The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
MONTHLY REVIEW OF BUSINESS CONDITIONS Federal Reserve Bank of San Francisco San Francisco, California, January 20,1937 Vol. X X I 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 Review o f the M onth Industrial production in the Twelfth District increased considerably in December after al lowance for seasonal influences. This bank’s adjusted index of Douglas fir lumber produc tion, which declined 37 percent in November because of the maritime strike, regained over half of that loss. The flour milling index, which declined sharply in November, also advanced considerably. The recovery in lumber and flour milling during December partly reflected increased movements of those products by rail. Expansion in output is reported to have con tinued in the furniture, automobile, and tire and tube industries, but a number of plants producing cane sugar, vegetable oils, and soap were idle during December and early January. In the construction industry, a small advance in the value of permits issued for new private building during December resulted entirely from a gain in the non-residential classifica tion. Seasonal influences were at least partly responsible for a 5 percent decline in the value of new residential building initiated in Decem ber. Total permits for residential buildings were about 10 percent smaller in value than in October, the peak month of 1936. A marked gain in awards for public works largely re flected increased railroad construction. In the Pacific Northwest, the number of in dustrial wage earners declined no more than is customary in December and factory pay rolls were reduced less than seasonally. Em ploy ment and pay rolls in California industries declined less than seasonally for the third suc cessive month, the adjusted employment index for December advancing to a new high level. Reports from the State Relief Administration indicate that reductions in employment result ing directly or indirectly from the maritime strike were about offset by gains in other lines, after allowance for seasonal influences. Recovery in business in December was also indicated by a larger than seasonal expansion in sales of department stores in practically all parts of the district. The actual increase amounted to 68 percent, compared with an or dinary seasonal gain of 60 percent. The outlook for agricultural production dur ing 1937 was unfavorably affected by weather conditions during December and early Janu ary. The comparatively small fall sown wheat crop was in poor condition because of lack of moisture and unusually cold weather. In Cali fornia, considerable damage to vegetables and citrus fruits resulted from freezing weather. Need for supplemental feeding of livestock increased, adding to production costs, and heavy losses of new-born lambs were reported. Review o f the Year The year 1936 was characterized by con tinued recovery in industry, private construc tion, agriculture, and trade, and by further expansion in loans of district banks for busi ness and personal uses. On an annual basis, output of a number of manufactured products and industrial employment were close to the level of predepression peak years. Although production of lumber and mineral products con tinued well below that of previous record years, total output in all industries for which statisti cal data are available averaged only 14 percent lower than in 1929. Value of retail trade was nearly as large as in 1931 and the movement of freight by rail was 13 percent larger than in that year. Agricultural cash income increased to the highest total since 1930, but still was about 20 percent smaller than in 1929. Substantial year-to-year gains were regis tered in practically all lines of economic activ ity. In industry, the largest advances occurred at plants producing durable goods and in a number of lines which had expanded more rap idly than industry as a whole in the decade preceding the depression. An advance of 20 percent in total industrial output was accom 2 panied by increases of 12 percent in employ ment and 19 percent in pay rolls at manufac turing establishments. In 1936, as in the preceding year, particularly large gains oc curred in new private building activity, the value of urban building permits for that type of construction increasing about 120 percent. Retail sales of department, apparel, and furni ture stores were 13 percent larger in value in 1936 than in 1935. Sales of new automobiles in 1936 were at the highest level on record. Largely as a result of increases in prices, rather than in output, agricultural cash income rose about 14 percent to $938,000,000 in 1936. Reflecting expansion in the value of business transactions, such as retail and wholesale trade, wage and salary payments, payments to farmers, and trading in securities, the value of checks drawn against deposits in district banks was 18 percent larger than in 1935. The volume of bank deposits also increased substantially and the rate of deposit turnover did not change materially. As in other recent years, the principal factor contributing to the growth of deposits was the disbursement in this district of funds collected elsewhere by the Federal Government. Deposits also were augmented by further expansion in commercial and personal loans of banks and by sales to the Mint of newly mined, reclaimed, and imported gold. Agriculture Incom e of farmers and livestock growers in the Tw elfth Federal Reserve District con tinued to increase during 1936. Cash returns from crops, livestock, and livestock products totaled about $938,000,000, compared with $823,000,000 during 1935 and an average of $821,000,000 during the five years 1929-1933. Although prices of seed, fertilizer, and feed as w^ell as wage rates increased, there was never theless a considerable gain in net income. More farm equipment was purchased than in 1935, and general retail trade, including sales of new automobiles, increased considerably in rural areas. Available information indicates that expenditures for new construction and re pair work on farms were also larger than in 1935. Some reduction in total indebtedness of many farmers, particularly among those borrowers who were delinquent in 1935, is also reported to have taken place. Both long-time mortgage credit and short-time production credit continued available from the Farm Credit Administration at the relatively low rates in effect in 1935. Farmers and stock growers continued to shift their borrowing to that agency. Increased farm purchasing power stimulated manufacturing output and pay rolls not only in the Tw elfth District but also in other parts January 193! M O N T H L Y REVIEW OF BUSINESS CONDITIONS of the United States, since a considerable pari of the goods purchased in farm sections of thii district is manufactured in the East. Weather conditions were favorable in mos localities during 1936, and irrigation water wa< ample. Spring frosts reduced output of severa important early deciduous fruits but warm dr) weather through October increased yields o other crops and permitted harvesting of almosi all production. In the aggregate, volume o: crops produced was about the same in 1936 as in 1935; consequently, the entire gain in farn income came as a result of price advances. PRODUCTION A N D FA R M V A L U E OF CROPS Twelfth District (in thousands) t----------- Production------------ \ 1928-1932 1935 Average Wheat ( b u . ) ........ .108,807 103,388 Barley ( b u . ) ........ . 40,570 48,938 24,648 30,035 Corn (b u .)............ . 8,090 6,966 Cotton (bales) . . . 328 374 Beans (b a g s)........ . 4,944 5,277 Tame Hay (tons) . 11,844 11,631 Hops (pounds)__ . 28,011 47,746 Potatoes (b u .). . . . . 45,367 50,306 , 7,442 6,732 Sugar Beets (ton s). . 1,930 2,511 Apples ( b u .) ........ , 54,748 50,664 Apricots (ton s). . . 227 216 Cherries (to n s)__ 50 48 Grapes (t o n s )* ... . 1,924 2,194 . 1,161 1,248 Table ................ 345 375 418 571 Peaches (b u .)* __ . 2 3 ,8 4 4 17,876 C lingstone........ . 15,610 1 2 ,0 0 1 Freestone ........ . 8,234 5,875 . 16,178 15,330 Plums (ton s)........ 133 117 Prunes (ton s). . . . 226 298 Almonds (to n s). . . 12 9 Walnuts (tons) . . . 35 55 Grapefruit (boxes) . 1,617 3,407 Lemons (b oxes) . . . 7,251 10,506 Oranges (boxes)*. . 3 3 ,0 2 2 46,086 Navel & Misc.. . 1 5 ,6 0 0 18,990 . 17,422 27,096 (—Farm Value**-— 1936 1935 110,215 41,116 30,261 7,178 610 5,381 11,945 23,310 52,981 9,548 3,174 44,767 223 59 1,699 907 74,375 19,486 9,975 5,536 22,532 17,034 90,042 4,141 29,512 5,857 13,910 29,086 9,850 4,785 324 468 21,627 14,251 7,376 18,995 128 177 7 43 4,067 7,787 33,049 1 4 ,4 6 9 18,580 2 8 ,3 4 4 16,385 5,250 6,709 1 1 ,5 1 2 7,776 3,736 9,152 3,619 17,172 2,604 11,240 3,221 1 5 ,1 5 3 54,367 21,425 3 2 ,9 4 2 1936 94,44? 24,19( 13,46/ 7,17/ 38,26( 25,Ilf 109,591 6,38( 55,15( 8,30/ 19,io; 34,38 f 8,37^ 5,1032,6316,04? 8,48S 8,096 14,019,234 4,77S 12,21^ 3,61C 13,81 S 2,854 8,44S 4,302 24,76 c 53,584 19,04C 34,544 **Farm value refers to estimated value of production in the year, as determined by using prices prevailing during the season. Estimated farm value of production during a given year dif fers from cash income received from crops marketed during the same period, because part of each season’s production is not sold until after the end of the calendar year. * California only. Citrus year ends on November 1 of years shown. Source: United States Department of Agriculture. Part of the advance in prices of farm prod ucts resulted from widespread increases in purchasing power with accompanying expan sion in demand for farm products. A consider able part of the price rise, however, reflected shortages of total United States production of certain crops due to the drought in the Middle W est. Furthermore, foreign demand improved considerably, stimulated by increased purchas ing power abroad and by decreases in trade barriers through the reciprocal trade agree ment program and otherwise. The livestock industry continued to benefit from the marked improvement in conditions noted in 1935, and cash income from sales of livestock and livestock products totaled about $425,000,000 compared with $386,000,000 in January 1937 FEDERAL RESERVE B A N K OF SAN FRANCISCO 1935. The number of cattle marketed from Twelfth District states was 12 percent larger than in 1935 and hog marketings increased 25 percent, while sheep and lamb marketings were about 12 percent smaller. Prices of the three kinds of meat animals averaged slightly higher than in 1935 and were about double those of 1932, 1933, and 1934. The w ool clip was about the same in amount in 1936 as in 1935, but re turns were 25 percent larger in 1936. Over 40 per cent of the total income received by the livestock industry is derived from the sale of dairy products. Gains in consumer pur chasing power during 1936 were accompanied by increased use of ice cream, fluid milk, evap orated milk, and other dairy products at higher average prices than in 1935. Creameries located in the Twelfth District produced about the same quantity of butter as in 1935, and prices, which averaged 12 percent higher than in 1935, were above quotations in any year since 1930. E gg producers in the Twelfth District shared in the increased agricultural income during 1936. Total production for the year exceeded that of 1935 by 15 percent. Prices averaged slightly lower, however, and gross income of producers is estimated to have increased by about 10 percent. Net income increased by a smaller percentage, there having been an ad vance in production costs, especially for feed in the last few months of the year. Consump tion of eggs in leading cities of the district was slightly larger than in 1935, and for the first time since 1930 shipments of eggs to eastern markets were larger than in the previous year. In the Pacific Northwest, a small increase in total crop output during 1936 was accom panied by a 30 percent advance in value. Grain crops, which provide a major source of income in that area, were 6 percent larger in volume and 32 percent larger in value than in 1935. Notwithstanding a 14 percent decline in pro duction of apples, the crop was valued at $30,000,000 compared with $25,000,000 in 1935. The marked advance in prices responsible for this gain in value reflected chiefly a small total United States apple crop. Production of pears reached record levels in the Pacific Northwest in 1936 due to increases in bearing acreage and in average yield per tree. Farm value of the crop advanced 36 percent to over $6,000,000. Markedly higher prices for potatoes, hops, and beans were chiefly responsible for a gain of 35 percent in the farm value of field crops. Growing of vegetables has become an increas ingly important source of income in Oregon, W ashington, and Idaho during recent years. The total value of all commercial truck crops raised in those states for shipment and manu facture was $9,254,000 in 1936, compared with $7,725,000 the year before. Crops such as can 3 ning peas, beans, and beets have contributed largely to the expansion in acreage and produc tion. Additional new canneries have been built and facilities of existing plants have been en larged to process these commodities. Sales of livestock and livestock products were 13 per cent larger than in 1935. The total volume of crops produced in Cali fornia was slightly smaller in 1936 than in 1935 but larger than in any other year. The decline from 1935 was a result entirely of smaller citrus and deciduous fruit crops. Mark edly higher prices for many products resulted in a 23 percent gain in value of all crops pro duced in the State. The acreage planted to vegetables and the tonnage harvested in 1936 were the largest in the history of California. These crops, valued at the record amount of $88,890,000, were worth 21 percent more than in 1935. Grain and field crops were grown and harvested under favor able conditions, and their farm value was esti mated to be $176,187,000. This amount is 42 percent above the 1935 value and higher than in any year since 1929. Higher prices received for most fruit and nut crops more than offset the smaller tonnage harvested, and the value increased 7 percent to $178,870,000. Value of the citrus crop increased 13 percent notwith standing a 25 percent decline in production. The record 1935 citrus crop brought growers extremely low returns per box, while the re verse was true in 1936. The livestock and live stock products industry has been the source of almost half the income of California agricul turalists in recent years. Cash income from that industry during 1936 was $205,000,000 an amount 6 percent larger than in 1935, and 23 per cent above average income during the five years 1930-1934. Crop production in Arizona, Nevada, and Utah increased during 1936 and value advanced about 14 percent from 1935. Receipts from the sale of livestock and livestock products, which usually account for more than 60 percent of agricultural income in these three states, were about the same as in 1935. Industry In the Twelfth District, industrial output and employment and private construction activity averaged considerably higher in 1936 than in 1935. M ost measures showed large gains over the 1935 average at the beginning of 1936 and advanced further during the year, reaching high levels in the fall. The upsurge of indus trial production recorded for the country as a whole during the last two months of the year was felt in most industries in this district, al though the gains were largely offset by the retarding influence of the maritime strike. On 4 an annual basis, industrial output and employ ment were higher than in any year since 1929, and the monthly average value of private build ing initiated was almost as large as in late 1930. Probably the most significant gains in 1936 occurred in the construction industry. For the second successive year, expansion occurred principally in the construction of new resi dences. Value of residential building permits issued increased 135 percent to $71,000,000 in 1936 in 20 cities, for which comparable data are available over a period of years. It is esti mated that the total value of urban residential construction exceeded $110,000,000. An increase of $35,800,000 during the first 11 months of 1936 in the amount of mortgage loans insured under the Federal H ousing A ct indicates the large and grow ing importance of that type of financing for building in this district. Partly reflecting industrial plant expansion, the value of private nonresidential permits was nearly twice as large as in 1935. Total value of per mits for new private building in the 20 cities for which sufficient data are available, how ever, still was little more than one-fourth as large as in the peak year of 1923. Public works contract awards, which have averaged $200,000,000 in the past seven years, totaled $240,000,000. The number of workers engaged in manu facturing occupations in the three Pacific Coast states averaged 12 percent higher than in 1935. A larger year-to-year gain in industrial pay rolls, amounting to 19 percent, reflected in creases in both the average number of hours worked per week and in average wage rates. The expansion in 1936 carried industrial em ployment to a level within 6 percent of the 1929 average, but industrial pay rolls still aver aged 25 percent below the pre-depression peak. Classified figures, available for California, in dicate that among the industries in which particularly large year-to-year gains were re corded were those producing aircraft, tin cans and other tinware, tires and other rubber prod ucts, agricultural implements, and stone, clay, and glass products. In 1936, as in the three preceding years, out standing year-to-year gains in industrial out put occurred in the building materials and nonferrous metals industries. In these lines, however, activity still was considerably lower than the record highs reached before the de pression. Further advances in 1936 carried output to new high levels in a number of in dustries which had grown unusually rapidly before the depression. Increased output in the canning and packing and container industries largely reflected record packs of a number of food products. In most other food industries, where output fluctuates irregularly within a January 1937 M O N T H L Y REVIEW OF BUSINESS CONDITIONS comparatively narrow range, volume of pro duction was about the same in 1936 as in 1935. A m ong the industries showing particularly large gains in output in 1936 were those pro ducing building materials, such as lumber, cement, and steel. Total lumber production increased 26 percent, substantial gains occur ring in the western pine, Douglas fir, and California redwood regions. Demand for lum ber continued to increase and prices advanced about 9 percent during the year. An advance of 82 percent in output at district cement mills reflected increased consumption on large en gineering projects such as the Grand Coulee Dam and the Los Angeles Metropolitan W ater project. Steel plants are reported to have ad vanced their schedules substantially and to have operated at near capacity levels through out the year. Notwithstanding large gains in the past few years, lumber output averaged 30 percent below the record level of 1926. Largely reflecting increased prices, produc tion of nonferrous metals increased substan tially in 1936. The average price of newly mined domestic silver, as established by the Secretary of the Treasury under the Silver Purchase Act, increased from 71.875 cents an ounce to 77 cents. Prices advanced from 8.3 cents to 9.2 cents a pound for copper, from 4.0 cents to 4.6 cents a pound for lead, and from 4.4 cents to 4.9 cents a pound for zinc. Nearly all of the advance in output occurred at mines which have been active almost continuously in recent years, but a number of old mines were rehabilitated and production at newly dis covered properties increased. It will be seen in the accompanying tabulation that output of most nonferrous metals still was substantially smaller in 1936 than in previous record years. M INE PRODUCTION OF NONFERROUS M ETALS Twelfth Federal Reserve District (000 omitted) (Gold and silver in fine ounces, other metals in tons) Pre-depression High ,-----Production-----* Year Production 1935 1936 G o ld ........................................ 1 8 5 2 ..................................... 1 9 2 3 C o p p e r ...................................1 9 2 9 Lead ......................................1 9 2 7 Zinc ........................................ 1 9 2 9 Silver 3 ,9 3 3 4 8 ,6 5 2 665 322 1 08 1 ,6 5 3 3 1 ,7 4 7 243 164 81 2 ,0 2 0 3 9 ,7 7 9 406 1 82 151 In the paper and pulp, motion picture, motor vehicle, and aircraft industries, production ad vanced further in 1936 to new record high levels. Output of tires and tubes and furniture increased sharply, and tire production was about as large as in 1929. Aircraft production, which in 1935 was about 40 percent larger in value than in 1929, is reported to have advanced sub stantially further in 1936. A ll of these lines grew more rapidly than industry as a whole during the decade preceding 1930. Their growth was checked during the depression, January 1937 FEDERAL RESERVE B A N K OF SAN FRANCISCO but as early as 1933 resumption of expansion became evident in some of them. Additional productive capacity in nearly all of these more rapidly grow ing industries as well as in a num ber of others was provided in an increasing amount during 1936. In some cases new plants have been established and in many lines addi tions and improvements to existing facilities have been made. Production estimates for some of the district’s rapidly expanding in dustries in 1935 and 1936 in relation to 1929 are shown in the follow ing table: ESTIMATED VOLUM E OF IN DU STRIAL OUTPUT (1929=100 percent) 1935 1936 Paper .................................................................. 104 120 150 Wood pulp ............ #.......................................... 131 Automobile assemblies .................................... 92 112 Motion pictures ( c o s t ) .................................... 128 138 Crude oil production, which in the opening month of the year had risen to the highest figure in nearly six years, was reduced sub stantially in February under a voluntary cur tailment program. The reduction was accom panied by an advance of 20 cents in the posted price of crude oil to $1.10 per barrel. Although output, averaging 587,000 barrels daily during 1936, was slightly larger than in 1935, refinery stocks declined 12 percent. An increase of 11 percent in gasoline production was accom panied by an expansion in demand. After moving irregularly during the first few months of the year gasoline prices were stabilized at the August 1935 level. The canning industry was considerably more active than in 1935, and the pack of a number of food products was larger than in any previous year. In California, output of canned vegetables increased 23 percent to a new high total of 16,429,000 cases, reflecting Industry— Indexes of daily average production, adjusted for seasonal variation (1923-1925 daily average=100) ,------------1936 /— 1935— \ Year’ s Year’ s General Av. Dec. Nov. Oct. Dec. Av. Carloadings— Industrial . . 70 85 71 77 68 56 Electric Power P roduction... 182 192 187 189 173 161 Manufactures Lumber .............................. .. .. 78 82 62 83ÏÏ 66 88 Refined Mineral O ilsf. . . . 154 155 151 154 157 140 Flour .................................. ., . , 109 89 75 109 113 99 Cement .............................. 112 64 150 138 114 Wool Consum ption!.......... . . . 94ÏÏ 741F 102 68 89 116 Slaughter of Livestock. .. , . . 112 126 117 114 102 99 Minerals 88 88 88 103 86 Petroleum ( C alifornia)!••.. . 89 Lead (United States)$ . . . , 74 70 71 59 Silver (United States) . 68 60 99 119 Building and Construction§ Total .................................. . 78 72 48 75 69 Building Permits— Value Larger Cities .................., . . 37 43 44 45 24 21 Smaller Cities ................ . . 58 71 38 69 65 30 Engineering Contracts Awarded— V alue Total ............................. . . 109 107 101 81 99 118 Excluding Buildings... . . 195 178 160 168 217 151 fN ot adjusted for seasonal variation. ^Prepared by Board of Gov ernors of the Federal Reserve System. § Indexes are for three months ending with the month indicated. ^Preliminary. 5 record packs of tomatoes and tomato products. A slight increase in the canned fruit pack to 17,133,000 cases made the 1936 output the largest since 1930. In the Pacific Northwest, the pack of canned peas, which advanced from negligible proportions prior to 1933 to nearly 2,000,000 cases in 1935, increased nearly 60 percent further in 1936. Reflecting a record pack of salmon in Alaska, the total salmon pack amounted to 8,983,000 cases, an increase of 49 percent over the short 1935 total and of 5 percent over the previous record reached in 1917. The pack of canned fish, while slightly smaller than in 1935, was larger than in any other year. There was some expansion of can ning facilities, particularly for tomatoes and peas, during the year. Trade Trade activity increased steadily during 1936. Value of retail and wholesale trade continued the expansion in progress since 1933, and num ber of new automobiles sold was larger than in 1929. Movement of goods by rail was larger than in any year since 1930, partly reflecting heavy traffic during November and December as a result of the maritime strike. Despite marked declines in foreign trade during N o vember and December because of the maritime strike, exports of merchandise from Pacific Coast ports was only 5 percent smaller in value Bank D ebits* — ,---- Twelve months----- N Dec. Dec. 1935 1935 1936 1936 Arizona Phoenix ............ .$ 48,918 $ 36,747 $ 436,426 $ 364,176 California 144,652 16,757 192,061 Bakersfield 24,197 221,872 187,894 17,437 21,645 Berkeley .......... 274,391 32,438 321,700 34,375 Fresno .............. 353,680 407,394 Long Beach . . . 34,916 40,637 8,021,018 818,651 10,216,206 Los A n g e le s.... 1,056,827 1,118,211 82,592 849,573 124,260 Oakland ............ 258,346 30,017 25,113 297,046 Pasadena .......... 1,198,928 1,279,208 104,834 Sacramento . . . . 124,825 88,276 114,237 12,822 8,526 San Bernardino. 499,980 62,121 47,902 574,139 San D ie g o ........ 925,225 10,637,827 9,567,859 San Francisco.. . 1,075,791 240,382 275,981 San Jose............ 25,225 22,725 119,750 Santa Barbara.. 13,768 12,881 142,885 47,389 57,330 5,608 4,640 Santa R osa........ 17,570 232,441 191,133 Stockton .......... 23,589 Idaho 202,108 179,369 20,961 16,705 Nevada 120,712 11,048 103,538 12,940 Oregon 7,853 5,903 76,610 59,713 1,699,568 P ortla n d ............ . 187,596 156,167 1,953,739 12,310 142,074 171,340 15,875 Utah 18,914 15,883 182,168 169,462 Salt Lake C ity ., 70,371 770,152 90,847 657,967 Washington Bellingham ___ 6,561 5,847 72,847 61,625 9.507 7,339 88,794 67,950 . 226,969 181,801 2,315,849 1,880,463 54,293 44,590 537,754 444,581 Spokane ............ Tacoma ............ . 29,508 36,249 388,817 303,663 6,310 Walla Walla . . . 67,156 59,167 4,951 17,007 11,932 160,930 138,539 T o t a l..................$3,436,507 $2,783,309 $33,553,660 $28,455,386 *In thousands of dollars. M O N T H L Y REVIEW OF BUSINESS CONDITIONS during 1936 than in 1935, while imports, ex cluding raw silk, were 5 percent larger. Retail sales of department, apparel, and furniture stores were 13 percent larger in value in 1936 than in 1935, an increase somewhat greater than the annual gains in 1935 and 1934. R ETAIL TRAD E—Twelfth District Percentage changes in value of sales and stocks -1936 compared with 1935STOCKS -N E T SALES Jan. 1 to end End of of December December December* 10.6 3.6 ( 51) Department S to r e s .... 15.8 ( 81) 3.9 ( 6) 18.0 ( 6) 11.3 Los Angeles ............ 8.2 12.5 ( 6) Other So. California 18.1 ( 9) 1.7 ( 4) Oakland .................... 13.5 ( 5) 10.3 — 2.8 ( 7) 10.3 San Francisco ........ 14.3 ( 8) — 1.2 ( 15) Bay Region ............ 14.0 ( 18) 10.2 0.7 ( 4) Central C alifornia... 15.4 ( 5) 7.3 Portland! ................ 17.3 ( 9) 16.0 6.6 ( 6) Seattle ...................... 14.8 ( 5) 11.2 ( 4) 11.2 11.3 8.4 ( 5) 12.4 ( 6) Spokane .................... 10.8 12.6 ( 4) Tacomaf .................. 14.4 ( 7) 10.3 ( 4) 6.3 Salt Lake C ity........ 8.9 ( 4) 10.7 ( 26) Apparel Stores ............ 21.0 ( 41) 16.7 22.9 ( 22) 25.6 Furniture Stores ........ 24.9 ( 32) 13.0 7.0 ( 99) All Stores ................ .. 17.2 (154) tlncludes five apparel stores each in Portland and Tacoma which are not included in district department store total. Figures in parentheses indicate number of stores reporting. ^December 1936 had one more trading day than December, 1935. No adequate measure of retail prices is avail able, but reports indicate that average prices of goods sold by department stores were only slightly higher than in 1935. In addition to the general expansion in purchasing power through larger wage, salary, and ordinary in come payments, sales were stimulated notice ably by payment of the veterans' bonus and, in November and especially December, by extra dividend payments and wage bonuses. After having advanced 27 percent in 1935, value of sales of furniture stores advanced 26 percent in 1936. The increase accompanied widespread gains in home building and modernization. Notwithstanding continuation of the mari time strike, Twelfth District Christmas deDistribution and T ra d e— Indexes adjusted for seasonal variation (1923-1925 average=100) ,--------------- 1936--------------- \ Year's Av. Dec. Nov. Oct. Carloadings^ Total ........................ .. 85 Merchandise .......... .. . 97 Intercoastal Trade Total ........................ .. . 65 Westbound .............. ... 98 Eastbound .............. , . 55 Retail Trade Automobile Sales^t Total .................... ., , 137 130 Passenger ............ . Commercial .........., . 216 Department Store Stocks§ ................ . . Collections# Regular.............. , . Installm ent........ 65 49.6 17.9 -1935Year’ s Dec. Av. 101 113 90 105 86 93 85 98 72 85 0 0 0 27 24 28 75 97 66 69 89 65 66 90 59 177ÏÏ 177ÏÏ 1791Í 109 108 114 93 84 189 129 124 183 104 97 179 100 66 95 68 95 65 90 64 85 62 49.4 17.6 52.1 17.7 49.3 17.7 48.2 18.1 50.6 17.3 :J:Daily average. §A t end of month. #Percent of collections during month to amount outstanding at first of month. ^Preliminary. fN ot adjusted for seasonal variation. January 1937 partment store sales increased considerably more than seasonally and were larger in value than in any December since 1930. Decreased purchases by those directly affected by the strike did not influence total sales materially, inasmuch as sales to that group is usually small relative to total department store sales. Sales of new automobiles in 1936 were at the highest level on record. Total number of cars sold during 1936 was 32 percent larger than in 1935, sales of passenger cars increas ing 34 percent and of trucks 21 percent. W HOLESALE TR AD E —Twelfth District Percentage changes in value of sales Automobile Supplies . Drugs ........................ Dry Goods ................ Electrical Supplies .. Furniture .................. Groceries .................... Hardware .................. Shoes .......................... Paper and Stationery. All L in e s .................... December 1936 ,----- compared with----- * Nov. 1936 Dec. 1935 18.2 — 19.7 1.9 15.5 — 23.0 15.4 27.1 36.1 15.4 54.6 2.7 14.4 7.4 21.8 — 13.4 13.5 7.7 14.1 3.4 20.4 Cumulative 1936 compared with 1935 13.2 12.6 6.6 33.6 0.6 8.8 22.4 15.4 12.4 15.0 Movement of freight on Twelfth District railroads increased 18 percent during 1936, a greater yearly gain than in any period since 1919. The seasonally adjusted index of freight carloadings advanced irregularly from 84 per cent of the 1923-1925 average at the beginning of the year to 101 percent in December. The gain was due mainly to the increase in indus trial activity, although in the last tw o months of the year considerable freight was diverted from water to rail shipments by the maritime strike. Shipments by rail from California ad vanced slightly more than did shipments from the Pacific Northwest. Industrial loadings from both areas were 25 percent higher in 1936 than in 1935, while merchandise and miscellaneous loadings increased 14 percent. Intercoastal water-borne traffic decreased 2 percent during 1936. In the first ten months, shipments from the Atlantic Coast advanced 26 percent and eastbound cargoes increased 7 percent. Petroleum shipments from Pacific Coast ports, which constituted about 23 per cent of total eastbound traffic in 1935, declined somewhat in the first ten months of 1936. Other eastbound cargoes however, advanced 14 percent. Sharp curtailment in intercoastal traffic in November and complete stoppage in December resulted from the maritime strike. T he Credit Situation Outstanding among banking developm ent in the Twelfth Federal Reserve District dur ing 1936 was the substantial further growth ir deposits. Time accounts of member banki increased $19,800,000 to $2,025,000,000 anc January 1937 fe d e r a l re se rv e b a n k o f san fr a n c is c o demand deposits increased $418,000,000 to $2,059,000,000. A t the close of the year both classes of deposits considerably exceeded any previous levels. The expansion in demand deposits, which constitute the principal purchasing medium in the district, was accompanied by a somewhat comparable increase in the volume of checks drawn against them or, in other words, the rate of turnover of those deposits changed lit tle. Based upon data for city banks, the per centage increases in demand deposits and in checks drawn against such accounts were ap proximately identical from the fall of 1934 to early 1936. In the spring and summer of 1936 the volume of checks debited tended to level off but subsequently increased considerably. One of the principal factors contributing to the growth in bank deposits during 1936 was an increase of $226,000,000 in total loans and investments of district member banks. Loans in the “ all other” classification, which consists principally of advances to customers for com mercial, industrial, and agricultural purposes but also includes personal installment loans and Federal Housing Administration loans for home modernization, advanced slightly more than $114,000,000. In 1935 loans of that type increased $102,000,000. Loans secured by real estate expanded $23,000,000 during 1936, the net change occurring at banks located outside the principal cities. The expansion in real estate loans came entirely in advances secured by nonagricultural property and resulted to a considerable extent from loans for new home SOURCES A N D USES OF BAN K IN G RESERVES Twelfth District Changes in millions of dollars during the weeks indicated SOURCES OF FUNDS Week Ending Reserve Bank Credit 1936— Nov. 18........ ... + .2 Nov. 25........ ...— 3.7 Dec. 2 ........ ... + 4 . 6 Dec. 9 ........ ... — 3.4 Dec. 16........ ... + 7.1 Dec. 23........ ... + 1.3 Dec. 30........ ... + 2 . 3 1937— Jan. 6........ ... — 8.1 Jan. 13........ ... + 1 . 2 Jan. 20........ ... + .7 Commercial Treasury Operations Operations — 1.9 — 5.3 — .1 + 9.7 — 15.6 +23.8 — 2.8 — 18.8 — 10.9 — 5.0 — 1.1 + 4 .9 +10.8 +12.1 — 18.6 + 8.9 — .5 + 6.7 + 3.5 — 4.3 Total Supply — 2.8 — 4.1 +15.3 +18.4 — 27.1 +34.0 — 1.0 — 20.2 — 6.2 — 8.6 USES OF FUNDS Demand Week for Ending Currency 1936— Nov. 18........ — 5.2 Nov. 25........ — .9 Dec. 2 ........ + 3.2 Dec. 9 ........ + .7 Dec. 16........ — .8 Dec. 23........ + 6.1 Dec. 30........ — 9.9 1937— Jan. 6 ........ — 1.7 Jan. 13........ — 12.8 Jan. 20........ — 3.3 Member Bank Reserve Deposits + 4 .5 — 3.6 +12.2 +16.5 — 24.9 + 3.4 + 9.1 + 7.7 + 3.3 — 4.2 Other F.R.B. Accounts — 2.1 + .4 — .1 + 1.2 — 1.4 +24.5 — .2 — 26.2 + 3.3 — 1.1 Total Demand — 2.8 — 4.1 +15.3 +18.4 — 27.1 +34.0 — 1.0 — 20.2 — 6.2 — 8.6 7 construction. Loan repayments at banks in the leading cities were about equal to new ad vances for construction and purchase of exist ing properties. Loans secured by stocks and bonds were practically unchanged over the year period. Total investments advanced about $85,000,000, increases amounting to $15,000,000 in United States Government direct obliga tions, $43,000,000 in obligations fully guaran teed by the United States Government, and $27,000,000 in all other securities. A second principal factor affecting de posits in the district was the continued local disbursement by the United States Treasury of much larger sums than were collected from this region. Government disbursements go principally to individuals, partnerships, and corporations and are ultimately deposited in banks, thus tending to increase deposits. Gov ernment collections, on the other hand, include tax payments from individuals and businesses and also payments for securities and repay ments for loans which, unless they originate with banks, tend to decrease deposits. Total collections by the United States Government in the Twelfth District have not been sufficient to meet local disbursements of the Treasury in recent years. It has thus been necessary for the Treasury to transfer into this district large amounts collected from taxes and sales of securities in other parts of the United States, principally New York, to help meet various local expenditures. Disbursement of those funds to individuals and businesses has been by far the largest factor increasing district bank deposits in the past few years. During 1936, Treasury disbursements exceeded collec tions in the Twelfth District by $454,000,000, exclusive of payments for newly mined, scrap, and imported gold, which totaled $144,000,000 and which also tended to increase deposits. In addition to payments for normal and re covery activities, Treasury disbursements dur ing 1936 included payment of the soldiers’ “ bonus” . Approximately 3,320,000 bonds (each having a value of $50) were distributed to 308,000 veterans in the Twelfth District in ex change for their adjusted service certificates. Actual payments of funds to veterans for odd amounts of less than $50 and for bonds which they elected to cash approximated $159,000,000. Expansion in bank deposits during 1936 be cause of the increases in loans and investments and the net Treasury disbursements was partly offset by several factors tending to reduce de posits. Withdrawals of currency from banks for circulation totaled $38,000,000, net, during the year, and payments to other districts aris ing from commercial and financial transactions were $359,000,000 larger than payments re ceived in this district from other areas. Factors 8 M O N T H L Y REVIEW OF BUSINESS CONDITIONS which cause transfers of funds from the Twelfth District to eastern districts include purchases of manufactured commodities such as automobiles, steel, machinery, apparel, and many other articles; payment of insurance premiums and interest on loans made by in surance com panies; dividend payments; and purchases of securities. On the other hand, Tw elfth District business concerns and in dividuals receive large payments for raw materials, manufactured products, and agricul tural products, which they sell in other re gions, as well as payment of dividends, loans, etc., from outside points. Detailed statistical data on the balance of payments between the Tw elfth District and other regions are not available, but the net result of all interdis trict transfers for commercial and financial purposes during 1936 was an outflow of $359,000,000, and payment of that net amount tended to decrease bank deposits in this re gion. Throughout the year local banks held idle funds in substantial volume. These funds, which were in the form of excess reserve bal ances at the Federal Reserve Bank of San Francisco or of correspondent balances in ex cess of operating requirements, were widely distributed among member banks of the dis trict. Consequently, most banks met the 50 percent increase in reserve requirements, or dered by the Board of Governors of the Fed eral Reserve System effective August 15, without borrow ing from the Reserve Bank or disposing of earning assets. This increase in required reserves immediately reduced excess reserves by about $110,000,000, lowering the excess balances from an average of 88 percent of required reserves in the first half of August to 32 percent in the last half of the month. From September through December additions to reserve balances were comparatively m od erate. Continued large disbursements of the United States Treasury in excess of local col lections tended to increase member bank re serve balances, but these were offset in con siderable part by an increase in local demand for currency and by a net outflow of funds to other districts because of payments in connec tion with commercial and financial transac tions. Furthermore, such additions to reserve balances as did take place were accompanied by an advance in the volume of required re serves resulting from the continued growth in bank deposits. Thus, in the last two weeks of December, excess reserves of all district mem ber banks averaged 30 percent of requirements, the ratio for country banks somewhat exceed ing that for city institutions. In addition, cor respondent balances were considerably larger than necessary for working purposes. January 193! Securities Markets Stock and bond prices on Pacific Coasl securities markets advanced considerably anc at a more rapid rate than trading activity dur ing 1936. Customers’ debit balances on brokers books, which represent funds borrowed from brokers for the purpose of financing security purchases in local and eastern markets, in creased at about the same rate as stock prices. During the first three months of the year, bor rowings increased 21 percent. About two-thirds of the increase was liquidated in the period from April to July, but subsequently balances increased. On December 31 they were 30 per cent larger than at the beginning of the year. Trading on Pacific Coast stock exchanges fluctuated widely during 1936. Activity, as in dicated by an index of the market value of shares traded, adjusted for price changes, was maintained at a comparatively high level early in the year. A decline commenced in February, however, and lasted until June. In that month, trading began an irregular increase, and by November markets were only slightly less active than in January when the high point of the year was reached. The index averaged 10 percent higher in 1936 than in 1935. As in 1935, about one-fourth of the market value of sales on all United States exchanges outside New Y ork City represented trading on Twelfth District exchanges. Price averages of Pacific Coast stocks were about 30 percent higher at the end of 1936 than at its beginning. A substantial rise early in the year was followed by a recession which carried prices to a point only slightly above their January level. The rise was resumed in June, and prices advanced irregularly during the remainder of the year. Corporate bond prices advanced about 5 percent on the average during 1936. Im prove ment was more marked in the lower than in the higher grade issues. Prices of municipal bonds were also higher, yields on long-term issues falling about two-thirds of 1 percent. This decline would represent a rise of eight and one-half points in the price of a 4 percent bond due in fifteen years. New securities distributed for Tw elfth D is trict corporations and local governing bodies in 1936 amounted to about $455,000,000. O f this amount approximately $75,000,000 repre sented municipal bonds, $335,000,000 corpo rate bonds, $25,000,000 preferred stocks, and $20,000,000 common stocks. Alm ost all of the corporate bond issues were for refunding pur poses, and more than half of the preferred stocks were sold for the purpose of retiring debt or other preferred stocks. The remainder of the preferred stocks and practically all of the common stocks supplied new capital. M O N T H L Y R E V IE W OF BUSINESS CONDITIONS Federal Reserve Bank of San Francisco Supplement San Francisco, California, January 20, 1937 Vol. X X I 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 Board of Governors of the Federal Reserve System The Board’s index of industrial production showed a sharp advance in December, after allowance is made for the usual seasonal changes. There was a marked expansion in employment and pay rolls, and retail trade con tinued at high levels. Production and Employment. Actual volume of industrial production showed little change from November to December, at a time when a sharp seasonal decline is usual, and the Board’s adjusted index advanced from 114 to 121 percent of the 1923-1925 average. There was a further rise in activity at textile mills to the highest level on record and output of other nondurable manufactures was main tained. Declines in production of steel and lumber were smaller in December than are usual in that month. A t automobile factories there was a marked increase in output. In the first three weeks of January activity at steel mills increased somewhat, but there was a de cline in assemblies of automobiles as a result of shutdowns occasioned by strikes. Coal pro duction declined seasonally from November to December, while output of crude petroleum increased, contrary to seasonal tendency. Value of construction contracts awarded, according to figures of the F. W . Dodge Cor poration, showed a seasonal decrease in De cember. Factory employment expanded further be tween the middle of November and the middle of December, contrary to the usual seasonal movement. Increases were general among the durable goods industries, with the largest ad vances at plants producing automobiles and machinery. In the nondurable goods industries there were marked increases in the number employed at textile mills and at shoe factories. Reflecting principally the higher level of em ployment and advances in wage rates, factory pay rolls increased sharply in December, par ticularly at steel mills and in the textile in dustries. In retail trade, employment rose more than seasonally and in most other nonagricultural pursuits there were increases, when al lowance is made for seasonal changes. Distribution. Retail sales in December in INDUSTRIAL PRODUCTION FACTORY EMPLOYMENT AND PAYROLLS Index of physical volume of production, adjusted for seasonal variation, 1923-1925 average—100. By months, January 1929 to December 1936. Indexes of number employed and payrolls, without adjustment for seasonal variation, 1923-1925 average=100. By months, January 1929 to December 1936. Indexes compiled by the United States Bureau of Labor Statistics. creased seasonally at department stores and by more than the usual seasonal amount at variety stores and mail order houses serving rural areas. Freight carloadings showed a smaller de crease than is usual in December, and the Board’s seasonally adjusted index advanced further. Com m odity Prices. W holesale prices, for both industrial and agricultural commodities, continued to advance in the second half of December and the first half of January. There in loans to brokers. The decrease in loans re flected in part the retirement of notes issued by the Commodity Credit Corporation last July and in part repayment of other loans, which had increased sharply in preceding weeks. Holdings of Government obligations declined further at New Y ork City banks, but increased at banks in other leading cities. Demand deposits decreased at the turn of the year, but thereafter increased somewhat, reflecting chiefly the return of currency from holiday use. The rate on 90-day bankers’ acceptances was MEMBER BANK LOANS AND INVESTMENTS 1932 1933 1934 1935 1936 1937 Indexes compiled by the United States Bureau of Labor Statistics, (1926=100.) By weeks, 1932 to date. Latest figure is for week ending January 16,1937. Wednesday figures for reporting member banks in 101 leading cities, September 5,1934 to January 20,1937. Loans on real estate and loans to banks excluded. were marked increases in prices of industrial raw materials, particularly nonferrous metals, lumber, hides, and w ool, and prices of a num ber of finished goods, such as steel products, paper, and textiles also advanced. Since the middle of January there has been a decline in prices of commodities traded in on the organ ized exchanges. Bank Credit. Loans and investments of re porting member banks in leading cities de clined in the first three weeks of January, as a result of reductions in commercial loans and raised 1/16 percent on January 13 and now stands at J4 percent. Market discount rates on Treasury bills have also increased, with bills offered in the week ending January 16 selling at a discount of over percent, as compared with a rate of about 1/10 percent early in December. Excess reserves of member banks increased from $1,880,000,000 to $2,130,000,000 in the four weeks ending January 20, reflecting large ly the post-holiday return flow of currency from circulation.
@FedFRASER