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MONTHLY REVIEW TWELFTH FEDERAI RESERVE DISTRICT F ed e r a l r e s e r v e Ba n k o f S a n F r a n c is c o June 1955 r e v ie w o f b u s in e s s c o n d it io n s en eral business activity has reached a new high level in June and most of the major economic indi G cators will apparently move into even higher ground in the next month or two. Moreover, the six months just ended have been the most active first half year on record for both the District and the nation. The number of people employed, incomes, industrial output, and ex penditures have all risen substantially in the first half of the year, in most instances to new record highs. Al though complete data are not yet available for the sixmonth period as a whole, information available through May and preliminary indications for June attest to the record first half. In the Twelfth District, total nonagricultural employ ment in the period of January through May averaged 3 percent ahead of the comparable m0iiths a year ago and nearly 1.5 percent ahead of the same interval in 1953, the previous most active first five months in the history of the District. A similar pattern of change is evident in the volume of sales at retail establishments. Seasonally adjusted sales at District department stores for the first half of this year were 10 percent above those of the comparable year-ago period and 1 percent above the same interval in 1953. Those data which are available for total retail sales point to an even stronger rise in spend ing than do department store figures. As the principal factors behind these developments have been discussed in several previous issues of this Review , only brief mention need be made of them at this time. Consumer demand, reflecting expanded incomes and a high degree of confidence, continued high. These factors have also made consumers willing to spend freely out of current income and to increase their indebtedness for the purchase of major durable goods and housing. Stemming in large measure from this behavior on the part of consumers has been the recent upward shift in capital expenditure plans of business firms and the ex panded outlays intended to bring inventories into line with current high sales rates. Total government demands have been more stable recently than in 1954, when they declined in the first half of the year. While some shifting in the emphasis placed upon specific types of defense goods has continued to have a favorable impact upon cer tain segments of the District economy, so far this year total government activity has provided only a modest stimulus to the business situation. District lumber industry moves ahead despite setbacks Under the impetus provided by the national construc tion boom, the District lumber industry has expanded its level of operations sharply. The rates of expansion, how ever, have been markedly different among the three pro ducing regions of the District, partly reflecting produc tion and shipment difficulties that have affected different areas in varying degrees. Production in the western pine region in the first five months of the year expanded most relative to the same period last year, nearly 13 percent. Output of redwood lumber rose not quite 5 percent, while Douglas fir production increased 1 percent despite production interruptions. Douglas fir production was hampered by late snows which cut logging operations in April and early May. In addition, a strike in the truck ing industry, which started May 19 and ended during the second week in June, interfered with the normal flow of product and acted as a further brake on output. With these factors no longer exerting a dampening influence, production should rebound sharply in the Douglas fir re gion after allowing for seasonal forces. Despite the strong pressure of demand, seasonal forces will place a drag on actual output. Industry vacation shutdowns and sum mer fire hazards will tend to restrain Douglas fir output during the summer. While production data, after allowance for seasonal factors and the special influences just mentioned, point to considerable strength in the lumber industry, trends in prices and unfilled orders are perhaps more indicative of the fundamental forces underlying the current market situation. In the first five months of the year, orders re ceived by mills in the western pine region rose nearly 14 percent from the same period a year earlier. For red wood the increase was much larger, 44 percent, while Douglas fir orders actually declined slightly. The deAlso in This Issue Twelfth District Commodity Trade —19 5 0 70 FEDERAL RESERVE BANK OF SAN FRANCISCO 70 cline in orders for Douglas fir reflects in part the fact that traditionally dealers do not order as heavily when production is being hampered in one way or another and there is a temporarily sharp upward pressure on prices. Late storms placed considerable upward pressure on prices. Moreover, in April, before the full effect of the storms had become apparent, Douglas fir prices (using dimension number 1 common 2 " x 4 " as a gauge) were nearly 15 percent above April 1954. The price of pon derosa pine (number 3 common 1" x 8 "— a bellwether grade for the western pine region) in April was more than 9 percent ahead of April last year. In May, prices for redwood lumber were 7 percent greater than in May a year ago. Unfilled order backlogs at the end of May were substantially higher than at that time last year in all three regions— 25 percent in western pine, 10 percent in Douglas fir, and 67 percent in the redwood region. Plywood output and capacity up sharply Plywood production, reflecting essentially the same demand factors as lumber, has accelerated at a rapid rate in the first half of the year. Cumulative output through the week ended June 25 was almost 30 percent above the comparable year-ago period, and production for the first 25 weeks averaged in excess of 100 million square feet weekly. This rate of production is roughly 4 percent above the industry’s normal (5 day-3 shift) weekly ca pacity of 96.6 million square feet. Prices have responded sharply to the marked increase in demand and in May averaged about 8 percent higher than in May last year. The strong growth trend in the industry has apparently continued unabated and is reflected in the rise in pro duction capacity from 84 million square feet weekly in June last year to nearly 97 million square feet weekly in late June this year. Department store sales at new high in first half Reflecting the high levels of employment and income, seasonally adjusted sales at District department stores in June moved up to a level just slightly under the peak June 1955 reached in January. Despite the relatively slackened rate of sales in February and March, total cumulative dollar volume of transactions for the first half of the year ex ceeded any previous first-half period. Cumulative sales, seasonally adjusted, for the first six months of this year were nearly 1.5 percent above the previous peak reached in the first half of 1953 and more than 10 percent higher than in the same period last year. All indications sug gest that total retail sales, of which department stores are only one component, have expanded even more. Based upon data for the Western Region supplied by the Department of Commerce, which includes more than the seven District states, total retail sales in the first four months of the year rose 13 percent above the year-ago period. This compares with an 8 percent gain for the comparative period at District department stores. Tax able retail sales in California in the first quarter rose even more sharply relative to department store sales, 18 percent as compared with 9 percent. Much of the differ ence in sales experience during these periods between the two groups of stores is accounted for by the extremely high sales rate of new automobiles. For example, while total California taxable retail sales rose by 18 percent in the first quarter, new automobile sales increased by 46 percent. Sales of other automotive products and of building materials also played a part in the greater rise in total retail sales compared with department store sales. Inventories of District department stores, after sea sonal adjustment, have tended to decline throughout the first five months of the year. This decline has occurred despite a large rise in the volume of orders placed by District stores. At the end of May the volume of orders outstanding was 20 percent above the volume at the same time last year. This suggests that the dwindling of stocks on hand may well have reflected an inability to increase stocks in the face of the sharp gain in sales volume. The decline in stocks, seasonally adjusted, has not been unduly large, 4 percent, and relative to May last year, stocks were higher by some 3 percent. TWELFTH DISTRICT COMMODITY TRADE—19 5 0 a ta have become available making possible an analy D sis in terms of dollar value of a major proportion of the commodities shipped into and out of the Twelfth District in 1950. Information is available with respect both to the District’s trade with all other regions, includ ing goods moving through District ports to and from foreign countries, and to its trade with other parts and possessions of the United States. Although brief refer ence will be made to the District’s trade with all other regions, including foreign countries, attention in this ar ticle will be concentrated primarily upon trade within the United States, including some discussion of intradis trict trade. The data show that during 1950 the District incurred a fairly substantial trade deficit with other parts of the nation resulting primarily from receipts of manufactures from the central and eastern parts of the nation. The Dis trict paid for a major part of its receipts from other do mestic areas by a large surplus of shipments of agricul tural products to domestic regions outside its boundaries. The data also reveal that the District has a rather large interregional trade and, therefore, its economy tends to react quickly to changes in national economic conditions. Until recently, only some isolated ideas and data were in existence on Twelfth District commodity trade with other areas, and they offered little in providing a com June 1955 M O NTHLY REVIEW prehensive view of District external trade. In 1953, the Interstate Commerce Commission provided a price series applicable to its sample data on physical quantities of railroad freight in 1950. The ICC figures, Corps of En gineers statistics for domestic waterborne commodity trade (including trade with offshore possessions), data on foreign trade through District ports from the Bureau of the Census, as well as data from some other sources provide a picture of District trade in 1950 which is fairly comprehensive. The data are not complete nor are they precise. The principal weakness is the absence of data on truck shipments. The methods of computing the trade figures and the limitations to which they are subject are discussed in an appendix to this article. Nevertheless, the available information covers a very high proportion of District trade, especially with regions outside the District, and permits a variety of observa tions which would otherwise not be possible. In the interest of brevity, all shipments out of the Dis trict will be referred to as exports and all receipts from other areas as imports in the following discussion. Ref erences to trade with foreign countries are clearly in dicated in the context. From this study some idea can be obtained of the flow of commodities or trade between the District and vari ous areas, the importance of particular commodities or groups of commodities as imports and exports, and the varying trade characteristics of the several District states. The effect of resources, market size, incomes, prices, dis tance, and tastes on interregional trade can also be ob served. Although gaps in the data and other limitations restrict the precision which can be attached to various conclusions, the clues provided offer a basis for more de tailed study of the District’s relationship to other parts of the nation. This article summarizes the principal char acteristics of District trade. The Twelfth District has a large merchandise trade flow with other regions In 1950 combined commodity imports and exports of the Twelfth District with other areas of the United States and the rest of the world totaled $16.8 billion, and im ports exceeded exports by almost $600 million. In the same year national foreign merchandise trade amounted to $19.2 billion and consisted of $10.1 billion in exports and $9.1 billion in imports. In recent years the foreign trade of the United States has received considerable atCommodity T rade T able 1 T welfth D istrict A rea— 1950 of the (thousands of dollars) Area Continental United States............. Offshore United States possessions Foreign countries .......................... Imports 7,655,440 344,010 731,988 Exports 6,320,414 1,047,329 775,126 T o t a l ................................................ 8,731,438 8,142,869 by M ajor Net (E xp ort+ Import—) — 1,335,026 - f 703,319 + 43,138 588,569 Note: Trade with continental United States and offshore United States posses sions does not include shipments or receipts by truck, air freight, parcel post, or private conveyance. Trade with foreign countries includes trade by all methods of transportation. Trade with all areas includes aircraft flown away under own power. Figures may not add to totals because of rounding. Source: See Appendix. 71 tention because of our role in world affairs and the ex istence of sizable “ dollar gaps” at various times. Never theless, in discussions of national economic conditions, our foreign trade is sometimes passed over lightly be cause the foreign commodity trade of the United States accounts for only a relatively small proportion of the total national output of goods. The interregional trade of the District, however, is much more important rela tive to District total output than foreign trade is to the total output of the nation. Precise figures with respect to the total value of out put of goods in the Twelfth District are not available. However, if the total value of cash farm marketings, value of mineral output, value of fish catch, and esti mated total value of all manufacturing production are combined, it appears that in 1950 the total value of goods produced or processed in the District approximated $20 billion. In the same year District exports which could be measured approximated $8 billion. In effect, measured exports accounted for roughly 40 percent of the District output of goods. Since both the figures for total value of product in the District and the total export figure are subject to various statistical errors1 and are also incom plete, this ratio of 40 percent is merely a rough approx imation. The volume of District interregional trade demon strates that the District relies to a considerable extent on other areas for both supplies and markets. The magni tude of the flows suggests, particularly with respect to the District’s trade with other areas of the United States, a very strong economic linkage. Through this linkage it may be expected that economic developments elsewhere in the United States will have a marked impact on ac tivity in this District. The lumber industry of the Dis trict offers a good example of how important the effects of national developments may be upon District business activity. A considerable part of the District lumber in dustry’s output is utilized in residential and other types of construction, and a major portion of District lumber output is sold outside the seven western states. Fluctua tions in construction nationally— particularly residential construction— have a marked effect on lumber output and hence upon business in general in several District states. The over-all domestic and foreign trade data indicate that a large part of the District’s interregional trade— more than 80 percent in 1950— is with other areas of the United States. Offshore possessions and foreign coun tries shared the remainder, with District foreign trade amounting to slightly more than trade with offshore pos sessions. The trade deficit accumulated with the conti nental United States is offset to a large extent by a siz able surplus with offshore possessions and to a minor extent by a small excess of exports in foreign trade. The District serves as a gateway for trade with offshore pos sessions— primarily Hawaii and Alaska— and some for eign areas. Some products imported into the District 1See Appendix for limitations on estimate of exports. 72 FEDERAL RESERVE BANK OF SAN FRANCISCO from other parts of the United States flow out as District exports— either in their original form or after some proc essing— to offshore possessions and foreign countries. Similarly, not all of the imports which come from over seas sources remain in the District. The export and im port figures are, therefore, inflated somewhat by these transshipments. In the net balance, however, individual imports that are exported cancel out except to the ex tent that the imports are processed and enter into ex ports as higher valued products. June 1955 T able M a j o r P r o d u c in g I n d u s t r y G r o u p — 1950 (Includes offshore U nited States possessions) (thousands of dollars) Miscellaneous ....................................... Total farm c r o p s ................................ Imports 482,612 119,830 9,110 7,437 201 47,751 184,329 Exports 1,613,987 68,897 497,385 447,242 166,246 181,071 1,360,841 Animal p r o d u c t s ................................... Total animals and p ro d u cts............. 250,374 26,304 276,678 59,264 174,789 234,053 Agriculture, forestry, and fisheries. . . V e g e t a b le s .............................................. District domestic exports based to significant extent on agriculture and forest products 2 D o m e s t ic C o m m o d it y T r a d e o f t h e T w e l f t h D i s t r ic t b y Net (E xp ort+ Import—) + 1,131,375 __ 50,933 + 488,275 + 439,805 166,045 + 133,320 + 4 -1,176,512 __ 191,110 + 148,485 42,625 Attention wTill now be turned to the District’s domes Fish and fish products ...................... 15,549 16,174 625 Miscellaneous forest products ......... 6,056 2,919 3,137 tic imports and exports (including offshore posses 95,696 49,402 --46,294 sions). The data in Table 2 provide a picture of the na Iron ores and concentrates................ 4,552 + 4,552 N onferrous ores and con cen tra tes.. ture of District domestic interregional trade in 1950.1 7,598 33,017 + 25,419 6,165 396 5,769 The bulk of District exports— almost 80 percent— con Petroleum and natural g a s ................ 72,514 1,400 __ 71,114 Clay, sand, stone, rock .................... 3,298 3,499 + sisted of manufactures. This heavy concentration, how 201 Miscellaneous ........................................ 6,121 6,538 + 417 ever, conceals the contribution of the raw materials re Manufactures and m iscellaneous........... 7,421,195 5,704,353 — 1,716,842 sources to the manufacturing structure of the District. F ood and kindred products................ 1,052,084 1,326,703 + 274,619 T obacco manufactures ...................... 268,123 3,852 264,271 More than 60 percent of District exports were either Textile mill and apparel products. . . 795,923 223,151 __. 572,772 agricultural products or goods manufactured from basic Paper and allied p r o d u c t s .................. 156,191 172,194 + 16,003 Printing, publishing, and allied agricultural or forest resources. In fact the two major __ industries ............................................ 77,113 77,113 Chemicals and allied p roducts........... 417,819 251,921 __ 165,898 manufactured exports— food and lumber— accounted for Petroleum products ............................. 20,719 198,653 + 177,934 almost 45 percent of the manufactures shipped out of the Rubber products ................................. 146,072 84,961 61,111 __ Leather and leather products........... 38,924 852 38,072 District in 1950. In addition, a large part of the chemi Total nondurables .............................. 2,972,968 2,238,437 __ 734,531 cals exported consisted of processed agricultural prod Stone, clay, and glass products......... 56,292 21,795 __ 34,497 ucts, and a substantial proportion of the exports of paper Lum ber and wood products (except furniture) .......................... 36,219 1,156,942 + 1,120,723 was based upon District forest resources. Furniture and fix t u r e s ........................ 122,457 31,613 __ 90,844 Primary metals in d u strie s.................. 73,716 429,517 + 355,801 The mineral resources of the District also made pos Fabricated metal p r o d u c t s ................ 469,883 126,017 343,866 Machinery (except electrical) ......... 253,113 86,802 __ 166,311 sible a fair amount of manufactured exports, principally Electrical machinery, equipment, of primary nonferrous metals and petroleum. The devel and supplies ..................................... 628,394 74,867 — 553,527 Transportation equipment ................ 991,944 526,845 — 465,099 opment of the District’s aluminum industry, a supplier Total durables .................................... 2,632,018 2,454,398 — 177,620 of part of the primary metal exports, was largely de Freight forwarder sh ip m e n ts ........... 956,044 70,998 __ 885,046 Miscellaneous manufactures ........... 860,165 940,520 + 80,355 pendent upon the availability of low-cost power in the Total— A ll co m m o d itie s .......................... 7,999,503 7,367,742 — 631,761 Pacific Northwest. Although a considerable part of the District exports Note: Does not include shipments or receipts by truck, air freight, parcel post, or private conveyance. Aircraft flown away under own power are included in the statistics. in 1950 was based on agricultural, forest, and mineral Source: See Appendix. resources, the industrial development of the District District's domestic trade deficit largely due to excess since 1940 is reflected in the fairly large quantity of goods exported which require a high degree of processing. Air of manufactured imports craft was the principal export in this group and accounted The District’s imports were even more highly concen for most of the transportation equipment shipments. A l trated in manufactures than its exports, and despite the though a net importer of goods which are highly proc importance of the District as a food producer, its largest essed, the District exported fair amounts of fabricated imports consisted of food and kindred items. Because of metals, electrical equipment, and machinery. Textile and the very large requirements of California, the District apparel exports offer an interesting example of the Dis was unable to supply all of its needs in meat. It imported trict’s role as a gateway to offshore possessions. Though a substantial quantity of livestock, but the value of man a net importer of these items, the District shipped out ufactured meat imports exceeded that of meat animal about 30 percent as much as it received from other areas. purchases from other parts of the nation. In addition, A major part of the District exports of textiles and ap the District obtained large quantities of manufactured parel went to offshore possessions; these exports in cereals and alcoholic and malt beverages from the rest of cluded reshipments of imports as well as District output. the nation. Automobiles, apparel and textiles, electrical machin 1The foreign trade of the District has been discussed in two supplements to ery (including appliances, radios, and television), fabri this Review. See “ Waterborne Trade of California Ports,” supplement to the Monthly Review for May 1951, and “ Waterborne Trade of the Pacific North cated metals, chemicals, and machinery follow food in west,” supplement to the Monthly Review, August 1952. June 1955 importance as imports. These imports reflect the variety of different forces which generate interregional trade. The District is deficient in steel and this accounts in part for its imports of many durable goods, particularly of fabricated metals and motor vehicles and parts. Chemi cal imports probably also reflect some resource differ ences between the District and other parts of the nation. Economies in scale of operation which favor other parts of the nation are at least as important as resource dif ferences in imports of automotive items, some types of electrical equipment, machinery, and textiles and ap parel. Differences in the stage of economic development and in tastes also help to explain why some of these items are imported. One of the problems presented by the data lies in the existence of two large blocks of manufactured imports and exports which could not be identified. One group consisted of manufactures which the agencies collecting the data were unable to classify. The other group con sisted of freight forwarder traffic shipments of less than carload lots of merchandise. The less than carload lot shipments accounted for more than half of the District’s domestic trade deficit in terms of manufactured goods. The inability to classify these two groups of shipments by producing industry, while detracting from the de tailed analysis, does not alter the fundamental importance of manufactures in District interregional trade. As is evident from Table 2, the District offset about 70 percent of its domestic deficit on account of manufac tures by exports of raw agricultural products. Fresh fruits and vegetables played a major role in District ex ports and reflected the agricultural pattern of the Dis trict. Fibers, consisting almost entirely of cotton, were also important, but domestic shipments alone tended to conceal the importance of cotton to the District because of the large volume of shipments by water to foreign countries. Wool, though popularly considered a fiber, is classified under animal products and accounted for most of these exports. Thus, the District offset most of its deficit in manufactures in 1950 by exporting more agri cultural products than it imported. Pattern of interregional trade reflects a variety of forces The intent of the following discussion is to indicate briefly some of the general factors influencing the trade of the District with other parts of the United States. No attempt is made to assign quantitative values to the in fluence of any particular factors nor to analyze in detail the factors affecting trade in particular commodities. A thorough examination of such matters would be a large undertaking which would require delving into far more detail than we have so far attempted. In essence, an un dertaking of that type would involve the development and analysis of a large body of factual material with which to fill in the general framework that is merely outlined in this summary discussion. 73 M O NTHLY REVIEW The forces which generate trade among areas ulti mately rest on the differences in the availability of the various factors of production, including raw materials, capital, and labor. Disparities in raw material endow ment, capital availability, and the nature of the labor force among areas result in qualitative differences in re gional output or the production of similar goods at vary ing costs among regions. In either case, in the absence of trade, price differentials among regions for a partic ular commodity may be quite large. The flow of trade reflects the profit opportunities resulting from such price differentials, and in turn trade tends to minimize price inequalities among areas except to the extent that trans portation costs or artificial barriers such as trade restric tions interfere with the free flow of trade. This brief description may be used to help explain the trade of the Twelfth District. For example, exports of citrus, canned fruits and vegetables, lumber, copper, lead, zinc, aluminum, and aircraft reflect various productive advantages possessed by the District. On the other hand, imports of livestock, tobacco, automobiles, and machin ery are some of the items which reflect the District’s in adequate supply of appropriate factors of production rel ative to other areas. Some important characteristics are concealed by this brief explanation of trade forces. The level of economic development is one aspect not mentioned explicitly. It could be included under the availability of capital or under the type of labor force or both. A highly special ized and intensive capital structure and a skilled labor force are in part products of an advanced stage of eco nomic development. Market size, an important consider ation for mass produced goods, is another influence not considered directly by the description. Nor are such con siderations as differences in taste or climate mentioned explicitly. An analysis of trade based on differences in the factors of production, even after amendment for the foregoing characteristics, explains the flow of trade generally, but T able 3 R e g io n a l P a t t e r n o f D o m e s t ic D is t r ic t C o m m o d it y T r a d e — 1950 (thousands of dollars) Net Imports Exports2 ........................... ............... 2,092,119 1,889,022 (E xport+ Import—) — 203,096 New England ................ M iddle A t la n t ic ............. ............... 1,740,456 472,271 1,416,749 -+ — Region1 Northeast North C e n tr a l.................... East North Central ............... W est N orth Central . . ............... 2,982,422 814,280 South Atlantic ............. ................. East South Central . . . ............... W est South Central . . . . . . . . . 806,953 297,682 338,087 Offshore United States possessions .................... 120,610 323,707 2,037,574 — 1,759,132 1,275,853 761,717 — 1,706,568 — 52,563 1,613,879 + 171,154 545,923 230,649 837,302 — — + 261,029 67,034 499,214 304,866 — 18,926 1,047,298 + 703,298 1 See Appendix for list of states included in these various regions. 2 Excludes export of aircraft not distributable by regions. Note: Does not include shipments or receipts by truck, air freight, parcel post, or private conveyance. Aircraft flown away under own power are included in the statistics. Figures may not add to totals because of rounding. Source: See Appendix. 74 FEDERAL RESERVE BANK OF SAN FRANCISCO it does not account directly for different levels of trade between one region— such as this District— and each of several areas. Other factors such as the income of other areas, their self-sufficiency relative to the output of this District, the size of their markets, the types of trans portation which can penetrate various areas, and the geographical proximity of other areas to this District tend to modify the trade relationships between this Dis trict and other areas. This is not an exhaustive list of the factors affecting trade between this District and other areas, nor is it possible to measure precisely the effect of each of these factors on trade between the District and other areas. Indications as to how some of these factors influence trade can be judged in an approximate way if the flow of goods between this District and other areas is related to some one element important in determining the trade pattern. For this purpose, income payments were seT able 4 R e g io n a l P a tt e r n o f D o m e s tic D is t r ic t C o m m o d ity T r a d e a n d U n i t e d S t a t e s I n c o m e P a y m e n t s — 1950 Región1 Northeast Percent distnbuition-------------^ Income Imports Exports2 payments* 27.4 37.6 ................................................. 6.9 20.6 8.2 29.4 29.6 30.6 18.5 11.1 19.7 10.9 South ......................................................... 23.4 28.5 South Atlantic ................................... 7.9 3.3 12.1 13.5 5.6 9.4 4.4 2.3 15.2 1.0* N ew England ................................... M iddle Atlantic ................................. . . 21.8 N orth Central ........................................ East N orth C e n t r a l........................... W e st N orth C e n t r a l ........................ , 37.3 W est South C e n t r a l........................ M o u n t a in ................................................... Offshore U nited States possessions. . 4.3 1 See appendix for list o f states included in these various regions. 2 Excludes export of aircraft not distributable by regions. 3 Income payments to individuals as published by the United States Department of Commerce. 4 Rough approximation only. Data not available except for Hawaii. Note: Does not include shipments or receipts by truck, air freight, parcel post, or private conveyance. Aircraft flown away under own power are included in the statistics. Source: See Appendix. lected as a yardstick. Data on them are readily available; they are a fairly comprehensive economic measure; and they have significance as an indicator of potential de mand. If all other regions were alike except for income and if the effects of differences in transportation costs were ignored, then the trade of the District would be distributed among regions in the same pattern as total income payments were distributed. As Table 4 illus trates, there were significant departures from this type of pattern among the regions studied. The Northeastern United States,1 comprising New England and the Middle Atlantic states, absorbed a much smaller proportion of District exports than in come alone would suggest. This region is relatively re mote from the District, and since distance increases the cost of moving commodities, the comparative prices for District products in that area tend to be high. Since there 1See Appendix for list of states and possessions included in the various regions under discussion. June 1955 are alternative sources of supply with more favorable delivered prices, District exports to that region tend to fall below the level suggested by income. For example, corresponding District products meet severe competi tion in that region from southern lumber and fairly strong competition in fresh and canned fruits and vege tables from supplies within the region and nearby areas. The South also bought less from this District than in come would suggest as its share. The South Atlantic states and the East South Central states bought relatively little lumber and less than their indicated share of agri cultural products from the Twelfth District. In large measure this reflected distance from the District as well as self-sufficiency of the area so far as items available from the District are concerned. The latter is particu larly true of lumber— a major export of the Twelfth Dis trict. The West South Central states, in contrast, bought a larger than expected share of District crops, processed foods, lumber, and some other manufactures. Partly a lack of alternative sources and to some extent the shorter distance from this District of these states make them better than average customers. The North Central region, which the major District exports penetrate without serious freight disadvantages, took almost as many goods as would be expected on an income criterion. Largely because of their proximity, the Mountain states took somewhat more goods than income alone would indicate. Location as an advantage stands out sharply in the trade with offshore areas, which buy more from the District than income would suggest. In this case the District, serving as an exit point, pro vided goods that are transshipped from other regions as well as its own products. Alaska and Hawaii bought major quantities of foods and manufactures from the District. Puerto Rico, though quite remote geographi cally, purchased large quantities of rice from the District. No uniform trade pattern can be noted even if income as a criterion is modified by distance. The effects upon trade of lineal distances from the District vary in im portance depending upon the degree of self-sufficiency of an area in items available from the District, alterna tive sources of supply, and the type of transportation available. The preceding discussion, largely concerned with the export trade of the District (excluding foreign), has pointed up the major factors determining the pattern of trade between this region and other areas. The same set of factors, although in a sense reversed, are operative in the determination of the composition of District imports. Broadly speaking, imports, reflect the relative inade quacy of the over-all resource base in the District. They tend to flow from those areas whose factor endowments give them a relative advantage in the production of those commodities where District demand exceeds the re gional ability to produce at competitive costs. For ex ample, food and kindred products, automobile parts and sub-assemblies, textiles and apparel, electrical machin June 1955 ery, and fabricated metals were among the principal im ports of the District. For some of these items, particu larly automotive equipment, the North Central area is a leading producer. As a result, the District acquired al most half its imports from that area in 1950. The North east region, which produces considerable amounts of tex tiles and apparel, iron and steel, fabricated metals, and other durables not available in the District, ranked sec ond in importance. The South played an important role, too, because it can supply some of the needs that other areas cannot meet. The principal purchases from this area included tobacco, liquor, textiles, and some foods. T able 5 R a t io s o f I n t r a d is t r ic t a n d I n t e r r e g io n a l D o m e s tic E x p o r t s a n d I m p o r t s b y S t a t e , T w e l f t h D i s t r i c t — 1950 (Includes offshore U nited States possessions) -Im p orts- -E xp ortsInterregional A r i z o n a ................................... California ............................... Idaho ..................................... Nevada ................................... O regon ................................... Utah ........................................ W ashington .......................... T w elfth D i s t r ic t .................. 75 M O NTHLY REVIEW 87.7 70.6 57.4 29.2 61.0 46.1 78.1 69.5 Intradistrict Interregional 12.3 29.4 42.6 70.8 39.0 53.9 21.9 30.5 Intradistrict 57.4 86.2 61.8 30.9 44.7 59.0 51.1 71.2 42.6 13.8 38.2 69.1 55.3 41.0 48.9 28.8 Flow of trade between states demonstrates differences in economic characteristics Note: Does not include shipments or receipts by truck, air freight, parcel post, or private conveyance. Aircraft flown away under own power are included in the statistics. Source: See Appendix. Trade of individual states predominantly interregional One interesting fact revealed by the trade data under consideration is that the states of the Twelfth District, except Nevada which has a very small volume, traded more with United States areas outside the District than with each other. Almost 70 percent of the District’s total domestic trade was with areas outside the District. Since District states are much closer to each other than to most other parts of the United States, the question arises as to why the District’s trade falls into such a pattern. Much of the explanation seems to lie in the fact that the degree of specialization of each state requires a much broader market than the District alone supplies. Many District products such as vegetables, fruits, cotton, T C o m m o d ity T rade manufactured foods, lumber, aircraft, and primary metals, to mention some outstanding examples, are pro duced in quantities that cannot be wholly consumed in the District. In some cases the population is insufficient to absorb the output. In other cases industries using the products are concentrated elsewhere. This is particularly true for primary metals such as copper, lead, zinc, and aluminum which are fabricated in other parts of the na tion. Insofar as imports are concerned, the resources of the District and its industrial structure were inadequate to supply some of its needs. Automobiles, machinery, steel products, electrical equipment, apparel, and even some food must be obtained from other United States areas because the District either has insufficient resources or cannot support an appropriate scale of operations. There was, however, an active trade among the District states in 1950 and their resources and output tended to com plement each other in some important respects. able The patterns of trade of the seven District states offer important clues to the nature of the economies of each state. California, for example, accumulated a trade deficit with continental regions outside the District and with two states within the District, Idaho and Utah. In its trade with continental regions outside the District, Cali fornia incurred a deficit because of its excess of imports of manufactured products, livestock, and some food prod ucts. California’s major imports of manufactured prod ucts included automotive equipment, electrical equip ment, machinery, textiles, and steel, as well as some other highly processed manufactures. Part of the trade deficit was offset by the large volume of agricultural products California supplies the rest of the nation. Its deficit with Idaho was primarily due to its imports of livestock and some crops. Imports of livestock also contributed to California’s deficit with Utah but more important were the steel products which California acquired from Utah in large volume. 6 B a la n c e s — T w e lf t h D i s t r i c t — 1950 (thousands of dollars; Export + , Im port — ) Destination Arizona .................... California ................ ......... Idaho ........................ ......... Nevada .................... O regon .................... U t a h ........................... W ashington ........... California + 60,276 Idaho + 310 + 10,696 — + + — + 10,696 25,471 269,651 84,864 583,207 Intradistrict ................ + Interregional1 ........... — N et dom estic1 ........... ......... Net balance1 ................ Arizona — 60,276 — 310 + 1 0 3 ,9 1 7 Oregon + 15,537 — 269,651 — 11,204 + 632 Utah + 3,593 + 84,864 — 21,118 + 1,275 + 328 .... + 21,373 f A Washington + 6,292 — 583,207 — 32,652 — 230 — 69,664 — 21,373 — * i 90 + 11,204 + 21,118 + 32,652 Nevada + 279 — 25,471 + 190 • •. . — 632 — 1,275 + 230 — *328 + 69,664 843,042 + 75,797 — 26,679 — 195,348 + 9 0 ,3 1 6 — 1,435,235 + 77,947 — 12,923 + 2 9 3 ,5 5 6 — 17,920 + 2 72t663 + 153,744 — 39,602 + 98,208 + 72,396 — 428,177 + 49,817 + 72,396 — 496,815 592,191 + 64,474 ------ ------ — 527,717 + 153,744 — 39,602 + 148,025 — 700,840 — 68,638 1 Includes offshore United States possessions. Note: Trade with all areas, except foreign, does not include shipments or receipts by truck, air freight, parcel post, or private conveyance. Aircraft flown away under own power are included in the statistics. Figures may not add to totals because of rounding. Source: See Appendix. 76 FEDERAL RESERVE BANK OF SAN FRANCISCO In its trade with offshore possessions, California ac cumulated a substantial surplus, reshipping some manu factured products imported into California and adding a very substantial amount of its own output, including agricultural products and a varied list of manufactures. Within the District, California had a surplus with four states based largely on its shipment of manufactures, of which assembled automobiles were a principal item. From the pattern of California's trade, it is apparent that in some cases the state did not have adequate re sources and in other cases markets were too limited to permit its industries to produce efficiently some of the important manufactures which it needed. On the other hand, the scale of operations of its industries was large enough so that it could act as a principal supplier of some manufactured products to other District states and to the offshore United States possessions and as an im portant supplier of agricultural products to other regions. The trade patterns of Arizona, Oregon, and Washing ton provided a direct contrast to that of California. Each of these states had a large deficit with California because of purchases of manufactures. Arizona's intradistrict deficit was intensified somewhat because of imports from District states other than California consisting of agri cultural products, lumber, and some manufactured items. Washington also ran a deficit with several District states other than California because of imports of agricultural products, livestock, and some manufactured items. Ore June 1955 gon, on the other hand, had a small net surplus with District states other than California. Each of these states, however, was able to export more to areas outside the District than it imported from them. Arizona’s trade surplus reflected very heavy shipments of refined copper, lead, and zinc and agricultural prod ucts to the rest of the United States. Oregon accumu lated a surplus because of shipments of lumber, plywood, millwork, paper, and some fruits to regions outside the District. Washington also accumulated a surplus with the rest of the nation because of its exports of lumber, plywood, aluminum, aircraft, and some agricultural products. Unlike Arizona and Oregon, Washington's surplus with areas outside the District fell considerably short of offsetting its deficit with other District states. Idaho was able to earn a surplus in its trade account both with District states and with the remainder of the nation. It provided District states with crops, livestock, and some lumber and the rest of the nation with these items plus lead, zinc, and sugar. Utah presented a some what different picture. It had a surplus with the District based partly on livestock and agricultural products and more importantly on the considerable quantities of iron and steel shipped to a number of District states. In its trade with the remainder of the United States, Utah had a deficit because of net imports of electrical equipment, machinery, iron and steel, motor vehicles and parts, and various other manufactures. APPENDIX A discussion of the sources of the information under lying this article and of the reliability of the data is es sential. The source materials were gathered from a va riety of agencies— public as well as private. The move ments of commodities by rail were obtained, in physical terms, from the Carload Waybill Analysis (1 percent sample) published each year by the Interstate Commerce Commission. Dollar values of these movements were de rived by applying wholesale per-ton prices published by the ICC in January 1953 in a report entitled, “ Freight Revenue and Wholesale Value at Destination of Com modities Transported on Class I Steam Railways in the United States, Calendar Year 1950.” Data on the physi cal quantities of goods moved by ship in coastwise and intercoastal trade and to and from offshore possessions were supplied by the United States Corps of Engineers. These data were valued by applying the per-ton commod ity prices of the ICC. Foreign trade statistics were drawn from published reports of the United States Bureau of the Census. Figures on the value of aircraft, normally flown to destination, entering the trade of the District were largely obtained from the airframe manufacturers, with some estimation for incomplete coverage. The value of natural gas and petroleum entering the District by pipeline was derived from official reports of the United States Bureau of Mines and from correspondence with private oil and gas firms. A number of elements of statistical discrepancy are present in the assembled data, but it is not possible to quantify their extent in any strict sense. An element of inexactness enters as a result of the method of pricing the physical quantity data. The prices utilized were na tional average wholesale values and insofar as regional differences exist the resultant data will not truly reflect the dollar volume of District trade. Also, there was not perfect correspondence as between the ICC and Corps of Engineers commodity classifications so that some ap proximations had to be made in the pricing process. These involved pricing some CE commodities by the most closely similar ICC prices, and in other instances weighted average prices covering several ICC commod ity groups were used to value individual CE classifica tions. The sample nature of the ICC data on rail move ments introduces an additional element of inexactness, but this is probably quite small as the sample was large in a statistical sense. A further, and perhaps more important, limitation is the significant gap in the data due to incomplete cover age. The principal gap is the absence of District infor mation on the movement of commodities by truck line. June 1955 Sufficient suitable data on such interregional shipments are not available from which even a rough approximation of the extent of the gap could be made on a District basis. The importance of trucks on short hauls is probably greater than on longer movements and places a more severe limitation on the data pertaining to trade among the District states than on the interregional figures. Data are also lacking on commodity movements by air-freight lines, railway express, parcel post, and private convey ances. However, these latter movements are likely to be quite small relative to the total dollar volume of District interregional commodity trade. Despite the above statistical limitations and gaps, the basic information is felt to cover adequately a sufficient proportion of total District trade to provide a general notion of the region's exchange of goods. This repre sents a substantial advance in an area where little or nothing has been known in the past. 77 M O NTHLY REVIEW R egions a n d G eographic D iv is io n s of t h e U nited S tates N ew England Maine Verm ont N ew Hampshire Massachusetts Connecticut R hode Island M iddle Atlantic New Y ork Pennsylvania N ew Jersey North Central East N orth Central W isconsin Michigan Ohio Indiana Illinois W est N orth Central Minnesota Iow a Missouri North Dakota South Dakota Nebraska Kansas South Atlantic Mountain Delaware Montana Maryland W yom in g District o f Columbia Colorado W est Virginia N ew M exico Virginia Twelfth District North Carolina Arizona South Carolina California Georgia Idaho Florida Nevada East South Central Oregon Kentucky Utah Tennessee W ashington Alabama Offshore Possessions Mississippi Alaska W est South Central Hawaii Oklahoma Puerto R ico Arkansas Louisiana Texas Source: Based upon United States Department of Commerce, Bureau of the Census classifications amended to include offshore United States possessions and to separate Twelfth District states from the West. 78 FEDERAL RESERVE BANK OF SAN FRANCISCO June 1955 BUSINESS INDEXES— TW ELFTH DISTRICT1 (1947-49 average=100) In d u s t r ia l p ro d u ctio n (p h y sic a l v o lu m e )2 T o ta l n o n agri T o ta l C ar D e p ’t R e ta il m f ’g c u ltu ra l lo a d in g s store food E le c t r ic e m p lo y e m p lo y ( n u m sales prices <> s power ber)2 m e n t4 (va lu e )2 m ent Y ear and m o n th Lum ber 1929 1931 1933 1935 1937 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 80 42 34 45 61 60 65 77 77 74 74 61 80 94 102 104 116 115 111 119 111 87 57 52 62 71 67 67 69 74 85 93 97 94 100 101 99 98 106 107 109 106 78 55 50 56 65 63 63 68 71 83 93 98 91 98 100 103 103 112 116 123 119 54 36 27 33 56 56 61 81 96 79 63 65 81 96 104 100 112 128 124 130 132 165 100 72 86 114 93 108 109 114 100 90 78 70 94 105 101 109 89 86 74 70 105 49 17 37 88 80 94 107 123 125 112 90 71 106 101 93 115 115 112 111 101 90 86 75 87 84 91 87 87 88 98 101 112 108 113 98 88 86 95 96 96 99 29 29 26 30 38 40 43 49 60 76 82 78 78 90 101 108 119 136 144 161 173 1954 April M ay June July August September October Novem ber December 116 123 97 79 87 109 124 117 130 107 107 107 106 104 105 104 104 105 119 123 119 118 115 121 116 119 119 134 143 140 143 137 138 143 132 132 71 67 69 63 73 69 70 73 69 98 103 105 91 75 97 110 116 114 96 96 96 92 101 108 105 104 101 1955 January February M arch April 135r 133r 121r 120 105 105 106 106 116 122 120 118 119 131 137 149 74 76 82 77 118 130 130 127 107 112 108 97 Petroleum * C ru d e R e fin e d C e m e n t Lead 3 W heat C o p p e r3 flour3 W a te rb o rn e fo re ig n tra d e 3* ■ E x p o r t s Im p o r t s 30 25 18 24 30 31 33 40 49 59 65 72 91 99 104 98 105 109 114 116 113 64 50 42 48 50 47 47 52 63 69 68 70 80 96 103 100 100 113 115 113 113 190 138 110 135 170 163 132 124 80 72 109 119 95 101 ‘ io o 101 96 95 99 102 99 103 111 118 122 120 “ 47 60 55 63 83 121 164 158 122 97 100 102 97 105 122 132 139 136 102 68 52 66 81 77 82 95 102 99 105 100 101 106 100 94 97 100 101 100 96 *89 129 86 85 91 186 171 140 131 “ ¿7 81 98 121 137 157 200 308 260 168 174 183 179 174 174 176 177 173 120 120 119 119 119 120 120 121 121 136 136 137 131 130 136 137 138 139 99 97 96 88 90 97 102 98 106 111 114 114 115 115 110 116 114 118 113 114 114 113 113 113 113 111 111 157 158 141 144 96 115 112 118 113 232 271 237 331 282 262 277 196 313 173 179 188 191 122 122 123 123 139 139 140 139 106r 99r 10 tr 106 124 115 116 122 112 112 112 113 163 183 287 263 240 BANKING AND CREDIT STATISTICS— TW ELFTH DISTRICT (amounts in millions of dollars) C o n d itio n Ite m s of a ll m e m b e r b a n k s 7 Y ear and m o n th U .S . Loans an d G o v ’t d is c o u n t s s e c u r it ie s T o ta l Dem and d ep osits t im e a d ju ste d 8 d e p osits 2,239 1,898 1,486 1,537 1,871 1,967 2,130 2,451 2,170 2,106 2,254 2,663 4,068 5,358 6,032 5,925 7,093 7,866 8,839 9,220 9,418 495 547 720 1,275 1,270 1,450 1,482 1,738 3,630 6,235 8,263 10,450 8,426 7,247 6,366 7,016 6,415 6,463 6,619 6,639 7,942 1,234 984 951 1,389 1,740 1,983 2,390 2,893 4,356 5,998 6,950 8,203 8,821 8,922 8,655 8,536 9,254 9,937 10,520 10,515 11,196 1,790 1,727 1,609 2,064 2,187 2,267 2,360 2,425 2,609 3,226 4,144 5,211 5,797 6,006 6,087 6,255 6,302 6,777 7,502 7,997 8,699 1954 M ay June July August September October Novem ber December 9,001 9,049 8,989 8,977 9,054 9,048 9,343 9,422 6,991 6,981 7,190 7,574 7,610 8,014 8,089 7,973 10,045 10,087 10,310 10,257 10,463 10,749 10,937 11,158 8,306 8,428 8,444 8,501 8,555 8,651 8,596 8,663 1955 January February M arch April M ay 9,510 9,612 9,696 9,657 9,810 7,998 7,693 7,390 7,756 7,690 11,246 10,945 10,733 11,060 10,951 8,725 8,765 8,837 8,833 8,885 1929 1931 1933 1935 1937 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 Bank rates on short-term b u sin e ss lo a n s 8 M e m b e r b a n k reserves a n d related ite m s 10 Reserve bank cre d it11 — + 3.20 3.35 3.66 3.95 4.14 4.01 4.14 34 21 2 2 + 1 2 + 2 + 4 + + 107 + 214 98 + 76 9 + — 302 17 + 13 + 39 + — 21 7 + 14 2 + + — + — 4.08 + + — 4.01 — 3.98 + + + C o in a n d C o m m e rc ia l T re a su ry cu rre n cy in o p e ra tio n s12 o p e ra tio n s12 c irc u la t io n 11 _ Reserves B a n k d e b its 1VÌU0X *J| 1 31 c itie s* u (1947-49100)2 0 154 110 — 163 90 192 148 596 -1 ,9 8 0 -3 ,7 5 1 -3 ,5 3 4 -3 ,7 4 3 -1 ,6 0 7 - 510 + 472 - 930 -1 ,1 4 1 -1 ,5 8 2 -1 ,9 1 2 -3 ,0 7 3 -2 ,4 4 8 + 23 + 154 + 150 + 219 + 157 + 245 + 420 + 1,000 + 2,826 + 4,486 +4,483 +4,682 +1,329 + 698 482 + 378 + 1,198 +1,983 + 2,265 + 3,158 + 2,328 6 48 + 18 14 + 3 31 + 96 + + 227 + 643 + 708 + 789 + 545 326 — 206 — 209 — 65 — 14 + 189 + 132 39 + 30 175 147 185 287 549 584 754 930 1,232 1,462 1,706 2,033 2,094 2,202 2,420 1,924 2,026 2,269 2,514 2,551 2,505 42 28 18 25 32 30 32 39 48 60 66 72 86 95 103 102 115 132 140 150 153 9 21 29 18 16 9 1 0 + - 148 254 307 28 170 138 244 127 + + + + + + + 136 277 170 12 196 142 342 175 + + + + 36 15 3 7 8 23 27 23 2,432 2,413 2,308 2,317 2,368 2,364 2,440 2,505 143 157 145 154 152 150 158 173 34 15 10 60 55 + - 150 26 401 306 51 + + + + 77 57 362 261 195 79 13 1 15 50 2,481 2,447 2,418 2,432 2,476 161 166 177 165 170 + + — + + + 1 Adjusted for seasonal variation, except where indicated. Except for department store statistics, all indexes are based upon data from outside sources, as follows: lumber, various lumber trade associations; petroleum, cement, copper, and lead, U.S. Bureau of Mines; wheat flour, U.S. Bureau of the Census; electric power, Federal Power Commission; nonagricultural and manufacturing employment, U.S. Bureau of Labor Statistics and cooperating state agencies; retail food prices, U.S. Bureau of Labor Statistics; carloadings, various railroads and railroad associations; and foreign trade, U.S. Bureau of the Census. 2 Daily average. 8 N ot adjusted for seasonal variation. * Excludes fish, fruit, and vegetable canning. 6 Los Angeles, San Francisco, and Seattle indexes combined. 6 Commercial cargo only, in physical volume, for Los Angeles, San Francisco, San Diego, Oregon, and Washington customs districts; starting with July 1950, “ special category” exports are excluded because of security reasons. 7 Annual figures are as of end of year, m onthly figures as of last Wednesday in month or, where applicable, as of call report date. 8 Demand deposits, excluding interbank and U.S. G o v ’t deposits, less cash items in process of collection. M onthly data partly estimated. 9 Average rates on loans made in five major cities during the first 15 days of the month. 10 End of year and end of month figures. 11 Changes from end of previous month or year. 12 Minus sign indicates flow of funds out of the District in the case of commercial operations, and excess of receipts over disbursements in the case of Treasury operations. 13 Debits to total deposits except interbank prior to 1942. Debits to demand deposits except Federal Government and interbank deposits from 1942. r— Revised.
@FedFRASER