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MONTHLY REVIEW B U S IN E S S C O N D IT IO N S IN T H E T W E L F T H F E D E R A L R E SE R V E D IS T R IC T Federal Reserve Bank of San Francisco n d u s tr ia l production in the Twelfth Federal Reserve during January remained at about the Decem Iber District level after allowance for seasonal influences. Further expansion in output of industries producing building ma terials and household furnishings approximately offset decreases in some other lines. Factory employment in Pacific Coast states was likewise well maintained and pay rolls advanced further, allowing for the customary sea sonal declines at this time of year. Following a sharp increase in December, railroad freight traffic declined moderately in January. Available information on retail trade indicates about the usual large seasonal decrease from December levels. Residential building, which was an important factor stimulating recovery in local production and trade during the second half of 1938, advanced sharply in January, although some decline is usual in that month. As a result, the seasonally adjusted index of permits rose to 62 per cent of the 1923-1925 average from 52 in December. In 1929, the index averaged 51. Substantial gains in value of residential permits were general throughout the district. Some part of the marked rise resulted from initial per mits, amounting to $349,200, taken in connection with the large Wyvernwood rental project in East Los Angeles on which work was started during the month. That $349,200 represented about 2 percent of the value of all January residential building permits included in this bank’s index, which covers 197 cities and the unincor porated area of Los Angeles County. Permits issued for private nonresidential construction decreased in January, and continued to have an aggre gate value considerably smaller than those issued for resi dential building. The value of new public works initiated was considerably larger in January than in December, owing partly to awards o f contracts totaling $8,000,000 for the construction of a pontoon bridge over Lake Wash ington in Seattle. Stimulated by a volume of unfilled orders accumulated during the last quarter of 1938, output of lumber ex panded further in January and was 53 percent higher than in January of last year. The adjusted index advanced to 89 from 81 in December. Expansion in district mill ac tivity has been almost continuous since early in 1938 and has largely reflected demand from the residential build ing industry. New business received by district mills was considerably lower in January than in December, and preliminary data covering the first 18 days of February indicate a further reduction in that month. Gross stocks of lumber reported by mills at the end of January were seasonally lower than a month earlier and were 6 percent lower than on January 31, 1938 when the volume of orders being received was much smaller than at present. Voluntary efforts of petroleum producers to curtail output of crude in order to prevent further additions to already excessive stocks resulted in a decline in daily average production from 646,000 barrels in December March 1, 1939 to 622,000 barrels in January. Practically no change in output took place in the first 25 days of February. Re finery activity remained at about the December level. Available information indicates that in most other im portant lines, including aircraft manufacture, automobile assembly, and meat packing, changes in output during January were negligible. Production of rubber tires and flour, on the other hand, expanded somewhat. Orders re ceived by district furniture plants are reported to have in creased appreciably in January, partly reflecting an active retail demand accounted for to a considerable extent by the increased occupancy of new houses. In mid-February, settlement of a two months’ strike at a large furniture plant in the Pacific Northwest opened the way for a sub stantial increase in furniture production. A g r ic u l t u r e Farm cash income in this district was moderately larger in January 1939 than in January 1938. Prices of meat animals were somewhat higher than a year ago, while most other livestock products and crops are selling at lower levels than in January 1938. Widespread storms in February added to snowpacks and improved irrigation water prospects for the coming season, but additional moisture is needed currently in much of the district. Livestock on farms and ranges at the beginning of the year is significant as one factor bearing upon the outlook for market supplies of meat animals and animal products during the coming season. As shown in the table, the numbers of milk cows and sheep on district farms and ranges on January 1, 1939 were about as large as a year earlier, while numbers of beef cattle and hogs declined. Principally because of the lower prices at which all ani mals except beef cattle were appraised, the inventory value of district livestock was considerably lower than on January 1, 1938. N u m b e r a n d V a lu e o f L iv e s to c k on R a n g e s a n d F a r m s a s o f J a n u a r y 1, 1939— T w e lfth D is tr ic t (in thousands) Beef c a t t l e ............... Chickens ................. Dairy cow s............... H o g s ........................... Sheep and la m b s .. /----------- Number----------- , --------------------- Farm Value------------- \ 1937 1938 1939 1937 1938 1939 4,953 4,840 4,725 $151,926 $152,416 $150,507 32,962 30,873 28,751 25,705 23,728 23,729 1,614 1,617 1,628 100,869 101,726 9 2 ,6 2 1 1,613 1,710 1,667 20,144 18,561 17,507 13,689 12,790 12,772 92,518 87,194 79,532 The current crop of navel (winter) oranges in Cali fornia has been exceeded only by the record 1934-1935 crop, and output of Valencia (summer) oranges is ex pected to establish a new record of 29,230,000 boxes. Total production of the two varieties in the 1938-1939 crop year will probably approximate 48,070,000 boxes. If realized, a crop of this size would be 4 percent larger than in the preceding year and 48 percent above annual aver age output during the ten years 1927-1936. New acreage coming into bearing in Arizona grapefruit orchards and 14 March 1, 1939 FEDERAL RESERVE B A N K OF SAN FRANCISCO D is tr ib u tio n a n d T ra d e— Index numbers, 1923-1925 average=100 Retail Trade Department store sales (value)* Tw elfth District ............................. California ............................................ Los A n g e l e s .................................. B ay R e g io n ..................................... San F r a n c isc o ................................ Oakland ......................................... Pacific N o r t h w e s t ........................... S e a t t l e .............................................. Salt Lake C ity ..................................... Department store stocks (value) f . Furniture store sales (value) * $ . . . Furniture store stocks ( v a l u e ) f $ .. Automobile sales (num ber)* Passenger ....................................... C om m ercial..................................... Carloadings (num ber)* Total .......................................................... Merchandise and misc..................... O t h e r ..................................................... Intercoastal Traffic (volume) E a stb o u n d ............................................ WTestbound ......................................... *D aily average. f A t end of month. B a n k i n g a n d C r e d it With Seasonal t —Adjustment—n 1938— N 1939 Jan. Dec. Jan. 93 99 93 105 102 113 74 84 69 66 80 67 95 101 93 107 102 123 75 85 81 65 71 66 94 99 91 107 104 114 73 80 73 68 76 77 — — — — — — — — Without Seasonal , — Adjustment1939 ,— 1938— \ Jan. Dec. Jan. 77 83 79 86 85 88 56 64 52 60 66 63 — 162 172 153 188 177 224 129 152 155 60 102 65 77 83 78 88 87 89 55 61 55 62 63 72 113 112 124 66 60 122 88 96 80 95 105 81 82 95 65 70 80 58 76 85 64 64 79 47 59 51 87 62 50 105 52 43 80 59 53 78 58 47 99 51 45 72 $1929 a v e r a g e s 100. in California lemon groves and heavier yields per tree as an increasing number of trees attain maximum bearing age is resulting this year in record output of these fruits in the district. The grapefruit crop is 123 percent and the lemon crop is 50 percent larger than average production in the ten years 1927-1936. These substantial gains in output of this region have been exceeded, however, by in creases in other producing areas of the United States. In Florida, the 1938-1939 crop of oranges is estimated to be 83 percent larger than the ten-year average. Grapefruit production in that State and in Texas has likewise ex panded sharply in recent years. The current crop in Florida is estimated to be 72 percent and in Texas 522 percent larger than the long term annual average. Citrus growers in this district, marketing their recordsize crops in face of these heavy competing supplies from Texas and Florida, are experiencing a relatively unfav orable year. Prices in the current marketing year which began on November 1, have been at low levels and ship ments have been curtailed to prevent further declines. Income to growers for the first three months of the cur rent season is estimated to be more than 15 percent below returns in the comparable months last season. Receipts o f lemon growers have declined more sharply than in come received by orange growers. T able I Beginning with the week ending February 8, city mem ber banks submitted weekly reports of principal resource and liability items on a revised form. The immediate effect of the introduction of the revised form on the pub lished weekly statement of banks in the larger district cities was the transfer of certain items, previously classi fied as loans for commercial, industrial, and agricultural purposes, or as loans on real estate, or as non-Government securities, amounting to $20,800,000, to the “ other assets” classification. Notwithstanding the resulting im mediate reduction of $20,800,000 in loans and non-Government securities, total loans and investments of weekly reporting city banks were moderately larger on Febru ary 21 than at the beginning of the year. This increase was accounted for entirely by an expansion in invest ments, particularly in holdings of Government securities. After making full allowance for the decrease in loans attributable to the transfer referred to above, total loans were unchanged. Decreases took place in loans for com mercial, industrial, and agricultural purposes and in mis cellaneous advances included in the “ other” loan classifi cation. Total adjusted demand and time deposits remained about unchanged during January and the first three weeks of February. Federal Relief Expenditures—Twelfth District April 8, 1935—December 31, 1938 Under the Emergency Relief Appropriation Acts of 1935, 1936, 1937, and 1938, Congress made available $10,349,126,000 for relief and work relief throughout the United States and possessions. These appropriations for “ relief and work relief” do not include funds for any of the ordinary functions of Government, nor do they include all types of relief and recovery expenditures. For example, they do not include large sums loaned by various Government agencies such as the Reconstruction Finance Corporation, and Farm Credit Administration in connec tion with the recovery program, nor do they include benefit payments by the Agricultural Adjustment A d ministration. Although the funds referred to are not representative of all Federal Government disbursements which have affected economic activity, they do cover an important part of such expenditures since April 8, 1935. They are of interest as indicating in tangible form some of the types of projects undertaken with relief funds and the channels into which money was paid, that is, personal services, supplies, and so on. F e d e r a l E x p e n d it u r e s i n t h e S e v e n W e s t e r n S t a t e s U n d e r t h e E m e r g e n c y R e l ie f A p p r o p r i a t i o n A c t s o f 1935, 1936, 1937, a n d 1938 By Types of W ork: April 8, 1935-December 31, 1938 (in thousands of dollars) A r iz o n a ........................... California ...................... . Idaho ................................ Nevada ............................. Oregon ............................. Utah .................................. W ashington ................. . Totals Tw elfth District United States............ . Highways and Streets 13,955 60,813 9,043 21,987 9,682 39,276 Public Bldgs. 4,420 49,640 1,816 554 5,304 4,962 16,717 160,054 2,503,720 83,413 746,147 Housing Projects -0 64 -0 -0 22 -0 388 474 118,548 Public Recre ation 3,656 37,982 1,237 1,351 4,846 2,777 11,019 Conser vation W ork 21,230 99,523 26,453 5,270 21,355 12,339 44,919 62,868 231,089 735,003 1,045,652 Public U til. 744 31,021 1,581 523 2,165 2,769 9,882 48,685 598,532 Transp. Educa. & Facili Clerical Projects ties 170 3,215 14,696 76,317 447 2,499 777 110 3,239 5,558 4,241 1,240 3,366 12,642 23,268 247,503 105,249 959,084 Sewing Canning & M isc. 3,594 53,033 2,916 1,292 6,563 4,488 10,598 82,484 772,396 Admin. Expen ses 1,891 16,006 1,879 711 2,842 2,232 5,024 30,585 504,928 Reset. & Direct Relief 2,893 9,929 5,046 620 6,537 4,719 6,489 Relief Grants to States 5,792 66,410 3,860 1,087 4,915 5,176 12,701 36,233 478,315 99,941 922,443 Total 61,561 515,435 56,777 17,592 85,332 54,625 173,021 964,343 9,632,271 Source: Report of the President of the United States to the Congress showing the status of Funds and Operations under the Emergency Relief Appro priation Acts of 1935, 1936, 1937, and 1938 as of December 31, 1938. March 1, 1939 P r o d u c tio n a n d E m p lo y m e n t■ Index numbers, 1923-1925 aver age= 100 Industrial Production* Manufactures (physical volume) L u m b e r ................................................ Refined o i l s ......................................... Cement ................................................ M e a t ....................................................... W heat flo u r ......................................... Minerals (physical volume) P e tr o le u m ........................................... Lead (U . S . ) t .................................... Silver (U . S . ) f .................................. Construction (value) Residential building permits^ Twelfth D is tr ic t........................... Southern California............... Northern California ............ Oregon ....................................... Washington ............................. Intermountain states............ Public works contracts................. Miscellaneous Electric power production.......... Factory Employment and Payrolls § Employment Pacific Coast .................................... California ....................................... Oregon ........................................... W ashington .................................. Payrolls Pacific Coast .................................... California ....................................... O r e g o n .............................................. Washington .................................. With Seasonal r ~ Adjustment -\ 1939 ,— 1938— N Jan. Dec. Jan. 89 — 107 116 120 81 55 — — 135 114 109 80 116 109 — — — 57 85 69 96 52 57 48 33 35 60 35 38 35 28 19 46 62 68 58 40 36 78 Without Seasonal r ~ Adjustment —\ 1939 t — 1938— \ Jan. Dec. Jan. 63 166 75 64 164 100 41 161 56 .— — — 120 109 109 94 98 58 86 108 70 97 41 49 33 20 20 39 203 27 30 28 13 14 19 132 — — — 47 54 46 18 30 32 249 206 210 196 191 199 182 97 107 93 79 97 109 81 80 97 111 80 76 91 102 81 72 94 106 78 77 92 107 71 70 97 105 93 83 94 105 84 74 91 103 76 72 88 98 78 69 91 103 78 71 83 97 64 60 * Daily average. tPrepared by Board of Governors of the Federal Reserve System, tlncludes figures from 197 cities and Los Angeles County, unincorporated. 5 Excluding fruit and vegetable canning. O f the $10,349,126,000 appropriated for relief and work relief under the Acts specified, $9,632,271,000 had been disbursed by December 31, 1938. These expendi tures included $964,343,000 disbursed in the seven west ern states, or approximately 11 percent of the national total. The seven western states, which, except for the five southeastern counties of Arizona, are in the Twelfth Federal Reserve District, have about 8 percent of the population of the United States. While these seven states received about 11 percent of the $10,349,126,000 ex pended during the years covered, that proportion declined from 11.4 percent in the period April 8, 1935-June 30, 1936 to 7.9 percent in the six months ending December 31, 1938. Over the entire period, the agency making the largest disbursements was the Works Progress Admin istration, whose expenditures in this region were $496,145,000, or slightly more than half the total. Expenditures through the Department of Agriculture were also large, amounting to $114,179,000. This included disbursement of $50,816,000 by the Bureau of Public Roads and more T a b le IS M O N T H L Y REVIEW OF BUSINESS CONDITIONS II than $37,500,000 by the Farm Security Administration. Table I shows expenditures for relief and work relief by types of work performed. In the Twelfth District states, conservation work received $231,089,000, the larg est total for any type of project. Expenditures on this type of activity accounted for almost 25 percent of the Twelfth District total, whereas in the United States as a whole conservation work took only about 11 percent of relief expenditures. Some of the larger conservation jobs in this region were Grand Coulee Dam in Washing ton and All American Canal in southern California. Most of the “ conservation” funds did not go into large jobs but were used in widespread conservation of natural re sources through protection of timber stands, develop ment of natural water supplies and wildlife refuges, erosion control, and improvement of recreational areas, as well as for reforestation and revegetation. Payments for highway and street construction totaled $160,054,000 in this district, the second largest class of project, as measured by expenditures. Educational, professional, and clerical projects received $105,249,000. These in clude numerous “ white collar” activities such as research studies and surveys and the Federal art, music, theater, and writers projects. Administrative expenses amounted to slightly more than 3 percent of total disbursements. Table II shows the channels into which Federal relief and work relief payments were made, such as personal services, supplies, rent, etc. O f the total disbursements in the seven western states under the Emergency Relief A p propriation Acts of 1935, 1936, 1937, and 1938, almost 60 percent or $566,864,000 went directly for personal services. In addition, an indeterminate portion of funds paid out as grants or loans to states and other admin istrative areas, or in connection with construction and repair contracts, also went promptly into payrolls. Pur chases of supplies and materials such as lumber, cement, and iron, totaled $87,880,000. Purchases of equipment with these Federal funds totaled only $11,486,000 or about 1 percent of all expenditures. The comparatively small use of Federal relief funds for purchase of mate rials, equipment, land, etc., is partly explained by the fact that local and state governments bore a considerable part of the nonlabor costs of relief projects. Since the bulk of the Federal funds were paid directly to individuals for personal services, it is evident that the initial stimulus to business from these relief payments came primarily in the manufacture, processing, and distribution of con sumer goods, particularly commodities of the less durable type such as foodstuffs and clothing. F e d e r a l E x p e n d itu r e s in t h e S even W e s t e r n S t a t e s U n d e r t h e E m e r g e n c y R e lie f A p p r o p r ia tio n A c t s o f 1935, 1936, 1937, and 1938 By Objects of Expenditure: April 8, 193 5 - December 31, 1938 (in thousands of dollars) Arizona ........................ California ...................... Idaho ............................. N e v a d a ........................... Oregon ........................... Utah ............................... W a sh in g to n ................. Totals Twelfth District. . . United States.......... Personal Services! 32,302 318,160 29,543 8,014 49,665 30,496 98,684 566,864 6,037,626 Supplies and Materials 6,906 46,602 6,959 1,510 7,808 4,457 13,638 87,880 686,317 Rent 304 10,739 879 171 1,729 1,126 3,540 18,488 286,673 Contracts! 4,701 12,606 1,686 243 2,084 1,008 18,143 40,471 249,330 Grants 11,804 108,460 9,898 6,041 15,905 11,086 28,044 191,238 1,749,007 Contrac tual Services 2,418 6,180 2,087 732 1,934 1,281 3,230 Equip. Pur chased 1,421 5,199 956 297 1,206 720 1,687 17,862 160,332 11,486 89,506 Land A cqui sition 382 809 769 __ * 1,531 134 1,316 Loans 1,217 5,830 3,874 558 3,276 4,210 4,457 4,941 77,001 23,422 280,878 Employees Accident Compensa tion 106 851 126 26 193 108 282 1,692 15,600 Total Expendi tures 61,561 515,435 56,777 17,592 85,332 54,625 173,021 964,343 9,632,271 *Less than $500.00. $Federal payroll only. fConstruction, maintenance, and repair contracts. Source: Report of the President of the United States to the Congress showing the status of Funds and Operations under the Emergency Relief Appro priation Acts of 1935, 1936, 1937, and 1938 as of December 31, 1938. 16 March 1, 1939 FEDERAL RESERVE B A N K OF SAN FRANCISCO S u m m a r y o f N a tio n a l B u sin e ss C o n d it io n s Prepared by the Board of Governors of the Federal Reserve System production increased less than seasonally in January and the first three weeks of February, following a rapid advance in the latter half of 1938. Wholesale commodity prices continued to show little change. tn d u s tr ia l P r o d u c t io n IN D U S T R IA L P R O D U C T IO N Index of physical volume of production, adjusted for seasonal variation, 1923-1925 average=100. By months, January 1934 to January 1939. FACTORY EM PLOYM ENT Index of number employed, adjusted for seasonal variation, 1923-1925 average=100. By months, January 1934 to January 1939. In January volume of industrial production, as measured by the Board’s sea sonally adjusted index, was at 101 percent of the 1923-1925 average as compared with 104 in December. A t steel mills, where activity usually increases consider ably at this season, output in January and the first three weeks of February was at about the same rate as in December. Automobile production declined seasonally in the first two months of the year as retail sales showed about the usual decrease and dealers’ stocks reached adequate levels. Output of cement declined in Jan uary, and there was also some reduction in output of lumber and plate glass. In the nondurable goods industries, where production had been at a high level in December, activity increased less than seasonally. Increases at cotton, silk, and tobacco factories were smaller than usual and at woolen mills there was a decline. Shoe production and sugar relining continued in substantial volume, and activity at meat-packing establishments showed little change, following a decline in December. Mineral production increased somewhat in January, reflecting an increase in output of crude petroleum. Value of construction contracts awarded declined in January, according to F. W . Dodge Corporation figures, owing principally to a reduction in awards for publicly-financed projects, which had been in large volume in December. Con tracts for privately-financed residential building continued at the recent advanced level, while awards for private nonresidential building remained in small volume. E m ploym ent Factory employment and payrolls showed the usual decline between the middle of December and the middle of January. In most individual industries, as well as in the total, changes in the number of employees were of approximately seasonal proportions. In trade, employment declined somewhat more than is usual after Christmas. D is t r ib u t io n Sales at department and variety stores and by mail order houses showed the usual sharp seasonal decline from December to January. In the first two weeks of February department store sales continued at the January level. Volume of freight-car loadings in January and the first half of February was at about the same rate as in December. C o m m o d i t y P r ic e s M O N E Y R AT ES IN N E W Y O R K C IT Y For weeks ending January 6, 1934 to February 18, 1939. Wholesale commodity prices generally continued to show little change in January and the first three weeks of February. Grain prices declined somewhat, following a rise in December, while prices of hogs increased seasonally. Changes in prices of industrial materials were small. B a n k C r e d it Excess reserves of member banks, which reached a record high level of $3,600,000,000 on January 25, declined somewhat in February. This decline re sulted chiefly from a temporary increase in Treasury balances with the Reserve banks representing cash receipts from the sale of the new United States Housing Authority and Reconstruction Finance Corporation notes. Purchases of these notes were also responsible for an increase in total loans and investments of reporting member banks in 101 leading cities, following a decline during January. M o n ey R ates M EM B ER BANK RESERVES A N D R ELATED ITEM S Wednesday figures, January 3, 1934, to February 21, 1939. Average yields on United States Government securities declined further during the first three weeks of February to about the lowest levels ever reached. New issues of 91-day treasury bills, after selling at par or at a slight premium in late December and early January, were again on a slight discount basis during Feb ruary. Other open market rates continued unchanged
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