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MONTHLY REVIEW B U S IN E S S F ederal R eserve Bank C O N D IT IO N S o f San IN T H E T W E L F T H pu r r e d P E R CEN T FACTORY EM PLOYMENT A N D P A Y R O L L S-P acific Coast Indexes, adjusted for seasonal variation, 1923-1925 average = 100. By months, January 1929 to September 1940. (Fruit, vegetable, and fish canning industries excluded). months, the aggregate for the quarter exceeded that for any like period in more than a decade, reflecting primarily the construction of facilities for the Army and Navy. Actual work on the bulk of these projects was under way in September but the phase of maximum employment and consumption of materials had not been reached. Major rearmament industries and those lines of activity supplying them with materials and parts, and the construc tion of industrial and military plants have accounted largely for the expansion in district industrial operations in the past several months. Mining and smelting of vari ous minerals have also shown gains. On the other hand, there has been but little other than the usual seasonal ex pansion in the activity of industries producing consum ers’ goods during recent months. Retail trade, which had shown impressive gains in August, was slightly less ac tive in September. Value of residential building permits increased less than seasonally in September, but the ad justed index, while lower than in either of the two pre ceding months, remained above the average for the first half of the year. Reflecting increased demand for credit resulting from expanding operations, loans of district city banks to commercial and financial enterprises in creased further in September and early October. R E SE R V E F r a n c isc o forward by the growing momentum of the defense program, the gains of the preceding several months in industrial production and employment in the Twelfth District were extended during September and October and factory payrolls attained record levels. The aircraft and shipbuilding industries, which are making the major district contribution to national rearmament, received further large contracts, adding considerably to already huge backlogs of orders. Substantial additional awards were made by both industries during September for the expansion of plant facilities. While the value of nonresidential construction contracts announced in Sep tember declined from the levels of the two preceding S F E D E R A L D IS T R IC T N ovem ber 1, 1940 I n du stry a n d C o n s t r u c t io n Value of building construction initiated in the Twelfth District during recent months has substantially exceeded that for any comparable period in more than a decade. This sharply higher level largely reflects the undertaking of numerous Government projects to provide new, or to expand existing, facilities for the Army and Navy. Expansion of facilities of privately operated plants pro ducing armaments has been undertaken under contracts providing for the assumption of the cost by the Govern ment. Also swelling the total have been several housing projects started by the U.S.H .A. to meet the needs of de fense workers in particular areas experiencing a large influx of families. From June 1 through October the Army and Navy initiated construction of facilities which will involve the expenditure of approximately $105,000,000. This figure excludes projects for which allotments had been made by the end of October but which had not reached the con tract stage at that time. A summary of the principal proj ects undertaken during the summer and early fall months follows : Naval Base, San Fedro, Cal........................................$18,012,000 Naval Air Station, Alameda, Cal............................... 11,417,000 Fort Lewis, Washington................................................ 10,442,000 Naval Base, San Diego, Cal........................................ 8,515,000 Camp Ord, Monterey County, Cal............................... 7,706,000 Naval Air Station, Seattle, Wash................................. 5,082,000 Presidio, San Francisco, Cal........................................ 4,045,000 Camp Merriam, San Luis Obispo County, Cal........... 3,880,000 Naval Supply Depot, Oakland, Cal............................. 3,404,000 Hill Field, Ogden, Utah................................................ 2,910,000 March Field, Riverside County, Cal........................... 2,821,000 Navy Yard, Vallejo, Cal............................................. 2,364,000 Naval Ammunition Depot, Hawthorne, Nev............... 2,200,000 Naval Air Station, Tongue Point, Ore........................ 1,823,000 Naval Ammunition Depot, Indian Island, Wash....... 1,426,000 Naval Fuel Depot, Middle and Orchard Points, Wash. 1,325,000 Navy Yard, Bremerton, Wash...................................... 1,293,000 Municipal Airport, Stockton, Cal................................. 1,019,000 Other army and navy bases, camps, etc.................... 8,189,000 Permanent defense housing, excluding U. S. H. A .... $ 97,873,000 7,203,000 $105,076,000 Funds allocated by the Government to finance the con struction of armament plant facilities in the district, or contracts providing for the cost of such construction to be repaid by the Government, amounting to $25,118,000 were announced up to late October. Of this total $17,819,000 has been allocated for construction of shipbuilding facilities in Washington and California. Included also is a contract announced by the War Department under which a Washington aircraft firm will spend $7,369,000 on construction, with the Government repaying the cost over a period of five years. 46 November 1, 1940 FEDERAL RESERVE B A N K OF S A N FRA NC ISCO Sharp increases in employment in the aircraft and ship building industries and on major army and navy con struction projects have created housing problems for workers and their families attracted to vicinities where these industries or projects are located. Low cost housing will shortly be provided in a number of these areas by projects financed by the United States Housing Authority and already under construction. Other projects are being developed on which actual building should commence within the immediate future. Those clearly initiated to meet pressing needs of housing defense workers include one at Bremerton, Washington, on which construction began in October, and one at Seattle, Washington, on which bids were opened in October. In the vicinity of the Mare Island Navy Yard on San Francisco Bay, actual construction was begun in October on a project financed from funds transferred to the Navy Depart ment by the U .S.H .A. to house navy workers and enlisted personnel. The accompanying table indicates pertinent details concerning the several U.S.H .A. projects in the Twelfth District for which loan contracts had been ap proved by the Administrator through mid-October. Total new residential construction undertaken in the district increased somewhat less than seasonally in Sep tember and for the second consecutive month the adjusted index declined. At 65 percent of the 1923-1925 level, however, the index was well above the average of 61 and of 62 for the first and second quarters of the year. The small declines of the past two months have been from the unusually high level of July when value of permits, after adjustment for seasonal influences, was above that for any month in more than a decade except last December when the total was swollen by several contracts for large U.S.H .A. projects. Reflecting the increase in building activity and possibly some advance buying by dealers, new lumber orders re ceived by mills increased considerably in August. Despite a decline in new business in September and a further increase in output, unfilled orders continued to advance, and at the month-end amounted to more than 1,200,000,000 board feet. This is the largest total reported at any time since early 1937. Prices of Douglas fir lumber were advanced in September and October to levels averaging higher than at any time in the past decade, while pine prices, although increasing in recent weeks, averaged 13 percent below the 1937 peak. Among other industries supplying construction ma terials, cement production in California advanced in Sep tember to the highest level since 1927, partly reflecting increasing requirements at Shasta Dam. In the Pacific Northwest, output declined further, current low rates of operation relative to those of recent years being traceable to sharply curtailed pourings on the Grand Coulee Dam project. The district steel industry continued to operate at the near-capacity level of last December. Additional large contracts were received by the two district “defense” industries in September and the first half of October. Late in October it is estimated that un filled orders of local aircraft firms exceeded $1,300,000,000, a sharp increase from the estimated $925,OCX),000 held in mid-September. Contracts or allocations held by coast shipyards for the construction of naval and com mercial vessels approximated $162,000,000 in early Sep tember. These were added to heavily during that month and in October, and it is estimated that they were in the vicinity of $815,000,000 late in October. The large in crease during the period came almost entirely in naval contracts. Activity in both industries expanded further in September. Increasing activity in mining and smelting of nonferrous metals in this district, where 66 percent and 43 percent, respectively, of the country’s output of copper and lead were produced in 1939, has recently extended to other minerals. Exploitation of district mines yielding strategic minor metals, including manganese and mer cury, is currently more active than in many years. Output of crude petroleum and refinery operations in California, however, have shown little change in recent months. U nited States H ousing A uthority P rojects—T welfth D istrict (Tabulation includes all projects for which loan contracts with local authorities hadbeen approved by the Administrator by mid-October) Name of Project Mathew Henson........................ Marcos de N iza........................ Frank Luke, Jr.......................... Ramona Gardens.................... . San Vincent Village.................. Rancho San Pedro.................. Location Aliso V illa................................ Los Angeles County, Calif. Carmelitos.................................. Harbor H ills.............................. . . Los Angeles County, Calif. Los Angeles County, Calif. Mara villa.................................... Campbell Village...................... Holly Courts.............................. Sunnydale ................................ Potrero .................................... Bernal D w ellings.................... Hayes Valley-Jefferson Park. . * * * * *t ............................ Yesler Terrace.......................... iN a m e 01 p r o j e c t 9,052 n u t a v a n a u ic . fT o be occupied by defense workers. ^Estimated. Familes Provided for 132 224 150 610 200 296 400 800 607 300 504 154 396 216 118 772 469 228 252 150 180 258 30 56 40 60 600 150 700 Tentative Development Cost $ 402,000 701,000 454,000 2,771,000 837,000 1,288,000 1,762,000 3,481,000 2,591,000 1,304,000 2,421,000 763,000 2,117,000 886,000 558,000 3,530,000 2,204,000 936,000 1,129,000 620,000 699,000 1,002,000 127,000 242,000 145,000 208,000 2,170,000 564,000 3,000,000 $38,912,000 Construction Contract Value $ 258,000 400,000 310,000 1,188,000 — — — — 1,723,000 821,000 1,237,000 454,000 t 1,000,000 — 388,000 2,079,000 1,350,000 — — — — — — — — — — — — Status Begun July 1940 Begun Sept. 1940 Begun Sept. 1940 Begun Mar. 1940 Loan approved Mar. 1940 Loan approved Mar. 1940 Loan approved Mar. 1940 Loan approved May 1940 Nearly completed Begun Feb. 1940 Contract awarded Mar. 1940 20-25% complete Bid opening Oct. 1940 Loan approved Aug. 1940 Completed June 1940 Begun Mar. 1940 Begun April 1940 Loan approved Mar. 1940 Loan approved Mar. 1940 Loan approved Oct. 1940 Loan approved Oct. 1940 Loan approved Oct. 1940 Loan approved Oct. 1940 Loan approved Oct. 1940 Loan approved Oct. 1940 Bid opening Nov. 1940 Begun Oct. 1940 Bid opening Oct. 1940 Bid opening Nov. 1940 November 1, 1940 A g r ic u l t u r e Despite the material curtailment of foreign markets for both raw and processed agricultural products, farm cash income in the Twelfth District, and in the country as a whole, continued above a year earlier through Au gust. Estimated returns during September, however, are expected to be about the same as in September 1939. Prices paid farmers advanced sharply at that time and have since fluctuated with little net change as a group. The citrus fruit industry has been one of the major factors in the higher level of district farm income in the first eight months of 1940. Total income to citrus fruit growers in Arizona and California during the marketing year just ended is estimated to be almost 20 percent greater than in the previous season. Reflecting freezing temperatures which severely damaged fruit crops in Florida and other southern citrus producing states last January, average prices for oranges have been about 9 percent higher than the extremely low prices of 1939 and out-of-state shipments from California and Arizona have been 20 percent larger this year than last. Returns from lemons, however, were slightly below those of the preceding season. The entire United States commercial crop of this fruit is grown in California, and with record production this year, prices have been down almost to the near-depression low levels of last season. Cooler weather during the past summer contributed to a rela tively inactive demand for lemons, and about 20 percent of the crop was disposed of through by-products plants, a larger proportion than in most other recent years. The canning of fruit juices and nectars, and of tomato juice, has expanded sharply during the past decade and now provides an important outlet for fruits and tomatoes. Production and Employment— Index numbers, 1923-1925 average=100 With Seasonal r~ Adjustment—N f—1940—s 1939 idustrial Production* Manufactures (physical volume) Lumber ...................................... Refined oils.................................. Cement ........................................ Wheat flour.................................. Minerals (physical volume) Petroleum .................................... Copper (U. S .) t .......................... Lead (U. S .) t ............................ Silver (U. S .) t .......................... Construction (value) Residential building permitsî Twelfth District...................... Southern California............ Northern California............ Oregon ................................ Washington ........................ Intermountain states.......... Public works contracts.............. Miscellaneous Electric power production.......... Sept. Aug. Sept. 97 92 87 — — — 124 105 107 117 113 118 — — — 134 144 167 88 107 111 67 71 61 54 53 122 43 46 38 26 44 60 65 69 54 58 61 91 Without Seasonal ,—Ad ju stment—N f— 1940— N 1939 Sept. Aug. Sept. 110 167 132 125 109 158 120 117 98 168 120 140 93 138 94 135 114 91 93 109 67 69 59 54 60 137 294 47 50 41 31 47 79 142 lii — — — 72 76 59 69 66 120 204 226 230 214 236 252 224 130 147 114 106 127 145 110 103 110 121 104 90 137 154 120 111 132 150 114 106 116 127 112 95 137 158 107 107 130 150 105 103 108 123 95 84 141 160 118 113 137 156 117 108 113 125 106 89 actory Employment and Payrolls § Employment Pacific Coast................................ California ................................ Oregon .................................... Washington ............................ Payrolls Pacific Coast................................ California ................................ Oregon .................................... Washington ............................ * Daily average. t Prepared by Board of Governors of Federal Reserve System. (1935-1939 = 100.) Jlncludes figures from 197 cities and Los Angeles County, unincorporated. §Excludes fish, fruit, and vegetable canning. 47 M O N T H L Y R E V IE W OF B U S IN E S S C O N D IT IO N S In 1930 less than 1,500,000 cases of fruit and tomato juices were packed in the United States and Hawaii, while preliminary estimates indicate that over 42,250,000 cases MILLIONS OF CASES M IL L IO N S OF C A S E S 45 m m m m m m k M 1930 1931 1932 1933 i l 1934 1935 1936 1937 1938 1939 1940 C A N N E D PACKS OF FRUIT A N D TOM ATO JUICES United States, including Hawaii. were packed during the current season. Over half of the domestic output of orange and lemon juice and concen trates and on the average about 15 percent of the coun try’s total output of tomato juice is canned in the Twelfth District. More than 40 percent of the total grape, berry, Index numbers, 1923-1925 average=100 With Seasonal t—Adjustment-^ /— 1940 — s 1939 Retail Trade Sept. Aug. Sept. Department store sales (value)* Twelfth District.......................... California .................................... Los Angeles.............................. Bay Region.............................. San Francisco.......................... Oakland .................................. Pacific Northwest...................... Portland .................................. S eattle...................................... Spokane .................................. Salt Lake C ity............................ Department store stocks (value) t Furniture store sales (value) *$. . . Furniture store stocks ( value)t $ . . Automobile sales (number)* 100 98 89 104 96 125 102 107 103 87 Without Seasonal ^—Adjustment—n ,— 1940— s 1939 Sept. Aug. Sept. 104 102 93 108 102 125 106 111 107 94 99 61 84 72 95 91 79 103 96 124 100 103 101 90 89 63 77 72 103 98 91 102 96 116 115 120 116 100 — — — — 89 87 99 73 63 Eastbound .................................. 48 Westbound .................................. 116 62 47 114 Passenger ................................ Commercial ............................ Carloadings (number)* 62 83 73 — — — Merchandise and misc.................. 63 88 72 98 99 92 105 98 126 99 102 100 88 78 59 87 70 98 91 80 101 97 116 113 115 115 104 95 64 82 71 84 75 170 105 94 218 76 69 144 86 98 72 102 101 111 88 100 116 80 78 66 117 65 50 117 65 50 116 68 118 — — Intercoastal Traffic (volume) * Daily average. tA t end of month. $1929 average =: 100. 80 48 FEDERAL RESERVE B A N K OF S A N FRA NC ISCO and other fruit juices and of fruit nectar have been canned in this area. Almost the entire domestic pack of grape fruit juice is processed in Florida and Texas, however, and the Territory of Hawaii is the only source of the United States pineapple juice output. Tomato juice quickly gained consumer favor after its introduction in the early 1930s, and the 1940 pack of 13,600,000 cases constituted over a third of the total of all juice packs. Output of pineapple, orange, and lemon juice and lemon concentrates set new records during the past season. These record packs, together with the larger output of tomato juice, more than offset smaller produc tion of the other items, and the total 1940 pack was esti mated to be 9 percent larger than a year earlier. B a n k i n g a n d C r e d it Expansion in district demand for bank credit to fi nance the increasing volume of commercial and indus trial operations has been evident in the rise of loans for this purpose reported by local city banks. In the week MILLIONS OF DOLLARS COM M ERCIAL, IN DU STRIAL, A N D A G R IC U LT U R A L LOANS REPORTING M EMBER BANKS—Twelfth District Monthly average of weekly figures—June 1937 to October 1940. ending October 23, these loans totaled $351,000,000, a gain of 6 percent from the average of $331,000,000 re ported last June. Loans to brokers and dealers in securi ties, which have been at unusually low levels in recent months, were considerably higher in late October than a month earlier, while loans in the miscellaneous “all other” classification likewise increased. Other classes of loans, including advances on real estate, remained about unchanged. November 1, 1940 In addition to the increase in total loans, district city banks added to their investments in the five weeks end ing October 23. Holdings of United States Government obligations and other securities increased to levels mod erately higher than a year earlier. The gain in loans of city banks for commercial and industrial purposes since last June partty reflects seasonal influences. At this time of year the harvesting, storage, and processing of farm products, the manufacture and stocking of goods to meet the fall and the Christmas demand, as well as other seasonal activities customarily result in an increase in bank loans. To a somewhat greater extent, however, it is a resumption, after a brief inter ruption during the spring and early summer months, of the somewhat sharp expansion in the credit requirements of commercial and industrial enterprises which began after August 1939 and extended through March of this year. This material gain in bank loans to commercial and financial enterprises during the past 14 months reflects expanding local requirements for funds to finance rising payrolls, inventories, and, to some extent, the expansion of production facilities by means of term loans. It follows the considerable liquidation of loans which, as shown in the chart, began in late 1937 and extended through the summer of 1939. This liquidation was partly connected with the curtailment in inventories of many business firms from the levels to which they had been built up during late 1936 and, more particularly, during much of 1937. Reserve balances of district member banks have con tinued to increase in recent weeks and on October 23 were at a record peak of $775,600,000, almost $147,000,000 higher than a year earlier. Despite a rather rapid further expansion in deposits during the past several months, particularly of demand deposits, against which an increasing amount of banking funds must be immobil ized as required reserves, the volume of excess reserves of these banks continued to increase. Out of total actual reserves of $762,900,000 during the first half of October, the portion in excess of requirements amounted to $266,200,000 on a daily average basis. This total approxi mated 54 percent of the reserves required to be main tained against deposits during the period. Thinking solely in terms of the availability of bank credit, with this large volume of excess reserves held by district banks there can be little serious questioning as to the ready availability of bank credit at moderate rates of interest to meet the requirements of the defense program so far as they may be seen at the present time. M O N T H L Y R E V IE W N o v e m b e r 1 ,1 9 4 0 F e d e r a l R e s e r v e B a n k o f S a n F r a n c isc o S u p p lem en t 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 Prepared by the Board of Governors of the Federal Reserve System industrial production increased sharply in September, owing mainly to a continued rise in output of durable manufactured products, and this month a further increase is indicated. Prices of basic industrial materials advanced in September and the first half of October. o lu m e o f V P r o d u c t io n 1934 »935 1936 1937 1938 1939 1940 INDUSTRIAL PRODUCTION Index of physical volume of production, adjusted for sea sonal variation, 1935-1939 average=100. Durable manufac tures, nondurable manufactures, and minerals expressed in terms of points in the total index. By months, January 1934 to September 1940. 1934 1935 1936 1937 1939 1940 IN COM E PAYMENTS United States Department of Commerce estimates of the amount of income payments to individuals, adjusted for sea sonal variation. By months, January 1934 to September 1940. , jJ\ / /" v' / r-J vJ" 1 FOODSTUFFS INDUSTRIAL V PMATERIALS I I 1937 1938 1935 1936 The Board’s seasonally adjusted index of industrial production, which for three months had been at a level of 121 percent of the 1935-39 average, ad vanced to about 125 percent in September. In the durable goods industries in creases in output were general. Steel production rose to 93 percent of capacity, and in the first half of October the rate was slightly higher as new orders con tinued in large volume both from domestic and foreign sources. Steel exports amounted to about 20 percent of ingot-producing capacity in August, the latest month for which data are available, with nearly three quarters of these shipments going to the United Kingdom and Canada. Activity in the machinery, aircraft, and shipbuilding industries advanced further in September following consider able increases in August, and automobile output increased sharply as volume production of new model cars was rapidly attained. Plants producing railroad cars and locomotives also showed an expansion in activity. Lumber production continued to rise under the impetus of a growing volume of demand for defense program purposes. Changes in output of nondurable manufactured goods and minerals in Sep tember were mixed. At wool textile mills activity advanced sharply further to near the peak reached last autumn, reflecting in part expanding production on Government orders. At cotton mills, however, activity showed less than the usual seasonal rise, following a sharp increase in August, and rayon deliveries de clined somewhat owing partly to a strike at plants of one large producer. Shoe production also declined in September. Paper production remained in reduced volume following a high rate of output during the early summer accompanying some inventory accumulation at that time. Output of most metals continued large during September. Crude petroleum production, which had been curtailed sharply during the summer, rose considerably, but coal production, which for several months had been maintained at high levels, showed a smaller increase than is usual at this season. Value of new construction work started in September was lower than in July and August, according to reports of the F. W. Dodge Corporation and the San Francisco Federal Reserve Bank. The decline occurred chiefly in contracts for defense projects which had been large in the previous two months. Awards for private residential building showed little change from recent high levels. Awards for other private work declined somewhat but continued considerably above the level of a year ago. D is t r ib u t io n V vv - 1940 1939 1934 W H OLESALE PRICES OF BASIC COM MODITIES Indexes compiled by the United States Bureau of Labor Statistics, 1926 — 100. By weeks, 1934 to week ending October 10, 1940. In September and the early part of October department store sales showed somewhat less than the usual seasonal increase from the exceptionally high level reached in August. Freight-car loadings rose somewhat more than seasonally in September, re flecting to a large extent increased shipments of miscellaneous freight. Loadings of coal, which have been large in recent months, showed less than the usual seasonal rise. C o m m o d i t y P r ic e s Prices of most industrial materials, particularly lumber, steel scrap, nonferrous metals, hides, and wool, continued to advance from the middle of Sep tember to the middle of October, and there were also increases in some manu factured products, notably cotton and woolen goods. Wheat prices were higher while prices of most other foodstuffs showed little change. B a n k C r e d it Commercial loans at reporting member banks in New York and 100 other leading cities continued to increase during the four weeks ending October 9, re flecting in part seasonal demands. Holdings of United States Government obli gations decreased further with the result that total loans and investments of these banks showed little change. U n it e d M EMBER BANKS IN 101 LEAD ING CITIES Wednesday figures, September 5, 1934, to October 9, 1940. Commercial loans based on new classification beginning May 19,1937. S t a t e s G o v e r n m e n t S e c u r i t y P r ic e s Prices of United States Government securities advanced in the second half of September and the first week in October, rising close to the high level of the year reached early last April.
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