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MONTHLY REVIEW OF B U S I N E S S C O N D IT IO N S ISAAC B. NEWTON, Chairman of the Board and Federal Reserve Agent Federal Reserve Bank of San Francisco San Francisco, California, January 20,1931 Vol. XV No. 1 S U M M A R Y O F N A T IO N A L C O N D IT IO N S Prepared by the Federal Reserve Board Production and factory employment declined further in December. W holesale prices de creased during the first half of the month, but thereafter were generally steadier. Conditions in the money market remained easy and in January money rates reached new low levels. Production. Industrial production was fur ther reduced during December, and the Federal Reserve Board’s index, which makes allowance for usual seasonal changes, showed a decline of over 2 per cent. Output of steel and iron, textiles, petroleum, cement, and copper was substantially curtailed. A ctivity in meat pack ing plants and at anthracite mines increased in December, and in the automobile industry there was an increase in output reflecting the introduction of new models. After the turn of the year, automobile output increased further, and steel plants were more active. Construc tion contracts awarded during December were in about the same volume as in November, ac cording to reports of the F. W . D odge Corpora tion. There were slight declines, partly seasonal in nature, in contracts for residential and commercial construction, while public works and utility awards increased somewhat. Employment and W age Payments. E m ploy ment in manufacturing industries was reduced further by 2.5 per cent between the middle of November and the middle of December, and factory pay rolls also declined. The largest reductions in working forces were in the can ning, lumber, steel, and wearing apparel indus-, PERCENT I4 0 r ", A 120 tries. There was little change in employment in railroad car shops, and in cotton and silk mills, while in the automobile, meat packing, and paper and printing industries working forces were increased slightly. In early Janu ary, follow ing year-end inventory periods, re ports indicate increased employment in certain industries, particularly automobiles, steel, and railroads. Distribution. Sales of department stores in creased in December by slightly less than the amount which is usual for the holiday season, according to preliminary reports to the Federal Reserve Banks. In December, as in earlier months of the year, the value of sales probably reflected the influence of declining retail prices. Distribution of commodities by freight showed a further decline for the month of December as a whole. Value of American exports to foreign countries was smaller in December than in N o vember, and approximately 35 per cent below that of December, 1929, the decrease reflecting in part the decline in wholesale prices. W holesale Prices. W holesale prices of com modities declined sharply in the first half of December, while in the follow ing four weeks average fluctuations were relatively small. For the month of December as a whole, there were large decreases in prices of corn, hogs, cotton, hides, and lumber, while prices of wheat, beef, and silk averaged somewhat higher than in Nov|#itib*er^#I7^I-irf#g ,the first two weeks in Janu ary, .o^Vp^*s*Vt§ar,# and silk increased, P E R CENT 11O r * •• /V \ 100 • • 00 60 1927 1928 1929 1930 1931 IN D U ST R IA L PRO DUCTION Index number of production of manufactures and minerals combined, adjusted for seasonal variations (1923*1925 average = 100). Latest figure, December, 82. 1927 1926 19 29 1930 1931 W H O L E SA L E PRICES Indexes of United States Bureau of Labor Statistics (1926=100, base adopted by Bureau). Latest figure, December, 78.4. M ON TH LY REVIEW OF BUSINESS CONDITIONS and the price of wheat in American markets remained fairly stable. Silver prices reached new low levels. Bank Credit and M oney Rates. Loans and investments of reporting member banks de clined in the four-week period ending January 14, reflecting liquidation of securities loans, as well as a reduction in “ all other” loans and in IN M IL L IO N S O F D O L L A R S M on th ly averages o f daily figures. Latest figures are aver ages o f first 20 days in January. investments. Changes in the position of reserve banks in recent weeks were largely due to changes in the demand for currency. In D e cember this demand increased more than is usual for the season, ow ing to the withdrawal of cash by banks and by the public in districts where there were important bank failures. In the two weeks after Christmas the return flow of currency from circulation was smaller than the usual seasonal amount and the result was January, 1931 that money in circulation, which during the larger part of 1930 had been in considerably smaller volume than in 1929, in January, 1931, was above the level of a year ago. In the fol lowing two weeks the return flow of currency was somewhat larger than usual, indicating a return of part of the extra currency which had been called into use in December. M oney rates M ON EY RATES M o n th ly rates in the open m arket in N e w Y o r k : com m ercial paper rate on 4- to 6-m onth paper and acceptan ce rate on 90-day ban k ers’ a c c e p t ances. Latest figures are averages o f first 20 days in January. in the open market continued at low levels dur ing December, and declined further in the first half of January. The discount rate at the Fed eral Reserve Bank of New Y ork was reduced to 2 per cent on December 24, and in the fol lowing three weeks rates were reduced to 2y2 per cent at the Federal Reserve Bank of Bos ton and to 3 per cent at the Federal Reserve Banks of Cleveland, St. Louis, Chicago, A t lanta, and San Francisco. T W E L F T H F E D E R A L R E S E R V E D IS T R IC T C O N D IT IO N S Business depression has been apparent nounced in December than in most months of throughout the Tw elfth Federal Reserve Dis 1930. A few individual fields of industry showed trict during the past year. A s in other parts of improvement, although the general tendency the world the extremely sharp declines in pro was still downward. Little other than seasonal duction and distribution have been similar in changes in the trade situation were recorded magnitude to those of the 1920-1921 depression during the month. Continued sharp declines in and the decrease in prices has been the greatest both wholesale and retail com m odity prices since that time. Crop production .iijci^ased further reduced price averages during D ecem ber and early January. substantially during 1§30;&& 1929, but large decJijie^*^'*fei?m^Mdflt?t!s $ric6fe#1,• Excepting some damage to citrus crops in occurred and retuVjfsj, topmost producers weW •;Qaljfornia by unusually low temperatures, reunusually small.‘.^¿tivity.in the District’s lead V & if^ e a th e r conditions have been favorable to ing industries suffered a ^ductiS'ftirqjn tfre.iprowth of crops already sown and to the the high lev^lsr of 1929, •pr64W<!13tor5 i ji Swgst prospetl^ for those to be planted in the spring. individual frldtetries receding to levels below The l\ige acreage sown to wheat in the autumn those of 1924.* Ther&vsCd&rcf^ijovfer^ftjincreasas. .$f;193Q.is#m excellent condition. Ranges and •livestock have also been benefited by the recent in the output of and packing and meat packing indusfffeS.* *rains. Declines in the petroleum and petroleum There was a considerable decline in the value products, copper, cement, and engineering con of commodities sold at retail and an even struction industries reduced total output, al greater decline in wholesale sales. Transporta though the aggregate decline was moderated by tion of freight on railroads and through Pacific a smaller than seasonal decrease in lumbering Coast ports (both foreign and intercoastal) was and a pronounced increase in building activity other than engineering construction. During in smaller volume than in 1929. The decline in business activity was less pro recent months, and especially in December, the January, 1931 continued curtailment of production that has been evident in the lumber and copper mining industries for the past year has begun-to effect reductions in inventories of those commodities. Easy m oney conditions prevailed in the Twelfth District throughout 1930, a reflection of the lack of demand for commercial credit which usually accompanies business depression. During the first half of the year short-term interest rates declined abruptly, then a more moderate decline set in which lasted until the end of October, since when there has been little change in rates. A fter the first few weeks of 1930 the difference between interest rates in the Twelfth District and eastern money markets made this District attractive to funds seeking employment, and during the first ten months there was a substantial net inflow of funds to San Francisco. These funds, which were chiefly bankers’ balances available for the most part on a day to day basis only, together with an excess of United States Treasury expendi tures over collections and a reduction of 30 mil lion dollars in the average amount of currency in circulation during the year enabled city banks to satisfy demands made upon them for commercial credit, to increase slightly their loans on securities, and to build up their in vestment portfolios, while their borrowings from the reserve bank were negligible in amount. During December, however, expan sion of currency circulation and some uneasi ness due to bank failures caused a reduction in the amount of bankers’ balances held in this District, and discounts at the reserve bank rose sharply to the highest levels of the year. On January 9, the discount rate of the Federal R e serve Bank of San Francisco was reduced from Zy2 to 3 per cent, the lowest general rate in the history of that institution. Agriculture General shortages of soil moisture and of snow pack on important watersheds in the Dis trict were relieved by rain and snow fall in late December and early January. By mid-January precipitation in the various parts of the District for the season since July 1, although slightly less than the long time average, was somewhat greater than for a corresponding period in 1929 and 1930. United States Department of Agriculture es timates of annual crop value and production have been used by this Bank in the preparation of indexes of crop production and value for the Twelfth District. A ccording to these indexes, the aggregate volume of crop production in this area was 6 per cent greater in 1930 than in 1929, while the aggregate value of crops declined 22 per cent over the same period. W heat was sown on 3,706,000 acres in this District during the autumn of 1930, an area 10 3 FEDERAL RESERVE AGENT AT SAN FRANCISCO per cent larger than the 1929 winter wheat plantings. The condition of the crop on Decem ber 1 was much better in all states of the District, particularly in the Pacific Northwest, than it was a year earlier. The 1930-1931 Navel orange crop in Califor nia was estimated in late December to be 15,513,000 boxes, a decrease of 7 per cent from the estimate of the previous month, but an in crease of 63 per cent from the estimated pro duction during the 1929-1930 season. Unusually cold weather during December caused some in jury to the fruit but the use of frost protecting devices prevented extensive damage. Market shipments of oranges from both California and Florida increased during December and the f.o.b. California price declined to levels ap proximately 45 per cent lower than a year ago, when a much smaller crop of fruit was being harvested. On January 1, the 1930-1931 lemon crop was estimated to be 6,374,000 boxes com pared with a 1929-1930 crop of 4,908,000 boxes. The position of the dairy and poultry indus tries at the year end was decidedly unfavorable to producers. Storage stocks of butter and eggs were larger than a year ago and daily receipts at the principal markets continued heavy. As a result, market prices for these products have declined approximately 30 per cent during the past six weeks. Good forage conditions in desert and other winter grazing* areas and adequate supplies of grains and hay in those regions where winter feeding is usually necessary have maintained livestock in satisfactory condition thus far this winter. Except for a slight increase in receipts of cattle, livestock receipts at the principal markets A gricultural M arketing A ctivity— ,------D e ce m b e r ------ ^ C a rlo t S h ipm en ts O ra n g e s * ............ L e m o n s * ............ V e g e ta b le s (C a l.) E g g s (C a l., O re ., W a s h .) ............ t— S eason to D ate — 1930 1929 1930 1929 4,701 4,930 668 4,660 3,049 4,333 526 5,008 45,111 8,761 1,329 15,607 33,141 8,080 900 15,937 524 409 4,628 4,539 E x p o r ts 13,045,113 15,973,486 W h e a t ( b u . ) t . . . 1,421,794 2,978,101 289,994 5,599,666 6,918,788 763,811 B a rle y ( b u . ) f - - * D a ir y P r o d u c t s (lb s .— S an F r a n c is c o ) . . . 2,785,093$ 2,867,049$ 29,729,324 § 37,121,469§ Ej^^js (eases__ _ San F r a n c is c o ) 246,420$ 177,216$ 2,999,310§ 2,534,059§ R e c e ip ts C a ttle II ............ S h eep j f .............. . . H o g s l i ............... . . E g g s (c a s e s ) ||. . B u tte r (lbs.)||. . . 67,568 314,416 221,970 122,841 6,262,077 S to r a g e H o ld in g s (e n d o f t h e m o n t h ) A p p le s (c a r s — W a s h .) ............ 14,686 W h e a t ( b u . ) ____ 6,195,000 B e a n s (b a g s — C a l.) ................. 2,218,674 B u tte r ( lb s .) 11... 2,997,231 E g g s ( c a s e s ) I f ... 96,744 67,305 785,610 803,759 187,591 4,201,290 3,877,519 243,427 2,060,980 2,254,140 132,786 2,021,555 1,855,986 5,194,349 73,276,899 69,945,369 11,520 5,226,000 1,398,556 2,312,187 12,301 * S e a s o n b e g in s N o v e m b e r 1. f S e a s o n b e g in s J u ly 1. $ O c to b e r . § F irst ten m o n th s . If E ig h t m ark ets. ||Three m ark ets. 4 MONTHLY REVIEW OF BUSINESS CONDITIONS o f the District during Decem ber continued the trend of the past year, hog receipts being smaller and sheep receipts larger than a year ago. Results from the past year’s operations have been unsatisfactory for sheep raisers. The drastic declines in both w ool and lamb prices were not alleviated by corresponding decreases in production costs with the result that profits were reduced substantially. Cattle price de clines were less severe than were those of sheep and w ool, and cattlemen generally have suf fered less than have other livestock raisers. January, 1931 The 1930 decline in industrial output cf the Tw elfth District was one of the most drastic yet experienced in this area. Reduced activity was apparent in nearly all industries because of shrinking markets and some of the major in dustries adopted voluntary curtailment pro grams during the year. In conjunction with the decrease in production, unusually large num bers of workers were discharged and others were placed on a part-time working basis, re sulting in what appears to have been an un precedented reduction in payrolls. M ovements in the production index of this Bank during the past 18 months have corre sponded closely with movements of production indexes for the United States as a whole during the same period. A fter the record activity of the summer of 1929 there was a gradual re cession extending through the autumn of that year which was follow ed by a precipitate drop in the index at the end of the year, a temporary rise during the spring of 1930, and a continuous, steep decline from that time to the present. The period of decline since last spring has been marked by decreases in outputs of lumber, crude and refined oils, copper, lead, silver, paper and pulp, and electric power and by a contraction in building activity. Engineering contracts awarded expanded temporarily dur ing the third quarter of 1930, but the total for the year was considerably lower than in 1929. Street and road construction held up well dur ing 1930. Manufacture of food products was almost the only field of industry in which output compared at all favorably with that of 1929. Meat packing and flour milling were approximately the same in volume as in 1929, while canning and pre serving of fruits and vegetables were substan tially more active than a year earlier and as active as in any previous year. The pack of canned salmon, in both Alaska and the Pacific Northwest was smaller, however, than in 1929. Inventories of some commodities declined slightly during the last half of 1930. Flour stocks decreased each month until the heavy production of the late summer and have in creased seasonally since that time. Stocks of crude oil were reduced during most months of the year, and gasoline stocks, after rising sharply during January and February, fell off until consumption decreased in October, since when they have increased. Excess production of lumber during the first half of 1930 resulted in an accumulation of inventories of that com modity and there was but little net decline during the remainder of the year. Total stocks of refined copper in North and South America increased every month of the year until Decem ber, 1930, when there was a slight decline. The most significant developments in indus try during December were large increases in Industry— Employment— Indexes oftdaily average production, adjusted for seasonal variations (1923-1925 daily average= 100) /— 192¡9— . 1930---Y r’s Year’s Aver. Dec. Nov. Oct. Dec. Av. General : 97 Ill 72 70 74 Carloadings— Industrial .. 85 144 139 159 153 Electric Power Production 158* -Oregon---------- > California------- N r""~ No. of No. of No. <—Employees —> No. <— Employees —n oí Dec., Dec., Dec., Dec., of 1929 1929 Firms 1930 Industries ]Firms 1930 18,705 135 23,272 All Industries* . . . . 837 130,285 165,341 (-21.2) <-19.6) Stone, Clay and 160 7,104 3 118 4,698 Glass Products. 45 (35.6) (— 33.9) Lumber and W ood 9,765 47 13,229 Manufactures .. 113 15,701 19,905 ( —21.1) ( - -26.2) 2,386 9 1,236 1,820 2,225 18 (— 6.7) ( - -32.1) Clothing, Millinery and Laundering. 73 5,320 6,054 364 8$ 405 ( — 12.1) ( - -10.1) Food, Beverages, 2,072 and Tobacco. .. 184 24,226 26,789 39 2,036 (— 9.6) (1.8) Public Utilities .. 34 55,951 60,518 (— 7.5) Other Industriesf. 380 72,184 93,357 ( — 22.7) 29 5,108 Miscellaneous . . . 24 5,931 9,746 5,664 ( —39.1) (-—9.8) Wholesale and 107 38,403 41,348 (— 7.1) *Public utilities and wholesale and retail figures not included in this total. $Laundering only, flncludes the following indus tries : metals, machinery and conveyances ; leather and rubber g o o d s; chemicals, oils and paints; printing and paper goods. Industry Manufactures : 86 Lumber .............................. Refined Mineral O ilsf. . .. 168 Flour .................................. 109 Slaughter of Livestock. .. 80 90 Cement .............................. 73* W ool C on su m p tion !........ Minerals : Petroleum (California) f .. 95 Copper (United States) %. 87 Lead (United States)$ . . . Silver (United S t a t e s )j... 74* Building and Construction.^ 55 Total .................................. Value of Building Permits Twenty Larger Cities.. 49 Seventy Smaller Cities. 60 Value of Engineering Con tracts Awarded Total .......................... 122 Excluding Buildings. 130 67 149 101 83 79 63 155 96 78 99 71 67 168 106 86 95 89 110 186 103 81 108 67 108 193 112 84 106 82 89 75 92 82 89 83 94 71 106 115 105 91 121 127 113 94 76 65 63 69 59 84 46 45 48 51 49 58 50 66 65 89 94 96 117 142 124 164 109 76 142 156 fN o t adjusted for seasonal variations. ^Prepared by Federal Reserve Board. § Indexes are for three months ending with the month indicated. * Eleven months average. Figures in parentheses indicate percentage changes from Decem ber, 1929. January, 1931 FEDERAL RESERVE AGENT AT SAN FRANCISCO the value of building permits, a smaller than seasonal decline in lumber production, and fur ther substantial decreases in output of crude oil and copper. A considerable part of the im provement in building activity was accounted for by an increase in the Pacific Northwest, particularly in Seattle, where the value of per mits issued in December was approximately twice as great as in November, 1930, or Decem ber, 1929. There were substantial increases in building in northern California cities also and a moderate expansion in southern California. Engineering contracts awarded, however, de clined abruptly in value, although the usual tendency is to increase. Lumber production decreased less than sea sonally during December and there was but a moderate decline in new orders, indicating at least a temporary improvement in that indus try. A ccording to figures of the W est Coast Lumbermen’s Association and W estern Pine Manufacturers’ Association, stocks declined during late December and early January by an amount approximately equal to the sharp in crease in the first half of December. During the last week of December and the first two weeks of January, output of crude oil in California fields was drastically curtailed, daily average production being reduced to ap proximately 535,000 barrels from an average of 600,000 barrels during immediately preced ing weeks. A daily average production of 500,000 barrels was announced by oil companies as the objective of the present curtailment pro gram. There was also a substantial decline in copper mining during December, and for the first time since October, 1929, stocks of refined copper declined slightly. F ollow ing the trend of the past several months, stocks of blister copper continued to decrease. Other industries throughout the District continued to operate on curtailed schedules. Trade Late in 1929, Tw elfth District trade entered upon a period of rapidly declining activity which continued throughout 1930 except for a brief recovery during the spring of that year. Both the volume and value of trade transacted receded sharply, with decreases in value data accentuated by downward movements in com modity prices. For the first time since 1921 the annual department store sales index of this Bank failed to show an increase from the pre ceding year. The value of sales of reporting wholesale firms not only failed to increase but declined to the lowest level of the past nine years. Pacific Coast chain grocery systems re ported some further expansion in the number of units operated, but sales per store averaged 13 per cent lower than in 1929. Severe declines 5 in registrations of practically all but the lowest priced automobiles were recorded. Registra tions of commercial cars held up relatively bet ter than did registrations of passenger cars. A 22 per cent decline in the movement of indus trial freight by rail corresponded closely with the decrease in industrial output. The value of imports and exports during the first eleven months of the year was 29 per cent less than in 1929, a sharper decline in foreign trade than any recorded since 1921. Tonnage of inter coastal shipments through the Panama Canal was the smallest recorded for any year since 1925. Slightly less than the usual seasonal expan sion in retail sales was indicated by the 66 per cent increase in department store trade during December as compared with November. A l though there was one more trading day during December, 1930, than in December, 1929, sales of department stores were 9 per cent less than in 1929. Reductions in inventories carried by department stores during 1930 were not so large as were declines in sales, with the result that the rate of stock turnover also declined. The volume of charge accounts, both regular and installment, averaged higher than in the previous year and the proportion of cash and C.O.D. sales to total sales declined. Collections on outstanding accounts were slower than in other recent years, although the ratio of collec tions on installment accounts was well main tained. Declines in the value of wholesale sales dur ing 1930 were partly the result of a lower level of commodity prices. After allowance for that factor, however, the volume of goods moved was well below that of 1929. Declines during the second half of the year were generally greater than in the first half and in October, November and December sales of reporting firms were smaller in value by 17, 23, and 18 per cent, respectively, than in the correspond ing months of 1929. W estbound shipments of commodities in the intercoastal trade through the Panama Canal declined 21 per cent as compared with 1929, although the tonnage of goods shipped com pared well with the volume of trade during 1927 and 1926. Shipments of articles of iron and steel manufacture declined markedly, while several items of minor importance — sulphur, oils, paper, textiles, and automobiles and acces sories— showed increases in volume during 1930 as compared with 1929. The year’s ship ments from the Pacific Coast were 8 per cent smaller in volume than in 1929, the decrease being due chiefly to greatly reduced movements of lumber and petroleum. Eastbound cargo, exclusive of lumber and petroleum, increased 6 per cent during the year, largely because of a greater movement of canned goods, fresh and 6 MONTHLY REVIEW OF BUSINESS CONDITIONS dried fruits, and paper and pulp. December shipments from the Pacific Coast increased more than seasonally, reflecting the largest movement of lumber through the Canal in any month since March, 1930, and the largest for any December since 1925. Both the quantity and value of imports and exports of Pacific Coast customs districts de clined substantially during the first eleven months of 1930 as compared with the similar period in 1929. The value of imports was $169,000,000 (36 per cent) less than in 1929. Exports to foreign countries did not decline as much, either proportionately or actually, as did im ports, although they were $126,000,000 (24 per cent) less than in 1929. January, 1931 The Bureau o f Labor Statistics' index of wholesale com m odity prices averaged 86.4 (1926 = 100) during 1930, the lowest annual average of that index for any year since 1916 and an average but 24 per cent above that of 1913. During the last quarter of 1930 prices of many commodities of prime importance to the Twelfth District reached the lowest points re corded since before the W orld W ar. Prices of such commodities as wheat, lambs, wool, but ter, eggs, rubber, sugar, copper, lead, and zinc have been extremely low in comparison with prices in other recent years, while prices of silver and silk have been the lowest ever re corded. Declines in prices continued to predominate during December and the first half of January. The Bureau of Labor Statistics’ index declined by 2.5 per cent to 78.4 between N ovem ber and December. This decline was approximately twice as great as the average monthly decrease of the past year and brought the price index to a point nearly 17 per cent below its level in December, 1929. The downtrend in retail prices, although less pronounced than in prices at wholesale, has become more marked in recent months. Retail food prices in the principal cities of the District were reduced approxi mately 4 per cent between November 15 and December 15 to the lowest level since 1917. The course of wheat prices for the first three quarters of 1930, while quite irregular, was decidedly downward. Since their low point, which was reached in mid-November, however, there has been a moderate upturn in domestic quotations. This increase was at least partly a result of large-scale purchases by the Federal Farm Board and was not accompanied by pro portionate advances in world prices. The un usual disparity between domestic and foreign prices during the past two months has been a serious obstacle to exports from Pacific Coast and other United States ports. M ost deciduous fruits sold at lower levels in 1930 than in 1929, reflecting both larger yields of fruits and generally lower agricultural prod ucts prices. Small crops brought high prices for citrus fruits during the 1929-1930 season and aggregate returns to growers were larger than in other recent years. During the past two months the 1930-1931 Navel orange crop, which is expected to be nearly 63 per cent larger than Distribution and Trade — Bank Debits* Prices ,---------------- 1930 Year’ s Average Dec. Nov. Oct. Dec. Average -Index Numbers*Foreign Trade0 t-------101 136 141 90 Totalf ...................... H0§ 101 129 128 94 Importst ................ 106§ 101 140 148 87 E x p o r t s .................... 110§ Intercoastal Trade' Total ...................... , Westbound .......... Eastbound ............ . Carloadingsi Total ...................... Merchandise and Miscellaneous . . . Retail Trade Automobile Sales$ Total .................. . Passenger Cars . . Commercial Vehicles ........ Department Store SalesJ ................ Stocksli .............. Stock Turnover||. , Collections# R e g u la r .......... Installment . . . 88 103 84 88 113 81 85 113 77 88 109 82 107 142 98 98 137 86 97 89 85 91 101 112 107 102 101 107 115 117 95 90 89 83 67 60 77 70 117 112 133 129 151 148 148 156 166 180 113 104 110 99 126 109r 120 106 .26 43.7 15.3 112 111 103 106 A a! T3 .44 42.8 15.2 .25 43.1 15.4 .27 46.1 16.7 .43 43.8 14.1 .26 45.7 15.3 *Adjusted for seasonal variations, 1923-1925 average=100. °Indexes are for three months ending with month indicated. tExcluding raw silk. JDaily average. IfAt end of month. §Eleven months average. j|Proportion of average stocks sold during month. # P e r cent of collections during month to amount outstanding at first of month. rRevised. December, December , ,---- Twelve Months——> 1929 1930 1929 1930 Arizona Phoenix ............ $ 36,914 $ 49,793 $ 435,659 $ 524,852 California 175,740 159,756 16,694 16,664 Bakersfield 255,749 232,257 20,492 19,312 Berkeley .......... 423,922 395,183 48,256 30,208 Fresno .............. 752,436 60,222 580,361 52,022 Long Beach . . . 1,101,567 11,998,756 14,621,942 959,480 Los Angeles . . . 2,846,394 2,316,683 237,658 222,000 Oakland ............ 489,840 406,474 38,619 35,306 Pasadena .......... 625,220 581,311 53,366 46,285 Sacramento 137,590 123,066 11,023 12,065 San Bernardino.. 775,630 656,908 65,716 57,399 San Diego ........ 1,302,146 15,055,143 16,987,478 San Francisco..., 1,212,779 384,322 332,044 30,568 San J o s e ............ 27,097 206,479 185,305 16,615 Santa Barbara.. 15,022 344,692 28,322 284,931 S to c k to n ............ 20,791 Idaho 190,860 17,618 175,390 16,701 Nevada 133,303 156,243 10,437 13,077 Oregon Eugene .............. 6,723 8,916 82,155 96,757 2,370,909 Portland ............ 160,267 187,913 2,100,003 Utah 20,797 22,976 224,134 245,209 Salt Lake C ity. . 85,430 98,960 884,885 1,012,128 Washington Bellingham 7,749 9,777 108,320 126,486 Everett .............. 10,760 12,992 146,656 168,189 232,003 249,853 2,814,322 3,297,121 Spokane ............ 48,867 58,521 611,551 737,135 Tacoma ............ 39,565 48,097 526,432 608,250 Y a k im a .............. 15,942 17,139 178,472 187,133 Total................ $3,417,543 $3,827,938 $41,729,460 $48,748,706 January, 1931 the 1929-1930 crop, has come into the market and prices for oranges have declined consid erably. Cattle prices fell sharply during the early months of 1930, but advanced steadily from June to December, recovering nearly half of the preceding decline. Except for a moderate seasonal rise during part of the spring, quota tions for lambs have moved downward through out 1930. Prices for silver declined 35 per cent in 1930 and during most of the year were lower than ever before quoted. A renewed decrease in December and early January brought the price for that metal to 2 8 ^ cents per fine ounce on January 9 and again on January 16, 1931. Q uo tations for copper, lead, and zinc declined ir regularly throughout 1930 and, after a period of relative stability in the third quarter, the downtrend was resumed in December and January. Copper prices on January 20 were ten cents per pound delivered Connecticut V al ley as compared with a quotation of 18 cents a year ago. Despite sharply curtailed production, lumber prices moved downward during nearly every month of 1930 and at the year-end averaged ap proximately 24 per cent lower than a year earlier. Credit Situation The easy money conditions which prevailed in the Twelfth District throughout 1930 may be explained largely by the slackening of de mand for commercial credit which usually ac companies business depression. The abrupt change from credit stringency during most of 1929 to credit ease at the close of that year was, however, an immediate aftermath of the col lapse in securities prices in October-November, 1929. Temporarily that debacle gave rise to bank credit expansion in eastern markets with FEDERAL RESERVE BANK OF SAN FRANCISCO (In millions of dollars) t-------------- Condition - ......... ..... \ Jan.21, Jan. 14, Dec.24, Jan.22, 1931 1931 1930 1930 Total Bills and Securities.......... 72 74 124 71 Bills D isco u n te d ...................... 19 17 54 21 Bills B o u g h t ............................ 14 18 30 38 United States Securities.......... 39 39 40 12 Total Reserves ............................ 300 311 273 309 Total Deposits .................... .. 189 196 194 190 Federal Reserve Notes in Circu lation .......................................... 165 174 189 170 Ratio of Total Reserves to De posit and Note Liabilities Combined ................................ 84.8 84.2 71.5 86.0 an accompanying drain of funds from this Dis trict to New York, but the more lasting out come was a release, during the late weeks of 1929, of funds which had been placed in New York by Twelfth District banks during 1928 and 1929. Partly in sympathy with tendencies in national money markets and partly because of an increased supply of and a decreased de 7 FEDERAL RESERVE AGENT AT SAN FRANCISCO mand for funds, interest rates were sharply reduced on all types of short-term money dur ing the first half of 1930 and continued to decline more moderately during the following three months. Interest rate declines in San Francisco and in other secondary money markets were smaller in magnitude than in New York. As a result, the differential for funds seeking employment had begun to favor San Francisco by early 1930, and during the first ten months of the year there was a substantial net inflow of bank ers' balances to that city. A large part of these funds came from New York and other eastern money markets and were available only on a day to day basis. Additional credit resources, provided by an excess of United States Treas ury expenditures over collections, due in part to financial assistance given to certain agricul tural groups by the Federal Farm Board, tended to increase deposits and to reduce pos sible loans of country banks and resulted in an unusually large accumulation of country bank balances in the larger financial centers of the District, chiefly in San Francisco. These factors and a reduction of 30 million dollars in the average amount of currency in circulation dur ing the year contributed materially to the ability of city banks to satisfy demands made upon them for commercial credit, to expand slightly their loans on securities and to build up their investment portfolios while their borrow ings from the Reserve Bank were almost neg ligible in amount. REPORTING MEMBER BANKS— Twelfth District (In millions of dollars) Loans and Investments— Total.. Loans— Total .............................. On Securities............................ All Other .................................. Investments— Total .................... United States Securities.......... Other Securities ...................... Reserve with Reserve Bank........ Net Demand Deposits.................. Time D e p o sits.............................. Due from B a n k s .......................... Due to^ Banks .............................. Borrowings at Reserve Bank. .. . f----- Condition------------------------Jan.21, Jan. 14, Dec.24, Jan.22, 1931 1931 1930 1930 1,930 1,942 1,986 1,950 1,299 1,312 1,326 1,380 404 411 420 447 895 901 906 933 631 630 660 570 319 318 336 320 312 312 324 250 106 111 108 112 738 752 729 760 1,013 1,020 1,027 1,021 224 224 195 164 275 283 240 196 14 12 49 10 Because of the circumstances enumerated above, the volume of credit extended by the Federal Reserve Bank of San Francisco was at lower levels during 1930 than at any time in post-war years. The entire decline was ac counted for by reduced discounts, since there was an increase in Reserve Bank holdings of government securities and but little change in holdings of acceptances. Acceptance buying rates of this Bank were reduced by a greater amount than was its discount rate early in the year. The reductions established a condition which favored the obtaining of reserve system credit through the acceptance market rather than by means of direct borrowing (discounts), 8 MONTHLY REVIEW OF BUSINESS CONDITIONS a situation which was maintained during the rest of the year. In consequence chiefly of this differential in favor of acceptances and the sub stantial member bank holdings of bankers’ balances on a day to day basis, the volume of acceptances held by this Bank was greater dur ing most of 1930 than was the volume of its discounted bills. Declines of country bank balances in the larger Pacific Coast cities at the end of the third quarter and small increases in commer cial loans during the fourth quarter reduced the supply of surplus funds in the District. During September, October, and November, therefore, it was the excess reserves of eastern banks ( “ Federal” funds available on a day to day basis) that enabled city member banks to main tain their reserve positions without borrowing from the Reserve Bank. During December, however, the expansion of currency circulation and the failure of some eastern banks prompted banks in New York, Philadelphia, and other eastern banking centers to keep their excess reserves at home. Circulation expanded in the Tw elfth District also during December, the in crease being induced chiefly by seasonal re quirements and secondarily by the bank failures. M IL L IO N S January, 1931 reporting member bank holdings of govern ment securities. City banks resumed borrow ing immediately after the first of the year, but a return of currency from circulation during the first half of January enabled them to curtail discounts to substantially lower levels than during the preceding fortnight. During the five weeks ended January 21, loans of reporting member banks remained practically unchanged, a slight increase in com mercial loans approximately equalling a decline in security loans. Banks have continued to create a substantial volume of acceptances as well as to hold large quantities as investments. Follow ing the reduction of the discount rate of the Federal Reserve Bank of New Y ork to 2 per cent (Decem ber 24, 1930) and coincident with the further easing of money rates in im portant centers of the United States, the Fed eral Reserve Bank of San Francisco lowered its discount rate to 3 per cent effective January 9, the lowest general rate ever applied by that Bank. On the same date the buying rate on bankers' acceptances with maturity not to ex ceed 120 days was reduced to a record low of 1¿4 per cent, superseding the l } i per cent rate in effect since July 22 of last year. This M IL L IO N S OF D O L L A R S OF D O L L A R S 2000 lO O O r 1 C O M M E R C IA L LO ANS 1 9 0 0 9 0 0 — ---------------- — - — 5 0 0 6 5 0 L ------------------------------ m m m JJ 1N V E S T M E N T S 4 0 0 T a —— — -------------------1 9 2 9 S E C U R IT Y LO AN S f 9 3 0 V is— ys 1931 C O M M E R C IA L LOANS and INVESTMENTS REPORTING MEMBER BANKS—Twelfth District Because of the inverse movements in these two series, their combined effect in changing the volume of total loans and investments was negligible during 1929 and 1930. TO T A L LOANS AND INVESTM ENTS and SECURITY LOANS REPORTING MEMBER BANKS — Twelfth District A s a result of these conditions, borrowings from the Reserve Bank rose sharply in the last three weeks of Decem ber to the highest levels of the year. Total credit extended by reporting member banks tended upward during 1930 and averaged slightly higher than in 1929. Security loans remained at the high level to which they had risen late in 1929 when large amounts of these loans were transferred from brokers directly to customers. An increase of investments in non governm ent bonds slightly more than offset declines in the average volume of commercial loans and investments in government bonds. As in preceding years, city banks were out of debt at the Reserve Bank over the year-end while condition statements were being issued. This reduction of borrowings was made pos sible in part by the sale of 23 million dollars of downward revision of the discount rate re established the one per cent differential be tween the New York and San Francisco R e serve Bank discount rates which existed during most of 1930. Interest rates charged customers of commercial banks in San Francisco changed little during the month ending January 15. Share turnover on the principal stock ex changes of the District during December was nearly double that of November and was ac companied by declines in average prices. The market value of transfers of stock was consid erably smaller in 1930 than in 1929, prices hav ing declined substantially, while the total num ber of shares traded changed little. Brokers' charges to customers borrowing money to pur chase New York listed securities were ad vanced slightly during December, but the rates on locally listed stocks were unchanged. The growth in credit extended during the past two years has been due largely to increases in security loans.
@FedFRASER