. From July to N o a certain amount of inertia among individual vember 1960, the return on Treasury bills investors coupled with a lack of knowledge ranged between 2.25 to 2.50 percent, and of the short-term Government securities of average subscriptions dropped back to $5 to fered. The investment possibilities of Govern $8 million per week. It may be assumed that ments was forcefully brought to the attention some individuals shifted funds back to banks of investors in October 1959 when the an where they could earn a return of 3 percent, nouncement of a 5-year Treasury note bear and this may be reflected in the strong upward ing a coupon rate of 5 percent (known aft erwards as the “magic fives” ) called forth tre n d in savings a cc o u n ts at c o m m ercial banks. 110,000 subscriptions from individuals in the nation. Noncompetitive bids important The Twelfth District pattern of Treasury in District bill subscriptions from individuals during the In the weekly bill auction, subscribers have period July 1959 to November 1960 shows the option of naming a price at which they that this group responded to changes in bill wish to purchase bills or entering a noncom yields but with a lag. There may be some re petitive bid. In the latter case, no price is luctance to buy bills unless it is clear that bill named and the investor agrees to pay the rates have established a definite upward trend. average price determined by the competitive Similarly, although bill yields began to fall bids. from their peak in February, the volume of individual subscriptions declined but still re In the Twelfth District, a large proportion of the bids tendered is entered on a noncom mained higher than the second half of 1959, averaging around $9 to $10 million per week petitive basis. Since the maximum allotment throughout the spring. It was only after bill to any one bidder submitting such a subscrip January 1961 MONTHLY REVIEW tion is $200,000 for 91-day bills and $100,000 for 182-day bills, it is likely that these bids come from smaller investors — small banks, businesses, local governments, and individu als— who do not follow money market con ditions as closely as do the larger investors. There may also be certain bidders who very much want the securities and do not wish to run the risk of underpricing their bid and not obtaining them. In the District, noncompeti tive bids account for between one-fourth and one-half of total allotments. For the country as a whole, bids at the average price generally run about one-fifth to one-fourth of total al lotments. The proportion of noncompetitive bids has grown sharply in recent years, attest ing to an increasing interest and participation by smaller investors in the bill market. On a national basis, such bids were only about 2 percent of the total in 1947; by 1953, they had grown to approximately 15 percent and in 1960 averaged 20 to 25 percent. The increase in the volume of noncompeti tive bids in recent years admits of two inter pretations. Since those bidders submitting noncompetitive tenders in effect agree to ac cept the average price (or conversely, yield) set in the auction, this throws the burden for the determination of the auction rate upon the bidders who tender specific bids. In assessing the influence of this development, much de pends upon the identity of the noncompetitive bidders— whether they have been consistent bidders entering specific prices who have had indifferent success in meeting the price and obtaining bills, or whether they are princi pally newcomers to the bill market. If the present noncompetitive bidders formerly sub mitted specific price bids, this would possibly presage a change in the structure of prices be ing tendered. On the other hand, if the bulk of those entering noncompetitive bids are es sentially new to the bill market and are not disposed to enter specific bids, the nature of the structure of specific price bids might be said to remain undisturbed. It is possible that a relatively large pro portion of noncompetitive bids might lead to larger swings in the average auction price. If the demand for bills is strong, specific price bids will be on the high side and force down the auction rate or yield. Conversely, if the demand for bills is slack, the Treasury must go further down the scale of specific bids and the auction rate will be relatively high. This would presume that those investors who regu larly submit bids at specific prices were not influenced by the growing number of non competitive bids. However, if this last group of investors were to take cognizance of the fact that growing numbers of investors were submitting non-price bids, they might feel th a t they m ust revise th e ir strateg y and “sharpen their pencils” if they are to satisfy their demand for bills. They would have to bid closer to what they feel the market price to be and in consequence the range of sub mitted prices may be narrowed. The evidence at hand is insufficient to support either of these views to the exclusion of the other. Summary In assessing the demand for Treasury bills in the weekly auction by the four investor groups considered, it is evident that forces other than the structure of money market interest rates condition the decision to buy bills. These forces may not operate in the same direction for different groups of invest ors. For example, in a boom when monetary policy leans toward restraint, banks may find that their reserve positions do not allow them to accommodate the demand for loans unless they reduce their securities holdings. In con sequence, banks may find that they must re duce their demand for bills at the same time that yields on bills are rising. In such periods, corporate income is rising and idle funds1 are ‘ T h e term " id le fu n d s” is used in a qualified sense, for th e corporate treasu rer w ould he quick to state th a t he has no " i d l e ” f u n d s ; they are all com m itted. T h e funds referred to as " i d l e ” are those w hich are com m itted to specific purposes but w hich m ay n o t actu ally be used for these purposes for a num ber of m o n th s. FEDERAL RESERVE B A N K OF S A N F R A N C I S C O invested in the short-term m arket in anticipa tion of tax payments or to be disbursed later for plant and equipment outlays. In effect, banks are then shifting their part of the under writing functions to other investors. The dem and for Treasury bills on the part of state and local governments is influenced to a high degree by the capital construction program s of these units and the volume of bond flotations in the long-term capital m ar ket. If the dem and for long-term funds on the part of this investor group was sensitive to 20 long-term interest rates, this might, by indi rection, influence the demand for bills, for, if long-term rates were rising, these units would be less inclined to float bonds, and, as the volume of bond sale receipts declined, the demand for bills from this sector would like wise decline. Individuals m ake up a relatively m inor p art of the total demand for Treasury bills in the District, but, if bill rates rise suffi ciently and persistently, they will be drawn into the market, although not in such volume as to constitute a major force in the m arket. FEDERAL RESERVE B A N K OF S A N F R A N C I S C O January 1961 BANKING AND CREDIT STATISTICS AND BUSINESS INDEXES— TWELFTH DISTRICT' (In d e x e s : 1947-1949 = 100. D o lla r a m o u n ts in m illio n s o f d ollars) Condition items of all member banks2' 7 Year and Month Loans and discounts U.S. Gov't securities Demand deposits adjusted3 Total time deposits Bank debits index 31 cities1’ 5 Bank rates on short-term business loans6' 7 Total nonagri cultural employ ment Total mf’g employ ment Car loadings (number)5 Dep’t store sales (value)5 Retail food prices J. 8 '57 105 121 130 137 134 143 152 156 154 163 102 52 77 98 100 100 100 96 104 104 96 89 93 30 18 31 107 112 120 122 122 132 141 140 143 157 64 42 47 100 113 115 113 113 112 114 118 123 123 1929 1933 1939 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 2,239 1,486 1,967 495 720 1,450 1,234 951 1,983 1,790 1,609 2,267 42 18 30 7,866 8,839 9,220 9,418 11,124 12,613 13,178 13,812 16,537 6,463 6,619 6,639 7,942 7,239 6,452 6,619 8,003 6,673 9,937 10,520 10,515 11,196 11,864 12,169 11,870 12,729 13,375 6,777 7,502 7,997 8,699 9,120 9,424 10,679 12,077 12,452 132 140 150 153 173 190 204 209 237 3^66 3.95 4.14 4.09 4.10 4.50 4.97 4.88 5.36 60 103 112 118 121 120 127 134 138 138 143 1959 D ece m b e r 16,537 6,673 13,375 12,452 240 5.71 147r 168r 98 158 123 1960 J a n u a ry F e b ru a ry M a rc h A pril M ay Ju n e Ju ly A u g u st S e p tem b er O cto b er N o v em b er D ecem b er;) 16,354 16,388 16,660 16,933 17,104 17,131 16,895 17,142 16,923 16,958 16,898 17,137 6,304 5,976 5,707 5,999 5,813 5,738 5,967 6,303 6,339 6.626 6,697 6,960 12,971 12,493 12,553 12,810 12,290 12,298 12,608 12,579 12,575 12,848 12,907 13,056 12,111 12,017 11,986 12,042 12,142 12,277 12,253 12,454 12,547 12,628 12,616 13,028 248 243 242 254 255 255 260 249 253 263 249 259 149 150 150 151 1.50 151 151 151 151 151 152 170 170 170 170 168 167 166 166 166 165 165 99 92 95 95 95 85 81 85 83 78 157 159 157 159 153 153 159 155 155 160 124 123 123 126 125 125 126 125 126 126 126 5,72 5.73 5.53 5.50 Industrial production (physical volume)5 Waterborne Foreign Trade Index1’ •• 10 Exports Petroleum7 Year and month Lumber Steel7 1929 1933 1939 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 95 40 71 114 113 115 116 115 122 120 106 107 116 87 52 67 98 106 107 109 106 106 105 101 94 92 78 50 63 103 112 116 122 119 124 129 132 124 130 55 27 56 112 128 124 131 133 145 156 149 158 174 1959' N o v em b er D ece m b e r 117 129 91 91 133 131 1960 Ja n u a ry F e b ru a ry M a rc h A p ril M ay June J u ly A u g u st S e p te m b e r O c to b e r N ovem ber 127 127 120 113 112 101 104 104 101 95 90 90 91 91 91 91 91 90 90 91 130 127 131 137 136 132 138 138 136 131 Crude Refined Imports Copper7 Electric power Total Dry Cargo Tanker Total Dry Cargo 29 26 40 120 136 145 162 172 192 209 224 229 253 190 110 163 92 186 171 141 133 166 201 231 176 188 150 247 7 i0 7 80 194 201 138 141 178 261 308 212 223 243 108 175 130 145 123 149 117 123 123 138 124 72 95 144 162 204 314 268 314 459 582 564 686 128 24 125 146 139 158 128 154 163 172 142 138 103 17 80 115 116 115 113 103 120 131 130 116 99 97 145 140 141 163 166 187 201 216 221 263 57 103 733 1,836 4,239 2,912 3,614 7,180 10,109 9,504 11,699 165 163 148 212 43 40 257 260 148 209 202 266 71 128 807 858 290 302 14,284 15,333 156 173 165 182 167 170 149 164 143 159 197 206 183 162 164 158 134 125 127p 124p 125p 67 116 134 141 144 142 123 121 141 144 265 263 271 265 271 270 270 275 229 230 287 240 251 243 193 227 296 271 316 287 331 288 257 280 134 172 246 172 139 180 102 153 958 720 678 813 774 872 681 1,025 277 259 296 286 290 294 263 261 18,687 12,719 8,707 14,484 13,341 15,944 11,565 20,948 Cement Tanker ::: 1 A d ju ste d fo r se aso n al v a ria tio n , e x c e p t w here in d ic a te d . E x c e p t for b a n k in g an d c re d it a n d d e p a r tm e n t sto re sta tis tic s , all indexes are b ased u p o n d a t a fro m o u tsid e so u rces, as follow s: lu m b er, N a tio n a l L u m b e r M a n u fa c tu re rs ’ A ssociation, W est C o a s t L u m b e rm a n ’s A ssociation, a n d W estern P in e A sso ciatio n ; p e tro leu m , cem en t, a n d co p p er, U .S. B u re a u of M in es; steel, U .S . D e p a r tm e n t of C o m m erce a n d A m erican Iro n a n d S teel I n s titu te ; e le c tric pow er, F e d eral P o w er C o m m issio n ; n o n a g ric u ltu ra l an d m a n u fa c tu rin g e m p lo y m e n t, U .S . B u re a u of L a b o r S ta tis tic s a n d co o p eratin g s ta te ag en cies; re ta il food p rices, U .S . B u re a u of L a b o r S ta tis tic s ; carlo ad in g s, v a rio u s ra ilro a d s a n d ra ilro a d a sso c ia tio n s; a n d foreign tra d e , U .S. D e p a rtm e n t of C o m m e rc e . 2 A n n u al figures are as of e n d of y e a r, m o n th ly figures a s of la s t W e d n e sd a y in m o n th . 3 D e m a n d d ep o sits, ex cluding in te r b a n k a n d U .S. G o v e rn m e n t d ep o sits, less cash ite m s in process of collection. M o n th ly d a ta p a r tly e s tim a te d . 4 D e b its to to ta l d ep o sits e x c e p t in te r b a n k p rio r to 1942. D e b its to d e m a n d d ep o sits ex cep t U .S . G o v e rn m e n t a n d in te r b a n k d e p o s its from 1942. 5 D a ily av erag e. * A v erag e r a te s o n lo an s m ad e in five m a jo r cities, weighted- by loan size categ o ry . 7 N o t a d ju s te d fo r se aso n al v a ria tio n . 8 L os A ngeles, S an F ra n cisco , a n d S e a ttle in dexes com bined. 9 C o m m ercial cargo only, in p h y sical volum e, for th e P acific C o a st cu sto m s d is tric ts p lu s A laska a n d H aw aii; s ta r tin g w ith J u ly 1950, “ sp ecial c a te g o ry ” e x p o rts are ex clu d ed b ecau se of se c u rity reasons. 10 A laska a n d H aw aii are in clu d ed in in d ex es b e g in n in g in 1950. p— P re lim in a ry . r — R evised.
@FedFRASER