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MONTHLY REVIEW OF B U S IN E S S C O N D IT IO N S ISAAC B. NEWTON, Chairman of the Board and Federal Reserve Agent Federal Reserve Bank of San Francisco Vol. X IV San Francisco, California, June 20,1930 No. 6 S U M M A R Y O F N A T IO N A L C O N D IT IO N S Prepared by the Federal Reserve Board The volume of industrial production declined in May by about the same amount as it in creased in April. Factory employment de creased more than is usual at this season and the downward movement of prices continued. M oney rates eased further, to the lowest level in more than five years. Industrial Production and Employment. The Board’s index of industrial production, adjusted for usual seasonal variations, declined about two per cent in May. In 1930, industrial pro duction has fluctuated between four and seven per cent above the 1923-1925 average, and the preliminary estimate for May is four per cent above the average for those years. Production at steel and automobile plants declined, cotton mills curtailed output, and activity at woolen and silk mills continued at low levels. Cement production increased sharply, while output of petroleum and of copper showed little change. In the first half of June, output at steel plants declined further. The decrease in factory em ployment in May was larger than usual and there was also a decline in factory payrolls. The number employed in the cotton and silk goods industries decreased further, while in the woolen goods industry there was an in crease from the extreme low point of April. Employment in the agricultural implement and electrical machinery industries decreased PER CENT from April but remained large relative to earlier years. Employment in the cement in dustry increased, but in the lumber industry continued at an unusually low level. Building contract awards in May, as reported by the F. W . Dodge Corporation, continued to be in substantially smaller volume than in any other year since 1924. Distribution. Freight carloadings increased by less than the usual seasonal amount during May and continued to be in somewhat smaller volume than in the corresponding period of 1928 and substantially below the unusually active period of 1929. Department store sales in May were approximately the same as those of a year ago. W holesale Prices. A further decline in the wholesale prices of commodities occurred in May and the first half of June. The downward movement was interrupted in the last half of May by substantial increases in the prices of grains, meats, and livestock, but became pro nounced about the middle of June when the prices of cotton, silk, rubber, copper, and silver reached exceptionally low levels. W heat, meats, livestock, and cotton textiles also declined in price at that time, while prices of w ool and woolen goods, pig iron, and steel showed little change. Bank Credit. Loans and investments of re porting member banks increased further by PER CENT IN D U S T R IA L P R O D U C T IO N W H O L E S A L E P R IC E S Index number of production of manufactures and minerals, combined, adjusted for seasonal variations (1923-1925 average *=100). Latest figure, May, 104. Index of United States Bureau of Labor Statistics (1926=100, base adopted by Bureau). Latest figure, May, 89.1. 42 June, 1930 M ONTH LY REVIEW OF BUSINESS CONDITIONS 265 million dollars in the four weeks ending June 11, to a level considerably higher than a year ago. The increase was entirely in invest ments and in loans on securities, of which a large part represented loans made by New Y ork City banks to brokers and dealers in securities in replacement of loans withdrawn by other lenders. “ A ll other” loans continued to decline and at 8,400 million dollars on June 11, were the smallest since 1926. B IL L O N S OF DOLLARS credit outstanding. Reserve bank holdings of United States securities increased by about 50 million dollars and their holdings of accept ances declined by about half this amount. For the week ending June 18 the total volume of reserve bank credit declined somewhat and there was a decline in the volume of money in circulation. M oney rates in the open market continued to decline during the latter half of M ay and PER CENT ----- C O M M E R C IA L P A P E R R A T E - ----- R E S E R V E B A N K D IS C O U N T - - - A r r r P T A K ir r d a t p - t - y 1 / A - R A T IE »I r \ h — k - L i '" - V r - \ s1 . N 1926 M EM B ER BANK CR ED IT 1927 1928 1929 1930 Monthly averages of weekly figures for reporting member banks in leading cities. Latest figures are averages of first two weeks in June. M O N E Y RATES Monthly rates in the open market in NewYork: commercial paper rate on 4- to 6-month paper and acceptance rate on 90-day bankers’ accept ances. Latest figures are averages of first 20 days in June. Expansion of member bank credit during this period was reflected in larger demand deposits and an increase of 30 million dollars in mem ber bank reserves at the reserve banks. The volume of m oney in circulation showed a net increase of 13 million dollars. Funds for these uses were obtained largely from further addi tions of 24 million dollars to the stock of monetary gold and from an increase of 22 mil lion dollars in the volume of reserve bank the first half of June, and at the middle of the month commercial paper at 3j^-3j4 per cent and acceptances at 2% per cent were at the lowest levels since 1924 and early 1925. Bond yields moved slightly lower in June. In the first week of June the rediscount rate at Cleve land was reduced from 4 to Zy2 per cent; in the third week the rate at New York was reduced from 3 to 2y2 per cent and the rate at Chicago from 4 to Zy2 per cent. 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 For the past two months business activ ity in the Twelfth Federal Reserve District has shown considerable stability, but at levels well below those prevailing during the correspond ing months of 1929. No important change in the situation was evident during May, m od erate improvements over April in certain components of the business structure being neutralized by compensating declines in other phases of activity. W eather conditions during May and the first half of June were favorable to crop develop ment and the growth of forage on livestock ranges in most parts of the District, although frost caused some damage to deciduous fruits in W ashington. Continued declines in the prices of agricultural commodities have been the most adverse factor in the farm situation. Little change in aggregate industrial output of the District was evident during May, but increases or decreases in activity of several industries were important. There were in creases in the value of building permits issued, construction contracts awarded, and cement output. The fact that production fell off in the District’s two most important industries, lum ber and petroleum, should not be interpreted as being entirely unfavorable, since production in both industries has been in excess of current demand for several months. Unemployment was reported as being more serious than in April and considerably greater than a year ago. The volume of trade declined during May and was below the level of the corresponding month of 1929 by a greater amount than in any other month thus far this year. Declines from both the preceding month and last year were recorded in retail and wholesale trade, sales of new automobiles, railroad freight carloadings, and intercoastal trade. W holesale com m odity prices moved irregu larly downward during most of May and wide- June, 1930 federal reserve a g e n t a t san spread declines in quotations were recorded during the first half of June. There was some evidence that retail prices also tended dow n ward. For several months credit conditions in the District have remained substantially un changed. Throughout this period borrowings from the Federal Reserve Bank have been small, commercial loans of reporting member banks have been moderate in volume, security loans have been at high levels, there has been a reduced volume of money in circulation, inter est rates on loans to customers have been lower than in 1929, and acceptance rates have been lower than at any time since 1924. Agriculture The growth of crops in some parts of the Tw elfth District was retarded during late May by cool weather and frequent rains but warm weather early in June resulted in more satisfac tory crop development in those areas and in general improvement of forage on livestock ranges. The declining level of farm products prices continues to be the most unfavorable factor in the agricultural situation, particu larly in the marketing of some of the District’s animal products. The outlook for the District’s winter wheat crop improved during M ay and estimates of production were increased by 11 per cent dur ing the month. On June 1 it was expected that the harvest of winter wheat this year would be but 20 per cent smaller than the harvest in 1929, compared with an estimated decline of 30 per cent in production of that crop a month earlier. PRODUCTION* — W IN T E R W H E A T t----------Forecast---------- HarJunel, M ayl, vested 1930 1930 1929 A r iz o n a .............................................. C a liforn ia ........................................... I d a h o .................................................. N e v a d a ................................................ O r e g o n ................................................ U ta h ..................................................... W a s h in g to n ..................................... T w e lfth D i s t r i c t ............................. U n ite d S tates .................................. 1,316 12,162 11,200 44 17,682 3,315 15,249 60,968 532,469 1,222 10,981 9,408 44 15,998 3,281 14,076 55,010 525,070 1,134 12,240 11,440 104 19,712 3,403 27,830 75,863 578,336 * I n th ou sa n d s o f bu sh els. S o u r c e : U n ite d S tates D e p a rtm e n t o f A g ric u ltu re . Production estimates of other grain and field crops are not yet available. The condition of these crops is, however, generally better than a year ago. C O N D ITIO N OF GRAINS A N D H A Y (Per cent of normal) Spring Wheat Oats June 1, June I, 1930 1929 1930 1929 A r i z o n a .......................... C a l i f o r n i a ..................... I d a h o ...................... 94 N e v a d a ................ .. 91 O r e g o n ................... 90 U ta h ........................ 93 W a s h in g t o n ......... 75 U n ite d States . . . 85.7 •• •• 88 90 84 88 77 84.8 93 84 94 93 94 94 86 83.2 82 70 88 87 88 90 84 82.0 Barley Tame Hay June 1, June 1, 1930 1929 1930 1929 93 84 94 92 92 93 80 86.4 90 69 89 91 88 92 82 83.7 Source : United States Department of Agriculture. 93 89 88 87 92 86 75 77.7 82 81 85 85 86 87 81 86.6 43 Fr a n c i s c o Estimates of deciduous fruit production in California, Idaho, and Oregon were about the same on June 1 as on M ay 1. One month ago the total yield was expected to be larger than in 1929 but smaller than in 1928. During late May frosts slightly damaged apples, pears, cherries, and peaches in W ashington, however, and production of those fruits is now expected to be smaller than was anticipated earlier in the season. DECID U O US FRUITS A N D N U T S— California t------ Condition------(Per cent of normal) <-----Production*— \ Junel, Junel, Forecast Actual 1930 1929 June 1,1930 1929 A p p l e s ....................................................... 76 59 A p r ic o t s ................................................... 57 .. C h erries ................................................... 59 .. G r a p e s ................................................................ ............. . R a isin ................................................... 87 68 T a b l e .................................................... 89 71 W in e ..................................................... 88 78 P e a ch e s .................................................. 84 . . C lin g sto n e ................................................................ . F re e s to n e ................................................................. . P ea rs ........................................................ 77 55 P lu m s ........................................................ 82 48 P ru n es ..................................................... 77 .. A lm o n d s .................................................. 63 30 W a ln u ts .................................................. 65 83 .. 209 18 .. .. .. .. 639 439 200 218 .. 234 . . .. 7 ,7 0 0 f 215 16 1 ,751 1,018 317 416 320 179 141 190 39 103 5 39 * I n th ou san d s o f to n s , f i n th o u s a n d s o f bu sh els. S o u r c e : C a lifo rn ia C r o p R e p o r t . Tlie 1930 Valencia orange crop in California was estimated to be 11,059,000 boxes on June 1. In 1929 there were 17,600,000 boxes of this variety of oranges produced. Shipments of oranges from California during May were 4,818 carloads or 40 per cent less than the 8,002 carloads shipped in May, 1929. Lem on produc tion for 1930 was estimated to be 5,128,000 boxes on June 1, compared with the 1929 crop of 5,025,000 boxes. During May, receipts of butter in leading Pacific Coast cities were 30 per cent larger than in May, 1929, and stored stocks at the end of the month were 31 per cent greater than a year earlier. As a result of the increased supply of butter available for consumption the price of 92-score butter at San Francisco declined from 38 cents per pound at the beginning of May to 34 cents per pound at the beginning of June. On June 1, 1929, that grade of butter was quoted at 45 cents per pound. Market receipts, stored stocks, and prices of eggs have revealed an oversupply of eggs at Pacific Coast centers during the past few weeks. Receipts during May, 1930, increased 12 per cent as compared with receipts during May, 1929, and storage holdings of eggs on the Pacific Coast were 49 per cent larger on June 1, 1930, than on June 1 last year. Eggs grading “ United States extra” at San Francisco were quoted at 2$y2 cents per dozen on June 1, com pared with 28% cents per dozen a month earlier and 32% cents per dozen a year ago. Livestock and livestock ranges improved during May, follow ing seasonal rains in most grazing sections. Cattle and sheep which had been withheld from market earlier this spring because of relatively poor condition, attained 44 June, 1930 M O N TH LY REVIEW OF BUSINESS CONDITIONS satisfactory weights and have been marketed in volume during recent weeks, although large numbers of them are still being held on ranges and in feedlots of the District. The movement of California spring lambs to eastern markets decreased sharply during the first half of June at which time lamb shipments from Idaho, Oregon, and W ashington were increasing in number. EASTER N SHIPM ENTS — C A L IF O R N IA LAMBS Season to June 1 Live 1930 .......................................... .427,000 .514,800 1929 _____1928 ...........................................380,490 S ou rce: Dressed 17,500 58,300 60,780 Total 444,500 573,100 441,270 S a n F r a n c is c o L iv e s t o c k M a r k e t N e w s R e p o r t . In d u stry Industrial activity during M ay continued at the low levels of the last several months. R e duction in output of some commodities, nota bly lumber and crude oil, may be construed as favorable from most standpoints, since it tended to bring production of those com m odi ties more nearly into line with demand for them. Substantial increases were reported in the value of building permits issued, of con struction contracts awarded, and in the output of cement and flour. Sharply declining tenden cies had been evident in each of those indus tries for a number of months. The number of men employed by the mining industry de creased during May, but there was a reversion to longer w orking hours than in earlier months of this year and output continued at the same levels as in April. The protracted decline in industrial activity is beginning to be reflected more definitely in industrial employment and payrolls. Increases in unemployment and some reductions in wage scales were reported from all parts of the District during May, contrary to the usual tendency at this season of the year. BU ILD IN G P E R M IT S In the fruit and vegetable canning industry, however, the number of workers employed is larger this year than last, partly because of larger crops and partly because of warmer weather and an earlier canning season. Total construction, as measured by the value of building permits issued and construction contracts awarded, increased sharply during May as compared with earlier months of this year, but was still considerably less active than a year ago. The quarterly indexes prepared by this Bank remained relatively low because of the extremely small value of permits and con tracts reported for the month of April. The value of building permits issued in the District increased more than seasonally from April to May, however, and in Seattle was larger than in May, 1929. In other parts of the District totals were well below those of a year ago, not withstanding the large increases from the pre vious month. Engineering and construction contracts awarded, exclusive of those for large commercial and industrial buildings, increased sharply during the month and were practically as large in value as they were in May last year. Important increases as compared with April this year were recorded in contracts for sewers, bridges, streets and roads, and public build ings. The total amount of lumber cut during May was moderately smaller than in April, fairly heavy production early in the month being more than offset by sharp curtailment of opera tions during the latter part of May. Shipments continued in about the same volume as in April and stocks did not increase as rapidly as in other recent months. New orders re ceived decreased further during the last two weeks of May and the ratio of orders to pro duction, which has been exceptionally low for several months, declined again. TOTAL C O N S T R U C T IO N AND CO NTRACTS B U ILD IN G A N D C O N ST R U CT IO N - Twelfth District Indexes of Building Permits Issued, Engineering Contracts Awarded, and Total Building and Construction, adjusted for seasonal variations (1923-1925 Average = 100). Original data were smoothed by a three-month moving average. June, 1930 Considering the month of May as a whole, daily average production of petroleum in Cali fornia declined slightly as compared with April. Early in the month some difficulty was expe rienced in holding to the proposed curtailment schedule, but more general observance of the control program later in the month, together with a substantial natural decline in productiv ity of the lower zones of the Santa Fe Springs field, effected a reduction to a daily average output of about 605 thousand barrels during the week ending May 31, a rate of output lower than for any week in the last two years. Some further reduction in the rate of output was reported during the first half of June. There was an increase in refining activity during May, and stocks of crude and fuel oils declined. A l though gasoline consumption increased it was not equal to the increased output and stocks of gasoline averaged higher during May than in April. Price uncertainty acted as a deterrent to purchases of California gasoline on the Atlantic seaboard and shipments to eastern markets de clined, contributing in part to the increase of stocks in this District. Refined copper output in the United States expanded moderately during May, follow ing heavy sales early in the month, and stocks in creased further from levels which were already high. Mine production, nearly 70 per cent of which comes from the Tw elfth District con tinued at the same rate as in April, and was substantially less than a year ago. There was a slight reduction in the number of men em ployed in the industry accompanied by a lengthening of the working week. Despite unsteady prices and relatively inac tive demand, particularly from foreign buyers, flour production increased in this District dur ing May and was larger than in May, 1929. (A ) E m ploym ent— 17 C lo th in g , M illin e ry and L a u n d e r in g . 3,543 ( — 2 .1 ) 3,619 1,294 ( - - 2 9 .3 ) 9 461 ( — 3.2) 9§ 1,830 476 7,578 54 6,815 ( - — 10.1) F o o d , B e v e ra g e s 1,684 25,772 43 1,879 and T o b a c c o . . . . 148 26,098 (1 .3 ) (1 1 .6 ) 27,574 30,191 P u b lic U t ilit ie s !. • 25 (9 .5 ) 83,662 O th e r In d u stries,fl. 318 72,811 (-— 13.0) 7,144 8,650 29 5,619 5,624 M is c e lla n e o u s ! 26 ________ (- - 1 7 . 4 ) ( — 0 .1 ) * P u b lic u tilities n o t in clu d e d in this to ta l, fE le c t r ic a l ra ilw a y and b u s o p e ra tio n s a d d e d . J M o tio n p ic tu re _ p r o d u c in g and d e v e lo p in g ad d ed to this g r o u p . § L a u n d e r in g o n ly . ^ In clu d e s th e fo llo w in g in d u s t r ie s : m etals, m a c h in e r y an d c o n v e y a n c e s ; leath er and r u b b e r g o o d s ; ch e m ica ls , oils and p a in t s ; p r in t in g an d p a p er g o o d s . Figures in parentheses indicate percentage changes from May, 1929. Trade Declines in trade during May as compared with both April, 1930, and May, 1929, were gen eral throughout the District. Sales at retail and at wholesale and registrations of new automobiles were smaller than in either the preceding month or May of last year. Railroad freight carloadings also declined from April and continued at substantially lower levels than in 1929, while the volume of intercoastal traffic through the Panama Canal reached the lowest point since the first of this year. Distribution of merchandise at retail, as measured by sales of nearly all department stores in the larger cities of the District, de clined during May and was smaller than in May, 1929. The smallest declines in sales over the year period were reported by stores in northern California, in Portland, and in Seattle. R E T A I L T R A D E — T w elfth D istrict ,------------N E T S A L E S * ------------ N-----S T O C K * Jan. 1 to M a y , 1930 M ay 31,1930 M ay, 1930 com pared com pared with com pared with Jan. 1 to w ith M a y . 1929 M ay 31,1929 M a y , 1929 D e p a r tm e n t S t ö r e s t . • — 5.0 A p p a r e l S to re s ................— 7.7 F u rn itu re S to r e s ...........— 16.5 A ll S to r e s ........................ .— 6.8 ( 69) ( 31) ( 46) (1 4 6 ) — 2.2 ( 66) — 8.0 ( 31) — 10.6 ( 4 3 ) — 3.9 (1 4 0 ) 0.0 ( 52) — 1.7 ( 19) — 7.8 ( 31) — 1.2 (1 0 2 ) * P e r c e n t a g e in cre a se o r d e cre a s e ( — ) . F ig u r e s in p aren th eses in d ic a te n u m b e r o f s tores r e p o r tin g , f ln c l u d e s d ry g o o d s stores. For the first five months of this year, retail sales were smaller in value than during the first five months of 1929 in practically all parts of the District excepting Portland. Value of stock carried has averaged slightly higher than in the corresponding months of 1929 and conse quently the rate of stock turnover has declined. A decline of 12 per cent in wholesale sales during May, 1930, as compared with May, 1929, (B ) Industry— r —O regon — G aliforni a--------- V N o. of N o. of •*— E m ployees —n N o. N o. E m ployees —> M ay, M ay, of M ay, of M a y, 1930 1929 1929 Firm s F irm s 1930 Industries 147 24,296 26,687 140,261 159,396 A ll Industries* . . . . 718 (-9 .0 ) ( -1 2 .0 ) S to n e , C la y and 237 194 5,699 6,945 6 G lass P r o d u c t s . 45 (2 2 .2 ) — 17.9) ( L u m b e r and W o o d 16,879 23,170 51 14,806 M a n u fa c tu r e s . . 110 18,151 (- — 21.7) ( - -1 2 .3 ) T e x t i l e s .................... 45 FEDERAL RESERVE AGENT AT SAN FRANCISCO In dexes o f daily average p roduction, adjusted fo r seasonal variations ( 1923-1925 daily average = 100) G en eral : C a rlo a d in g s — In d u s tr ia l ..................... E le c t r ic P o w e r P r o d u c t io n ............... M ay 99 - 1930 A p r. 107 161 M ar. I ll 151 1929 M ay 124 158 M a n u fa c tu r e s : L u m b e r ...................................................... . . . 108 R efin ed M in era l O ils f ........................ , . . 120 78 S la u g h te r o f L iv e s t o c k ...................... . . 93 W o o l C o n s u m p t io n f ............................. 114 169 96 78 88 55 112 161 100 72 88 63 111 180 106 82 103 80 M in e ra ls : P e tro le u m (C a lifo r n ia ) t ................... , , . C o p p e r (U n ite d S ta te s ) $ ..................... . . . L e a d (U n ite d S ta tes) $ ........................ S ilv e r (U n ite d S t a t e s ) $ ...................... . . . 95 90 105 90 98 88 108 93 117 139 125 100 93 90 81 B u ild in g an d C o n s tr u c t io n : V a lu e o f B u ild in g P e rm its § T w e n t y L a r g e r C ities ................... . . . 51 S e v e n ty S m aller C ities ................. . . . 67 V a lu e o f E n g in e e rin g C o n tr a c ts A w ard ed § T o t a l .................................................... . . 108 E x c lu d in g B u ild in g s ................. 107 59 67 88 50 610 54 59 73 96 92 98 124 124 134 146 fN ot adjusted for seasonal variations. JPrepared by Federal Re serve Board. §Indexes are for three months ending on the month indicated. ^Revised. 46 June, 1930 M O N TH LY REVIEW OF BUSINESS CONDITIONS was reported by 244 firms in ten lines of trade. That is the largest year to year decline in wholesale trade thus far reported for this D is trict during 1930. A fter allowance for the usual seasonal change, sales were also smaller (three per cent) than in April of this year. More than two-thirds of the individual houses reported a smaller value of sales for May than a year ago, and in only one line of business— drugs— did total sales increase. M ovement of goods in the intercoastal trade declined for the fifth consecutive month. T o n nage of the tw o most important commodities in eastbound shipments — lumber and petro leum products— was smaller than in any May since 1925. Eastbound shipments of other cargo increased, however, both in relation to April, 1930, and to May, 1929. W estbound cargo, which is made up largely of miscellaneous manufactured and semi-manufactured goods, was also smaller in volume than in either the preceding month or in May of last year. The value of foreign trade through Pacific Coast ports was less during the first quarter of 1930 than in any first quarter since 1925. Imports of foreign goods declined more sharply than did exports. A noticeable increase of ex ports was reported for April, but this Bank’s adjusted index for the three months ending with April was lower than the index for the three months ending with March. Lowered prices of staple commodities have been partly responsible for the reduced value of imports in recent months, but the volume of goods enter ing the D istrict’s ports has also declined. Silk r~ M ay -1930— A p r. 1929 M a r. M ay f----------- In dex N um bers* In t e r c o a s ta l T r a d e 0 T o t a l .......................................................... E a s tb o u n d , 109 .............................................. . 73 123 124 110 132 138 128 143 84 115 75 91 110 86 870 125 76 109 114 108 111 119 118 101 94 112 C a r lo a d in g s î M e r ch a n d is e and M is c e lla n e o u s ... . PER CENT R E G IS T R A T IO N O F N E W A U T O M O B IL E S Indexes o f daily average registrations o f new passenger and co m m e r cial m otor veh icles in the T w elfth D istrict, adjusted fo r seasonal variations (1923-1925 d aily average = 100). Shipments of freight on the D istrict’s rail roads were smaller during M ay than in April. Indexes of carloadings declined by a relatively large amount, a particularly sharp reduction being noted in loadings of forest products in the Pacific Northwest. (D ) Bank Debits*— A r iz o n a P h o e n ix (C) Distribution and Trade— F o r e ig n Trade® T o t a l t ....................................................... imports were practically negligible during March. Registrations of both new passenger auto mobiles and trucks declined by more than the seasonal amount during May. The number of passenger cars registered during that month was 26 per cent less than in May, 1929, and the number of new truck registrations declined by 14 per cent during the same period. I ll ............ $ M ay, 1930 40,341 C a lifo rn ia 12,892 B a k e r s f i e l d ......... 20,812 B e rk e le y .............. 27,957 F r e s n o ................. 50,472 L o n g B e a ch . . L o s A n g e le s . . ,. 1,092,843 . 194,630 O a k la n d ............ P a sa d e n a ............ 35,916 50,180 S a cra m e n to 11,172 San B e r n a rd in o 55,926 San D ie g o .......... S an F r a n c is c o . . . 1,267,849 San J o s e ............ 25,480 S an ta B a rb a ra . 15,818 S tock ton .......... . 24,425 $ M ay, 1929 46,154 r—First F iv e M o n t h s — $ 1930 204,758 $ 1929 224,311 13,181 21,291 29,529 60,533 1,239,702 235,107 42,483 48,335 11,049 63,397 1,321,661 28,828 16,548 28,918 68,114 101,958 197,386 249,352 5,338,461 978,666 186,188 241 ,724 55,353 293,650 6,535,697 136,777 77,974 125,553 72,488 107,155 155,178 326,714 6,246,108 1,206,051 224,766 241,970 57,357 333,571 6,912,817 140,792 84,597 136,363 13,581 13,491 67,970 71,943 Id a h o W h o le s a le T r a d e § S ales .......................................................... N evada R eta il T r a d e A u to m o b ile S alesJ T o t a l ................................................... . . 102 P a s s e n g e r C ars ................................ . 98 C o m m e rcia l V e h ic le s ................. . . 140 10,472 13,027 54,643 59,678 108 103 167 101 96 158 1380 1340 1620 O regon E ugene .............. P o r tla n d .......... 7,661 202,821 8,311 202 ,016 34,226 887,109 37,095 939,146 D e p a r tm e n t S to r e S a le s î .................................................. . . 115 StocksH .............................................. , 103 118 104 121 109 121 103 U ta h O gden ................ S alt L a k e C i t y ., 16,269 74,098 17,739 76,63 5 84,404 379,76 5 89,592 395,632 9,762 12,979 655 235,206 52,856 47,414 14,753 10,748 15,082 972 258 ,820 59,677 50,568 13,481 46,978 66,783 3,052 1,218,984 2 64,457 228 ,726 71,001 52,029 69,883 4,382 1,318,681 297,160 247,832 67,508 S t o c k T u r n o v e r || ............................ C o lle c tio n s # R e g u l a r ......................................... In s ta llm e n t ................................. .25 45.8 15.0 • A ctu al Figures --------- ^ .24 .25 .26 43.6 15.1 45.3 14.9 47.3 15.2 * A d ju s t e d f o r s ea son a l v a ria tio n s, 1923-1925 a v e r a g e = 1 0 0 . “ I n d e x e s are fo r th ree m o n th s e n d in g o n m o n th in d ica te d . f E x c lu d in g raw silk . $ D a ilv a v e ra g e . § M o n t h ly to ta ls o f ten lines c o m b in e d . IIA t end o f m o n th . ||P r o p o r t io n o f a v e ra g e s to c k s so ld d u r in g m o n th . # P e r c e n t o f c o lle c tio n s d u r in g m o n th to a m ou n t o u ts ta n d in g at first o f m o n th . O Revised. W a s h in g t o n B e llin g h a m E v e re tt ............... R it z v ille ............ S eattle ............... . S p o k a n e ............ T a c o m a .............. Y a k im a .............. T o t a l ............... .$3,6 25,240 *In thousands of dollars. $3,947,283 $18 ,199 ,70 9 $20,120,799 June, 1930 Prices The downward tendency of wholesale com modity prices, which commenced in July, 1929, continued during May. The index of the United States Bureau of Labor Statistics at 89.1 (1926 = 100) in May was 1.8 per cent lower than in April and 9 per cent lower than at the beginning of the decline last July. The downward movement of 9 per cent during the past ten months has been greater than any other continuous downward movement of this index since 1920-1921 when a drop of 44 per cent was recorded between May, 1920, and June, 1921. Declines in retail prices have be come increasingly evident during recent months, but available data indicate that they have been much less than the declines in whole sale prices, and that consequently the con sumer has benefited only moderately in reduced costs of living. Prices of several commodities important in this District declined sharply during May. Silver, which is mined chiefly as a by-product of other metals, was quoted on June 16 at the record low figure of 33^8 cents per fine ounce. Follow ing a month of unchanged quotations, the price of copper declined to 11 ^ cents per pound, Connecticut Valley, on June 18— the lowest quotation for that metal since 1914. The price of crude rubber, large quantities of which are consumed in the automobile tire industry of this District, has continued to decline to pre viously unrecorded low levels. Sugar quota tions have advanced somewhat during June from the low levels of April and May. W ool prices increased slightly in early June, while continued reductions in quotations for raw silk carried prices for that com m odity to the lowest point of record. Continued declines in prices of many agricul tural products have been reported during the past month. Quotations for wheat changed lit tle during the second half of May or the first ten days of June, but since that time they have moved downward sharply. On June 20 the July contract in the Chicago market sold for $.93%-.96^4 Per bushel compared with $1.03^2-1.04^4 Per bushel on May 20. U n usually large stored stocks of butter, cheese, and eggs have contributed to further declines in prices for those commodities to levels ap proximating those of 1922. Lamb and hog prices advanced slightly during May but cattle were quoted lower than a month ago. Citrus fruits and vegetables continued to be marketed at prices satisfactory to producers. Lumber, cement, and other building mate rials are currently selling at the lowest prices of recent years, but building wage scales have changed little and consequently the decline of general building costs has been retarded. Cutting of retail gasoline prices in many Pa cific Coast cities has been prevalent during 47 FEDERAL RESERVE AGENT AT SAN FRANCISCO June and has been accompanied by reductions in wholesale quotations for gasoline. Although there was a temporary reduction in quotations for oil produced at the Santa Fe Springs and Signal Hill fields, crude oil prices have shown no important changes during the past month. Credit Situation The credit situation has changed little dur ing recent weeks. In the last week of May and the first three weeks of June the amount of Reserve Bank credit in use in the District remained at the low levels of early May, at which point the figures were lower than at any time since 1924. A t the same time Reserve Bank holdings of locally purchased accept ances, which reached a peak of 31 million dol lars on March 5, 1930, declined. On June 5, the buying rate on 90-day bills was reduced ]4 per cent to 2)4 per cent, and on June 17 the rate on 45-day bills was reduced to 2y% per cent. Money in circulation increased slightly (five million dollars) during the four weeks ended June 18, Federal reserve notes comprising nearly all of the increase. During the same period transfers of funds into the District through the gold settlement fund were prac tically equal to outgoing transfers, and there was no gain or loss of funds to this District due to such transactions. There was some curtailment of activity upon the leading stock exchanges of the District during May. During the first two weeks of June, however, the turn over of shares increased greatly and was ac companied by sharp declines in the prices of nearly all shares. R E P O R T I N G M E M B E R B A N K S — T w elfth D istrict (In millions of dollars) C on d ition------- ... -----June 18, June 11, M a y 21, June 19, 1930 1930 1930 1929 1,972 T o t a l L o a n s and In v e s tm e n ts . . . 1,970 1,967 1,984 1,351 1,354 T o t a l L o a n s ...................................... 1,352 1,353 C o m m e r c ia l L o a n s ........................ 898 901 922 898 L o a n s o n S e c u r it ie s ....................... 453 456 451 431 In v e s tm e n ts ...................................... 621 616 615 631 N e t D e m a n d D e p o s i t s ................. 738 741 726 781 T im e D e p o s i t s .................................. . 984 1,032 1,011 1,024 B o r r o w in g s fr o m F e d e ra l R e se rv e B a n k .................................... 1 0 57 t Few significant changes in the condition of reporting member banks have been recorded during the past four weeks. Perhaps the in crease in holdings of government securities shown on the latest reporting date was of most importance. That increase was largely a result of the allotment of 21 million dollars of 2% per cent United States Treasury Certificates of Indebtedness to this District on June 16, part of which were held by the subscribing banks on June 18. A small decline in commercial loans of reporting member banks between May 21 and June 18 was approximately off set by an increase in loans on securities. In vestment holdings other than government se curities increased somewhat throughout this 48 June, 1930 M ON TH LY REVIEW OF BUSINESS CONDITIONS period, continuing the tendency of the past six months. The large reduction in borrowings at the Reserve Bank since the beginning of this year has not been accompanied by a proportionate decline in the number of borrow ing banks. In fact, until late April, the number of banks ac commodated was larger this year than in the corresponding months of 1929. During May, however, there was a smaller than seasonal in crease in the number of banks borrowing from this Bank, and the figures were ten per cent below those of a year ago, as compared with a decline of nearly 80 per cent in the amount of discounts during the same period. The- num ber of borrow ing banks is usually greater (28 per cent above the annual average) during June and July, just prior to the most active harvest period in this District, than in any other month. The peak is follow ed by a rapid decline to the lowest point of the year in N o vember, when the number of borrowers has averaged 25 per cent below the annual average. F E D E R A L R E S E R V E B A N K O F SA N F R A N C IS C O (In millions of dollars) t------------- — C ondiition-----June May June June 18. 21, 19. 11. 1929 1930 1930 1930 92 66 71 T o t a l B ills and S e c u r it ie s .......... 66 12 9 9 B ills D is c o u n t e d ............................. 22 21 25 13 B ills B o u g h t ...................................... 37 37 12 37 U n ite d S tates S e cu ritie s ............ 279 295 285 266 T o t a l R e s e r v e s ............................... 183 .. 178 185 178 T o t a l D e p o s it s ................................. F ed era l R e s e r v e N o te s in .. 155 153 156 161 C ir c u la tio n .................................... The chart at the bottom of the page shows the number of member banks borrowing from this Bank and the total (not the average) amount of bills discounted by this Bank during each month since January, 1924. The per centage of discounts maturing within 15 days is shown on the other chart. A t present, this percentage is lower than it has been at any time since January, 1926, showing that a larger AMOUNT OF B IL L S D IS C O U N T E D proportion of paper of longer maturities is now being carried by the Reserve Bank than has heretofore been the case during the period cov ered by the chart. The explanation of this is to be found in the present predominance of coun try bank borrowers, both in numbers and in the amount of their borrowings. Ordinarily a much larger part of the borrowings of country member banks than of the borrowings of city PER CENT D IS C O U N T M A T U R IT IE S Percentage o f discou n ts maturing within fifteen days — F ederal R eserve B ank o f San F ra n cisco . member banks is based on the rediscount of eligible customer’s paper, which is permitted by law to have a longer maturity than other forms of paper eligible for discount at the R e serve Bank. Maturities of such paper may legally range from 90 days for commercial paper to nine months for agricultural and live stock paper. During recent years the greater part of city bank borrow ing has been based on the discount of the banks’ own notes having a maturity of not over 15 days as required by law and backed by eligible collateral such as government securities or acceptable customers’ notes. NUMBER OF BANKS B O R R O W IN G A M O U N T O F B IL L S D IS C O U N T E D A N D N U M B E R O F B A N K S B O R R O W IN G F R O M F E D E R A L R E S E R V E B A N K (M o n th ly T o t a ls ) — T w elfth F ederal R eserve D istrict. M O N T H L Y R E V I E W OF B U S IN E S S C O N D IT IO N S ISAAC B. NEWTON, Chairman of the Board and Federal Reserve Agent Federal Reserve Bank of San Francisco Supplement San Francisco, California, June 20, 1930 Vol. XIV No. 6 So m e A sp ects o f U n ited States T reasury E xp en d itures in the T w elfth D istrict Ordinary expenditures of the United States Treasury are made with considerable regularity and continuity from day to day and from month to month in the Twelfth Dis trict. Funds to meet these expenditures, which include ex penses of the Army and Navy and other governmental agencies, are derived from the collection of taxes and fees (ordinary revenues) and from short-term borrowings. Short-term borrowings, through the sale of Treasury cer tificates and, more recently, Treasury bills, have been made with regularity at the customary quarterly intervals but have occurred oftener at times. Ordinary revenues are derived chiefly from the regular quarterly collection of income taxes, the amount obtained from the collection of fees being of secondary importance. A study of the figures of ordinary expenditures from September, 1927, to the present time shows that they ex ceeded ordinary revenues by about 201 million dollars dur ing that period. This constant tendency of ordinary expen ditures to exceed ordinary revenues is illustrated in the accompanying chart, one curve of which shows the cumu lative amount of the excess of expenditures over collec tions during the period covered by this study. The sharp dips in this curve occurring regularly at quarterly intervals represent the periodic effects of tax receipts in excess of current expenditures. The Federal government may offset this constantly accumulating difference between its ordinary expenditures and ordinary revenues by (1) transferring funds collected in other districts to this District, (2) borrowing in this District or (3) both borrowing in this District and trans ferring funds to it from other districts. The first alterna tive would result in a gain of funds to the Twelfth District. The second alternative would in itself have no effect on the total amount of funds in the District if the borrowings were exactly equal to the deficiency of ordinary revenues as compared with ordinary expenditures. If the borrow ings were greater than this deficiency and if part of them were transferred out of the District, the result would be a loss of funds by this District. The outcome of the third alternative might be either a gain, a loss, or no gain or loss of funds, depending upon the relative amounts in volved in the deficiency, the borrowings, and the transfers of funds into the District. During the period covered by this study the Federal government collected more money from the Twelfth Dis trict by means of short-term borrowings than it expended within the District in redeeming the public debt. This excess of Treasury collections over expenditures on the public debt (shown by the lighter curve in the chart) amounted to 266 million dollars and was 32 per cent greater than the excess of ordinary expenditures over ordinary collections (201 million dollars), leaving a net amount of approximately 65 million dollars, much, or possibly all of which was transferred by the Treasury through the gold settlement fund to other districts in the United States. It is essential at this point to note that the sale of govern ment issues in this District does not necessarily result in an immediate withdrawal of funds from the District, even though the Treasurer may thus secure more funds than are needed within the District. The proceeds of these sales are kept on deposit with subscribing banks until the Treasurer has need for them either within or without this District, and such needs do not usually require the immediate deple tion of the funds. Superficially, it would appear that the net result of these transactions concerning the public debt was the loss of approximately 65 million dollars from Twelfth District banking funds during the period from September, 1927, to June, 1930. Considering certain practices of the banks, however, further analysis tends to show that a net gain of a considerable though not absolutely determinate, amount of funds was the final result. In this District, short-term Treasury loans generally have been purchased by banks which have disposed of a large proportion of the paper be fore it has reached maturity, for the most part selling it to markets outside the Twelfth District, chiefly New York.* The proceeds of these sales ordinarily have been trans ferred into this District through the gold settlement fund and immediately have become a part of the District’s avail able banking resources. The securities disposed of in this manner were first paid for by Twelfth District banks, and, as pointed out above, the Treasury transferred a consider able portion of the funds so obtained out of the District. But these securities were redeemed by the Treasurer in the market which held and presented them for payment at maturity, and this fact accounts almost entirely for the cumulative excess of revenues over expenditures on ac count of the public debt of the United States in the Twelfth District. These two types of transactions, the one involving transfers of funds into the District, the other involving * F o r a d is c u s s io n o f this an d o th e r p e rtin e n t ph a ses o f G o v e r n m e n t fin a n c in g in th e T w e lft h D is tr ic t, see th e M o n t h ly R e v ie w o f B u sin e ss C o n d itio n s f o r S e p te m b e r, 1929. M ON TH LY REVIEW OF BUSINESS CONDITIONS---- SUPPLEM ENT 2 transfers of funds out of the District, tend to offset each other. Although the exact amounts involved are difficult if not impossible to ascertain, available evidence, both nonstatistical and statistical, indicates that, during the period studied, the outflow of funds incident to the Federal gov ernment’s sales of securities within the District was apM IL L IO N S OF D O LLARS G O V E R N M E N T F I N A N C I N G — T w e lfth D istrict E x cess o f p u b lic debt colle ctio n s over expenditures on account of the p u b lic debt, excess o f ordinary expenditures over ordinary revenues. B oth curves are cum ulative from Septem ber, 1927. proximately offset by an inflow of funds for the account of banks which disposed of part of those securities before they reached maturity. The evidence may be summarized as follows: (1) On the basis of available data, including complete figures for reporting member banks and incomplete data for all banks, it is estimated that total govern ment security holdings of all banks increased by not more than 115 million dollars nor less than 80 million dollars.* At the same time the Treasurer’s collections on account of the public debt exceeded expenditures on the same account (including redemption and inter est) by 266 million dollars, leaving from 151 to 186 million dollars unaccounted for. (2) However, since the total public debt of the United States was reduced by more than two billion dollars and since neither the volume of borrowing nor the volume of redemption on account of the public debt were seriously influenced by changes of interest rates or changes in the life of securities issued during this period, it may be assumed that most, if not all of this amount (151 to 186 million dollars) would have been redeemed in this District had the securities remained here until maturity. (3) But, as previously stated many banks in this Dis trict customarily sell large proportions of their allot ments of government issues to the New York market and the greater part, if not all of the redemptions involved in the 151 to 186 million dollars not yet * C h a n g es in the h o ld in g s o f a g e n cie s o th e r than ba n k s are re la t iv e ly u n im p o r ta n t a n d are th e r e fo r e d is re g a rd e d . June, 1930 accounted for undoubtedly were made in that market after the original (Twelfth District) holders of the securities had been paid for them and received the resulting funds by transfer through the gold settle ment fund. If this conclusion is correct, and the evidence, even though predominantly non-statistical, seems sufficient, it follows that the excess of the Federal government’s ordi nary expenditures over its ordinary revenues in the Twelfth District (referred to in the second paragraph of this article) necessitated transfers of funds into the Dis trict through the gold settlement fund. It also follows that the amount of these transfers (approximately 201 mil lion dollars) minus the 80 to 115 million dollar increase in holdings of government securities represented a net gain of funds by the District as a result of the Federal government’s financial transactions during the period since September, 1927. These incoming funds, estimated to have been from 86 to 121 million dollars in amount during the past two and two-thirds years, were thus added to the banking resources of the Twelfth District and had virtually the same effect on demand for credit at the Reserve Bank as would the importation or production within the District of a like amount of gold. The immediate effect was a ten dency to increase bank deposits and to enable member banks to reduce their indebtedness at the Reserve Bank or to make it less necessary for them to borrow from that bank. During those temporary periods in which the Fed eral government’s collections exceeded its expenditures either on account of the public debt or on account of ordi nary revenues and expenditures or possibly due to a com bination of both factors, an effect similar to that caused by the exportation of gold was caused if the government’s excess funds were withdrawn from the District in whole or in part. Under such conditions available banking funds, including reserves of the Federal Reserve Bank, are re duced temporarily, and member banks may be forced either to borrow from the Reserve Bank, to sell invest ments, or otherwise to secure funds if they do not wish to reduce the volume of bank credit in use in the District by calling for payment of some of their loans. In general, it may be said that over the shorter-term period an excess of Treasury disbursements releases an equivalent amount of funds which may be employed in expanding the credit structure or reducing borrowings at the Reserve Bank, while an excess of Treasury collections results either in a contraction of credit or an expansion of reserve system credit in use. Over the longer-term period a continued excess of Treasury disbursements with its resultant net addition to the District’s banking funds tends to encourage economic development within the District and to stimulate the purchase of commodities and invest ments in other districts. In this manner compensating factors arise and the balance of trade between districts tends to absorb the funds added to the Twelfth District’s banking resources by the Treasurer’s excess of disburse ments over expenditures within the District.
@FedFRASER