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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 Federal Reserve Bank of San Francisco District industry and trade continued at sub stantially the same levels in March as in January and February. Taking the first quarter as a whole, consumer demand for most commodities was well maintained, the most important exception being for automobiles. After declining in February, retail automobile sales failed to increase by anything approaching seasonal expectations in March. While sales of new automobiles were slow during March, considering the seasonal expansion usual in that month, sales of other durable consumer goods for which information is available were maintained in good volume. Demand for new homes continues strong, and retail furniture sales appeared in March to have main tained the slow expansion evident during most of the past year. In addition, department store sales of highunit-cost household appliances have displayed no ten dency to decline. The level of aggregate sales of non durable consumer goods including food, apparel, motor fuel, drugs, and the like has been practically unchanged since early in 1938. T w e lfth R e s id e n t ia l B u il d in g Residential building activity advanced slightly more than is usual in March and on a seasonally adjusted basis was higher than at any time in more than 10 years, except ing January of this year. The upturn was not general, being largely attributable to sharp expansion in several Intermountain cities and to additional permits, totaling $794,500, issued in connection with the large Wyvernwood rental project in East Los Angeles. The adjusted index of new residential construction fluctuated narrow ly around 50 percent of the 1923-1925 average in the sec ond half of 1938 but has been moderately higher in the first quarter of 1939. In March, it advanced two points to 54, and preliminary data for April indicate the index will probably be about 54 in that month. M a n u f a c t u r in g New orders received by lumber mills rose abruptly late last November and early in December, largely as a result of considerable forward buying by distributors supply ing the residential building market. Mill operations were advanced to fill these orders and, with the customary substantial lag between receipt of orders and delivery, expansion in production extended into January of this year. Following the bulge in orders in the late fall, new business declined and producers have recently reduced output to prevent the accumulation of excess stocks. In March, this bank’s seasonally adjusted index declined to 68 percent of the 1923-1925 average, compared with 81 in December, 88 in January, and 63 in March a year ago. Early in March, however, the downward movement in orders was reversed, and in the two weeks ending April 15 new business received was at a rate only moder ately below the high levels of the first half of December. Prices at the mill, which had weakened earlier in the year, tended somewhat higher late in March. F E D E R A L R E SE R V E D IS T R IC T May 1, 1939 Reflecting the reduced level of new car and truck sales in February and March, employment and working hours at district automobile assembly plants declined in those months. In mid-March, the number of man-hours was running about 22 percent lower than in mid-January. There was little change in activity at tire plants during the first three months of this year. Daily average output of petroleum during the first 22 days of April was approximately the same as in each of the preceding three months, and 10 percent lower than the high 1938 average. Stocks of gasoline-bearing crude increased by a small amount, however, and on March 31 were higher than at any time since 1936. Finished and unfinished gasoline stocks also rose moderately, but the increase appears to have been seasonal. The upward trend of gasoline consumption was affected but little by the business downturn of 1937-1938. A leveling off in sales, after allowance for the customary sharp seasonal fluc tuations, was apparent during much of 1938, but late in the year the upward movement was resumed. On a seasonally adjusted basis, gasoline consumption in De cember 1938 and January 1939 was the highest on record, and changes in demand since that period have been only nominal. Records over the past few years show that gasoline producing operations conform closely to sales, except that inventories, in anticipation of the summer peaks in sales, are customarily built up in the preceding fall and winter months. Inasmuch as utilization of fuel oil manufactured as a by-product of gasoline has not kept pace with gasoline sales, refinery stocks of that item increased almost continuously from mid-1937 through October 1938. To those fuel supplies have been added large quantities of crude, suitable only for fuel purposes, resulting from expanded drilling operations. On October 31, 1938, stocks of fuel oils reached a total of 100,000,000 barrels, compared with a 1937-1938 low of 70,000,000 barrels. On March 31, 1939, stocks were still close to the 100,000,000 barrel level of last October, indicating that attempts to stabilize the petroleum indus try have been at least partly successful. Stocks of canned fruits and vegetables held by pro ducers have been materially reduced in recent months, and are now considerably lower than they were a year ago. While inventories of some canned fruits remain con siderable, unsold stocks are reported to be moving in good volume at firm prices. Preliminary information indicates that the 1939 packs of early vegetables will be about the same as last year. It is tentatively estimated that the Cali fornia spinach pack, begun late in March, will be little larger than the light 1938 pack of 1,040,000 cases, which was the smallest since 1932. Asparagus canners and growers have agreed upon a maximum pack of 1,850,000 cases. This compares with a 1938 pack of 1,800,000 cases, also the lowest since 1932. Producers’ stocks of canned salmon were lower on March 31 than at the end of the first quarter in most recent years. Movement of canned salmon has been considerably greater than seasonal since 22 the first of this year, and prices for some grades were higher on April 1 than a month earlier. Flour milling activity declined more than seasonally in March, and was approximately the same as a year ago. During the first quarter of 1939, however, output was higher than in any corresponding period during the past 16 years except in 1924 and 1929, owing principally to heavy export demand. The adjusted index of meat pro duction was 116 percent of the 1923-1925 average in March, the same as the 1937 and 1938 monthly averages. This is one of the more stable food industries; in more than two years the index has rarely deviated by more than four points from the 116 percent level. A g r ic u l t u r e Prices paid farmers and livestock growers for their products advanced slightly in March and April, and vol ume of farm marketings expanded seasonally to levels somewhat higher than in the early spring of 1938. Last year, marketings of early crops and livestock were de layed by heavy rains; this year, less than the normal amount of rainfall and favorable growing weather thus far have resulted in early maturing and marketing of crops. In addition, the Federal wheat and flour export subsidy program has stimulated sales of wheat by farm ers in the Pacific Northwest considerably during recent months. Cash receipts of wheat and apple growers in Idaho, Oregon, and Washington have been considerably above the extremely low returns received in the comparable period last year, and total farm income in that area dur ing the first quarter of 1939 is estimated to be more than 20 percent larger than in the first quarter of 1938. In come elsewhere in the district was smaller than a year ago, with the largest declines recorded for Arizona and California. Reduced income from marketings of cattle, citrus fruits, cotton, hogs, and rice were the principal sources of the decline in returns to farmers in those states. Cash receipts from the sale of dairy products, in fluenced by low milk and butter prices, were down in all states of the district. For the entire district, total farm cash income during the first three months of this year was slightly higher than in comparable months of 1938. Physical conditions were generally favorable for cur rent farm operations in March and early April, except in parts of California and Oregon where sub-normal rainfall has reduced anticipated crop output on nonirri gated lands and forced growers to irrigate more heavily than is customary at this season. Fortunately, this com paratively dry season was preceded by several years of generous rainfall which raised the water table in most of the important agricultural areas of the district. Never theless, with snow packs in the mountains much lighter than in 1938, supplies of irrigation water are expected to be adequate only if used carefully. The outlook for late irrigation water is poor to fair. Average annual precipitation— rainfall and snowfall combined— in the Twelfth District varies from practi cally nothing in some desert areas of the southwest to well over 100 inches in parts of western Washington. Although a considerable portion of the farm acreage in this district is so-called “ dry land,” relying solely upon rain and snowfall for moisture, many important crop producing areas depend mainly upon irrigation. O f the 96,307,000 acres of the district classed as farm land in M ay 1, 1939 FEDERAL RESERVE B A N K OF SAN FRANCISCO 1934 (latest date for which accurate figures are avail able), 7,143,000 acres, or 7 percent were under irrigation. In terms of crop land, which totaled 30,515,000 acres in 1934, more than 23 percent was irrigated. The amount of land now under irrigation is estimated to be some what larger than in 1934. Irrigation projects are of importance in each State of the Twelfth District, although in some of the most proL a n d A r e a , A c r e a g e i n F a r m s , C rop L a n d , a n d I r r ig a t e d L a n d (in thousands of acres) A r iz o n a ........................ California ................... Idaho ........................... Nevada ........................ Oregon ........................ Utah ............................. W ashington ............... Land Area 72,838 99,617 53,347 70,285 61,189 52,598 42,775 Farm Land 14,018 30,438 9,952 3,622 17,358 6,239 14,680 Crop Land 849 11,631 4,284 380 4,921 1,706 6,744 Twelfth D istrict____ 452,649 96,307 30,515 Source: Irrig. Land 430 3,488 1,388 253 579 583 422 Percent Under /"-Irrigation—\ Farm Crop Land Land 3 51 11 30 14 32 17 67 3 12 9 34 3 6 7,143 7 23 Census of Agriculture, 1935. ductive states only a small percentage of crop land is under irrigation. In Arizona, the Salt River Valley around Phoenix, the Gila River Basin some distance southwest of Phoenix, and the lower Colorado River Basin around Yuma are important irrigated sections which account for more than half the total crop land of the State. In California, irrigated lands include the Im perial Valley, the citrus fruit producing sections of south ern California, and much of the San Joaquin and Sacra mento valleys, as well as other small areas in the central and northern parts of the State. In Idaho, irrigated regions are scattered over the southern half of the State and in the aggregate include a third of the crop land. About two-thirds of the crop land of Nevada is irrigated, most of it located in the west central part of the State. Production and Employment— Index numbers, 1923-1925 aver a g e = 100 Industrial Production* Manufactures (physical volume) Lumber ................................................ Refined o i l s ......................................... Cement ................................................ W ith Seasonal r~ Adjustment —\ t— 1939— V 1938 Mar., Feb. M ar. Without Seasonal <— Adjustment —\ ,— 1939— V 1938 M ar. Feb. Mar. 68 — 63 158 63 — 55 119 116 — — 115 58 150 76 __ 124 58 156 56 __ 114 — 64 98 95 94 110 65 106 52 62 42 27 29 70 — 34 36 30 22 23 60 — 62 72 51 31 41 82 140 47 55 45 26 24 33 157 39 42 37 32 27 54 156 211 190 196 194 177 95 106 86 78 97 107 89 79 95 105 81 81 93 104 82 76 92 104 80 74 93 103 77 79 91 101 87 72 94 102 91 77 87 96 80 72 91 101 83 72 89 100 79 69 87 96 76 72 116 W heat flour ....................................... 121 Minerals (physical volume) — P e tr o le u m ............................................ Lead ( U . S . ) t .................................... Silver (U . S . ) t .................................. Construction (value) Residential Building Permits^ Twelfth D istrict........................... 54 Southern California............... 63 Northern California............... 42 Oregon ....................................... 21 Washington ............................. 36 Intermountain states............ 92 — Public works contracts................... Miscellaneous Electric power production.......... 211 Factory Employment and Payrolls§ Employment Pacific Coast ............................... California ....................................... Oregon ........................................... W ashington .................................. Payrolls Pacific Coast .................................... California ....................................... Oregon ............................................ W ashington .................................. 74 — 86 112 124 * Daily average. tPrepared by Board of Governors of the Federal Reserve System. ¿Includes figures from 197 cities and Los Angeles County, unincorporated. § Excluding fruit and vegetable canning. 23 M O N T H L Y R EVIEW OF BUSINESS CONDITIONS M ay 1, 1939 The south central part of Oregon and the Hood River Valley in the north central part of the State contain a good deal of irrigated land, but most Oregon crops de pend upon rain and snowfall for moisture. In Utah, where about a third of the crop land is under irriga tion, the more important areas are pretty well scattered throughout the central and southwestern parts of the State. The Wenatchee, Yakima, and Okanogan River valleys in central Washington are the principal irrigated land sections of that State, which has a smaller percent age of crop land under irrigation than any other state of the district. Over 80 percent of the irrigated land acreage within this district is located in the intensively farmed areas specified. Crop yields and the value of commodi ties produced per acre are generally much greater than in nonirrigated sections. the year. In the second half, however, loans expanded considerably and at the close of the year were unchanged from the total reported at the end of 1937. While the aggregate volume of loans at the beginning of 1939 was about the same as a year earlier, the composition of the total was altered considerably. Loans on real estate in creased sharply from $730,200,000 on December 31, 1937 to $797,800,000 at the end of 1938. O f the latter total, $96,000,000 comprised advances secured by farm lands, $508,800,000 was secured by residential proper ties, and $193,000,000 by other properties. The propor tion of total loans secured by real estate advanced from 39.0 percent at the end of 1937 to 42.7 percent at the end of 1938. In the first quarter of 1939, a further gain in C r e d it Total loans of district city banks during late March and the three weeks ending April 19 continued the de cline in evidence since the first of the year. This reduc tion came principally in loans for commercial, industrial, and agricultural purposes and was largely seasonal in character. Loans on real estate increased further, con tinuing the persistent growth which has been under way for more than a year. Most other classes of loans re mained about unchanged, although loans included in the “ other” classification advanced moderately to the levels prevailing at the beginning of 1939. This miscellaneous group of loans consists largely of consumer instalment loans and advances for modernization and repair of resi dential properties, made under Title I of the National Housing Act. The decline since the first of the year in loans at offices of member banks located in the principal cities of the district extended also to banks and branches located in smaller cities and towns. Loans of all district member banks on March 29 amounted to $1,850,000,000, com pared with $1,869,000,000 on December 31, 1938. As shown in the accompanying chart, aggregate loans of district member banks declined during the first quarter of 1938, the decline extending through the first half of Distribution and Trade— Index numbers, 1923-1925 average=100 W ith Seasonal <■— Adjustment—n , — 1939— % 1938 M ar. Feb. Mar. Retail Trade Department store sales (value)* Twelfth District ............................. 93 California ........................................... 97 Los A n g e l e s .................................. 92 Bay Region .................................. 102 San Francisco ............................. 100 Oakland ......................................... 110 Pacific N o r th w e s t........................... 77 87 S e a t tle .............................................. 74 Salt Lake C ity .................................. 65 Department store stocks (value) t 73 Furniture store sales (value) *$ . . . 70 Furniture store stocks (v a lu e )t$ . Automobile sales (number)* — Total ..................................................... — Passenger ...................................... — C om m ercial.................................... Carloadings (number) *§ 80 94 Merchandise and misc................... O t h e r ..................................................... 62 Intercoastal Traffic (volume) Total .......................................................... 69 Eastbound ......................................... 57 Westbound ......................................... 110 *Daily average. fA t end of month. Without Seasonal Adjustment—\ ,— 1939— , 1938 M ar. Feb., M ar. t— 94 99 89 108 105 118 72 81 88 65 74 69 89 94 88 99 99 107 72 80 74 66 68 74 84 89 85 91 89 98 68 75 65 67 66 70 79 84 78 91 90 95 56 64 70 63 67 66 81 86 82 88 87 94 64 69 63 68 61 74 — — — — — — 84 77 163 75 69 137 72 64 150 81 94 64 76 86 63 74 87 58 67 78 53 71 80 59 60 52 86 53 45 86 68 53 116 53 46 78 53 42 78 $1929 averages 100. §Revised series. 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 L O A N S O F A L L M E M B E R B A N K S —Twelfth District Call report data; March 29, 1939, figures preliminary. Logarithmic vertical scale; that is, equal vertical distances measure equal percentage changes rather than absolute amounts. real estate loans was accompanied by a decrease in other loans to customers, with the result that loans secured by real estate represented 44.6 percent of total loans of Twelfth District member banks on March 29. In com parison, less than 30 percent of all loans reported by dis trict member banks in 1929 consisted of loans on real estate. Not only have real estate loans shown a net expansion over the past ten years but there has also been a sub stantial decline in demand for bank credit for commer cial, industrial, and shorter term agricultural purposes. (In part, this decline in private bank credit has reflected a shift in borrowing to agencies of the Federal Govern ment.) To some extent, the reduction in commercial, industrial, and agricultural loans of member banks has been offset by the development of new loan outlets. Among the more important of the new loan outlets has been the financing of consumer purchases of automobiles and of household appliances on an instalment basis. Per sonal instalment loans for a diversity of other purposes have also been made in an increasingly large volume since about 1934. Loans of this character, which were rela tively unimportant a decade ago, constituted a large per centage of the $323,900,000 reported by district mem ber banks as “ all other loans” on December 31, 1938. 24 M ay 1, 1939 FEDERAL RESERVE B A N K OF SAN FRANCISCO POiNTS IN TOTAL INDEX POINTS IN TOTAL INDEX S u m m a ry 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 manufacturing production was maintained at about the same rate as in March but mineral production declined, reflecting a sharp reduction in output of bituminous coal pending settlement of negotiations between operators and miners. In the first quarter of this year industrial output, after a rapid rise in the latter half of 1938, increased less than is usual at this season. I n A p r il P r o d u c t io n M A N U F A C T U R IN G P R O D U C T IO N Index of physical volume of production, adjusted for sea sonal variation, 1923-1925 average— 100. Durable and nondurable series expressed in terms of points in the total index. By months, January 1934 to March 1939. W H O L E S A L E P R IC E S Indexes compiled by the United States Bureau of Labor Statistics, 1926=100. By weeks, 1934 to week ending April 15, 1939. Volume of industrial production showed little change in March, and the Board’s seasonally adjusted index remained at 98 percent of the 1923-1925 average. The index for the first quarter averaged 99, compared with 101 in the final quarter of last year. Activity at steel mills in March was at 54 percent of capacity, a slightly higher level than in January and February. Automobile production in creased less than seasonally. Retail sales of cars continued to fluctuate around a level considerably higher than last year but lower than in 1936 and 1937. Dealers’ stocks of new cars began to decline in March, following an increase to a season ally high level. Activity in the machinery industries increased further in March, continuing the rise that began last summer. Lumber production increased less than seasonally from the relatively low level of other recent months. Production of nondurable goods in March continued at about the level that has prevailed since last autumn. In the woolen textile industry, activity showed a decrease from the high level of recent months, while at cotton mills and shoe factories output was maintained in large volume. A t meat-packing establishments and sugar refineries increases in activity were reported, following earlier declines. Value of construc tion contract awards increased in March, according to F. W . Dodge Corporation figures, reflecting a seasonal rise in residential and other private building. Awards for public projects showed little change. In the first three weeks of April bitumi nous coal production declined to a low level as most mines were closed, pending the settlement of biennial contract negotiations between mine operators and workers. Steel ingot production was reduced somewhat, averaging about 52 percent of capacity, and automobile production showed little change from the rate reached in the latter part of March. D is t r ib u t io n Sales at department stores and mail order houses increased somewhat more than seasonally in March, while variety store sales showed about the usual rise. For the first quarter as a whole retail sales were in about the same volume as in the final quarter of 1938, after allowance for seasonal changes. Freight-car load ings showed less than the customary advance from February to March as loadings of coal declined and shipments of miscellaneous freight increased less than sea sonally. In the first half of April there was a marked decrease in freight traffic, reflecting in large part a sharp decline in coal shipments. C o m m o d i t y P r ic e s M E M B E R B A N K S IN 101 L E A D I N G C IT IE S Wednesday figures for reporting member banks in 101 lead ing cities, September 5, 1934, to April 19, 1939. Commer cial loans, which include industrial and agricultural loans, represent prior to May 19,1937, so-called "O ther loans” as then reported. Prices of steel scrap, copper, hides, and some other industrial raw materials declined from the middle of March to the third week of April, and there were decreases also in prices of livestock and dairy products. Silk prices rose consid erably. The general level of wholesale prices, as measured by the index of the Bureau of Labor Statistics, declined to 76 percent of the 1926 average as compared with 77 in the middle of March and at the beginning of the year. B a n k C r e d it Reflecting continued heavy gold imports and Treasury disbursements from its balances at the Reserve banks, member bank reserves and deposits increased sharp ly during the four weeks ending April 19. Excess reserves rose to a record high level of $4,000,000,000. Total loans and investments at banks in 101 leading cities, which had shown little change during March, increased somewhat during the first three weeks of April, reflecting principally continued purchases of United States Government obligations by New York City banks. Loans to brokers and dealers in securities declined. M o n e y R a t e s a n d S e c u r i t y P r ic e s E X C E S S RESER VES O F M E M B E R BAN K S Wednesday figures of estimated excess reserves for all member banks and for selected New York City banks, January 3, 1934, to April 19,1939. Prices of Government bonds and of other bonds of highest grades continued firm at high levels during March and the first three weeks of April, while prices of the lower-grade corporate bonds and of corporate stocks declined. The average discount rate on new issues of 91-day Treasury bills continued at a low level and other open market rates remained unchanged.
@FedFRASER