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Mcmimu FEDERAL RESERVE BANK MAY activity in the Twelfth District continued to expand in March, but there was some evidence of a slackening in the over-all rate of increase. War prob lems faced by individual manufacturing industries are emerging with greater frequency and are also becoming more critical. These problems are varied in character, but among the more important are those arising from shortages of materials, skilled labor, power, and trans portation and machine facilities. Notwithstanding the braking effects of these difficulties, factory employment and payrolls again rose to new record levels in March, but the increases over February were small. Retail trade, as measured by department store sales, failed to expand by the full seasonal amount in March but nevertheless re mained close to the record levels attained earlier in the year. I n d u s t r ia l Indnstry and Trade Emphasis upon expansion in production of materials essential to the war effort led to further curtailment in output of nonessential civilian goods in March. Displace ment of workers during the month from this cause oc curred principally in metal consuming plants which have not obtained, or have been unable immediately to com mence filling, war contracts. In the aggregate, however, such displacements were not large. More pressing were the problems of obtaining the materials, labor, and equip ment to supply adequately the vast expan sion in essential production which continued through March in this district. Activity in the aircraft industry contin ued to increase, although apparently at a rate that was, temporarily at least, some what slower than in immediately preceding months. Problems in this industry arise pri marily because of the inability of expansion in production of certain parts and equipment to keep pace with the rapid increase in air frame assembly facilities. The construction of ships and output in a number of other lines expanded further, with additional large increases in output foreseen. Production of chemicals, munitions, and essential metals, including aluminum and magnesium, is in creasing, and the construction of plants for synthetic rubber, ferro-alloys, iron and steel, aluminum, and magnesium is being pushed rapidly. Demand for electric power by newly established electro-process industries prom ises to absorb the greater part of the district hydroelectric output, and additional genera ★ 4^ 04 V ic io J u f ★ OF SAN F R A N C ISC O 1, 1 9 4 2 tor installations in the Pacific Northwest are being urged. Conversion of automobile assembly and machinery plants is still in process, and reports indicate that the rubber tire industry is well on the way toward producing war goods exclusively, including leak-proof gasoline tanks, gas masks, and tires for military vehicles. Although nonessential construction has been sharply curtailed by lack of materials and other factors, demand for district lumber and timber products continues in large volume, and output during 1942, despite anticipated further declines in civilian uses, is expected to exceed last year's near-record production. Unfilled orders held by mills during the first quarter of 1942 averaged 22 percent above the high levels of a year earlier. Produc tion and shipments, however, were only 5 percent higher than a year ago. The indicated disparity between orders and shipments of lumber reflects shipping difficulties (practically all lumber is now shipped by rail), unsea sonable weather tending to impede logging operations, and to some extent a scarcity of labor, particularly of skilled loggers. New private residential building declined in March to the lowest level in four years, seasonal factors consid ered, and preliminary data point to further drastic cur tailment in April. Work has been commenced on a large volume of new Federally-financed dwellings during re cent months, and on the basis of new projects approved this type of construction may be expected to increase. Up to March 31, contract awards for Federal housing projects, prin cipally for civilian war workers and en listed personnel, but including a few slum clearance projects, exceeded 43,000 units costing $132,000,000, of which contract awards for 2,000 units costing $6,700,000 were made in March. The substantial vol ume of dwelling construction of all kinds has been dwarfed, however, by the volume of army, navy, and defense plant construc tion initiated throughout the district, con cerning which no specific data may be pub lished. Military construction will become relatively even more important as a result of the W P B conservation order, effective April 9, prohibiting virtually all nonessen tial construction. Petroleum has been the one industry most seriously affected by transportation difficulties. Transfer of tankers to war ser vice as well as the loss of others by enemy action have prevented the normal move- ß u tf U ' n ite d S tcU e A . I/U a s i ß o tu & d , a tu & S ta m p A , ★ 26 FEDERAL RESERVE BANK ment of petroleum products to the Pacific Northwest. As a result, these commodities are being shipped via tank car and truck in amounts limited by carrier facilities, and steps are being taken to curb the consumption of gasoline and fuel oil in Washington and Oregon. A further diffi culty faced by the industry relates to the technical fact that heavy fuel oil and gasoline are produced jointly from crude petroleum. In the face of prospective reductions in gasoline consumption resulting from the rubber tire shortage, attempts are being made by the California pe troleum industry to avoid unmanageable accumulations of gasoline. At the same time, demand for heavy fuel oil, which is largely consumed by railroads, merchant and navy vessels, and industry, is close to an all-time high. About 90 percent of the demand at the present time is being met by refinery operations, the balance from in ventories on hand. On March 31, California producers’ stocks of heavy fuel oil totaled 60,600,000 barrels, or about six months’ supply at the current rate of consump tion. In view of the necessity for maintaining refinery operations at a level compatible with gasoline demand, and because of the steady reduction in available heavy fuel supplies, efforts are being made to reduce the output of refinable crude petroleum, and to increase the output of non-gasoline bearing crude for use as heavy fuel oil. Total crude petroleum output declined moderately in March and April to a level some 4 percent below average production since mid-1941, although production of heavy crude was advanced to the highest level in four years. In fixing California crude production allocations for April, wells yielding heavier crudes were favored over others. O f the important food processing industries, fruit and vegetable canning, with the exception of spinach and asparagus packing, is seasonally inactive. Because of military and lease-lend demands, plans have been drawn up for substantial increases in output of both canned and dried fruits and vegetables to what may prove to be a record level. To conserve tin and shipping space, a larger than usual proportion of apples, apricots, freestone peaches, and prunes will be dried, and the canned packs of these commodities will, according to present indica tions, be smaller than last year’s production. Reports in dicate that the salmon canning industry, particularly in the Bristol Bay area, will be hampered during the coming season by a shortage of shipping and the high cost of war risk insurance on vessels and cargoes, together with a shortage of available labor. During February, cane sugar refining was reduced to the lowest level in two years owing to the interruption in supplies of raw sugar. In March, however, operations were about normal for that time of year. While beet sugar refineries are now seasonally inactive, intentions of sugar beet growers to plant indicate that output this year will approximate the record output of 754,000 tons in 1940. District flour mills were operating at a rate of only 63 percent of capacity in March. Consumer purchases at district department stores ex panded in March, but because of the unusually high level of sales in January and February the increase was some what less than the customary seasonal advance. Prelim inary data for April point to little if any recession in trade during that month. Gasoline consumption in the Twelfth District during March expanded, although less May 1, 1942 OF SAN FRANCISCO th a n s e a so n a lly , a n d w a s a b o u t 8 percent ab ove 1941 le v e ls, c o m p a r e d w ith a y e a r -p e r io d in c r e a se o f 11 p e r cen t in F e b r u a r y . Agriculture S u b sta n tia l in cre a se s in a c re a g e s o f a n u m b e r o f field c r o p s g r o w n in th e T w e l f t h D is t r ic t a r e in d ica te d b y g r o w e r s ’ in te n tio n s to p la n t a s re p o r te d t o th e D e p a r t m e n t o f A g r ic u lt u r e . A c r e a g e s d e v o te d to a f e w c r o p s h a v e b e e n cu r ta ile d , h o w e v e r , a n d w ill fa ll sh o r t o f th e g o a ls e sta b lish ed in J a n u a r y . T h e a c c o m p a n y in g ta b le F ield Crop A creages 1930-1941 a n d I ndicated P l a n t in g s a n d G oals i n 1942— T w e l f t h D istrict (in thousands of acres) W heat........................................ Spring .................................. Winter .................................. Barley........................................ O ats............................................ Corn .......................................... Sorghums ................................ .. H a y ............................................ Flaxseed.................................... Sugar beets .............................. Potatoes .................................... Beans, dry.................................. R ice............................................ 1930-1939 5,704 1,971 3,733 1,503 760 255 149 5,395 49 238 280 457 119 1941 5,188 1,061 4,127 2,048 849 299 254 5,320 235 241 288 570 163 Indicated 1942 4,453 814 3,639 2,922 957 282 277 5,290 223 301 286 619 184 Goal 1942 4,170 2,156 937 297 245 5,360 276 327 705 160 s h o w s a c r e a g e s p la n te d to th e m o r e im p o r ta n t d istr ic t field c r o p s in re ce n t y e a r s , in d ica te d p la n tin g s th is se a s o n , a n d g o a ls s u g g e s te d b y th e D e p a r tm e n t o f A g r ic u lt u r e . W i t h a ll re str ic tio n s u p o n a c r e a g e r e m o v e d , in c r e a se s in s u g a r b e e t p la n tin g s o v e r a y e a r e a r lie r a r e f o r e c a s t a t 30 p e r c e n t f o r C a lif o r n ia , 20 p ercent fo r Id a h o , and 19 p e r c e n t f o r U t a h . P a r t ly b e c a u se p r o d u c tio n o f s u g a r b e e ts c o m p e te s w ith b e a n s f o r ir r ig a te d la n d , e x p e c te d p la n tin g s o f b e a n s, a lth o u g h la r g e r th a n la s t y e a r in C a li fo r n ia a n d I d a h o , fa ll s h o r t o f th e g o a l e sta b lish e d in P r o d u c tio n a n d E m p lo y m e n t — Index numbers, 1923-1925 average=100 With Seasonal Without Seasonal t------- Adjustment-------\ ,------ Adjustment----- \ ,------- 1942------- x 1941 Industrial Production1 Mar. Feb. Jan. Mar. Manufactures (physical volume) Lumber .......................... *108 123 f ll7 106 Refined oils...................... — — — — Cement ............................ 161 176 218 130 Wheat flour...................... 117 124 112 120 Minerals (physical volume) Petroleum ...................... — — — — Lead (U. S.)2........................... 140 138 118 Copper (U. S.)2.............. *163 158 tl61 148 Construction (value) Residential building permits3 Twelfth District.......... * 53 225 74 t 77 Southern California. * 40 206 81 70 Northern California. * 41 147 43 t 85 Oregon.................... * 24 54 97 t 38 Washington............ *184 503 85 t 97 Intermountain states *160 882 150 131 Public works contracts.. — — — — Miscellaneous Electric power production *303 308 306 240 Factory Employment and Payrolls4 Employment Pacific Coast.................. *242 *241 t237 155 California .................. 282 284 279 185 Oregon........................ *206 *196 tl95 123 Washington........ , . . . *178 *177 1*177 114 Payrolls Pacific Coast.................. *357 *363 t352 173 California.................... 410 423 408 203 Oregon........................ *296 *283 t286 135 Washington................ *278 *278 t268 131 ,------- 1942--------v 1941 Mar. Feb. Jan. Mar. t 85 * 97 172 162 114 91 158 156 124 148 154 112 95 161 131 117 92 .. *166 98 95 140 131 160 tl58 92 116 151 * 61 191 * 45 181 * 50 155 * 34 52 *212 418 *142 415 671 1571 54 64 34 45 63 60 495 t 89 80 tl04 t 55 1112 117 291 282 f283 223 *236 *227 220 275 272 263 *198 *177 tl69 *176 *163 tl60 152 180 118 113 *352 *338 f317 405 402 380 *284 *249 t238 *278 *250 t227 171 200 130 131 *282 JDaily average. 2Prepared by Board of Governors of the Federal Reserve System. (1935-1939 = 100). 3Includes figures from 197 cities and Los Angeles County, unincorporated. 4Excludes fish, fruit, and vegetable canning. * Preliminary. t Revised. M ONTH LY May 1, 1942 January. A 20 percent increase in rice acreage is indi cated for California, bringing that state’s rice acreage well above the goal. Flaxseed, from which linseed oil is made, was planted before the revised goals were anP r ic e s of S elected in F P a r m t h e T R roducts w e lfth D e c e iv e d F by arm ers is t r ic t March 15March 15 1941 1942 W heat (per bu sh el)....................................... $ .65 Barley (per bu sh el)................................................48 Oats (per b u sh el).....................................................35 Corn (per b u shel).................................................... 79 1.10 Sorghums (per 100 pound s)................... H ay (per t o n ) ................................................... 8.39 Flaxseed (per b u sh el)............................... 1.70 Potatoes (per b u sh el)...........................................40 Beans (per 100 p ound s)............................. 2.80 Rice (per b u sh el).................................................. 73 H ogs (per 100 pounds)............................... 7.71 8.16 Beef cattle (per 100 pou n d s)................... Sheep (per 100 pound s)............................. 4.74 M ilk, wholesale (per 100 p ound s).......... 1.83 E ggs (per d o zen ).................................................... 18 Percentage Increase $ .92 .81 .59 .95 1.59 12.97 2.58 1.00 5.14 1.40 12.97 9.98 5.66 2.65 .27 42 69 69 20 45 55 52 150 84 92 68 22 19 45 50 nounced and plantings are estimated at 200,000 acres in California. This is well below the state goal of 240,000 acres and is also below 1941 plantings of 213,000 acres. Plantings of feed grains are expected to be increased considerably, with the largest percentage increase in bar ley. A 35 percent increase is anticipated in California where more than half the district barley crop is grown. In line with the goal established by the Department of Agriculture, wheat acreage, on the other hand, is ex pected to be much lower than a year ago, since seedings of winter wheat were reduced last fall and a reduction in spring wheat plantings is expected. Fall-sown wheat has come through the winter with less than usual damage, and, although yields per acre may not be as high as in 1941, an excellent crop is expected. District production of livestock and livestock products is also expanding. The numbers of meat animals, dairy cattle, and poultry on district farms were all larger on January 1, 1942 than a year earlier. The condition of livestock ranges in all Twelfth District states except Utah and Nevada has been below average, and by April 1 reached the lowest point in 20 years in Oregon. Range deterioration has been reflected to some extent in the con dition of sheep and cattle, although the primary result has been the necessity for more than usual supplemental feeding. Growth of pasture has also been delayed by cold Distribution and TradeWith Seasonal -Adjustment ,---------19 4 2 1941 Retail Trade Mar. * Feb. Jan. Mar. Department store sales (value)1 130 Twelfth D istrict................. 161 166 167 132 160 165 172 Southern California. . . 145 145 145 115 Northern California. . 164 123 172 Portland ........................... 166 161 Western W ashington. 206 217 215 Eastern Washington 148 130 150 and Northern Idaho 144 Southern Idaho 130 162 177 165 and U t a h ................... 123 Phoenix ........................... 162 16 5 173 Index numbers, 1955-1939 daily average=100 Automobile sales (num ber)2 Total .................................... Passenger ...................... C o m m ercia l................... Carloadings (number)2 Total ......................................... Merchandise and m isc.. . Other .................................... — — — — — — — — 115 123 105 126 137 113 130 141 117 101 108 92 Without Seasonal -Adjustment/---------1942"7941 Mar. * Feb. Jan. Mar. 148 151 134 152 183 132 140 115 141 163 129 172 112 134 158 116 122 103 110 140 122 99 94 106 142 166 121 145 112 141 111 124 11 8 43 14 9 64 174 167 253 104 114 92 103 118 84 94 101 86 107 114 97 1Revised series. Tabulations of back figures for these and other cities and areas will be made available on request. *1923-1925 daily average = 100. •Preliminary. REVIEW 27 weather. As a result, milk production per cow recently has not been as high as a year earlier, but this decline has been offset by the increase in the number of milk cows. Increases in production, present and forecast, have been more than paralleled by price increases. Prices re ceived by farmers for the crops and livestock products mentioned above in mid-March this year and last are shown in the accompanying table. Increased output and increased prices are being re flected in higher cash farm income from marketings of crops and livestock. During the first two months of 1942, total cash receipts were $228,176,000, 56 percent above those of the corresponding period last year. Banking and Credit Loans of weekly reporting member banks declined slightly from mid-March to mid-April. Loans for com mercial, industrial, and agricultural purposes increased slightly to $516,000,000 on April 22, but advances in the “other loan” category, which includes personal and retail instalment loans, continued the decline evident since the first of the year. Investments of these banks increased over the period, reflecting participation in the recent Treasury issue of certificates of indebtedness and an in crease in holdings of Treasury bills. Adjusted demand deposits of reporting member banks totaled $1,525,000,000 on April 22, an increase of $46,000,000 since the first of the year. Adjusted demand de posits of all member banks in the Twelfth District, which amounted to $2,893,000,000 at the end of 1941, increased by $503,200,000 during that year, compared with a gain of $406,500,000 in 1940, and an annual average increase of $156,400,000 in the five years 1935-1939. Increased payments, as reflected in bank debits, arrested the de cline in the turnover or rate of use of deposits in 1941 which had been continuous during the preceding six years, and turnover remained at about the 1941 level through the first quarter of 1942. An Executive Order of the President, dated March 26, 1942, authorized the War and Navy Departments and the Maritime Commission to guarantee loans made to finance war production. The Federal Reserve banks, sub ject to supervision by the Board of Governors of the Federal Reserve System, were authorized to act as agents of the Army, Navy, and Maritime Commission in carry ing out the provisions of the Order. Regulation V of the Board, effective April 6, 1942, prescribes the general rules and policies to govern the operation of the Reserve banks pursuant to the Order. Under this regulation the Reserve banks, in accordance with instructions of the three military procurement agen cies, may arrange loans and guarantees thereof wherever they will facilitate and expedite war production. It is expected that any applicant will first take up his credit needs with his commercial bank or other financing in stitution. When the necessary credit cannot be arranged promptly without assistance, arrangements are to be made through the Federal Reserve bank for the guar antee of a part or all of the proposed financing. The Re serve bank is to analyze the financial aspects of the ap plication, including the integrity of the management, and determine the type of financing best suited to meet the situation. Rates of interest on loans guaranteed in whole or in part are to be prescribed by the Board. 28 FEDERAL RESERVE BANK May 1, 1942 OF SAN FRANCISCO S u m m a ry o f N a tio n a l B u sin ess C o n d itio n s Released April 22, 1942— Board of Governors of the Federal Reserve System activity continued at a high rate in March and the first half of April. Dis tribution of commodities to consumers was maintained in large volume and commodity prices advanced further. I n d u str ia l P r o d u c t io n I N D U S T R I A L P R O D U C T IO N Federal Reserve monthly index of physical volume o f production, adjusted for seasonal variation, 1935-39 average=100. Latest figures shown are for March 1942. D E P A R T M E N T S T O R E S A L E S A N D ST O C K S Federal Reserve monthly indexes of value of sales and stocks, adjusted lor seasonal variation, 192325 average = 100. Latest figures shown are for March 1942. Volume of industrial production increased seasonally in March and the Board’s adjusted index remained at 172 percent of the 1935-39 average. Output of durable manu factured products, now mostly war materials, continued to advance, reflecting mainly increased activity in the iron and steel, machinery, aviation, and shipbuilding industries. Production of lumber and cement, which had been maintained at unusually high levels during the winter months, increased less than seasonally in March. In most industries manufacturing nondurable goods activity was sustained at earlier high levels. In some, however, notably wool textiles and petroleum refining, there were declines owing to restrictions on production for civilian use and, in the case of petroleum products, to transportation difficulties. Mineral production declined in March and the first half of April, reflecting sharp curtailment in output of crude petroleum. Coal pro duction, which usually declines at this season, was maintained in large volume. The Great Lakes shipping season opened in the latter part of March and the first boatload of iron ore reached Lower Lake ports 12 days earlier than the record set last year. Shipments during the coming season are expected to exceed considerably the total of 80 million gross tons brought down The Lakes last year. Value of construction contract awards continued to increase in March, according to figures of the F. W . Dodge Corporation, and the level of the first quarter of 1942 was the highest in recent years, being some 30 percent above that of the corresponding period last year. Awards for public work amounted to close to 80 percent of the total and in the residential field accounted for 52 percent of the value of all projects. Publiclyfinanced contracts for factory construction showed a sharp increase, partly offset in the total by a decline in private factory construction. On April 9 the W ar Production Board issued an order which required explicit per mission of the Government for initiation of all new private construction involving ex penditures in excess of specified small amounts and not covered by specific priority ratings. D is t r ib u t io n Value of retail trade in March continued at the high level of other recent months, making allowance for customary seasonal changes. Sales at department and variety stores increased by somewhat less than the usual seasonal amount while sales by mail order houses rose more than seasonally. On the railroads total loadings of revenue freight were maintained in large volume in March and the first half of April. Shipments of coal and coke declined less than seasonally and ore loadings increased sharply, while grain shipments declined further from the peak reached in January. Loadings of miscellaneous merchandise, which had been unusually large in the preceding three months, increased less than seasonally. 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 I N 101 L E A D I N G C IT IE S Wednesday figures. Commercial loans, which in clude industrial and agricultural loans, represent prior to M ay 19, 1937, so-called “ Other loans” as then reported. Latest figures shown are for April 8, 1942. The general level of wholesale commodity prices advanced 1^2 percent further from the middle of March to the middle of April. Among manufactured products, finished consumers’ goods, such as foods, clothing, and shoes, continued to show the largest price increases. Prices of most raw materials were unchanged or showed increases, which in a number of cases reflected the raising of Federal maximum price levels. There were declines in prices of wheat and of a few other commodities, including gasoline at Gulf ports and turpentine. In retail markets maximum prices were fixed in this period for a number of elec trical products, most of which will no longer be produced for civilian use after May 31. Prices of many other commodities and services advanced further. Bank C r e d it During the four weeks ending April 15 holdings of Government securities at banks in leading cities increased by nearly 700 million dollars, while commercial loans de clined somewhat, following a rise in previous weeks. Changes in member bank reserves and deposits reflected principally the temporary effects of Treasury operations in con nection with income tax collection and the sale of certificates of indebtedness. Money in circulation continued to increase. M E M B E R B A N K RESER VES Wednesday figures. Required and excess reserves, but not the total, are partly estimated. Latest fig ures shown are for April 8, 1942. U n it e d S tates G overnment S e c u r it y P r ic e s Following an advance from the mid-February low, prices of U. S. Government bonds remained relatively steady in the first half of April.
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