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MONTHLY REVIEW B U S IN E S S F ederal R eserve Bank C O N D IT IO N S o f San IN T H E T W E L F T H F r a n c isc o activity in the Twelfth District was well maintained in January, after allowance for seasonal influences, at the high level attained late in 1939. Small reductions in output took place in a few lines, but these were more than offset by expansion in others, notably in the aircraft and lumber industries. Largely as a result of expanded activity in aircraft plants and lumber mills, payrolls advanced to a new record level. New orders re ceived by district manufacturers for most primary indus trial products on which information is available continued in about the December volume, and in the lumber, steel, and pulp industries orders approximated current rela tively high rates of output. On the other hand, orders for several processed agricultural products, including flour and canned and dried fruits, continued relatively small in January and February even allowing for the customary slackness at this season. Slow current sales of some of these goods reflect partly the heavy advance buying by domestic distributors early last fall and partly the dis turbed trading conditions in usually important foreign markets for such products. In the field of construction, new residential building undertaken in January continued in good volume but nonresidential building remained dull. After having expanded moderately in November and December, retail trade declined in January and Feb ruary to about the levels of the early fall. I n d u s t r ia l I n du stry Last September, new orders placed with district pro ducers of lumber, steel, and pulp and paper rose for a brief period to unusually high levels. In the lumber in dustry, this extremely heavy buying was followed by a rapid decline, and in November new orders were lower than in any month since February 1939. In December and in January, however, new business at district lum ber mills increased moderately and in the first three weeks of February averaged 225,000,000 board feet weekly, compared with 188,000,000 board feet in November. Out put of lumber, which had increased almost continuously since March 1939, rose further in January and early February of this year, after allowance for seasonal in fluences. At this advanced level, output is about in line with new orders, which are being well maintained largely because of high consumption of lumber in the residential building industry. Since mid-January, mill prices for lumber have been firm to advancing, but in mid-February were around 5 percent below the highest fall quotations. Although orders placed with local steel producers re ceded from the war-inspired peak in September, new business since then has been maintained at an active level well above that of a year earlier. In January, the high rate of steel mill operations of the two preceding months continued and was only moderately in excess of incoming new orders, while mills were reported in early February as still holding a substantial backlog of orders placed earlier. Recent demand for steel in the district has been diversified in character. F E D E R A L R E SE R V E D IS T R IC T M a rc h 1 ,1 9 4 0 District production of pulp and paper since the first of the year has been maintained close to practical capacity, but has been no larger than new business received. In creased output of pulp has been occasioned not only by the rise in operations at district paper mills but also by demand from mills in the Middle West, formerly sup plied by imported wood pulp. Increased export demand has also stimulated local output. MILLIONS OF BOARD FEET LUMBER ORDERS—Twelfth District New orders received by sawmills. By weeks. Latest figures cover week ended February 17, 1940. Operations at district copper mines and smelters, which produce about two-thirds of total domestic output, were materially stimulated by a spurt in copper buying last September. Sales dwindled in the fall, and relatively in active copper markets were accompanied by price declines in January. District production during January con tinued at the high levels attained in the late fall, but it was indicated during the month that at least one large producer contemplated curtailment in output by early March unless demand improved. In mid-February, how ever, refined copper sales became unusually active and prices recovered somewhat. The market for lead, which is also mined and smelted in important volume in the Twelfth District, likewise became more active in the latter half of February. Since the first of the year district aircraft plants have received additional large foreign orders and some do mestic commercial orders for planes. This industry, which employed more than 28,000 workers in December, ex panded its operations further in January. While war has been the major factor in the sharp ex pansion of the aircraft industry in recent months, it has tended to restrict activity at southern California motion picture studios through reducing rentals of films in the formerly important European market. Motion picture production is reported to have declined somewhat more than is customary in January, and wage-earner employ ment and payrolls were lower in that month than at any time since the spring of 1938. Output of petroleum products, despite greater do mestic use in connection with increased industrial opera tions and transportation of goods, continued in January 14 at about the level of a year earlier. Exports, which had declined in December, recovered in January to about the level of the preceding five months. Output of furniture and structural clay products de clined more than seasonally in January. On the other hand flour production increased, and output of automo biles and tires was about the same as a month earlier. B u il d in g Value of new residential construction in the district, which had risen sharply in December on a seasonally ad justed basis, declined in January but remained consider ably higher than in any month of 1939 except December. Large contract awards for multi-family projects spon sored by the U. S. H. A . have added considerably to the figures of total residential building in recent months. During the past four months, work has started on six U. S. H. A. projects having a total value of $9,500,000 and providing facilities for more than 3,500 families. Even after excluding these publicly-financed projects, however, seasonally adjusted residential building under taken in December was the highest for any month since early 1929, and the decline in January was small. Value of new non residential building, which fluctuated between $7,000,000 and $11,000,000 monthly in 1939, decreased to something below $6,500,000 in January. T rade A moderate but widespread expansion in retail trade took place in the district during the last two months of 1939. In January, however, there was a decline sufficient to cancel much of the increase of the preceding two months. Value of department store sales decreased con siderably and on a seasonally adjusted basis was no larger than during the summer months of 1939. A decline in sales of apparel and food stores and of restaurants also took place in January. Furniture store trade and sales of products handled by filling stations increased while retail sales of drugs remained about unchanged. Preliminary figures for February indicate that depart ment store sales continued at about the January level, after allowance for seasonal factors. A g r ic u l t u r e The shortage of soil moisture, which had become acute in large sections of the district late in 1939, has been re lieved since the first of the year by unusually heavy rains and snows. In California precipitation during January and February was substantially in excess of normal and was also heavy in Nevada and Utah following an ex tremely dry autumn in all three states. All sections^f the Pacific Northwest have received ample moisture since the first of the year. The snow pack in the higher eleva tions increased but by February 20 was still below normal in most western states and more was needed for future irrigation use. Widespread storms since that date, how ever, have added further to mountain snow storage, and at the end of February snow packs were approaching normal at many points. Livestock ranges were greatly improved by the heavy precipitation in January and February, and fall- and winter-sown grains, truck crops, and citrus fruits also bene fited. Mild temperatures generally prevailed throughout the district and frost damage was small. In contrast, March 1, 1940 FEDERAL RESERVE B A N K OF S A N FR A N C ISCO unusually severe weather elsewhere in the United States damaged competing truck crops and citrus fruits and contributed to the sharp reduction during January in estimated output of oranges and grapefruit grown in Florida, Texas, and other southern states, shown in the accompanying table. Prices of California oranges re covered during January from the low levels prevailing in December, much of the increase taking place following the damage to the crop in competitive areas. Despite a moderate decline in February, prices late in the month were higher than before the freeze and substantially P r o d u c t io n of O r a n g e s a n d G r a p e f r u it — U n it e d S t a t e s * (in thousands o f packed b oxes) Oranges Arizona .................. California .............. Florida .................. T e x a s ...................... Other States.......... Total ...................... Grapefruit Arizona ................ California .............. Florida .................. T e x a s ...................... Total ...................... <—Crop Forecast—> Jan. 1, Feb. 1, 1940 1940 460 460 39,080 39,740 35,900 27,700 2,730 2,450 390 350 Average 1933-37 186 34,125 18,480 826 359 1938 350 45,914 26,700 1,440 381 1939 430 41,152 33,900 2,815 566 53,976 74,785 78,863 78,560 70,700 1,171 1,809 13,460 3,533 2,750 1,943 14,600 11,800 2,700 1,744 23,600 15,670 2,500 1,800 17,100 15,200 2,900 1,800 13,700 12,400 19,973 31,093 43,714 36,600 30,800 *Crop year ends October 31. above the extremely low levels of a year earlier. Grape fruit prices also advanced, particularly in the first half of February. While part of this increase was subsequent ly lost, prices were considerably higher late in the month than a year ago. Gains in consumer incomes during the latter part of 1939 resulted in some increase in the domestic market for farm commodities at slightly advancing prices. Twelfth District agriculturalists, producing widely diversified crops and livestock products, have shared in this ex panded market. On the other hand, the export market, an important outlet for a number of the major raw and processed farm products, has been curtailed. Shipments Distribution and Trade— Index numbers, 1923-1925 average=100 Retail Trade Department store sales (value)* Twelfth District.......................... California .................................... Los A n g eles............................ Bay Region.............................. San Francisco.......................... Oakland .................................. Pacific Northwest........................ Portland .................................. S eattle...................................... Spokane .................................. Salt Lake City............................ Department store stocks (value) t . Furniture store sales (value) *%. . . Furniture store stocks (value) t$- • Automobile sales (number)* Passenger ................ ............ Commercial.............................. Carloadings (number)* Merchandise and misc.................. With Seasonal ^-Adjustment—x 1940 ,— 1939— ^ Jan. Dec. Jan. 98 96 88 102 94 123 103 98 107 106 87 64 83 74 — 104 104 94 111 101 138 105 105 107 98 93 62 82 75 — 99 100 93 107 101 127 97 97 100 92 81 66 81 67 Without Seasonal f—Adjustment—N 1940 ,— 1939— , Jan. Dec. Jan. 80 80 75 83 78 96 79 84 78 69 64 58 69 69 — — — — — — — 179 181 156 201 179 264 175 163 195 152 185 58 119 74 81 84 79 88 84 99 75 83 73 60 60 60 67 63 116 113 148 84 80 132 94 99 89 91 103 75 89 94 82 75 83 64 80 92 66 70 79 59 67 56 104 69 53 122 59 51 87 66 58 94 64 49 115 59 53 78 Intercoastal Traffic (volume) Eastbound .................................. W estb ou n d.................................. * Daily average. fA t end of month. J1929 average =: 100. March 1, 1940 to foreign countries of apples and pears in the last four months of 1939 were only about half as large as a year earlier and exports of dried fruits were down 30 percent. Exports of the principal canned fruits produced in the district were 3 percent lower than in the last four months of 1938, sharp declines in November and December more than offsetting the large gains in the preceding two months. The movement of wheat out of the Pacific Northwest to foreign countries was 50 percent smaller in the five months through January than a year earlier, while exports of California barley were 39 percent lower. Despite reductions in foreign sales, total marketings of district farm products have been larger than a year earlier and prices have been moderately higher. N u m b e r a n d V a l u e of L iv e s t o c k o n F a r m s a n d R a n g e s a s of J a n u a r y 1— T w e l f t h D i s t r i c t (in thousands) Beef cattle... . Dairy c o w s ... H o g s .............. Horses .......... Mules ............ Sheep— lambs. Chickens ___ Turkeys ........ t— Number of Animals— \ Average 1929-38 1939 1940 4,430 4,752 4,821 1,590 1,641 1,647 1,456 1,699 1,915 941 875 858 93 81 77 13,502 12,725 12,384 33,518 28,751 29,999 1,252 1,653 2,283 f-----------Farm Value-----------\ Average 1929-38 1939 1940 $128,393 $150,905 $166,238 91,441 93,379 98,281 13,240 17,992 15,441 61,595 63,486 58,472 7,405 7,591 6,622 84,177 79,249 84,725 26,265 23,772 21,745 3,445 4,947 5,750 T o t a l......................................................... Production and Employment— Index numbers, 1923-1925 average=100 idustrial Production* Manufactures (physical volume) L u m b er........................................ Refined o i l s .................................. Cement ........................................ Wheat flo u r ................................ Minerals (physical volume) Petroleum .................................... Lead (U. S .) t .............................. Silver (U. S .) t ............................ Construction (value) Residential building permitsî. . . Twelfth District Southern California............ Northern California............ Oregon ................................ Washington ........................ Intermountain states.......... Public works contracts.............. Miscellaneous Electric power production.......... actory Employment and Payrolls§ Employment Pacific Coast................................ California ................................ Oregon .................................... Washington ............................ Payrolls Pacific Coast................................ California ................................ Oregon .................................... Washington ............................ With Seasonal t—Adjustment-^ 1940 ,— 1939 —N Jan. Dec. Jan. Without Seasonal f—Adjustment—N 1940 ,— 1939—n Jan. Dec. Jan. 101 71 160 81 118 75 163 102 109 62 160 75 121 96 88 — — — 115 118 138 109 107 121 — 70 86 93 78 105 93 79 106 94 71 86 66 81 63 50 62 48 76 49 59 56 89 67 124 43 56 85 71 57 40 34 81 — 60 39 27 42 36 174 58 86 26 32 55 135 56 45 18 26 33 249 — B a n k in g — — — 240 227 208 222 214 192 126 138 119 105 123 135 114 102 108 118 108 88 116 129 104 95 119 132 108 97 99 111 94 79 126 138 110 109 120 134 110 98 107 118 104 88 112 126 91 92 117 132 99 93 95 108 86 75 * Daily average. f Prepared by Board of Governors of Federal Reserve System. ^Includes figures from 197 cities and Los Angeles County, unincorporated § Excludes fish, fruit, and vegetable canning. and C r e d it A decline in loans to commercial and industrial enter prises by city member banks is customary during Jan uary and February, but this year such loans expanded, continuing the increase evident during the last four months of 1939. In late February these loans were some what larger than a year earlier, gains since last Septem ber more than offsetting the reduction in bank credit extended business enterprises during the first half of 1939. The substantial liquidation of business loans in the first half last year was partly seasonal in character but appears also to have been associated with inventory liqui dation. The expansion in loans last fall partly reflected seasonal influences, while a few large term loans and somewhat larger than customary advances to the motion picture industry were also factors. The non-seasonal increase since the first of the year is traceable to diversi fied demand from a considerable number of borrowers. Much of the increase last fall occurred at banks in Los Angeles, and a further large gain has taken place at banks in that city since the first of the year. Commercial S e l e c t e d I t e m s o f C o n d i t i o n o f R e p o r t in g M e m b e r B a n k s — T w e l f t h D is t r i c t (in m illion s of dollars) $415,961 $441,321 $457,274 Annual inventory data showing the number of live stock on district farms and ranges as of January 1 have recently been released by the United States Department of Agriculture and are shown in the accompanying table along with like estimates for earlier years. Total farm value of all livestock was 4 percent higher than a year ago and 10 percent higher than the average during the ten years 1929-1938. 15 M O N T H L Y R E V IE W OF B U S IN E SS C O N D IT IO N S Loans— total ........................ Commercial, industrial, and Open market paper............ Loans to finance securities transactions.................... Real estate loans................ All other loans.................... Other securities. Feb. 21, 1940 968 /-------- Change from--------- N Dec. 27, Aug. 30, Feb. 21, 1939 1939 1939 — 12 +29 + 1 341 18 + 11 — 3 +40 + 1 + H - 4 61 384 164 971 318 1,035 1,069 — 5 — 1 — 14 — 21 — 2 + 14 — 5 0 0 — 12 +27 + 2 +42 +21 0 + 5 - 11 b 63 - 12 -103 + 22 and industrial customers of banks in San Francisco, after reducing their borrowings substantially during the first half of 1939, sought only moderately increased ac commodation in the last four months of the year. Their borrowings were about unchanged in January but in creased considerably during the first three weeks of Feb ruary. Loans to commercial and industrial enterprises in other district cities expanded moderately in the early fall but have since declined, as is customary at this time of year, and in late February were slightly lower than in August 1939. Loans of district city banks to finance transactions in securities and the purchase of real estate have shown little net change in recent months, while loans in the mis cellaneous classification have declined. Reserve balances of district member banks have in creased considerably since the first of this year, and in late February were the highest on record. Contributing directly to this increase were the post-holiday seasonal return of $17,092,000 of currency from circulation and United States Treasury expenditures in the district of $48,062,000 in excess of local collections. Interdistrict payments in connection with commercial and financial transactions, which resulted in an average net outflow of about $2,500,000 weekly during 1939, had almost no net effect upon local member bank reserve balances during the seven-week period ending February 21. The addi tional reserve funds appeared mainly as excess reserves, which averaged $164,376,000 in the first half of Febru ary out of total reserves of $623,325,000. 16 FEDERAL RESERVE B A N K OF S A N FRA N C ISCO PER CENT March 1, 1940 PER CENT S u m m a r y o f N a tio n a l B u sin ess C o n d itio n s Prepared by the Board of Governors of the Federal Reserve System January and the first half of February industrial activity declined from the high level reached in the latter part of 1939. Retail trade, which had been in large volume, decreased more than seasonally, while merchandise exports were maintained. I n P r o d u c t io n IN DU STRIAL PRODUCTION Index of physical volume of production, adjusted for seasonal variation, 1923*1925 average=100. By months, January 1934 to January 1940. F A C TO R Y EM PLOYM ENT Index of number employed, adjusted for seasonal variation, 1923-1925 average = 100. By months, January 1934 to January 1940. POINTS IN TOTAL INDEX POINTS IN TOTAL INDEX Volume of industrial production declined somewhat from December to Jan uary, and consequently the Board’s index, which allows for a considerable seasonal increase, dropped sharply from the high level of 128 reached in December to 120 in January. Data available for the first half of February indicate a further sharp reduction in the index. Steel ingot production, which had been above 90 percent of capacity during most of the fourth quarter of 1939, has declined steadily since the turn of the year and by the middle of February was at about 69 percent of capacity. Plate glass production, which also had reached high levels in the latter part of 1939, was reduced in January and lumber production showed a considerable decrease owing in part to unusually cold weather in the southern regions. Automobile production in January was larger than is usual at this season. In the latter part of the month, however, and in the first half of February, as retail sales of new cars declined seasonally and dealers’ stocks, which had been lower than usual at the beginning of the year, rose rapidly, the output of cars declined. In the machinery industries activity was generally sustained at the advanced levels reached in December. Output of cotton textiles in January continued at about the high rate of other recent months but production of wToolen textiles declined further from the peak levels of October and November, and output of silk products remained in small volume. Activity at meat-packing establishments was maintained in January at the high level prevailing for several months. Coal production rose sharply, fol lowing a marked reduction in December, and was at about the high level reached last October. Output of crude petroleum continued in large volume. Value of contracts awarded for both public and private construction declined considerably in January, according to reports of the F. W. Dodge Corporation. Awards for private residential building showed a greater than seasonal reduction and were lower than the level prevailing a year ago. Contracts for other private work declined somewhat but remained in larger volume than in the corresponding period last year. E mploym ent Factory employment and payrolls, which had risen sharply during the latter half of 1939, declined by somewhat more than the usual seasonal amount from the middle of December to the middle of January, according to reports from leading industrial states. D is t r ib u t io n Sales at department stores, variety stores, and mail order houses in January declined more than seasonally from the high level of December. Total freightcar loadings showed a seasonal decline; shipments of miscellaneous freight and grain decreased, while coal loadings increased considerably. F o r e ig n T r a d e F R E IG H T -C A R LOADINGS Index of total loadings of revenue freight, adjusted for sea sonal variation, 1923-1925 average=100. Miscella neous, coal, and all other expressed in terms of points in the total index. By months, January 1934 to January 1940. Exports of United States merchandise, which usually decline in January, were maintained this year at the high level reached in December. Shipments of cotton, which have been large in recent months, rose further, while exports of many industrial products declined. Exports to the United Kingdom increased sharply, owing mainly to larger cotton shipments. Reflecting principally acquisitions of foreign gold, the country’s monetary gold stock increased by $287,000,000 during January and by $132,000,000 in the first two weeks of February. C o m m o d i t y P r ic e s Prices of copper, lead, and silk showed marked declines from the middle of January to the middle of February and there were smaller decreases in prices of some other basic industrial materials, such as steel scrap, wool, and textile yarns. Prices of foodstuffs, on the other hand, showed little change in this period. G o v e r n m e n t S e c u r it y M a r k e t Prices of United States Government securities declined slightly during the latter half of January from the recovery peak reached early in the month but regained part of these losses during the first half of February. B a n k C r e d it MEMBER BANKS IN 101 LEAD ING CITIES Wednesday figures, September 5, 1934, to February 7, 1940. Commercial loans based on new classifica tion beginning May 19, 1937. Total loans and investments at reporting member banks in 101 leading cities rose during the five weeks ending February 7 as a result of increases in holdings of Government securities at New York City banks. Loans to security brokers and dealers and commercial loans declined. Demand deposits continued to increase during the period.
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