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MONTHLY REVIEW OF B U S IN E S S C O N D IT IO N S ISA A C B. NEWTON, Chairman of the Board and Federal Reserve Agent Federal Reserve Bank of San Francisco Vol. X V II San Francisco, California, January 20,1933 No. 1 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 Twelfth District business declined steadily during the first half of 1932, but became fairly stable in the second half of the year. The vol ume of crop production was larger in 1932 than in 1931, but the quantity of agricultural com modities marketed was slightly smaller and agricultural income declined sharply because of reduced prices for farm products. Activity in several leading industries of the District— lum ber, petroleum, electric power, meat-packing, non-ferrous metals, and cement— fluctuated near the low levels of late 1931, showing little net decline during the year. The paper and pulp and textile industries increased produc tion schedules during the year. Flour milling and canning of fruits and vegetables decreased during 1932 as compared with 1931. The value of engineering contracts awarded and building permits issued was considerably smaller in 1932 than in 1931, although state and Federal Gov ernment projects continued to be initiated on a relatively large scale. Both retail and whole sale trade improved seasonally in the last half of 1932, but substantial declines in value were reported for the year. Adjusted freight carloadings and intercoastal traffic advanced from low mid-year levels. Registrations of new auto mobiles and the value of foreign trade receded in most months of 1932. Prices for commodities important in the Twelfth District continued to decrease during 1932. There was little net change during the second half of the year, how ever, and the average price decline from the year before was less than in 1930 or 1931. The strained credit situation of late 1931 grew considerably worse during the first two months of 1932 as a result of continued large deposit withdrawals and heavy payments of funds to other districts, accompanied by numerous bank failures. Borrowings from the Reserve Bank rose to the highest levels in eleven years. W ith the passage of the Glass-Steagall Act and the opening of operations by the Reconstruction Finance Corporation in February, however, sentiment improved and the decline in deposits and the rate of bank failures moderated. This partial improvement was offset by a consider ably larger than usual mid-year withdrawal of currency. Beginning in late July, the credit situation became easier, a tendency which con tinued throughout the remainder of the year. This improvement was traceable in part to a continued large inflow of funds through Treas ury expenditures in excess of collections, and to a marked reduction in the net outflow of funds to other parts of the United States be cause of commercial transactions. (In early months of the year this inflow had been offset by losses through individual and banking trans actions.) Another factor of importance in easing credit conditions during the last half of the year was the issuance of substantial amounts of new national bank notes secured by Gov ernment bonds. The improvement in the bank ing situation was reflected in an increase in deposits, and in increased investments in United States securities. During December, California crude oil out put and adjusted lumber production changed little. The value of engineering contracts awarded and building permits issued was smaller than in November, in which month the Golden Gate Bridge contracts were included. Flour milling and cement production increased, after seasonal allowance. Expansion in depart ment store sales from November to December was somewhat greater than seasonal but freight carloadings and intercoastal traffic decreased. The credit situation became somewhat easier during the five weeks ended January 18, a sea sonal reduction in demand for currency having enabled banks to reduce borrowings further. The principal change in the condition of mem ber banks was the continued decline in loans. Agriculture Although weather conditions were more favorable and crop production was larger in 1932 than in 1931, the demand for agricultural products of the Twelfth District was further reduced by a deepening of the world-wide de- 2 M O N T H L Y REVIEW OF BUSINESS CONDITIONS pression and an increase in trade barriers in the form of foreign tariffs and depreciated cur rencies. Declines in prices resulted in another year of extremely low returns for most agri cultural products of the District, the further decrease in agricultural income being accom panied by increased delinquencies in taxes on farm real estate and interest payments on mort gage indebtedness. The low prices received for agricultural commodities discouraged the mar keting of considerable quantities of products, and instances in which prices failed to return, or barely returned, costs of transportation to market were more numerous than in any other recent year. In 1931, drought conditions had reduced crop yields and the acreage of crops harvested. Dur ing the winter of 1931-1932, however, rainfall was near the long-time average, furnishing plentiful soil moisture, and heavier snowfall than usual in the mountain areas was a source of adequate irrigation water during the 1932 crop-growing period. Production of wheat, oats, and barley, the principal grain crops of the District, increased 25, 46, and 122 per cent, respectively, from 1931 to 1932. The increase was the result not only of larger acreage but also of improved yields. Production of all field crops except sugar beets and hay decreased. The volume of deciduous fruit crops in Cali fornia was about 13 per cent greater in 1932 than a year previous, chiefly because of an in crease in grape production. In the Pacific North west the aggregate volume of fruit harvested in 1932 was approximately the same as in the pre ceding year. There was a slight decrease in the 1931-1932 orange and lemon crops in California as compared with production of those crops during the previous season. The acreage sown to winter wheat during the autumn of 1932 was estimated by the United States Department of Agriculture on Decem ber 1 to be 5 per cent greater than the acreage sown a year earlier. The cold weather of early January, 1933 December, however, caused an undetermined amount of damage to winter wheat, particularly in eastern Oregon and Washington, where the usual protective covering of snow was lacking. Production of eggs, as indicated by receipts at Pacific Coast markets, was about 15 per cent smaller during 1932 than in 1931. Butter pro duction declined only 3 per cent in this period. A t the year-end, storage holdings of butter and eggs were 33 per cent and 20 per cent lower, respectively, than on December 31, 1931. Physical conditions for the livestock industry were more satisfactory during 1932 than in 1931, although severe losses of sheep on the desert ranges of Utah, Nevada, and Idaho early in the year were a result of heavy snows. Live stock ranges furnished more and better forage in 1932 than in 1931 and forage for supple mental feeding of livestock on ranges or for fattening of stock in feedlots was more plentiful during the later year. Smaller numbers of cattle and sheep were shipped to the principal Twelfth District mar kets during 1932 than in 1931, while shipments of hogs in 1932 increased 25 per cent. Prices received for livestock were substantially lower in the later year, with the result that the total value marketed was less than in 1931. During the past three years sheepmen have marketed a greater proportion of young ewes from their flocks than is generally the custom and have retained the older animals because prices for such stock would not pay transporta tion costs to central markets in many cases. The trend of market receipts indicates that cattle producers have reduced their herds dur ing the past two years. On January 1, 1933, the number of cattle on feed in the seven states of the District was estimated to be 204,000 head, or 3 per cent greater than the number on feed a year earlier. A similar comparison for lambs shows that 438,000 head were being fed Janu ary 1, 1933, as compared with 472,000 head a year earlier, a decrease of 7 per cent. Industry A g r ic u ltu r a l M a r k e tin g A c tiv ity — -December— 1932 1931 4,386 4,108 4,663 3,965 3,066 4,578 Carlot Shipments Apples and Pears. Citrus Fruit ........ Vegetables............ Exports 7,039 Wheat (bu.) . 410,417 Barley (bu.) ........ Receipts Cattle* .................. 38,282 178,193 Hogs* ................ 154,299 Sheep* .................. 103,403 Eggs (cases) ........ Butter ( l b .) .......... 6,308,990 2,928 Wheat (carlots) . . Storage Holdings (end of month) Wheat ( b u .) ........ 3,085,000 Beans (bags) . . . . 1,895,643 908,664 Butter (lb.) ........ 9,530 Eggs (cases) . . . . 2,449,482 161,375 1932 42,110 9,633 20,163 1931 46,371 10,472 23,417 2,021,402 4,340,750 16,385,363 3,752,291 589,472 522,654 48,944 1,806,691 210,427 2,032,695 182,752 3,774,634 4,532,813 126,067 1,592,444 1,850,293 6,423,707 78,812,270 79,175,074 26,701 33,004 4,033 3,614,000 2,379,252 1,108,381 27,243 * Receipts at Los Angeles not included. f— Season to Date— Output of most Twelfth District industries during 1932 was well below that of 1931, during which year operations had been rapidly cur tailed. Declines in activity during the first half of 1932 were moderate, and a fair degree of stability was shown in total industrial produc tion during the second half of the year. Activity in the engineering construction, paper and pulp, wool manufacturing, and gold mining indus tries averaged higher in the last six months than in the first half of the year, while meat packing and production of electric power, petroleum, lumber, cement, and silver changed little. D e clines were recorded in the output of flour, lead, and zinc and in residential and commercial building throughout the year. January, 1933 FEDERAL RESERVE AG EN T A T SAN FRANCISCO The seasonally adjusted index of lumber pro duction did not change much in 1932, remaining near the exceptionally low level reached late in 1931. Output was considerably less in 1932 than in 1931, however, because of the large declines recorded in the earlier year. Both orders and shipments consistently exceeded the volume of lumber cut, contributing to further material re ductions in inventories. Although orders held up fairly well in December, that month was the only one in 1932 in which shipments of lumber were smaller than production. Continued recession in the value of engineer ing contracts awarded and building permits issued during most of 1932 was checked in the last few months of the year, chiefly as a result of Golden Gate Bridge contracts, but also be cause certain types of building had already become negligible. Public works construction was fairly active during 1932, such awards com paring favorably with those of other recent years, except 1931, when the Hoover Dam con tract greatly enlarged their value. In late December and in early January several large additional contracts, aggregating about $33,000,000 were awarded, representing construc tion to be undertaken on the Colorado River aqueduct and Los Angeles flood-control sys tem. During 1932, the value of permits issued for residential, commercial, and industrial building was extraordinarily low. California petroleum production continued to be restricted throughout 1932 under voluntary proration agreements first adopted in late 1929 and thereafter revised from time to time to meet current conditions in the industry. W ith few exceptions, actual production remained in excess of proration schedules. The most recent and probably the most notable exception was In d u stry — Indexes of daily average production, adjusted for seasonal variations (1 9 23-1925 d aily a v erag:e= 100) — 19;52----Year’s Aver. Dec. Nov. General Carloadings— Industrial . . . 37 36 40 Electric Pwr. Production , , 140 14811 143 Manufactures Lumber ................................ , . 35 32 33 134* 128 Refined Mineral O ils f........ Flour .................................... . . , 96 83 78 Slaughter of Livestock . . . . 87* 81 Cement.................................. , 46 42 40 Wool Consumptionf .......... 102* 120 Minerals Petroleum (California) f . . . . . 74 71 71 Lead (United States) $ 46 40 45 Silver (United States) $ . . . , 37 30 37 Building and Construction§ T otal...................................... . . . 35 48 44 Building Permits— Value 15 14 Larger Cities.................... 16 15 15 13 Smaller Cities.................. Engineering Contracts Awarded— Value 87 Total.............................. . . 63 83 Excluding Buildings . . 117 162 150 ,— 1931—^ Year's Oct. Dec. Aver. 57 42 45 137 156 155 36 131 75 88 41 139 38 136 116 87 57 113 55 140 104 91 72 89 72 38 36 76 64 48 79 70 50 28 45 62 10 13 21 26 32 38 52 91 76 123 109 186 *Eleven months’ average. fN ot adjusted for seasonal variations. JPrepared by Federal Reserve Board. §Indexes are for three months ending with the month indicated. ^Preliminary. 3 in June, 1932, when one of the largest purchas ers of crude oil agreed to raise prices should output be kept within a proration allowable of 476,700 barrels daily (an increase over the al lowable existing at that time). During remain ing months of the year, production fluctuated around the June level of 470,000 barrels daily. New pro ration schedules calling for a daily average of 440,000 barrels were announced on October 1, but output remained unchanged and exceeded the allowable continuously through out the remainder of the year. The quantity of refined oils produced was 4 per cent smaller in 1932 than in 1931, a decrease slightly less than the decline in crude oil output. Inventories of gasoline, crude petroleum, and fuel oil were about the same at the end of 1932 as a year earlier. The volume of canned fruits packed in the District decreased substantially further in 1932, output totaling only 80 per cent of that of 1931 and 60 per cent of the average amount packed from 1927 through 1931. The pack of canned vegetables was slightly greater than in the preceding year, but was 32 per cent below the average of the past five years. The 1932 Ha waiian canned pineapple pack was sharply re stricted to 5,000,000 cases, as compared with 12,543,000 cases in 1931. A t least partly as a result of curtailed production and reduced prices, the unsold stocks of canned fruits and vegetables was considerably smaller at the end of the year than in 1931. According to prelim inary figures canneries packed 10 per cent less salmon in 1932 than in 1931 and the tuna pack in southern California was 8 per cent under that of the preceding year. Production of prunes deE m p lo y m e n t- California------- Oregon------No. of No. of No. r-Employees — No. - Employees of Dec., Dec., of Dec., Dec., Industries Firms 1932 1931 Firms 1932 1931 All Industries* . . . . 1,180 117,603 128,114 123 13,438 14,876 (-9.7) Stone, Clay, and ^ ^.2) Glass Products. 56 4,016 5,264 Lumber and Wood ^ 23.7) Manufactures . . 130 11,253 13,992 6,612 7,222 45 (— 19.6) (— 8.4) Textiles ................ 15 1,354 1,191 1,568 1,289 (— 7.6) Clothing, Millinery, ^ 13.6) and Laundering. 148 10,008 11,395 6$ 207 240 (—12.2) (— 13.8) Food, Beverages, and Tobacco .. . 26,205 27,706 34 1,278 1,430 (— 5.4) (—10.6) Public Utilities... 51 47,094 51,277 (—8.2) Other Industriesf. 497 58,788 63,283 (— 7.1) Miscellaneous . . . . 46 5,979 29 4,150 4,695 (21.9) (—11.6) Wholesale and Retail................ 194 37,525 39,454 (— 4.9) *Public utilities and wholesale and retail figures not included in this total, tlncludes the following industries: Metals, ma chinery, and conveyances; leather and rubber goods; oils and paints; printing and paper goods. ^Laundering only. 4,906 Figures in parentheses indicate percentage cember, 1931. change from De 4 creased from 1931 to 1932 while output of raisins and figs increased. Although a larger proportion of the apricot crop was dried this year than last, the output of dried apricots was smaller than a year ago. Additional evidence of industrial conditions is furnished by employment data covering a more diversified list of industries than that for which production figures are available. These data indicate that approximately seasonal changes took place in the number of employed in most states of the District during the last half of 1932, following fairly large scale reduc tions earlier in the year. Efforts of the Twelfth District Banking and Industrial Committee to spread available work and create new jobs suc ceeded in increasing the number of employed or in keeping workers employed who would other wise have been released. Such programs usually involved a reduction in the hours and wages of labor. In California, the number, employed in manu facturing activities averaged about 15 per cent lower during 1932 than in 1931. Declines were largest early in 1932 and smallest in the last four months of the year, when they averaged about 10 per cent. Average industrial payrolls were 28 per cent lower and average weekly earnings 14 per cent lower in 1932 than in 1931. Employment and wages reported by firms in Oregon varied approximately the same as in California. Data on employment conditions are less satisfactory for other states of the District but general reports from United States Labor Directors indicate that changes were similar to those recorded in California and Oregon. Approximately the seasonal decline in indus trial activity was recorded from November to December. Adjusted lumber production re mained practically unchanged, as did California crude oil output. The year-to-year decline in electric power production was the smallest in recent months. Flour milling increased, after seasonal allowance, and stocks were larger than for any month since October, 1930. Trade The value of department store sales receded 24 per cent from 1931 to 1932 and was smaller than in any year since data were first available in 1919. As in the preceding two years, a con siderable part of the decline is attributable to reduced prices at which sales were made. This conclusion is borne out by a decline of 14 per cent in the Fairchild index of retail prices of important articles entering into department store trade and by the fact that the number of sales transactions decreased but 10 per cent. Declines approximating the District average were reported by stores in Los Angeles and January, 1933 M O N T H L Y R EVIEW OF BUSINESS CONDITIONS Oakland, while San Francisco and other north ern California stores reported smaller than average decreases. Sales in the Pacific North west and in Salt Lake City were reduced by larger proportions than in the District gener ally. Most of the decreases in sales occurred RETAIL TRADE—Twelfth District Percentage changes in value of sales and stocks with no adjustment for price changes t------------ 1932 compared with 1931-----------,--------- NET SALES-----------N STOCKS January 1 to end December of December December Department Stores . . . — 19.8 ( 68) — 23.9 ( 64) — 22.1 (52) Los Angeles ............ — 17.9 ( 9) — 23.4 ( 9) — 21.1 ( 8) Other Southern Calif. — 18.0 ( 8) — 25.2 ( 7) — 22.0 ( 6) — 23.0 ( 4) — 25.2 ( 4) Oakland .................... — 24.8 ( 4) San Francisco............— 18.2 ( 7) — 20.6 ( 7) — 20.9 ( 7) Other Northern Calif. — 15.7 ( 10) — 21.4 ( 8) — 13.0 (10) Portlandf ................ ..— 30.2 ( 8) — 30.8 ( 6) — 39.8 ( 7) Seattle ...................... — 21.0 ( 5) — 28.0 ( 5) — 27.6 ( 5) Spokane .................... .— 27.2 ( 4) — 24.8 ( 4) — 14.2 ( 4) — 25.7 ( 4) — 11.3 ( 3) Salt Lake City.......... — 19.4 ( 4) Apparel Stores ............ .— 20.7 ( 27) — 23.9 ( 21) — 24.6 (14) Furniture Stores ........ — 30.1 ( 33) — 30.1 ( 31) — 29.5 (26) — 24.6 (116) — 23.3 (92) All Stores .................... .— 20.7 (128) tIncludes six apparel stores which are not included in District department store total. Figures in parentheses indicate number of stores reporting. Note: These figures take no account of operating costs. during the first half of the year, more than the full seasonal increase having been reported in following months until November, when a sharp non-seasonal decline took place. Part of the abrupt November drop in the seasonally adjusted index was recovered in December. D e partment store inventories continued to be sharply reduced during the year. The average decline in the value of wholesale sales was 25 per cent in 1932, compared with 20 per cent in 1931. Decreases of more than 35 per cent were reported by dealers in agricul tural implements, electrical supplies, and fur niture ; declines of from 25 to 30 per cent were reported by wholesalers of dry goods, hardD istr ib u tio n a n d T r a d e — , ------------------ 1 9 3 2 -------------------v , ------1931------ \ Year’s Year’s Aver. Dec. Nov. Oct. Dec. Aver. Indexes adjusted for seasonal variations Carloadingsî r---------- (1923-1925 average—100)-----------N Total .................................. ... 57 54 58 59 65 75 Merchandise...................... ... 74 68 74 72 80 89 Foreign Trade0 Totalt ................................ ... 48* .. 43 46 55 72 Im p orts!............................ ... 43* .. 41 39 51 64 Exports.............................. ....50* .. 45 50 57 76 Intercoastal Trade Total .................................. ... 54 56 60 62 65 71 Westbound ........................ ... 67 58 66 70 77 84 Eastbound ........................ ... 50 56 57 58 63 66 Retail Trade Automobile Salesî Total .............................. ... 34 35 32 28 62 67 Passenger .................... ... 32 32 30 26 57 62 Commercial ................ ..... 57 62 52 50 115 114 Department Store Salesî ............................ ....74 68 63 75 85 98 Stocks§ .......................... ... 68 61 63 61 81 87 Collections# t----------------Actual F^ures----------------- N Regular ...................... ... 40.9 40.7 41.8 43.3 41.0 42.8 Installment................ ... 14.0 12.8 13.4 14.7 13.3 15.1 JDaily average. 0Indexes are for three months ending with month indicated. fExcluding raw silk. §At end of month. ^#Per cent of collections during month to amount outstanding at first of month. *Eleven months average. January, 1933 FEDERAL RESERVE A G E N T A T SAN FRANCISCO ware, and shoes; and declines of 20 per cent or less were reported by automobile supplies, drug, grocery, and paper and stationery houses. Wholesale commodity prices declined some what less during the later year. WHOLESALE TRADE —Twelfth District Percentage changes in value of sales with no adjustment for price changes Cumulative 1932 compared Nov., 1932 Dec., 1931 with 1931 — 45.6 — 40.0 Agricultural Implements ........ — 22.7 Automobile Supplies ................ — 3.4 — 10.1 — 19.8 Drugs .......................................... — 4.1 — 12.0 — 19.1 — 9.7 — 29.7 Dry Goods ................................ — 16.2 Electrical Supplies .................. 19.4 — 31.4 — 41.4 Furniture .................................... — 7.6 — 20.5 — 35.8 Groceries .................................... — 6.2 — 15.8 — 18.0 Hardware.................................... 0.4 — 18.3 — 28.1 Shoes .......................................... — 15.3 0.2 — 24.7 7.9 — 22.6 — 20.3 Paper and Stationery................ All Lines .................................... — 3.0 — 17.4 — 24.5 Note: These figures take no account of operating costs. December 1932 in value in the first eleven months of 1932 than in 1931. Greater than seasonal increases in exports occurred in August, September, and October, in part reflecting larger canned fruit shipments in anticipation of a rise in tariff schedules of some foreign countries in No vember. Prices ,----- compared with----- \ Total freight carloadings on District railways were 23 per cent lower in 1932 than in 1931. The declines were relatively small during the last months of the year, however, as compared with a year ago because traffic expanded more than is usual during the autumn months when the largest seasonal movement of commodities takes place. Loadings of grain and livestock were considerably smaller in 1932 than in 1931, but the heaviest reductions were recorded in shipments of forest products, ore, and coal and coke, which comprise about 75 per cent of total industrial loadings. As in the two preceding years, merchandise and miscellaneous freight decreased relatively less than did other classes of carloadings. The volume of intercoastal trade through the Panama Canal dropped from nearly 8 million cargo tons in 1931 to 6 million tons in 1932, which is about half the 1923-1925 average ton nage. The decline in traffic from the Atlantic to the Pacific Coast was larger than in the more important eastbound traffic. Lumber shipments in the latter direction were about 40 per cent smaller in 1932 than in 1931, while petroleum tonnage decreased 26 per cent and other cargo declined 7 per cent. After seasonal adjustment, total traffic reached its lowest point in June, since when moderate increases have been re corded. New automobile registrations of both passen ger cars and trucks decreased substantially in number during 1932 to the exceptionally small total of 113,000, about 47 per cent lower than in 1931 and 74 per cent below the record high number of registrations in 1929. December registrations declined by slightly less than the seasonal amount. The value of the District’s foreign trade de creased sharply during the first seven months of 1932, but in the following four months approxi mately seasonal changes were recorded. Both exports and imports averaged 33 per cent less Prices of products produced in the Twelfth District declined further during 1932. In most cases, decreases were not so great as during the two preceding years, increases during summer months having reduced the net decline for the year. W hile decreases in prices of farm prod ucts were smaller than in 1930 or 1931, they continued to exceed decreases in prices paid by the farmer for the commodities he buys. Prices for field and grain crops declined more than quotations for other agricultural prod ucts. Wheat, barley, and rice prices moved downward sharply between January and June and showed little net change during the last half of the year. The decrease in barley prices was especially large, reflecting to some extent a much larger crop than in 1931. Cotton prices, after declining to a new low level in June, in creased until early September, following which declines were resumed. In December, prices approximated those of a year earlier. Bean quo tations fluctuated much the same as cotton prices, except that the low for the year was B a n k D e b its* — Cumulative Dec., 1932 19,674 Arizona Phoenix............ .$ California 9,159 Bakersfield ........ Berkeley .......... 12,867 Fresno .............. 16,163 Long Beach 25,951 Los Angeles . 532,771 Oakland ............ 228,886 Pasadena .......... 20,806 Sacramento 37.876 San Bernardino. 7,145 San Diego ........ 36,141 San Francisco .. 651.762 San Jose ............ 15.020 Santa Barbara.. 8,678 Stockton ............ 11,521 Idaho 10,975 Nevada 4,527 Oregon Eugene .............. 3,032 Portland ............ 90,831 Utah 12,805 Salt Lake City.. 54,138 Washington Bellingham........ 4,228 Everett .............. 4,809 120,760 Spokane ............ 27,087 Tacoma.............. 19,134 Y akima ............ 7,455 Total .$1,994,201 *In thousands of dollars. $ Dec., 1931 27,566 f---- Twelve Months---- s 1932 $ 239,640 1931 $ 355,888 29.493 46.704 9,558 46,181 831,585 21,850 13.071 17,109 92,260 163,716 187,970 307,304 6,560.761 2,020,820 249,375 450,893 70.785 399,970 7,742.014 188,570 107,543 150,563 127,736 200,723 272.070 472,509 9,288.170 2,247,211 354,451 558,291 103,903 558.066 11,178,630 289,670 155,185 205,102 12,944 117,506 158,776 9,043 82,396 118,943 5,372 140,721 44,546 1,177,498 65,166 1,711,062 14,335 64,891 115,700 515,139 167,491 710,693 5,794 7.393 168,148 36.583 28,819 9,912 53,531 62,276 1,514,847 327,877 243,059 92,539 78,614 107,022 2,242,438 484,830 385,027 141,575 11,968 17,716 23,742 36,419 711,630 211,686 $2,560,233 $23,279,098 $32,739,242 6 M O N T H L Y R EVIEW OF BUSINESS CONDITIONS reached in April. Hay prices were compara tively high at the beginning of 1932, the result of a shortage of feeds of all kinds, but declined during the year. Potato prices declined to the low level of the year in late August, subse quently rising in December to levels approxi mately 30 per cent lower than a year earlier. Prices for all fruits sold in eastern auction markets this year were lower than in 1931. The fruit and vegetable price index of the United States Department of Agriculture declined about 20 per cent. Reports of prices received for deciduous fruits failing to return the costs of transportation to market were more numerous than in any other recent year. During 1932 orange prices averaged about 10 per cent below those of 1931, while prices for California lemons averaged about 9 per cent higher than in the preceding year. Opening prices for the 1932 pack of canned fruits, announced in October, ranged from 20 to 25 per cent below those of 1931. Quotations for most canned fruits had been reduced several times during the year prior to October in an attempt to reduce inventories. Prices for the major dried fruits— raisins, prunes, apricots, apples, figs, and pears— were from 10 to 45 per cent lower in December, 1932, than in Decem ber, 1931. Dairymen and poultrymen received lower prices for butter and eggs during 1932 than during 1931. Egg prices, after the usual increase in the autumn, approximated quotations of a year earlier during the last 3 months of 1932. Butter prices also increased seasonally in N o vember, but subsequently declined to levels approaching the lowest recorded during the year. Although lamb prices in 1932 were more stable than in 1931, quotations at Pacific Coast markets averaged 23 per cent lower than in the earlier year. Cattle and hog prices declined about 20 per cent and 40 per cent, respectively, during 1932, quotations for hogs on the Chicago market reaching the lowest level in 50 years. The decline in wool prices, which had been continuous since late 1929, was checked during the last half of 1932. Quotations on this com modity were approximately 15 per cent lower at the end of the year than in December, 1931. Hide prices decreased during 1932. Prices for the principal non-ferrous metals produced in this District— copper, lead, and silver— declined during 1932, while the quota tions for zinc, of lesser importance in this area, increased slightly. Lumber quotations de creased less during 1932 than in either of the two preceding years. Prices for both crude oil and gasoline were advanced considerably dur ing June and remained practically unchanged thereafter. January, 1933 Credit Situation A t the close of 1932, member banks found themselves under much less pressure than they had been at the opening of the year, when their position was rapidly becoming stringent. In January and February, 1932, the predominant influences— withdrawal of deposits and inabil ity of borrowers to liquidate loans— were those which had brought about a critical banking situation in this District during the latter part of 1931. By the end of February, borrowings at the Reserve Bank were larger than at any time since 1921. There was little actual improve ment in the situation between February and the middle of the year, but banking difficulties did not increase during that period and borrow ings at the Reserve Bank were reduced. During the last half of the year a net movement of Government funds into the District, together with returning confidence on the part of de positors and the issuance of additional quanti ties of national bank notes by national banks, resulted in considerable improvement in the condition of banks in most parts of the District. This improvement in credit conditions con tinued into January, 1933. The amount of money in the hands of the public and in com mercial banks, which had shown practically no seasonal increase immediately before Christ mas of 1932, decreased somewhat and enabled CURRENCY CIRCULATION—Twelfth District (Changes cumulated from January 2, 1929) Monthly averages of weekly figures. Latest figure is an average of the first three weeks in January. member banks to make small additions to their reserve deposit accounts. Borrowings from the Reserve Bank had reached a comparatively low level by the end of December, and did not change much during the first three weeks of January. Time and net demand deposits of re porting member banks remained unchanged. Commercial and security loans declined, reach ing a level somewhat lower than in November, following which a small expansion of commer cial loans had taken place. A more detailed summary of credit develop ments in the District during 1932 follows. January, 1933 FEDERAL RESERVE AG EN T A T SAN FRANCISCO Deposits were withdrawn from banks in large amounts during January and February, 1932. Time and net demand deposits of city member banks decreased about 100 million dollars during this period and deposits of coun try banks, as measured by deposits of member banks in smaller centers, also declined sharply. A part of the extraordinary demand thus made upon banks by depositors resulted from a sub stantial movement of funds out of the District in payment of obligations in other parts of the United States. Even though a considerable part of the decline in deposits came about through drawing down accounts in making repayments of loans, thus simultaneously reducing assets and liabilities by equal amounts and freeing a CHART 1 7 half of 1932, this improvement being reflected principally in further reductions in borrowings from the Reserve Bank, in increases in deposits of reporting member banks, and in expansion of the holdings of United States Government se curities by those banks. As in the first half of the year, local disbursements by the Federal Gov ernment exceeded collections in this District by a large amount and continued as a major source of supply for additional banking funds.* The important differences between the January-June and July-December periods were that, in the later months, the demand for additional currency subsided and net payments of funds by individuals and banks to other parts of the United States decreased substantially. Thus, CHART 2 M IL L IO N S FACTORS, OTHER THAN RESERVE BANK CREDIT, SUPPLYING BANKING RESERVES—Twelfth District (Changes cumulated from December 30, 1931) A. Treasury disbursements in excess of collections. B. Treasury credit extended by issuance of national bank notes. C. Net payments to or receipts from other parts of the United States by individuals or banks in the Twelfth District. small amount of cash reserves held against de posits, banks were forced to increase their use of Reserve Bank credit by about 75 million dol lars during the two months. More than 50 Dis trict banks closed during this period. W ith the commencement in February of operations by the Reconstruction Finance Cor poration and the passage of the Glass-Steagall Act, which permitted the reserve banks to use United States Government obligations as col lateral for Federal reserve notes, the prevailing lack of confidence in the banking structure was partly eliminated. Currency hoarding declined during March, April, and M ay; the number of bank failures decreased considerably; and mem ber banks reduced their borrowings from the Federal Reserve Bank of San Francisco. A large exodus of gold from the United States during April, May, and June caused public ap prehension regarding banks to arise again, and a sharp renewal of hoarding in different parts of the United States, including the Twelfth District, took place during June and July. Credit conditions improved during the second OF D O L L A R S RESERVE BANK CREDIT AND THE SUM OF OTHER FACTORS SUPPLYING BANKING RESERVES Twelfth District (Changes cumulated from December 30, 1931) A. Reserve bank credit. B. Funds other than reserve bank credit (this curve represents the aggregate of curves A, B, and C in Chart 1), during the later months of the year, the inflow of Government funds made for actual net credit improvement whereas their effect in earlier months had been to lessen the strain caused by the heavy commercial outflow of funds and by currency hoarding. A further substantial source of Treasury credit during the late sum mer and autumn months of 1932 was provided by the issuance of new national bank notes under the amendment provision of the Federal Home Loan Bank Act, which became effective in July. Twelfth District banks made greater use of this privilege, relatively, than did banks in the country as a whole.f In summary of developments during the last half of 1932 : the credit supply available to * These funds were made available to banks through the deposits by individuals and corporations of checks drawn against Government account in payment for goods or services. In effect, the building up of individual deposits in this manner represented the transfer of deposits created by the Government’s borrowing operations to the credit of individuals, f See Monthly Review for September, 1932, for a more complete discussion of this subject. 8 January, 1933 M O N T H L Y R EVIEW OF BUSINESS CONDITIONS banks was increased by about 56 million dol lars through the excess of Federal Government expenditures over collections in this District and by about 50 million dollars through the issuance of new national bank notes, while the outflow to other districts because of commer cial transactions was only 22 million dollars, leaving a net gain in funds of 84 million dollars. These funds were used to the amount of about 65 million dollars to reduce indebtedness at the Reserve Bank, to the amount of 14 million dol lars in building up reserve deposits at the Re serve Bank, and to the amount of 3 million dollars in meeting increased public demand for currency. SUPPLY OF AND DEMAND FOR FUNDS USED AS BANKING RESERVES —Twelfth District Changes in millions of dollars during the periods indicated Dec. 30, 1931-Mar. Mar. 2, 1932-July July 6, 1932-Dec. Dec. 30, 1931-Dec. SOURCES OF FUNDS Monetary Reserve Gold Treasury Bank Total Stock Operations Credit Supply 2, 1932. — 129.4 47.8 76.2 — 5.4 6, 1932. — 24.2 80.7 — 53.9 2.6 28, 1932. — 21.9 105.8 — 65.1 18.8 28, 1932. — 175.5 234.3 — 42.8 16.0 Dec. 28, 1932-Jan. 18, 1933. — 13.7 Dec. 30, 1931-Mar. Mar. 2, 1932-July July 6, 1932-Dec. Dec. 30, 1931-Dec. USES OF FUNDS Member Unexp’d Demand Bank Capital for Reserve Funds, Total Currency DepositsEtc. Demand 2, 1932. 7.6 — 3.2 — 9.8 — 5.4 6, 1932. 19.1 — 15.7 — .8 2.6 28, 1932. 3.1 14.1 1.6 18.8 28, 1932. 29.8 — 4.8 — 9.0 16.0 Dec. 28, 1932-Jan. 18, 1933. — 9.2 8.3 4.7 — .2 — 1.1 — 5.6 — 5.6 The Federal Reserve Bank of San Francisco participated as usual in the open-market opera tions of the Federal Reserve System during 1932. This participation necessitated extensive use of Government bonds as security for Fed eral reserve notes. During the two weeks end ing January 18, 1933, this Bank’s holdings of Government securities were reduced 5 million dollars to 118 million dollars. Bank failures in the District were numerous during 1932. During January and February 52 banks failed, following which the rate of sus pensions decreased somewhat until late in the year. Another epidemic of failures occurred in December, when the cumulative effects of several seasons of low returns in agricultural regions forced additional country banks to sus pend operations. Total failures during the year involved 146 banks with deposits of 99 million dollars (preliminary figures) as compared with suspensions of 76 banks having 49 million dol lars in deposits in 1931. Almost all the failures in 1931 occurred in the last half of that year. Many of the smaller country banks took ad vantage of state or local banking moratoria toward the close of 1932. During the first quarter of 1932 large ship ments of gold from Japan for Japanese Govern ment account, practically all of which were transferred to New York, were received at San Francisco. Numerous shipments of gold from China and Australia were also received during FEDERAL RESERVE BANK OF SAN FRANCISCO ( i n m illion s o f dollars) -----Cone lition ----....... Jan. 18, Jan. 11, Dec. 21, Jan. 20, 1932 1932 1933 1933 149 177 148 145 101 25 25 24 2 2 2 25 121 118 123 48 243 246 247 218 154 153 153 147 r Total Bills and Securities........ Bills Discounted...................... Bills Bought ............................ United States Securities........ Total Reserves ............................ Total Deposits ............................ Federal Reserve Notes in Circulation................................ Ratio of Total Reserves to De posit and Note Liabilities Combined ................................ 221 65.0 225 65.1 228 64.9 233 57.4 the year. Due to renewed interest in gold min ing, the District’s production of gold increased sharply, and more than the usual addition from this source was added to the gold reserves of the Federal Reserve Bank of San Francisco in 1932. W ith the continued decline in foreign trade and other activity giving rise to the creation of acceptance credits, the amount of bills accepted by San Francisco banks was much smaller than in preceding years. Because of the small vol ume of bills and the lack of suitable opportuni ties for investments of funds, banks held most of this class of paper themselves, with the result that the Reserve Bank’s holdings of locally pur chased acceptances declined during most of the year and were almost negligible at the year-end. REPORTING MEMBER BANKS—Twelfth District ( i n m illion s of dollars) Loans and Investments— Total. . Loans— T o ta l.......................... . On Securities...................... All Other .............................. Investments— Total .............. . United States Securities . . . Other Securities .................. Reserve with Reserve Bank Net Demand Deposits................ Time Deposits .......................... . Due from Banks ........................ Due to Banks.............................. . Borrowings at Reserve Bank . .. ------Con<lition----r Jan. 18, Jan. 11, Dec. 21, Jan. 20, 1932 1933 1933 1932 1,716 1,740 1,826 1,706 958 961 970 1,098 241 299 237 237 729 799 721 724 770 748 755 728 417 423 436 391 332 331 334 337 90 89 89 83 562 571 568 614 921 919 924 907 209 194 189 107 204 199 201 160 17 17 15 86 Interest rates in San Francisco and Los A n geles, while lower than in 1929, were somewhat higher than in 1931 and tended to rise slightly during the year. Money rates changed little during the year in other District cities. The discount rate of the Federal Reserve Bank of San Francisco remained at Z y 2 per cent all year, compared with rates of 3 per cent, 2 y 2 per cent, and Z y2 per cent during different periods in 1931. Acceptance buying rates were reduced to 1 per cent on 90-day paper at mid-year. In terest rates charged by brokers upon debit bal ances of customers averaged nearly 1 per cent above 1931 on eastern securities but were equal to or below 1931 charges for local securities. Effective January 1, 1933, several banks in San Francisco, and most banks in Los Angeles re duced the rates paid on savings deposits from 3 y 2 per cent to 3 per cent. M O N T H L Y R E V IE W OF B U S IN E S S C O N D IT IO N S ISAAC B. N E W T O N , Chairman of the Board and Federal Reserve Agent Federal Reserve Bank of San Francisco Supplement San Francisco, California, January 20, 1933 Vol. X V II No. 1 S U M M A R Y O F N A T I O N A L C O N D IT IO N S Prepared by the Federal Reserve Board Volume of industrial production declined in December by slightly less than the usual sea sonal amount, while factory employment and payrolls showed a decrease somewhat larger than is usual at this season. The general level of wholesale commodity prices, after declining in December, showed relatively little change in the first half of January. Production and Employment. In December the Board’s seasonally adjusted index of indus trial output showed an increase from 65 per cent of the 1923-1925 average to 66 per cent, the level prevailing in September and October. There was a substantial increase in output of automobiles in connection with the introduction of new models, and lumber production showed a less than seasonal decline. In the textile in dustries there were decreases in output in ac cordance with the usual seasonal tendency. Activity at steel mills showed a substantial decline in December, followed by a seasonal in crease in the first three weeks of January. Volume of employment in manufacturing in dustries decreased from the middle of Novem ber to the middle of December by somewhat more than the usual seasonal amount. Working forces were reduced in the clothing, leather, and building material industries, while at auto mobile factories there was a substantial in crease in employment. Value of construction contracts awarded as reported by the F. W . Dodge Corporation, de clined by more than the usual seasonal amount in the fourth quarter, following a non-seasonal increase in the third quarter. Contracts awarded in the first half of January showed an increase, as measured by daily average figures, reflect ing the award of large contracts in connection with construction of a bridge at New Orleans. Distribution. Freight traffic decreased in De cember by an amount somewhat smaller than is usual at this season. Sales by department stores increased by somewhat less than the usual sea sonal amount and were smaller than a year ago by 23 per cent, reflecting in part a decline in prices. Foreign Trade. Value of exports in Decem ber was smaller than in December, 1931, by about one-fourth. For the year as a whole the decline was about one-third, reflecting decreases ranging, in the first eleven months, from 8 per cent for crude material to 45 per cent for fin ished manufactures. Value of imports into this country during 1932 was smaller than in 1931 by 37 per cent. Wholesale Prices. Wholesale prices of many PER CENT PER CENT INDUSTRIAL PRODUCTION Index numbers of industrial production, adjusted for seasonal varia tions (1923-1925 average=100). WHOLESALE PRICES Index of United States Bureau of Labor Statistics (1926=100). leading commodities, including non-agricultural as well as agricultural products, declined from November to December, and the monthly index of the Bureau of Labor Statistics showed a decrease from 63.9 per cent of the 1926 aver age to 62.6 per cent as compared with 68.6 per cent a year ago. In the first half of January, wheat prices advanced from the low levels reached at the end of December and cotton of member bank borrowings at the Federal reserve banks and through a decline of $73,000,000 between January 4 and January 18 in the reserve banks’ holdings of United States Government securities. Member bank reserve balances, however, increased further during the four-week period by about $100,000,000 to a level $575,000,000 higher than a year ago. E x cess reserves of member banks, which have M IL L IO N S OF D O L L A R S 1928 1929 1930 1931 1932 1933 MEMBER BANK CREDIT Monthly averages of weekly figures for reporting member banks in leading cities. Latest figures are averages of first two weeks in January. prices also increased somewhat, while prices of silk, rubber, and gasoline declined considerably. Bank Credit. In the four weeks from Decem ber 21 to January 18, the stock of monetary gold increased by $80,000,000 and there was a seasonal decline of $130,000,000 in the volume of money in circulation— a considerably smaller decline than usual, reflecting a smaller than usual increase for the holiday trade in Decem ber and some withdrawal of funds accompany ing bank suspensions in the middle of January. The reserve funds arising from these two sources were absorbed in part by a reduction FEDERAL RESERVE BANK CREDIT AND PRINCIPAL FACTORS IN CHANGES Monthly averages of daily figures. Latest figures are averages of first 19 days in January. been in substantial volume for several months, also increased during the period. Volume of member bank credit continued to decline during December and the first part of January. From the middle of December to January 11, total loans and investments of re porting member banks in leading cities declined by $165,000,000 to a level about $350,000,000 above the low point of last summer. The de cline was entirely in the banks’ loans, while investments showed relatively little change. Money rates in the open market continued at low levels.
@FedFRASER