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MONTHLY REVIEW OF BUSINESS CONDITIONS ISAAC B. NEWTON, Chairman of the Board and Federal Reserve Agent Federal Reserve Bank of San Francisco Vol. X V San Francisco, California, May 20,1931 No. 5 S U M M A R Y O F N A T IO N A L C O N D IT IO N S Prepared by the Federal Reserve Board Output of manufactures and employment at factories showed little change from March to April, and output of mines, which ordinarily decreases at this season, also remained un changed. W holesale prices continued to de cline, and money rates eased further. Production and Employment. Industrial production as measured by the Board’s sea sonally adjusted index which covers both manu factures and mines, increased from 88 per cent of the 1923-1925 average in March to 89 in April, compared with 82, the low point reached last December. Steel mill activity declined by considerably more than the usual seasonal amount, while in the automobile industry there was a larger than seasonal increase in output, according to' preliminary reports. Consump tion of cotton by domestic mills continued to increase, contrary to the usual seasonal move ment, while there was a decrease in unfilled orders for cotton cloth, which was only partly seasonal in nature. Consumption of wool, which ordinarily declines in April, increased considerably; and activity at silk mills de clined. There were large increases in the out put of petroleum and anthracite coal while production of bituminous coal declined by about the usual seasonal amount. The number of employed in factories at the middle of April was about the same as a month earlier. In PER CENT carbuilding shops and in establishments pro ducing machinery employment decreased con siderably, while in the automobile and cement industries there were seasonal increases, and in the fertilizer industry a larger than seasonal increase. Employment at textile mills declined by less than the seasonal amount, reflecting chiefly a slight increase in employment at cotton mills, and a small decrease in the clothing industry ; at mills producing woolen and silk goods de clines in employment were larger than usual. Factory payrolls declined somewhat in April. Value of building contracts awarded, which fluctuates widely from month to month, de clined considerably in April, according to the F. W . Dodge Corporation. Decreases were reported in all the leading classes of construc tion. In the first four months of the year total awards decreased 26 per cent from the corre sponding period of 1930, reflecting declines of 10 per cent for residential building, 17 per cent for public works and utilities, 25 per cent for educational building, 43 per cent for factories, and 57 per cent for commercial buildings. Distribution. Freight carloadings showed about the usual seasonal increase in April. Department store sales increased 9 per cent from March, and the Board’s index which makes allowance for the usual seasonal variaPER CENT IN DU STRIAL PRODUCTION FA CTO R Y EM PLOYM ENT AN D PAYROLLS Index numbers of industrial production adjusted for seasonal varia tions (1923-1925 average=100). Indexes of factory employment and payrolls without adjustment for seasonal variations (1923-1925 aver age=100). 34 MONTHLY REVIEW OF BUSINESS CONDITIONS tions including changes in the date of Easter, stood at 105 per cent of the 1923-1925 average, compared with 97 per cent in March. W holesale Prices. The general level of wholesale prices declined 1.6 per cent further in April, according to the Bureau of Labor Statistics. In the first half of May, prices of many leading commodities were reduced fur ther and for the six-week period as a whole there were large declines in the prices of cotP E R Volum e of reserve bank credit declined somewhat in the six weeks ending on May 16. Contrary to the usual seasonal tendency, there was some further increase in currency demand for the period, reflecting chiefly banking dis turbances in the middle west. Gold imports continued in considerable volume and supplied the member banks with sufficient funds to meet the additional demand for currency, and also to reduce somewhat the amount of reserve P E R C E N T WHOLESALE PRICES Index of United States Bureau of Labor Statistics (1926 = 100). ton, silk, and textiles; livestock and dairy prod ucts ; and cement, petroleum products, and non-ferrous metals. Bank Credit. Loans and investments of re porting member banks in leading cities de clined by about 150 million dollars between April 1 and the middle of May, reflecting sub stantial liquidation in loans on securities and in all other (largely commercial) loans. This liquidation of loans was offset in part by fur ther large additions to the banks’ investments, which on M ay 13 were over one billion dollars larger than at the beginning of the year. May, 1931 C E N T MONEY RATES Monthly rates in the open market in NewYork: commercial paper rate on 4 - to 6-month paper and acceptance rate on 90-day bankers'accept ances. Latest figures are averages of first 20 days in May. bank credit outstanding. M oney rates declined to new low levels during May. Rates on bank ers’ acceptances, which had declined from \y 2 per cent in the middle of April to 1J4 Per cen* by the end of the month, were reduced to % per cent by the nineteenth of May. Rates on com mercial paper declined from a range of 2 Yk-2y2 per cent to a range of 2-2^4 per cent. A t the re serve banks, buying rates on bankers’ accept ances were reduced in April and the first half of May, and in May discount rates were also re duced, the rate at the Federal Reserve Bank of New Y ork being lowered to \y 2 per cent. T W E L F T H F E D E R A L R E S E R V E D IS T R IC T C O N D IT IO N S A fter due allowance for seasonal expansion, the business situation in the Tw elfth District has remained unchanged during the past three months. Industrial activity, which had been stable during February and March, appears to have shown about the seasonal increase during April. Divergent movements were shown by the various available measurements of trade. Comm odity prices continued to decline and the agricultural outlook was attended by fac tors similar to those prevailing in recent months. There was little to alter the agricultural situation during April and the outlook is for good crops. A pril rains afforded relief to dry land farming in some areas and helped to re plenish the smaller than usual irrigation water supplies. Rainfall, although well below normal in most parts of the District this year, has been equal to or slightly greater than last year. The principal exception is in north ern and central California, where precipitation has been unusually light this season. In certain areas, the growth of forage on ranges has been somewhat retarded this spring by lack of rain fall. This situation has induced an early mar ket movement of livestock from California, the condition of which is less favorable than usual. The condition of most crops, according to May 1 estimates, is as satisfactory as in other recent years. Industrial operations increased from March to April by about the usual amount. Total lum ber production increased more than seasonally, although developments in this industry were not uniform throughout the District. Daily average output of crude oil was negligibly less than in April, but reports for the first half of May, 1931 FEDERAL RESERVE AGENT AT SAN FRANCISCO M ay indicate an upturn. There was a substan tial increase in the output of refined oil products during- April. Mining- of non-ferrous metals other than gold continued at an unusually slow rate. Building and construction activity de clined from the relatively high levels of March. Trade activity did not change greatly from the March levels. Department store sales de clined slightly during April, but this was due almost entirely to the fact that nearly all of this year’s Easter trading came in March. Registrations of new automobiles and w hole sale trade increased somewhat, but the volume of railway and intercoastal traffic contracted slightly during April. Neither total deposits nor total loans and investments of reporting member banks have changed appreciably during the past five weeks. Borrowings from the Federal Reserve Bank of San Francisco by city member banks increased temporarily during late April and the first half of M ay but have since declined to less than a million dollars. Recent reductions of acceptance buying rates by the Federal R e serve Bank of San Francisco have been fol lowed by an increased sale of acceptances by member banks as a means of obtaining funds from the Reserve Bank. There have been marked declines during recent months in mem ber banks’ holdings of acceptances as well as in the creation of this type of paper. An expan sion in member bank holdings of government securities has accompanied recent financing by the United States Treasury, while invest ments in other securities were about the same on May 20 as on April 15. There has been no change in interest rates charged customers by commercial banks during late April and early May. Rates paid to depositors have been re duced, both by banks and by building and loan associations. A griculture W eather conditions during April helped to maintain the growth of crops and of forage on livestock ranges in the Tw elfth District, al though frosts and windstorms caused some damage in scattered areas of the Pacific North west. Partial relief from the drought which existed in California during most of April was obtained from rain which fell late in that month, the relief being greater in the southern than in the northern and central part of the state. Seasonal rainfall, both in California and in the other states of the District, remains less than normal, however, and some shortage of irrigation water prevails. The condition of winter wheat in Idaho, Oregon, and W ashington is better than in April last year and is about the same as in the corresponding month of the years immediately 35 preceding 1930. On the basis of the May 1 crop estimates winter wheat production in the Twelfth District will approximate 78,934,000 bushels, a 12 per cent increase from the harvest of 1930. This increase is attributable solely to an estimated 20,000,000 bushel increase in W ashington. Estimates of the volume and acreage of the spring wheat crop, reported to be in good condition, will not be available until July 1. W heat exports from Puget Sound and Columbia River ports have been 35 per cent smaller during the current marketing season to May 1 than they were during the same period of the 1929-1930 marketing season. Estimates of the 1931 production of barley in California are not available, but on May 1 it was expected that 613,200 acres, or about 60 per cent of plantings, would be harvested as compared with 1,012,000 acres harvested in 1930. Exports of this crop from San Francisco up to the end of April lagged 12 per cent be hind the movement during the corresponding season one year ago, most of the decline occur ring in late 1930. Data on the volume of pro duction and the acreage planted to field crops are incomplete, since several of these crops are still being sown. Observations made prior to May 1 (based on weather conditions and the quantities of fruit blossoms up to that date) indicated that yields of the 1931 deciduous fruit crops in the Pacific Northwest would approximate those of 1930. California fruit crops are generally in good condition, but further shortage of irrigation water would be likely to reduce actual harvests during the current season. The 1931 crop of Valencia oranges in Cali fornia is estimated to be 17,760,000 boxes as compared with harvests of 10,500,000 boxes in 1930 and 17,600,000 boxes in 1929. A pproxi mately 6,100 carloads of oranges were shipped to eastern markets during April. During March, 1931, and April, 1930, shipments totaled 7,400 carloads and 5,820 carloads, respectively. Orange prices remain at levels approximately 50 per cent below those of last year. The seasonal movement of poultry and dairy products into storage continued during April. Storage holdings of both eggs and butter on May 1, 1931, approximated the heavy holdings of one year ago and were nearly twice as great as on May 1, 1929. Feed conditions on ranges in all of the states of the District, except Arizona, declined dur ing April and these changes were reflected in the poorer condition of livestock. The condi tion of California ranges was less satisfactory on May 1 than at any time since January, 1930. The movement of grass-fat cattle to the D is trict’s markets is now well under way. Receipts at these markets were greater during April 36 MONTHLY REVIEW OF BUSINESS CONDITIONS than in March but somewhat smaller than a year ago. W o o l shearing has been completed in the southern parts of the District and is at its spring peak in the other w ool grow ing sections. Market prices for w ool have changed but little during the past month. Estimates of the 1931 lamb crop in the seven western states are not yet complete because lambing continues in many northern districts. It is generally be lieved that the 1931 lamb crop will be as large as or larger than that of the preceding season, since the number of breeding ewes on farms was greater this year than in 1930 and losses o f new-born lambs have been less than usual. Eastern shipments of live and dressed lambs from California totaled 375,900 head between March 15 and May 8 as compared with 244,400 head shipped during a similar period in 1930. This increase is largely if not entirely the re sult of the relatively early marketing season this year. Industry Since January there has been an increase of approximately seasonal proportions in Twelfth District industrial activity. During April, lum ber production expanded more than seasonally and output of refined petroleum products in creased although daily average crude oil pro duction was slightly lower than in March. There was a further decrease in mining of nonferrous metals and, contrary to seasonal ten dencies, building and construction declined. Electric power production increased sharply in March, the latest month for which figures are available, reversing the declining tendency evident since last July. The number of in dustrial employees increased slightly during April, but reductions in wage rates appear to have becom e more widespread. Although daily average crude oil output changed little from that of immediately pre ceding months, refineries were more active during April than in March. There was practi cally no change in stocks of petroleum held by producers. Inventories of gasoline have also tended to decline during recent weeks, influ enced somewhat by the existing unusually low prices for gasoline as well as by a seasonal ex pansion of consumption. Daily average crude oil production increased during early May but continued far below output during the corre sponding period in 1930. Output of lumber increased by more than the usual amount between March and April. The ratios of shipments and orders to output, which are usually considered good measures of the relation between consumption and production, were low er in April than in March, but were considerably higher than during either of these May, 1931 months last year. Inventories of lumber did not change greatly during April, whereas sub stantial declines in lumber stocks had been re reported in most preceding months since the middle of 1930. Notwithstanding the continued curtailment in mine production of copper, there was a sub stantial increase in refined stocks of that metal during April, and at the close of the month these stocks were approximately at the record levels of four months ago. This increase in refined inventories took place while stocks of blister copper continued to decline. During April, the price of copper declined to 9 cents per pound, Connecticut Valley, and there were similar reductions in quotations for other nonferrous minerals, except silver. Output of sil ver, which is influenced largely by the output of other non-ferrous metals in the production of which silver is a by-product, was much smaller in April than in March. The price of silver remained practically unchanged during April and early May but declined moderately around the middle of the later month and was quoted at 2 7 ^ cents per ounce on May 20. Follow ing a substantial increase in building and construction during March, activity in this field fell off considerably during April, al though in past years it has usually increased during that month. The total value of engi neering contracts awarded (exclusive of build ings and omitting the H oover Dam contract in March) declined slightly, even though there were increases in the value of contracts let for bridges, sewers, and streets and roads. The value of building permits in 20 large cities of the District also showed a non-seasonal decline and was 40 per cent less than in April, 1930. In 70 smaller cities of the District the value of Industry— Indexes of daily average production, adjusted for seasonal variations (1923-1925 daily average»100) 1930 - 1931 Apr. Mar. Feb. Apr. General : 64 66 107 Carloadings— Industrial ................ .. . . 63 157 151 161 Electric Power Production ............ Manufactures : 59 114 60 . 65 140 187 138 Refined Mineral Oilsf ...................... . 150 94 101 96 77 84 86 Slaughter of Livestock .................... ’ ’ 83 81 96 88 77 74 55 W ool Consumptionf ........................ Minerals: 95 79 80 81 Petroleum (California) t ................ 90 Copper (United States) $ ................ . . 70 70 76 79 82 111 Lead (United States)$ .................... , 71 Silver (United States) $ .................... . . 54 63 62 90 Building and Construction*^ . .. 72 59 85 56 Value of Building Permits Twenty Larger Cities .................. . . 33 44 50 36 Seventy Smaller Cities ................ 45 45 61 Value of Engineering Contracts Awarded Total ............................................ . 145 158 83 92 Excluding Buildings ................ . , 258 308 107 98 tNot adjusted for seasonal variations. JPrepared by Federal Re serve Board. §Indexes are for three months ending with the month indicated. 37 FEDERAL RESERVE AGENT AT SAN FRANCISCO May, 1931 building permits issued declined by somewhat more than seasonal amount. W hile less flour was produced in April than in March, both domestic and foreign demand increased slightly, resulting in further de creases in stocks of that commodity. A t the end of the month producers also held smaller supplies of milling wheat than at the end of March. Trade Movement of commodities by rail and by water declined during April, while department store sales, after adjustment for seasonal ten dencies and allowance for Easter, remained at March levels. Registrations of new automo biles and wholesale trade improved somewhat. All available measures of trade continued to be well below the levels of last year. Department Storesf. Apparel S to r e s ........ Furniture Stores . . . All Stores ................ P E R C E N T 1 130 SALI 120 110 STOCKS* " A A W V À A ,/V 100 RETAIL TRAD E—Twelfth District ,--------- NET SALES*--------- y Jan. 1 to Apr. 30,1931 Apr., 1931 compared compared with Jan.1 to with Apr. 30,1930 Apr., 1930 — 8.8 ( 66) 9.6 ( 66) — 10.2 ( 26) — 13.1 ( 27) .— 15.2 ( 39) — 11.9 ( 39) .— 10.5 (132) — 9.3 (131) Inventories of department stores, which have been declining since June, 1930, were smaller in value at the end of April than at any time since the first quarter of 1923. This decrease has been due partly to price declines and partly to a reduction in the volume of goods. The accompanying chart affords some evidence that department store inventories in relation to sales have tended to decline since the end of 1924, showing that the rate of stock turnover has increased. The proportion of charge accounts collected during April, 1931, was somewhat lower than in April, 1930. -» V v V \ m v ‘ Y /f \ \ A “' V v . A ^ k' V .......... \ v' IN V E N T O F Î I E S % .......... % 9 0 Apr., 1931 compared with Apr., 1930 — 14.4 (51) — 17.9 (17) — 11.7 (29) — 14.3 (97) *Percentage increase or decrease (-—). Figures in parentheses in dicate number of stores reporting, flncludes dry goods stores. .. 8 0 DEPARTM ENT STORE SALES AND INVENTORIES Index numbers of daily average sales and inventories at the end of month of department stores in the Twelfth District, adjusted for seasonal variations (1923-1925 average = 100). The small decline in department store sales from March to April was largely if not entirely due to the fact that most of the Easter trading was done in March this year. A comparison of March and April sales, combined, with sales during March and April, 1930, shows the small est year-to-year decline between strictly com parable trading periods since last October. Sales of wholesalers were 6 per cent greater in value during April than in March, whereas there has usually been a small decline in sales between those months. Increased sales were shown in all lines for which data are received, excepting electrical supplies and paper and sta tionery. The largest increases were in sales of automobile supplies, groceries, and agricul tural implements. As compared with April, Employment— Distribution and Trade — r - — Calif orn:¡a------- \ ..... -O regonNo, of No. of No. r~Employees •—* No. Employees —> of A nr., Apr., of Anr., Anr., Industries Firms 1931 1930 Firms 1930 1931 All Industries* 1,035 145.760 180,299 137 23,427 19.338 (—19.2) ( -17.5) Stone, Clay and 6,897 Glass Products. 51 5.667 3 186 215 (— 17.8) ( - -13.5) Lumber and W ood Manufactures .. 125 16.480 20,437 11,035 49 14,008 (— 19.4) ( - -21.2) Textiles ................ 17 2,184 2,145 9 1,247 1,510 (1.8) ( - -17.4) Clothing, Millinery and Laundering. 128 11,575 12,175 8$ 372 386 (— 4.9) ( —3.6) Food, Beverages, and T o b a c c o ... 235 31.600 40,710 38 1.410 1,638 (— 22.4) ( - -13.9) Public Utilities. .. 37 54,299 60,057 (— 9.6) Other Industries!. 438 70,943 88,374 (— 19.7) Miscellaneous . . . 41 7,311 9,561 30 5,088 5,670 (— 23.5) ( - -10.3) Wholesale and Retail .............. 140 35,497 38,843 (— 8.6) *Public utilities and wholesale and retail figures not included in this total. ^Laundering only, flncludes the following in dustries : metals, machinery and conveyances; leather and rubber goods; oils and paints; printing and paper goods. Figures in parentheses indicate percentage change from April, 1931 -------- y Mar. Feb. Apr. t------ Index Numbers*Carloadingsÿ 80 82 , 77 Merchandise and Miscellaneous.. . 91 95 91 Foreign Trade® Tqtalf ............................................ 991Ï 861T Importsf ........................................ 90ff 86ff 88 94 Intercoastal Trade® 76 . 71 83 Westbound .................................... . 86 86 92 Eastbound ...................................... . 67 73 81 Retail Trade Automobile Salest . 76 71 720 Passenger Cars ......................... 71 670 67 Commercial Vehicles ................ . 127 115 123 Department Store . 107 111 105 Stocks§ ...................................... . 88 92 92 -Actual FiguresStock Turnover|| ...................... .26 .27 .22 Collections# Regular .................................... 43.7 43.5 40.9 . Installment .............................., 16.0 15.9 14.8 r 1930 Apr. 109 114 118 109 123 84 115 75 108 103 167 118 104 .24 43.4 15.5 ♦Adjusted for seasonal variations, 1923-1925 average=100. °Indexes are for three months ending with month indicated, tExcluding raw silk. $Daily average. §At end of month. IIProportion of average stocks sold during month. # Per cent of collections during month to amount outstanding at first of month, fiPreliminary. QRevised. 38 MONTHLY REVIEW OF BUSINESS CONDITIONS 1930, sales decreased 18 per cent, an amount about the same as the decrease during the first quarter o f the year. A ccording to R. G. Dun and Company, both the number and liabilities of failed retail and wholesale firms in the Tw elfth District were larger during the first four months of 1931 than in any previous comparable period. W hile this condition undoubtedly reflects the severity of the present business depression, it should be borne in mind that the statement makes no allowance for the normal growth in number and liabilities of failures which might be ex pected to accompany the long time growth in numbers of business concerns and in the total volume of their assets. Since the first of this year, liabilities of trading concerns in Utah, Nevada, W ashington, and Oregon have in creased by a greater percentage than have the numbers of failures, reflecting the insolvency of several large concerns. A different situation has prevailed in California. Liabilities in that state were 16 per cent smaller during the first quarter of the year than in the first quarter of 1930, while the number of failures of trading concerns was the largest on record, showing that a larger number of small establishments failed in 1931 than in 1930. Trading concerns have accounted for approximately 66 per cent of the total number of failures in this region during the past ten years, but their average liability per failure has been smaller than that of manufacturing establishments. This Bank’s adjusted index of new automo bile registrations increased slightly more than is customary between March and April, the in dexes of both passenger car and truck sales rising by more than the seasonal amount. The index for March has been revised and shows that only the usual February-March change in registrations took place this year, rather than the sharply greater than seasonal rise reported last month. There was further recession in railway freight carloadings during April. A s in other recent months, the movement of forest prod ucts on railroads throughout the Pacific North west and California failed to increase as much as seasonally and loadings of merchandise and miscellaneous commodities did not attain the seasonal volume. Shipments of grain were larger than in April of 1930 or 1929, and during the first four months of this year were greater than during the same period in 1930. Because of the declining tendency in inter coastal trade since last December, this Bank’s index, which is computed from data for the three months ending with the current month, was somewhat lower in April than in March. The actual movement during April, however, was fairly well maintained. Atlantic to Pacific shipments remained practically unchanged al May, 1931 though there has usually been a sharp drop during that month. Eastbound shipments de clined less than seasonally from the March level and, excluding lumber and petroleum cargoes, were slightly greater than in April, 1930. Prices Commodity prices have continued to move downward sharply during the past six weeks. The wholesale price index of the Bureau of Labor Statistics declined from 74.5 (1926 = 100) in March to 73.3 in April at which level it is approximately 19 per cent below the April, 1930, figure and is but 5 per cent above the 1913 annual average. Since July, 1929, when the practically continuous down-trend of the current price recession began, the decline of wholesale com m odity prices has amounted to 25 per cent. Between March 15 and April 15 retail food prices at the principal Pacific Coast cities were further reduced. Despite continued reports indicating that the 1931 winter wheat crop is in good condition and likely to be greater in size than the aver age of recent years, wheat prices at District markets have been fairly steady during the past month. Since late 1930, quotations on wheat for delivery prior to July have been con siderably higher in domestic markets than for comparable grades in world markets, thus re tarding the normal movement of wheat from Pacific Coast ports. Slight advances in world prices during recent weeks, however, have Bank Debits* — Arizona Phoenix ............ $ California B akersfield........ Berkeley .......... L ong Beach . . . Los Angeles . .. Oakland ............ Pasadena .......... Sacramento . . . San Bernardino, San Diego ........ San F rancisco.,. San J o s e ............ Santa B arbara., Stockton ........ . Idaho April, 1931 33,071 $ April, 1930 39,986 First Four Months —v 1930 1931 $ 131,047 $ 164,417 12,565 15,750 21,541 43,480 868,364 189,822 33,614 48,057 9,119 52,573 1,009,214 24,020 14,602 18,210 13,025 19,565 37,427 49,583 1,079,862 190,414 37,480 48,571 11,580 61,166 1,300,659 26,574 15,834 25,802 48,373 64,413 91,675 180,620 3,482,404 764,027 134,302 184,554 36,212 207,137 4,174,006 97,429 55,346 71,035 55,222 81,146 169,429 198,880 4,245,618 784,036 150,272 191,544 44,181 237,724 5,267,848 111,297 62,156 101,128 11,856 12,957 49,666 54,389 10,130 11,358 37,658 44,171 5,506 144,277 7,236 177,970 21,793 561,564 26,565 684,288 13,813 63,780 16,895 76,263 57,033 251,645 68,135 305,667 7,462 10,240 202,853 40,513 34,191 12,438 10,283 14,183 253,589 51,171 46,336 15,229 28,093 37,972 792,113 171,060 138,691 50,723 37,216 53,804 983,778 211,601 181,312 56,248 Nevada Oregon Portland .......... Utah Salt Lake C ity ., Washington Bellingham . . . Everett .......... Spokane .......... Tacoma .......... Yakima .......... T otal............ $2,951,061 * I n thousands of dollars. $3,650,998 $11,920,591 $14,572,072 May, 1931 FEDERAL RESERVE AGENT AT SAN FRANCISCO tended to reduce this unusually large disparity, but exports have continued small in volume. The prospects of a reduction in the barley crop because of dry weather in California have been reflected in a sharp increase of California bar ley prices during the past six weeks. Declines in livestock prices at District mar kets have been recorded during recent weeks. The decline in lamb prices has been seasonal in nature, reflecting the increased volume of spring shipments, and has not been comparable to the precipitous drop which took place in lamb quotations at this time last year. F ollow ing an almost continuous decline for more than two years, quotations for Pacific Coast w ool at eastern markets advanced slightly early in April, since when they have been stable. Silk and rubber have recently been quoted at the lowest prices yet recorded, and cotton, sugar, coffee, butter, and lemons have also tended to decline in price during the past few weeks. Reductions in shipments of oranges during April and early M ay have been accompanied by slight increases in quotations. Opening prices for the Columbia River salmon pack are reported to be the lowest since 1919. Late in April copper was offered by some producers at 9 cents per pound, delivered Con necticut Valley, although most of the larger refiners held supplies- at 9 1/4r91 / 2 cents per pound. W ithin recent weeks, however, 9 cents has becom e the prevailing price and on May 20 the metal sold as low as cents per pound, lower than any price previously recorded. Zinc, lead, and scrap steel prices have recently de clined sharply to the lowest quotations in many years. Since the drastic reductions during March, crude oil prices have changed little and gaso line prices have declined but slightly from the unusually low levels reached in that month. There have been small decreases in average lumber and cement prices at Pacific Coast mar kets during recent weeks. Credit Situation There have been more rapid reductions in interest rates in national money markets out side the Tw elfth District than in local money markets during the past few months. N ot withstanding these reductions, the volume of excess reserves of eastern banks obtained by Twelfth District banks on a day-to-day basis was sharply reduced during the last week of April and the first two weeks of May and was considerably smaller than it had been during most of the preceding eight months. The de crease in volume of such funds was offset by a temporary increase in borrowings at the Fed eral Reserve Bank of San Francisco and by the sale of a relatively large amount of acceptances 39 to’ that Bank. The amount of bankers’ balances from Twelfth District banks held in San Fran cisco changed little during the period under re view, however, and these balances continued to furnish the bulk of the outside funds used in that market. FEDERAL RESERVE BANK OF SAN FRANCISCO (In millions of dollars) t..... May 20, May 13, Apr. 22, May 21, 1930 1931 1931 1931 Total Bills and Securities........ 68 71 65 71 6 6 6 9 Bills Discounted .................... Bills Bought .......................... 13 16 20 25 United States Securities . . . 49 49 39 37 Total Reserves .......................... 308 302 292 285 Total Deposits ............................ 191 189 180 183 Federal Reserve Notes in Circu167 165 160 153 Ratio of Total Reserves to De posit and Note Liabilities Combined ................................ 85.9 85.2 86.1 84.9 The needs of reporting member banks for funds during the past five weeks were rela tively stable. Loans declined slightly and in vestments increased by about the amount of that decline. Changes in currency circulation in the District between mid-April and May 20 were small in amount and had no apparent effects upon member bank deposits. The United States Treasurer’s disbursements for current expenditures and public debt opera tions, which in this District were 25 million dollars in excess of collections, tended to ex pand bank deposits, however, while an adverse balance of trade with other parts of the United States tended to reduce deposits by drawing funds out of the District. The adverse balance of trade was practically equal in amount to Treasury transfers into this area plus small purchases of locally produced gold by the San Francisco Mint, so that no net change in bank deposits resulted from these operations. During the past 17 months open market in terest rates at New York and other eastern money markets have declined rapidly and their decline has been accompanied by decreases in the acceptance buying rates of this and other reserve banks. A t the Federal Reserve Bank of San Francisco the decline of acceptance buying rates has caused a widening of the usual spread between those rates and the discount rate (3 per cent)* and there has been a tendency for many member banks to' obtain reserve bank funds by the sale of acceptances rather than by discounting. The spread between these two rates was increased during the first three weeks of May by further reductions in ac ceptance buying rates. * Discount rate reduced to 2 J4 per cent effective May 22, 1931. ACC E PTA N C E BUYIN G RATES-1931 /------------------- Effective------------ -------Jan. 8, Feb. 19, May 7, May 19, Maturities 1931 1931 1931 1931 1— 120 days .................. 1H 1 ^ -1 H 1 121— 180 d a y s .................. 2 2 2 2 Purchases upon agreement of seller to repurchase.. 1$4 1H MONTHLY REVIEW OF BUSINESS CONDITIONS 40 The recent reductions in open market bill rates, together with the numerous offerings of governm ent obligations, have brought yields on short-term United States Treasury securi ties above those on bankers’ acceptances. Since November, 1930, the total acceptance liability of city banks in this District has been decreas ing steadily, and is now lower than at any time since August, 1929. Their total acceptance REPORTING MEMBER BANKS— Twelfth District (In millions of dollars) f— . ■ Condition — May20, May 13, Apr.22, May 21, 1930 1931 1931 1931 1,967 1,992 1,988 Loans and Investments- -T otal. 1,992 1,352 1,235 1,238 1,237 Loans— T o t a l ...................... 451 339 340 340 On Securities ................ 901 899 895 897 All O t h e r ........................ 754 615 755 753 Investments— Total .......... 343 391 391 383 United States Securities 362 272 371 364 Other S ecu rities............ 105 109 103 Reserve with Reserve Bank. 113 726 740 757 751 Net Demand Deposits.......... 1,032 1,076 1,046 Time D e p o sits .............................. 1,084 177 219 189 Due from B a n k s .......................... 196 232 259 264 Due to Banks .............................. 257 0 0 0 Borrowings at Reserve B ank... 0 portfolio declined from 43 million dollars at the end of February, 1931, to 25 million dollars at the close of March, from which it rose to 33 million dollars by April 30. Credit needs of the Tw elfth District are much less elastic than is the demand for credit in the larger money markets and custom and the absence of effective competition tend to retard the movement of rates charged cus tomers in this District. Consequently the rapid changes of open market interest rates, which are influenced chiefly by conditions in the larger markets, have not been accompanied by such rapid changes in rates charged custom ers by banks in this District. In fact, the rates charged customers have not declined greatly since 1929 and have changed hardly at all dur ing the past month in most cities of the District. As might be expected, the most sub stantial reductions in these rates have been in San Francisco, where the demand for funds is more elastic than in other parts of the District. Even in that market, however, reductions in rates have averaged much less than in New York. On the other side of the picture— that of rates paid depositors — a different situation exists. The relatively slack demand for loans has tended to increase the necessity for bank^ to employ funds in the purchase of invest ments. But the banks have been confronted with heavy reductions in returns on their in vestment securities, practically all of which are purchased in competition with banks throughout the cou n try; consequently their in come on deposits and other banking funds has been reduced substantially during the past year, the reduction being particularly sharp during recent months. Bank deposits have therefore become less profitable during recent months and it has become necessary for banks to lower the interest rates paid on them. Rates paid on both commercial and savings accounts were reduced by many banks in the larger cities, effective in April and May. D uring M ay the general movement toward lower rates paid on deposits was joined by several of the larger building and loan associations in this District. The turnover of shares on the principal stock exchanges of the District was slightly greater in April than in March but the value of turn over was substantially less, reflecting the drastic decline in prices of securities. There was more activity in locally listed bonds than for some months and new issues underwritten in San Francisco found a ready reception. D E M A iH D S E C U F IIT Y L O A N R A T E —«L x - " ' D IS C O U N T R A T E lr ,- s a fe J \ A C C E : p t a n c e e lU Y IN G L h R / u — 1. 1 1 ____ 1 1 1 S A N ___ 1__ 1____ L 1 1 1 » e 1 1 May, 1931 1 F R A N C IS C O DISCOUNT RATES AND ACCEPTANCE BUYING RATES—Federal Reserve Banks COMMERCIAL LOAN RATES— Prevailing rates charged customers SECURITY LOAN RATES— San Francisco, rates charged customers on demand loans. New York, open market rates on time loans, mixed collateral.
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