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R eview FEDERAL RESERVE B A N K OF S A N MARCH FRA N C ISC O 1947 Review of Business Conditions— Twelfth District in industrial employment and production, coupled with some slackening in the pace of distribu tion and trade, marked District business activity in Feb ruary. No great change occurred in nonagricultural em ployment and payrolls, but evidence began to mount indicating increased consumer resistance to high retail prices, especially of such items as textiles, shoes, and clothing. t a b il it y S Prices resume upward trend The business development of probably greatest sig nificance during the past two months was the marked acceleration of the upward trend of prices that has char acterized the past year. Little change had occurred during December and January in the general level of either wholesale or retail prices, but beginning early in February the advance in wholesale prices was resumed on a broad front, with practically all major commodity groups par ticipating in the rise. During the first half of March, 17 of the 27 basic commodities traded on primary markets, whose prices are reported on a daily basis by the Bureau of Labor Statistics, were at new highs since last June, and seven others attained new highs for 1947. Only in the case of silk among these 27 commodities has there been a consistent and substantial downward trend in price since the removal of basic controls last November. Corn, lard, and hides were considerably below their 1946 peaks in March but shared in the general rise beginning in Feb ruary. Average prices of basic commodities receded some what toward the end of March, but the general index of wholesale commodity prices continued to advance until the end of the month. Important District products af fected by the recent upward price surge include petroleum and refined oils, lumber, copper, lead, wheat, barley, live stock, and cotton. A decline of about two percent in retail food prices between December and February brought the Bureau of Labor Statistics consumers’ price index down fraction ally in January and February. All other components of the index continued to increase, however, and it is highly probable that recent advances in wholesale prices will soon be reflected in a renewed upward trend in prices at the retail level. Employment and production In California the total volume of factory employment decreased moderately in February, chiefly as a result of seasonal contraction in the fruit and vegetable can ning industry. Hourly and weekly earnings continued to improve, and total payrolls increased between January and February. Slight reductions in employment in the aircraft, shipbuilding, and nonferrous metals industries were more than offset by gains in other durable goods lines, notably in automobile assembling. Gains and losses in employment were about equally distributed among the nonmanufacturing industries, although motion picture production suffered a decline of about 15 percent in em ployment and payrolls. Manufacturing employment in Washington increased somewhat during the month, in spite of seasonal contraction in’ food processing, chiefly because of improvement in ship repair and aircraft pro duction and renewed logging activity. Lumber output in the Douglas fir region in February was at the highest level since June 1945. Construction activity increased generally during the month, reflecting better weather conditions and improved building material supplies. Arizona mining employment attained a new postwar high in February. Favorable weather for farm work and an increased labor supply led to the hiring of approximately 20,000 additional farm workers in Febru ary on the Pacific Coast. The number of hired farm workers on March 1 was considerably greater than on the same date in either 1945 or 1946. Bank deposits During the first quarter of 1947 total deposits of Dis trict member banks declined about 600 million dollars. This was a decrease of nearly four percent, and is signifi cantly larger than the decline in the country as a whole. The downward trend in deposits started in 1946, but an examination of the trends in the separate categories of deposits reveals that the factors responsible for the de crease this year were considerably different from those which caused a slight decline in total deposits in the corresponding period a year ago. United States Government deposits in the District increased in the first three months of this year, whereas they experienced a net decline in the first quarter of 1946. That decrease was due, in part at least, to the withdrawal of funds from War Loan account for the purpose of making a substantial reduction in the public debt in March 1946. Funds for a somewhat larger reduction in the public debt in the first quarter of 1947 have come primarily from current receipts. 26 M arch 1947 FEDERAL RESERVE BANK OF SAN FRANCISCO In the first three months of this year, total deposits held by the public declined, though time deposits in creased slightly. Income tax payments were a significant factor in this decline. During this period the retirement of public debt held by nonbank investors did not increase private bank deposits, as it did in 1946, because the proc ess of debt redemption simply transferred bank deposits from taxpayers to security holders, with no net shift of Government deposits from W ar Loan account to pri vate hands. Total bank loans in the Twelfth District increased about seven percent in the first quarter of 1947. Taken by itself, this increase should produce a corresponding expansion in bank deposits held by the public. But, for the first time in many years, the Twelfth District has had a first-quarter excess of Treasury receipts over Treasury disbursements this year. This is probably the major factor which accounts for the decline in deposits held by the public despite the expansion in District bank loans. Another contributing factor has been the loss of deposits to the rest of the country on commercial and financial account, but this first-quarter loss appears to have been smaller than usual. Operating Ratios of Twelfth District Member Banks— 1946 n c r e a sed earnings in 1946 raised the rate of return on I capital of Twelfth District member banks substantially over that realized in 1945. In every state of the District, member bank profits increased relative to capital accounts. The average profit ratios1 of small and medium-sized District banks did likewise; only the very large banks did not report a rate of return in 1946 well above that of 1945. Government security holdings of member banks de clined throughout the year, but loans increased substan tially. Compared with 1945 operations, earnings on loans in 1946 were a larger share of total earnings, and rates of return on both loans and securities were slightly higher. Although expenses increased in dollar amount, they declined relative to total earnings. Ratios of capital accounts to total deposits and to total assets were slightly lower. Because of last year’s loan expansion, the ratio of capital accounts to total assets other than United States Government securities and cash also declined. Effects of loan expansion An increase in the rate of earnings on capital of Twelfth District banks has occurred every year since 1942, but the gain last year was the result of quite different forces than those operating during the war. In the war years the increasing return on capital was largely a result of the continued expansion in total earning assets of member banks. During those years profits as a percent of total assets were declining, since it was Government security holdings that were increasing. The marked expansion in total earning assets, characteristic of the war years, did not continue through 1946, but there was a partial shift from lower-yield Government security holdings to higheryield bank loans. For the first time in several years, profits rose relative to total assets, and loan earnings rose rela tive to total earnings. The last time earnings on loans as a percent of total earnings increased over the previous year was in 1941, but the continuing effect of war finance upon the earning structure of District banks is demon strated by the fact that earnings on loans were almost two-thirds of total earnings in 1941 but only two-fifths in 1946. The decline over several years in rates of return on 1 A ll operating ratios, upon which the text and table are based, are arith metic averages of ratios of individual banks, not ratios of aggregate dollar totals. See the note to the accompanying table. securities and on loans also ended last year. Although there was some strengthening of short-term interest rates last year, the slight increases that occurred in realized rates of return probably were due as much to changes in S elected O p e r a t in g R a t io s of M e m b e r B a n k s 1941-46— T w e l f t h D is t r ic t 1941 Percentages of total capital accounts N et current earnings before income taxes ........................... 1 — Profits before income taxes. . N et profits .................................. 9.1 Percentages of total assets Total earnings ........................... Net p r o fit s .................................... 1942 9.2 1943 1944 1945 1946 7.4 10.7 11.4 9.7 13.3 14.2 11.8 14.6 15.7 12.3 18.4 18.6 14.4 3.9 1.0 3.0 0.7 2.3 0.6 2.0 0.6 1.9 0.5 2.1 0.6 19.8 6 4 .12 23.7 58.82 34.4 46.4 42.9 38.6 46.8 36.4 44.4 40.3 — Percentages of total earnings Interest and dividends on Earnings on loans ................... Service charges on deposit accounts .................................. 5.8 6.2 7.5 7.2 6.1 5.8 Salaries and wages ................. 31.9 Interest on time deposits. . . . 15.7 i N et current earnings ............ 34.3 15.3 34.6 13.1 32.1 12.8 30.5 13.8 30.4 12.5 18.3 28.2 32.8 34.1 36.9 10.0 7.0 6.4 5.7 5.3 4.9 4.7 4.8 4.5 28.3 32.0 32.5 28.7 6.02 5.9 5.7 5.4 5.5 Capital accounts as percentage of Total d e p o s it s ............................. 12.5 — Total assets ................................ Total assets, less cash and U . S Government securities . . . . — 23.9 Earnings on loans as percentage 6.42 Interest and dividends on securi ties as percentage of total se curities ............................................ 3.0 2.3 1.6 1.4 1.3» 1.43 Interest on time deposits as per centage of total time deposits 1.6 1.5 1.1 1.0 0.9 0.9 1 Figure comparable wTith those for 1942-46 not available. 2 Excluding service charges and other fees on loans. 3 Interest on U . S. Government securities only. The rate of return on other securities, which supplied an average of 4 to 5 percent of total earnings, averaged 3.1 percent in 1945 and 3.2 percent in 1946. N o te : Figures are arithmetic averages of ratios of individual banks, not ratios of aggregate dollar totals. Thus, the operations of each bank regard less of size have equal weight in the determination of the averages. Bal ance sheet figures used as a basis for ratios are averages of amounts re ported for December 31, 1945, and June 29 and September 30, 1946. M ore complete tabulations of Twelfth District member bank operating ratios for 1946, including separate tabulations by state, by state or com bination of states and size, by proportion of time to total deposits, and by proportion of loans to total assets, are available upon request . the composition of bank loans and of security holdings as to an increase in the structure of interest rates. ( If yearend instead of September 30 figures had been used in averaging loans and securities, 1946 loan rates would have been slightly lower and security rates slightly higher than those shown in the accompanying table.) The loan ex pansion of Twelfth District member banks occurred in business, real estate, and consumer loans. Those loans March 1947 27 M O N T H L Y REVIEW carry higher interest rates than loans for purchasing or carrying Government securities, which declined substan tially during the year. Similarly, reductions in holdings of Government securities tended to be concentrated in short-term lower-yield issues. Total expenses continued to rise in dollar terms but to decline relative to total earnings, as they did during the war years. In most of the District banks with total de posits of 275 million dollars or more, however, the ratio of expenses to earnings was higher in 1946 than in 1945. This appears to have been the result primarily of less than average increases in dollar earnings rather than of greater than average increases in dollar expense. Earn ings of the large banks appear to have been more affected than earnings of other banks by the reduction in Govern ment security holdings during 1946. In the large banks, Governments make up a larger share of total assets, and income from such securities provides a larger share of total earnings than in smaller sized banks. Capital ratios Capital accounts as a percent of total assets and of total deposits had declined sharply in the past several years, but with the end of the expansion in security holdings and deposits, these capital ratios were only slightly lower in 1946 than in 1945. The ratio of capital accounts to total assets less cash and Government securities, which rose considerably from f942 through 1945, turned downward again in 1946 because of the loan expansion. Even though capital ratios have declined in recent years, capital ac counts of member banks have been increased in dollar terms, largely through the retention of profits. A sub stantial proportion of profits were again retained in 1946. Dividends paid during the year by member banks took an average of only one out of every four dollars of profit, although the ratio of aggregate dividends to profits was somewhat higher. Comparisons of 1946 and 1945 ratios involving average assets and liabilities for the year as a whole, such as the capital ratios indicated above, tend to obscure the fact that Government security holdings, total assets, and total deposits of District member banks declined over the year, while loans increased substantially, especially in the latter part of 1946. As a consequence, the ratio of capital ac counts to total deposits or assets was probably somewhat higher at the end of last year than for the year as a whole, but the ratio of capital accounts to assets less Govern ments and cash was undoubtedly lower. If member bank loans through 1947 continue at or increase over the 1946 year-end level, the importance of loan to total earnings for this year will rise further. Barring a marked increase in current expenses or a substantial shift of deposits out of the District, the rate of return on capital accounts for 1947 may well be close to the 1946 figure. Public Debt Redemption Treasury retired 23 billion dollars of marketable public debt during the calendar year 1946. It accom plished this by drawing upon the large cash balance built up in its War Loan account during the Victory Loan Drive toward the end of 1945. The Treasury’s cash bal ance reached a peak at the end of February 1946 of nearly 26 billion dollars, of which 24.5 billion were in War Loan deposits. By the end of 1946, the Treasury’s cash balance had declined to 3.5 billion dollars, including 2.6 billion in W ar Loan account. This large decrease in United States Government deposits, supplemented by a decline in interbank deposits, resulted in a reduction in total bank deposits during the year. Private deposit hold ings continued to increase, however, though at a less rapid rate than during the war years. This further growth resulted largely from the redemption, from funds held in War Loan account, of about 6.5 billion dollars of public debt held by nonbank investors, and from the creation of new deposits through a marked expansion in bank loans. In the first quarter of 1947 the Treasury reduced the marketable public debt by another 4 billion dollars, and has announced plans for retiring an additional 1.5 billion on April 1. This will bring the total redemption of mar ketable public debt since February 28,1946 to 28.5 billion dollars. The reduction of 23 billion dollars in marketable public debt during 1946 was partially offset by an increase of T h e 3 billion in nonmarketable public debt. Total public debt, therefore, declined 20 billion dollars from its peak of 279 billion reached at the end of February 1946. Among non marketable public debt issues, savings bonds outstanding increased one billion dollars, and special issues to Federal agencies and trust funds rose nearly four billion from the end of February to the end of December. Treasury tax and savings notes, on the other hand, declined somewhat over two billion dollars. C o m p o s i t i o n o f U. S. G o v e r n m e n t D e b t (in billions of dollars) Febru ary 28, 1946 Treasury bills ........................................................ 17.0 41.4 Certificates of indebtedness............................. 19.6 Treasury bonds ..................................................... 121.6 0.2 Decem ber 31, 1946 17.0 30.0 10.1 119.3 0.2 Change _ — 11.4 — 9.5 — 2.3 — Total marketable o b lig a tio n s ................. 199.8 176.6 — 23.2 Savings notes .......................................................... Savings b o n d s .......................................................... Depository b o n d s ................................................... Armed forces leave b o n d s .................................. Special issues to government agencies and trust f u n d s ................................................... 8.0 48.7 0.5 5.7 49.8 0.3 0.6 — 2.3 + 1.1 — 0.2 - f 0.6 20.9 24.6 + 3.7 Total nonmarketable obligations.......... 78.1 81.0 + 2.9 Matured debt on which interest has ceased Debt bearing no in te r e s t.................................. 0.2 1.1 0.4 1.1 + 0.2 — Total public d e b t ......................................... 279.2 259.1 Guaranteed o b lig a tio n s....................................... 0.6 0.3 Total public debt and guaranteed obligations................................................... 279.8 259.4 — — 20.1 — 0.3 — 20.4 28 FEDERAL RESERVE BANK OF SAN FRANCISCO Effects of debt retirement on bank reserves and deposits The effect upon the reserve position of member banks of the retirement of the public debt from W ar Loan account funds differs, depending upon whether the holder of the securities retired is a commercial bank, a Federal Reserve Bank, or a nonbank investor. Retirement of the portion of the debt held by commercial banks has no effect on member bank reserves. When the Treasury transfers its funds from a W ar Loan account in a member bank to its account in a Federal Reserve Bank, total deposits of the member bank decline by the same amount. Its reserves also decline, for the actual transfer is accomplished by reducing its reserve account by the amount of the transfer. If the Treasury then redeems securities held by this mem ber bank, the reserves of the member bank are increased but its deposits remain unchanged. If the redemption is equal in amount to the original withdrawal, the reserve position of the bank has not been changed by the entire transaction, for W ar Loan deposits require no reserves. (It may be noted that W ar Loan deposits again will be subject to reserve after June 30.) The use of funds withdrawn from W ar Loan account to redeem securities held by Federal Reserve Banks also reduces total bank deposits. Bank reserves decline as well, however, for there is no return to the commercial banks of the reserves which they lost as a consequence of the withdrawal of funds from W ar Loan account. If the securities redeemed are held outside of the bank ing system, the effects upon total deposits and required reserves are still different. Total bank deposits decline at the time of the withdrawal of W ar Loan deposits, but then rise again as the nonbank holders deposit the pro ceeds of their redeemed securities in their accounts. The deposit of these proceeds adds to the reserves of the banks, but a portion of these reserves is required for the new deposits. Hence, in this case, the total reserves of the banks are unchanged, but their required reserves are increased. Once the W ar Loan deposits which were obtained in the Victory Loan Drive have been used, no further reduc tion in total public debt, as distinguished from marketable public debt, can occur until the Treasury has a budget surplus. Reduction of debt from the proceeds of a budget surplus has a different impact upon bank deposits and reserves than the debt retirement of 1946 from funds withdrawn from W ar Loan account. An excess of budget receipts over budget expenditures reduces the amount of bank deposits held in private hands if the Treasury’s cash balance is allowed to rise. If the resulting surplus is used to retire bank-held debt, this, taken by itself, permanently reduces the amount of privately-held bank deposits. Total bank reserves are reduced to the extent that the redeemed securities were held by the Federal Reserve Banks. The retirement of debt held by nonbank investors, on the other hand, results in the transfer of bank deposits from depos itors, in their capacity as taxpayers, to depositors, in their capacity as holders of securities redeemed, leaving the M arch 1947 total amount of bank deposits and reserves involved in this set of transactions unchanged. The use of funds from a budget surplus to retire some bank-held and some pri vately-held public debt results, therefore, in a net decline in total bank deposits of businesses and individuals. This contrasts with the increase in privately-held bank deposits which resulted from the debt retirement during 1946 from funds withdrawn from War Loan account. Somewhat over half of the 23 billion dollars of public debt retired during 1946 was held by commercial banks. Bank reserves were unaffected by this portion of the debt retirement. Federal Reserve Banks, however, held about one-fifth of the total, and hence member bank reserves were reduced significantly because of this. Nonbank in vestors held somewhat over one-fourth of the securities that were redeemed. The resulting expansion in private deposits in member banks increased required reserves. The net effect of the debt retirement program, therefore, was to tighten the reserve position of member banks. To replenish their reserves, and to provide the additional reserves required by the expansion of deposits, which resulted from both the retirement of public debt held by nonbank investors and the increase in bank loans, member banks sold short-term Government securities to the Re serve Banks. During the period of debt redemption in 1946, the purchases of Government securities by the Reserve Banks exceeded by half a billion dollars the retirement of securities from Reserve Bank holdings. At the same time, excess reserves declined from an average of 1.1 billion dollars in February to an average of 0.9 billion in December. Debt retirement in the first quarter of 1947 had a different effect upon bank deposits and reserves than it did in 1946. Funds used so far this year have come from current tax receipts and borrowings from the public. Instead of using funds previously held in its W ar Loan account, the Treasury has used an excess of tax receipts over current expenditures, the proceeds of savings bond sales, and the proceeds of sales of special issues to Federal agencies and trust funds. In the last instance, the public has supplied these funds indirectly through the payment of social security taxes and similar contributions. Ownership of marketable public debt Of the 23 billion dollars of marketable securities retired during 1946, commercial banks held somewhat over 12 billion, the Federal Reserve System nearly 4.5 billion, and nonbank investors the remainder. Commercial banks, however, sold during this period an additional 7.2 billion dollars of Government securities, so the total decline in their holdings was 19.5 billion. The securities sold by the commercial banks were absorbed largely by the Federal Reserve Banks, which made purchases in the market in order to offset the loss of reserve funds resulting from the retirement of Federal Reserve security holdings. The retirement of nearly 4.5 billion dollars of Government securities held by Reserve Banks was more than offset by purchases amounting to 5 billion; therefore Federal Re M arch 1947 M O N T H L Y REVIEW serve holdings of Government securities showed an in crease of half a billion. The decline of 23 billion dollars in marketable public debt was partially offset by an increase in nonmarketable debt, resulting in a net decrease of 20.5 billion in total interest-bearing public debt. Ninety-five percent of this decrease occurred in the Government security holdings of commercial banks. Among nonbank investors, the Government security holdings of corporations and assoE s t im a t e d O w n e r s h i p of t h e I n t e r e s t - b e a r in g P u b l ic D ebt 1 (in billions of dollars) Febru ary 28, Banks 1946 Commercial b a n k s ........................................... 93.2 Federal Reserve Banks ................................ 22.9 Total b a n k s ..................................................... Nonbank investors (excluding- Federal agencies and trust funds) Individuals .......................................................... Insurance c o m p a n ies....................................... Mutual savings b a n k s ........... . . ................... Other corporations and associations.......... State and local g o v ern m en ts...................... 116.1 63.5 24.8 11.1 28.3 6.7 D ecem ber 31, 1946 73.7 23.4 Change — 19.5 + 0.5 97.1 — 19.0 63.4 25.3 11.8 23.5 — 0.1 + 0.5 + 0.7 — 4.8 6.1 Total nonbank in v e s to r s ........................... 134.4 130.1 Federal agencies and trust funds...................... 28.0 30.9 Total interest-bearing debt ............................. 278.5 258.0 0.6 — — 4.3 + 2.9 — 20.5 1 Comprises marketable and nonmarketable interest-bearing public debt and guaranteed obligations not held by the Treasury. N o t e : Figures will not necessarily add to totals because of rounding. ciations other than insurance companies and mutual sav ings banks showed the largest decrease, 4.8 billion dollars, a substantial portion of which occurred in the holdings of tax savings notes. The largest increase, which amounted to nearly three billion dollars, occurred in the holdings of Federal agencies and trust funds. Maturity distribution of bank portfolios The marketable public debt retired during 1946 con sisted of nearly 14.4 billion dollars of certificates of indebtedness, 6.5 billion of Treasury notes, and somewhat over 2 billion of Treasury bonds. In terms of maturity, all M a t u r i t y D i s t r i b u t i o n o f C o m m e r c i a l B a n k H o l d in g s o f M a r k e t a b l e P u b l ic D ebt1 (amounts in billions of dollars) t------Amount held------ \ Febru ary 28, Due or callable 1946 34.3 W ithin 1 year........................ 1 to 5 years............................. . 27.2 23.0 5 to 10 years........................... 3.8 10 to 15 years........................ 0.1 15 to 20 years........................ 20 years and over................... 2.7 Total holdings of marketable public debt. . . 91.0 t— Percent of total— N D ecem ber 31, 1946 18.2 30.9 18.0 2.3 0.2 2.8 Febru ary 28, 1946 37.7 29.9 25.3 4.2 0.1 2.9 D ecem ber 31, 1946 25.0 42.7 24.9 3.2 0.2 3.9 72.3 100.0 100.0 1Estimates of par value of holdings derived from U . S. Treasury Depart m ent’s monthly survey of ownership of U . S. Government securities. Total includes minor items not shown by m aturities; largely F .H .A . guaranteed debentures. N o te : Figures will not necessarily add to totals because of rounding. of these were, of course, due or callable during 1946. The retirement of these issues and the sale by banks of addi tional amounts of short-term Government securities pro duced a substantial change in the maturity distribution of commercial bank portfolios of Government securities. 29 On February 28, 1946, when the public debt was at its peak, 38 percent of the Government securities held by commercial banks were due or callable within one year, and 30 percent had a maturity of from one to five years. By December 31, 1946, Government securities due or callable within one year had declined to 25 percent of the portfolio, while those with a maturity of from one to five years had risen to 43 percent of the total. Most of this shift in percentage distribution was due to the decline in the amount of Government securities with a maturity of less than one year held by the commercial banks, but there was also some dollar increase in their holdings of issues with a maturity of from one to five years. The total amount of holdings of issues with maturities in excess of five years decreased somewhat. However, by far the greatest abso lute change in dollar amount of holdings occurred in Gov ernment securities with a maturity of less than one year. Continued retirement of public debt According to President Truman’s January Budget Message, the total public debt was estimated to be 260.4 billion dollars on June 30,1947, and 260.2 billion on June 30, 1948. Actually, tax receipts in the first quarter of 1947 have exceeded the budget estimates, and the Secre tary of the Treasury has indicated the possibility of a balanced budget for the current fiscal year. A two billion dollar deficit had been estimated in the Budget Message. The total public debt at the end of March amounted to 259.1 billion dollars. Even if the total amount of public debt should not change significantly during the next 18 months, continued reductions in marketable public debt are possible. Accord ing to the budget estimates, marketable public debt will continue to decline through the fiscal year 1948, but this decrease will be offset by an approximately equal increase in nonmarketable public debt. The principal increase in the latter will occur in special issues to be purchased and held by the Government trust funds, of which the Fed eral Old-Age and Survivors’ Insurance Fund is an ex ample. The investments made by these Government trust accounts will supply the bulk of the funds during the next 18 months for the continued retirement of marketable public debt. A further reduction during this period of almost two billion dollars in the Treasury’s cash balance will also provide funds for the retirement of an equivalent amount of marketable public debt. At the end of 1946 the Treasury’s cash balance was 3.9 billion dollars, and the President estimated that it will be 2.5 billion on June 30, 1947, and 2.1 billion on June 30, 1948. Two billion dollars is apparently regarded as the minimum working cash balance for the Treasury. The Treasury retired 1 billion dollars of marketable public debt in February 1947, 3 billion in March, and has announced plans for retiring an additional 1.5 billion in April. This will bring the reduction in marketable public debt to 28.5 billion dollars since February 28, 1946, and the reduction in total public debt to 21.5 billion dollars. 30 FEDERAL RESERVE BANK M arch 1947 OF SAN FRANCISCO BUSINESS INDEXES—TWELFTH DISTRICT 1935-39 Average = 100x In d u stria l pro du ction (ph ysical vo lu m e) 2 Fa ctory e m p lo y m e n t 4 F a ctory p a y ro lls4 P e tr o le u m 3 Year an d Lum ber Ad ju s te d 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 U nad ju s te d C rude R efined U nad ju s te d U nad ju s te d 148 112 77 46 62 67 83 106 113 88 110 120 140 140 133 138 108 118 121 95 78 74 72 73 86 89 99 104 93 93 96 103 118 129 135 131 193 1G8 140 134 127 123 140 154 163 159 160 158 172 175 194 226 243 219 C e m e n t3 Ad ju s te d W h e a t flour3 U nad ju sted Ad ju s te d 107 93 71 46 53 67 64 114 109 88 110 121 159 1S9 154 121 127 160 U nad ju ste d Electric pow er Adj u sted 115 107 110 98 97 106 113 109 114 111 123 118 120 120 132 136 152 147 U nad ju ste d C aliforn ia Ad ju s te d 83 84 82 73 73 79 85 96 105 102 112 122 136 167 214 231 219 219 U nad ju s te d C aliforn ia Ad ju s te d 100 86 73 61 66 79 87 99 112 98 104 122 173 270 333 335 246 177 U nad ju ste d 111 93 73 54 53 64 78 96 115 101 110 134 224 460 705 694 497 339 1946 February M arch April M ay June July August September October November December 121 109 111 111 132 107 113 120 122 128 133 87 97 114 129 152 120 139 139 133 122 100 128 129 131 131 132 132 131 131 131 132 133 203 210 210 222 219 228 234 222 229 227 221 154 148 160 158 149 155 158 167 146 171 223 137 149 168 165 169 169 176 177 169 171 165 176 143 153 150 167 124 136 129 130 133 166 176 140 135 132 147 109 136 154 154 146 166 208 209 211 210 212 213 222 227 236 237 243 204 206 209 212 216 222 231 227 229 232 240 162 160 170 176 179 180 184 184 187 192 192 161 159 170 176 179 180 185 185 188 193 193 296 294 321 333 341 345 362 360 372 372 387 293 293 321 335 342 345 364 361 375 373 388 1947 January February 155 170p 106 118p 134 136 219 227 229 183 161 163 174 162 174 162 250 249 246 244 194 192 191 191 386 387 379 384 C arloadin g s (n u m b e r) 3 Year an d m o n th M erch a n d ise and m iscella n eo u s T o ta l Ad ju ste d 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 U nad ju s te d Ad ju s te d 112 96 75 57 58 66 72 85 90 79 85 90 105 113 109 115 110 111 1946 February March April M ay June July August September October November December 114 104 106 108 113 121 102 109 109 111 121 94 96 103 108 122 124 118 126 128 112 107 1947 January February 136 134 108 111 U nad ju s te d D e p a r tm e n t store sales (value) 2 O th er Ad ju s te d D istrict U nad ju s te d Ad ju sted 109 84 57 37 43 48 56 70 75 65 72 79 91 103 97 97 83 86 114 105 89 74 70 81 85 97 102 90 96 99 116 121 119 130 131 132 U nad ju s te d D e p t, store stock s (value) 5 C a li fo rn ia Pacific N o r th w est U ta h & So. Id a h o Ad ju ste d Ad ju s te d Ad ju s te d 112 104 94 71 68 77 86 100 105 100 109 116 139 169 201 221 244 306 109 103 94 72 68 75 86 99 106 100 109 117 136 160 192 217 242 304 115 106 91 68 66 78 85 100 105 100 110 117 146 189 219 232 252 310 124 111 97 69 72 82 89 99 104 98 110 116 138 174 212 217 237 304 D istrict Ad ju s te d U nad ju s te d C on su m ers* p rices8 A ll ite m s Food U nad ju s te d U nad ju ste d 1 2 1 .8 1 1 8 !l 1 0 8 .2 132 125 110 89 80 85 89 97 108 101 106 113 137 187 172 177 182 238 9 3 .6 9 5 .3 9 7 .0 97^9 1 0 2 .2 1 0 2 .0 1 0 1 .0 101! 1 1 0 6 .3 1 1 9 .4 1 26.1 128^3 13L 7 142! 1 1 3 2 .0 124^8 1 0 4 .0 8 9 .8 8 6 .8 93^2 9 9 .6 100^3 104^5 99^0 96^9 97! 6 1 0 7 .9 130^9 143^4 142! 1 146 3 167i4 98.8 134 145 113 114 121 120 145 147 140 148 151 134 129 85 80 79 83 84 101 74 90 89 83 91 70 74 80 93 93 96 90 100 99 84 79 299 297 291 305 315 322 324 313 319 319 317 252 258 287 284 288 266 291 326 330 376 503 292 289 293 300 315 316 311 308 320 325 310 307 310 284 317 310 327 333 312 313 307 329 311 303 286 278 300 331 364 319 301 289 305 190 190 215 217 217 250 240 249 270 296 334 167 177 212 225 221 265 263 281 299 313 273 1 3 3 .0 1 3 3 .4 1 3 3 .8 13 4 .6 1 3 6 .8 143.1 1 4 5 .7 1 4 7 .7 1 5 0 .6 1 5 6 .2 1 5 6 .9 1 4 7 .8 1 4 8 .2 1 4 8 .7 1 5 0 .0 1 5 4 .5 1 7 0 .8 1 76.1 1 7 9 .7 1 8 6 .2 1 9 9 .9 1 9 8 .4 146 150 122 125 124 113 89 93 313 330 249 278 307 317 318 352 326 335 315 330 277 290 1 5 6 .5 1 5 6 .2 1 9 5 .7 1 9 3 .5 137 123 129 128 137 138 125 125 125 1 The terms “ adjusted” and “ unadjusted” refer to adjustment of monthly figures for seasonal variation. Excepting department store statistics, all indexes are based upon data from outside sources, as follows: Lumber, various lumber trade associations; Petroleum and Cement, U .S. Bureau of M ines; W heat flour, U .S . Bureau of the Census; Electric power, Federal Power Commission; Factory employment. Factory payrolls, and Consumers’ prices, U. S. Bureau of Labor Statistics and cooperating state agencies; and Carloadings, various railroads and railroad associations. 2 D aily average. * 1923-25 daily average=100. 4 W age earners only. Excludes fish, fruit and vegetable canning. 6 A t retail, end of month or end of year. 8 Los Angeles, San Francisco, and Seattle indexes combined, p-preliminary. r-revised. M arch 1947 31 M O N T H L Y REVIEW BANKING AND CREDIT STATISTICS-TWELFTH DISTRICT (amounts in millions of dollars) C o n d itio n ite m s o f all m e m b e r b a n k s 1 Y ear an d m o n th In v e s tm e n ts 2 L o a n s an d d iscou n ts T o ta l 2 2,239 2,218 1,898 1,570 1,486 1,469 1,537 1,682 1,871 1,869 1,967 2,130 2,451 2,170 2,106 2,254 2,663 4,068 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1946 February March April M ay June July August September October November December 2,641 2,720 2.794 2,909 3,030 3,184 3,334 3,601 3.794 3,954 4,068 1947 January February 4,140 4,254 C o m l., in d . For p u rc h ., & agric. carry’ g secs. R eal estate All other 647 721 711 635 668 670 662 686 663 664 735 933 870 934 956 1,103 1,882 730 798 864 931 82 76 65 59 51 62 184 343 195 1,283 1,000 974 899 885 908 1,431 246 1,882 327 362 399 460 275 211 228 309 560 1,090 195 411 1,431 560 U .S . G o v ’ t secu rities A ll oth e r secu rities 495 467 547 601 720 1,064 1,275 1,334 1,270 1,323 1,450 1,482 1,738 3,630 6,235 8,263 10,450 8,426 458 561 560 528 510 575 587 614 498 486 524 590 541 538 557 698 795 908 10.698 10,451 10,377 10,090 9,673 9,651 9,624 9,171 9,157 8,815 8,426 824 844 850 867 861 882 8,303 8,058 D em and dep osits a d ju s te d 3.« T im e d e p o sits 4 1,234 1,158 984 840 951 1,776 1,915 1,667 1,515 1,453 1,759 2,006 2,078 2,164 1,201 U .S . G o v ’ t d e p o sits 4 36 49 99 148 233 228 167 96 90 127 118 1.389 1,791 1,740 1,781 1,983 2.390 2,893 4,356 5,998 6,950 8,203 8,821 2,263 2,351 2,417 2,603 3,197 4,127 5,194 5,781 5,302 5,332 5,354 5,404 5,494 5,521 5,570 5,609 5,669 5,696 5,781 2,147 1,969 1,865 1,635 1,213 1,125 900 891 889 908 8,198 8,158 8,236 8,339 8,328 8,488 8,566 8,630 8,757 8,801 8,821 911 893 8,760 8,366 5,761 5,804 308 370 888 2,212 68 144 307 842 1,442 2,050 303 1,122 853 80S 610 303 M e m b e r b an k reserves and related i t e m s 5 Y ear an d m o n th C oin an d currency in circu lation Reserve ban k cred it 6 C o m m e rc ia l o p era tio n s 6 T reasu ry o p era tio n s 6 T o ta l 6 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 F .R . n o te s o f F .R .B . o f S .F . B an k debits index 31 citie s 8 R eserves 7 T o ta l R equired Excess 23 89 154 234 150 257 219 454 157 276 245 420 ,000 ,826 ,486 ,483 ,682 ,329 — + + + — + + + — + + + + + + + + 6 16 48 30 18 4 14 38 3 20 31 96 227 643 708 789 545 326 189 186 231 227 213 211 280 335 343 361 388 493 700 1,279 1,937 2,699 3,219 2,871 175 183 147 142 185 242 287 479 549 565 584 754 930 1,232 1,462 1,706 2,033 2,094 171 180 154 135 142 172 201 351 470 418 459 515 720 1,025 1,343 1,598 1,878 2,051 4 5 — 4 8 37 84 100 119 70 142 138 257 245 262 103 104 136 59 146 126 97 68 63 72 87 102 111 98 102 110 134 165 211 237 260 298 + + + + + + + — + + — 126 10 192 220 55 128 95 20 223 111 62 — — — — — — 5 63 39 11 52 42 0 9 2 2 7 3,106 3,040 2,996 2,984 2,931 2,894 2,890 2,878 2,875 2,866 2,871 1,914 1,937 1,938 1,955 2,038 2,000 2,045 2,005 2,040 2,092 2,094 1,900 1,876 1,877 1,900 1,929 1,936 1,958 1,987 2,002 2,030 2,051 77 68 64 77 84 66 54 55 56 54 59 275 302 286 281 307 291 292 306 310 313 339 — 168 133 — 81 32 2,800 2,765 2,081 1,981 2,043 1,982 60 51 322 325 — 34 — 16 + 21 — 42 — 2 — 7 + 2 + 6 — 1 — 3 + 2 + 2 + 4 +107 +214 + 98 — 76 + 9 0 — 53 — 154 — 175 — 110 — 198 — 163 — 227 — 90 — 240 — 192 — 148 — 596 — 1,980 — 3,751 — 3,534 — 3,743 — 1,607 + + + + + + + + + + + + +1 +2 +4 +4 +4 +1 1946 February March April M ay June July August September October November December + — + — + + + — — + + 19 17 2 34 35 11 28 26 162 74 37 — — — — — — — — — — + 263 36 231 177 2 272 73 15 29 136 37 1947 January February +109 + 14 — — 35 25 — — — — + U n a d ju ste d 1 Annual figures are as of end of year; monthly figures are as of last Wednesday in month or, where applicable, as of call report date. 2 M onthly data for 1946 partly estimated. 3 Demand deposits, excluding interbank and U .S . G ov’t deposits, less cash items in process of collection. 4 Monthly data partly estimated. * End of year and end of month figures. • Changes only. 7 Total reserves are as of end of year or month. Required and excess: monthly figures are daily averages, annual figures are December daily averages 8 Debits to demand deposit accounts, excluding interbank and U.S. G ov’t deposits. 1935-39 daily average=100. p-preliminary. r-revised. 32 FEDERAL RESERVE BANK OF SAN FRANCISCO March 1947 National Summary of Business Conditions INDUSTRIAL PRODUCTION Released Mft*ch 27, 1947— Board of Governors of the Federal Reserve System output and employment were maintained in February and the early part of March at the record peacetime levels reached in January. Value of department store sales has continued at a seasonally adjusted rate close to the level prevailing since early last summer. Wholesale commodity prices have advanced further. I n d u s tr ia l I n d u s t r i a l P r o d u c t io n Industrial production, as measured by the Board’s seasonally adjusted index, was maintained in February at the January rate of 188 percent of the 1935-39 average. Federal Reserve index. Monthly figures, latest shown is for February 1947. CONSTRUCTION CONTRACTS AWARDED Output of durable manufactures was slightly above the January rate, owing mainly to increased activity in the automobile industry and to a somewhat greater than seasonal gain in production of lumber and other building materials. The number of automobiles and trucks assembled reached a new postwar peak which was about the same as the 1941 average. The Board’s index of steel production showed a slight gain in February as a 9 percent increase in output at electric furnaces more than offset a 2 percent decline in production at open hearth furnaces. In March scheduled operations continued to advance, reaching a new postwar high of 97 percent of capacity in the last week of the month. Output of manufactured food products declined somewhat in February, after allowance for the usual seasonal changes, owing largely to a reduction in the processing of fruits and vegetables. Activity showed little change at textile mills, and also in industries producing chemicals, rubber products, and most other nondurable manufactures. Minerals production was maintained at the January rate, as a 6 percent decline in coal output was offset in the total by increased production of crude petroleum and metals. C o n s t r u c t io n F . W . Dodge Corporation data for 37 Eastern States. Nonresidential includes awards for build ings and public works and utilities. Monthly fig ures, latest shown are for February 1947. Value of construction contracts awarded in February was about the same as in Decem ber, according to the F. W . Dodge Corporation. Awards in January had been about one-fourth higher, owing mainly to several large public and private projects. Value of awards for private nonresidential construction continued to show little change from the reduced levels reached in November. The maximum amount of this general type of activity permitted under Federal orders was raised substantially on January 10. D is t r ib u t io n WHOLESALE PRICES Department store sales in February and the first half of March showed about the usual seasonal advance and the Board’s adjusted index of sales during the first quarter of the year is likely to be at about the same average level as during the fourth quarter of last year, when the index was close to 270 percent of the 1935-39 average. Value of department store stocks showed a greater than seasonal increase in February and the preliminary adjusted stocks index reached a level of 280 percent of the 1935-39 average. Shipments of coal and most other classes of revenue freight declined somewhat in February, owing in part to severe weather conditions, and then advanced during the first two weeks of March. Loadings of forest products, however, were considerably above the January rate throughout this period. C o m m o d i t y P r ic e s Bureau of Labor Statistics’ indexes. W eekly figures, latest shown are for week ending March 22, 1947. MEMBER BANKS IN LEADING CITIES Wholesale commodity prices continued to rise during February and the first half of March. The Bureau of Labor Statistics’ index of wholesale prices at 149 (1926— 100) was one-third above the level of last June. There were sharp increases to a new high level of 184 in the index for farm products and the average of prices of commodities other than farm products continued to rise. B a n k C r e d it Deposits of businesses and individuals at commercial banks declined sharply and Treasury deposits at Federal Reserve Banks increased in February as a result of large tax payments. This shift of funds to Treasury accounts at the Reserve Banks put a drain on member bank reserves, which was offset in part by a decline in required reserves and in part by an increase in Reserve Bank holdings of Government securties. In the first half of March, however, when Treasury deposits at the Reserve Banks were drav/n down in connection with cash retirement of about 3 billion dollars of maturing securities, member bank reserve positions were eased considerably and Reserve Bank holdings of Government securities declined sharply. Completion of the United States payment to the International Monetary Fund in February resulted in a decline in the total monetary gold stock of the Treasury and in offsetting changes in other Treasury and Federal Reserve accounts without affecting member bank reserve balances. Demand deposits (adjusted) exclude U . S. G o v ernment and interbank deposits and collection items. Government securities include direct and guaranteed issues. W e d n e s d a y figures, latest shown are for March 12, 1947 Commercial and industrial loans increased further at banks in leading cities. Real estate loans rose moderately. Holdings of Government securities were reduced further in Febru ary through sales to maintain reserve position and were increased somwhat early in March as purchases of Treasury bills and certificates were larger than the amount of retired issues held by these banks.
@FedFRASER