The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
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 F E D E R A L R E SE R V E D IS T R IC T F r a n c isc o i t h the domestic armament program an increas ingly pressing stimulus, economic activity in the Twelfth District expanded on a broad front in August and early September. Industrial production increased further and additional gains took place in factory employ ment and payrolls. Of even greater significance than the actual expansion of industrial operations and incomes were the placing of large orders with local firms, prin cipally those in the aircraft and shipbuilding industries, and the awarding of substantial contracts for construction of military and naval facilities and for expansion of plants to produce defense equipment. The filling of these orders and contracts will make heavy claims upon the supply of labor and upon industrial facilities in the dis trict during coming months. The increase in consumer incomes resulting from the recent expansion in employ ment was reflected in retail trade gains. Value of sales of department stores advanced considerably more than sea sonally in August and gains were reported in most other lines of retail trade. The market for new single-family dwellings continued strong while sales of new passenger cars appeared to reflect merely the declines incident to the closing of the model year. O cto b er 1 ,1 9 4 0 Coast aircraft industry, although the availability of cheap power from the Bonneville project was a major consider ation in selection of the site. The district shipbuilding industry, after having been practically dormant for nearly two decades, was revived to some extent in December 1938 by awards of $5,700,000 for construction of two freighters under the Maritime Commission program. Since that date and through Au gust 1940 private shipyards on the coast received con tracts of $155,000,000 for the construction of naval and merchant vessels. In September these yards received further awards of $492,400,000 for naval vessels. To be added to these is the allocation during September of $60,600,000 for the construction of ships at the Mare Island Navy Yard in Vallejo, California, and the Puget Sound Navy Yard at Bremerton, Washington. Both of these yards were already much more active than a year ago. The number of ways available at private shipyards is being increased. Value of new building undertaken in the Twelfth Dis trict in August was slightly below the extraordinarily large total for July but substantially larger than in any other month in recent years. Marked expansion in the nonresidential classification in which permits exceeded I ndustry To date, the more direct effects of thp defense program have been felt in the Twelfth District principally by the aircraft, construction material, shipbuilding, and related industries. Some orders for items such as bedding, camp equipment, and ammunition components, have also been received by district firms. In relation to contracts for similar items placed in eastern and southern states, how ever, these latter awards have been of minor proportions and have been dwarfed by the commitments made locally for aircraft, building construction and ships. Huge additional orders for military planes were placed with local aircraft firms during recent weeks and it is estimated that the backlog of orders held by Coast plants approximated $925,000,000 in mid-September. The mag nitude of this figure may be more fully appreciated when it is realized that deliveries of airplanes by local firms in the entire year 1939 were valued at little more than $100,000,000. Operations have, of course, been vastly expanded during the past year or more, and further addi tions to production facilities and personnel were made in August and early September. In mid-August between 50,000 and 60,000 workers were employed by district air craft plants, compared with an estimated 28,000 last De cember. This growth has been accompanied by consider able increase in employment in the so-called “ satellite” industries. An interesting development along these lines has been the erection of an aluminum reduction plant near Vancouver, Washington, one unit of which was com pleted and commenced operation in September. Its out put will be absorbed largely, if not entirely, by the Pacific 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 IS39 1940 RESIDENTIAL BUILDING PERMITS—Twelfth District Index of value of permits, adjusted for seasonal variation. (1923 -1925 average=100). $32,000,000 in August and $39,000,000 in July was the principal factor in the increase. In 1939, nonresidential building approximated $8,000,000 in July and was about the same in August. O f the August, 1940, figure, some $23,000,000 represented projects undertaken by the Fed eral Government almost entirely for the Army and Navy. New residential construction continued in substantial vol ume. The seasonally adjusted index receded three points in August to 67 percent of the 1923-1925 average, mainly reflecting a moderate decline of activity in southern Cali fornia. The index averaged 62 during the first half of 1940 and 55 during 1939. The large expansion in building in the district and in the country as a whole since last spring, traceable to a considerable extent to construction for the Army and Navy, has already increased demand for various building 42 FEDERAL RESERVE B A N K OF S A N FRA NC ISCO materials, particularly lumber. On August 20 it was an nounced by the National Defense Advisory Commission that considerable millwork and about 653,000,000 board feet of lumber had been or would be ordered within the following few weeks for barracks and other structures. This estimate, which subsequently was raised consider ably, compares with an average monthly output of 2,000,000,000 board feet or more cut in the entire country dur ing the first seven months of 1940. The Twelfth District normally supplies about 60 percent of domestic lumber October 1, 1940 With few exceptions, prices of commodities produced in important volume in this district have been relatively stable during the summer and early fall. Douglas fir lum ber prices, which have advanced markedly, are one excep tion, but there have been only s m a l l changes in western pine and redwood lumber prices or in quotations for other building materials. Earlier in the year, spot prices for pulp and paper increased considerably as European sources of supply were cut off by the war. In July, how ever, a conference called by the Price Division of the National Defense Advisory Commission resulted in public assurances by members of the industry that an “inflationary spiral” in pulp and paper prices would not be permitted. A g r ic u l t u r e JAN. FED. MAR. APR. MAY JUN. JUL AUG SEP OCT. NOV. DEC LUMBER ORDERS — Twelfth District New orders received by sawmills. By weeks. Latest figures cover week ended September 14, 1940. requirements. Total new orders received by district mills rose sharply in July and August to the highest average level for any two months in more than a decade. This new business caused further expansion in mill output in the district as a whole during August, when the season ally adjusted index of lumber production advanced three points to 95 percent of the 1923-1925 average. During the first half of 1940 the index averaged 88. Production in the western pine area apparently attained an all-time record in August. Available information indicates that activity increased during August not only in lumber but also in the clay products and steel industries and in most other lines sup plying the building industry. Cement production was an exception, however, since it continued the declines evi dent during the preceding two months. These declines largely reflected curtailed shipments to Grand Coulee Dam, which is now in an advanced stage of construction. Output of Oregon and Washington cement mills during August was 33 percent below that of August 1939. Pulp production continued at capacity levels in August and early September. P;lans have been announced for the construction of a new mill unit having an annual capacity of 50,000 tons of unbleached sulphite pulp. The petroleum and copper mining and smelting indus tries offer something of a contrast to the industries dis cussed above. Production in both these industries has showrn no appreciable change during recent months and operations in both are well below capacity levels, despite the fact that some petroleum products and copper may be considered as essential to the armament program. Inventories of refined copper held by producers declined in August for the first time in several months, however, and the market for that product became unusually active in September. The petroleum industry in California con tinues burdened with heavy inventories of non-gasoline bearing crude petroleum and refined products. While expansion of urban consumer incomes has been the principal factor in the growth of domestic demand for farm products during recent months, various Federal and state aid programs have likewise affected domestic markets. Among the latter, are the stamp plan of distrib uting foodstuffs to relief recipients which is being con stantly extended to a wider area, the recently inaugurated cotton stamp plan, and the program of providing free school lunches for the needy and undernourished. Aided by a Federal subsidy, agricultural products are being introduced into new domestic and foreign markets and exports of wheat, cotton, walnuts, and winter pears con tinue to be subsidized. Various other measures, directly or indirectly bearing upon prices of farm products, have been retained or extended for the coming marketing sea son. These include Federal non-recourse loans on several important income-producing crops, and Federal and state programs designed to promote the orderly marketing of farm products moving in interstate and intrastate com merce. Direct payments to growers cooperating in the Federal soil and range conservation plan, and to cotton, wheat, and sugar beet growers augment the income of the farm group directly. Largely reflecting these developments, agricultural cash income in the Twelfth District has been maintained in recent months at levels well above those of 1938 or 1939. In Arizona and California the increased returns are traceable principally to citrus fruits, although gains are evident in receipts from most crops, while in the Pacific Northwest increased sales of livestock and re lated products were the principal factor. Income from wool was considerably higher than in the 1939 season in all sections of the district. Government payments to grow ers cooperating wTith the Federal farm program also con tinued larger than a year ago. Total district farm cash income during the first eight months of 1940 approxi mated $674,600,000, an increase of 9 percent from a year earlier. Present prospects indicate a total of $1,140,000,000 for the year as a whole, compared with $1,046,000,000 in 1939. This would be the second highest cash return to farmers since 1930, being exceeded only by the $1,218,000,000 received in 1937. Harvesting has reached a seasonal peak in recent weeks, and a number of the earlier crop estimates have been re vised. In the Pacific Northwest, drought conditions re duced the yield of wheat, barley, potatoes, and oats, while in Utah the sugar beet crop has been severely damaged by drought, disease, and insects. California flaxseed October 1, 1940 growers are harvesting a record crop, with acreage and yield per acre the largest since the crop was first intro duced commercially in the state in 1934. This crop is also becoming more important in Arizona and the Pacific Northwest. Total output for the district is expected to be approximately 3,224,000 bushels, compared with 2,079,000 bushels harvested last year and an average of 549,000 during the five years 1934-1938. In the Pacific Northwest in 1939 almost $25,000,000, or about 15 percent of the total income from crops, was realized from the sale of apples. Commercial output in that section is expected to total 33,326,000 bushels this year, compared with 31,474,000 bushels harvested last year and an average of 36,508,000 bushels produced durC O M M E R C IA L A P P L E P R O D U C T IO N * — T W E L F T H D IS T R IC T A N D U n ite d S t a t e s Average 1934-38 7,897 C alifornia........ Idaho .............. 3,635 O r e g o n ............ 3,462 Utah ................ 356 Washington . . . 29,411 Twelfth District 44,761 United States.. 121,755 (thousands of bushels) 1936 1937 1938 1939 8,033 9,339 7,364 8,024 2,592 3,960 2,960 2,574 3,550 3,320 3,400 2,900 397 398 385 395 27,135 29,346 30,150 26,000 41,707 46,363 44,259 39,893 98,608 156,376 109,595 143,085 Indicated 1940 6,496 2,160 3,120 326 28,046 40,148 114,830 *Refers to the production of apples in commercial apple counties of each state. ing the previous five years. Elsewhere in the United States unfavorable weather and heavy insect infestation have reduced the commercial crop from 143,085,000 bushels in 1939 to 114,830,000 bushels for harvest this year. The short crop for the country as a whole and increased con sumer buying power will tend to offset the loss of foreign outlets. B a n k i n g a n d C r e d it A moderate revival in district demand for bank credit to finance the expansion in production and trade has been evident during the summer and early fall months. Loans of city member banks for commercial and industrial pur poses have risen from $328,000,000 on JunQ 19, the low point for the year, to $349,000,000 on September 18, Index numbers, 1923-1925 average=100 Retail Trade Department store sales (value)* Twelfth District.......................... California .................................... Los Angeles.............................. Bay Region.............................. San Francisco.......................... Oakland .................................. Pacific Northwest...................... Portland .................................. S eattle...................................... Spokane .................................. Salt Lake City............................ Department store stocks (value) f Furniture store sales (value) Furniture store stocks (valu e)fl. Automobile sales (number)* With Seasonal ✓--Adjustment-^, ,— 1940— X 1939 Aug. July Aug. Without Seasonal r~Adjustments ,— 1940— n 1939 Aug. July Aug. 104 102 93 108 102 125 106 111 107 94 99 61 84 72 101 99 91 106 97 129 102 105 102 95 89 61 86 71 100 99 88 108 101 128 100 105 99 91 91 62 76 69 98 99 92 105 98 126 99 102 100 88 78 59 87 70 83 82 78 85 79 102 84 88 84 76 63 58 79 71 94 96 88 105 97 129 94 97 93 86 72 60 78 67 — — — — — — 105 94 218 153 148 206 91 83 180 85 91 76 83 97 67 101 111 88 87 98 72 96 108 81 55 36 116 71 59 109 65 50 116 58 40 118 74 63 111 Passenger ................................ — Commercial ............................ — Carloadings (number) * Total ................................................ 87 Merchandise and inisc................ 99 72 O th er............................................ intercoastal Traffic (volume) Total ................................................ 62 Eastbound .................................. 47 Westbound .................................. 114 fA t end of month. a gain of 6 percent. A year earlier these loans approxi mated $315,000,000. Much of the increase during the past three months is accounted for by banks in San Francisco and Seattle with smaller gains indicated from other re porting cities except Salt Lake City and Tacoma. Demand for other classes of loans, however, has been practically unchanged in recent months. Loans to finance securities transactions have declined slightly further and in late September were at the lowest level in years. Ad vances on real estate outstanding at district city banks have remained unchanged at about the figure for a year earlier. Total deposits of these banks continued the almost un interrupted growth of the past two years during late August and September. Total adjusted demand and time accounts of $2,230,000,000 on September 18 were $175,000,000 or 9 percent higher than a year ago. Member bank reserve balances in the Twelfth Dis trict were increased further in the four weeks ending September 18. The gain was occasioned by operations of the United States Treasury which continued to dis burse substantially larger sums in the district than it collected locally. The full effect of these net disburse ments was not reflected, however, in a corresponding in crease in member bank reserve balances. Interdistrict payments in connection with commercial and financial transactions resulted in a net outflow of funds from the d i s t r i c t a n d , together with a further increase in demand for currency, constituted a substantial drain upon local banking reserves. Over the past year, net payments of currency and coin into circulation by the Federal Reserve Bank of San Francisco have exceeded $60,000,000 com pared with an average of $17,200,000 during the preced ing five years. Production and Employment— Index numbers, 1923-1925 average=100 idustrial Production* Manufactures (physical volume) . Refined oils................................ . Distribution and Trade— *Daily average. 43 M O N T H L Y R E V IE W OF B U SIN E S S CO N D IT IO N S — $1929 average= 100. Wheat flour.................................. Minerals (physical volume) P etroleum .................................... Lead (U. S .) t .............................. Silver (U. S .) t ............................ Copper (U. S .) t .......................... Construction (value) Residential building permits$ Twelfth District......................, Southern California............ Northern California............ Oregon ................................ Washington ........................ Intermountain states.......... Public works contracts.............. Miscellaneous Electric power production........ actory Employment and Payrolls§ Employment Pacific Coast................................ California ................................ Oregon .................................... Washington ............................ Payrolls Pacific Coast................................ California ................................ Oregon .................................... With Seasonal Adjustment-^ 1940 —\ 1939 Aug. July Aug. 95 92 83 — — — 107 117 118 118 108 120 — — — 142 120 122 150 108 84 109 67 71 61 54 53 122 70 75 61 45 62 121 57 68 43 38 36 73 Without Seasonal r-Adjustment-% /— 1940—s 1939 Aug. July Aug. 113 149 120 117 99 145 130 104 98 162 120 120 93 134 93 112 113 133 92 106 87 103 68 73 55 43 66 133 509 57 67 42 38 41 82 263 — — — 67 69 59 54 60 137 294 231 221 216 254 247 237 127 145 110 101 125 142 106 99 109 120 105 89 132 150 115 104 126 143 110 100 113 124 109 92 130 150 106 101 126 146 100 96 108 121 95 86 137 156 118 106 125 145 102 94 113 126 106 90 * Daily average. f Prepared by Board of Governors of Federal Reserve System. (1935-1939=100) ^Includes figures from 197 cities and Los Angeles County, unincorporated. §Excludes fish, fruit, and vegetable canning. 44 FEDERAL RESERVE B A N K OF S A N F R A N C ISCO PER CENT October 1, 1940 PER CENT 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 roduction and employment in August showed a further rise from the level maintained in June and July and distribution to consumers also increased. Prices of industrial materials were somewhat higher in the middle of September than a month earlier. I ndustrial P roduction The Federal Reserve index of industrial production is estimated at 123 in August as compared with 121 in June and July and 111, the low point for the year, in April. This rise has reflected chiefly the direct and indirect effects of the defense program on industries producing durable goods and textiles. Steel production rose further in August as new orders for steel continued in large volume, and for the month as a whole mills operated at 90 percent of capacity. Following a temporary decline over the Labor Day week, the rate of output advanced to 93 percent of capacity in the third week of September. In most branches of the machinery industries activity showed a continued expansion in August and there were further sharp increases in shipbuilding and the manufacture of aircraft. With the growth in production of finished durable goods, consumption of nonferrous metals advanced to the highest levels since last winter. Output of automobiles was in small volume in August owing to the seasonal change-over to 1941 model cars. The low point in production was reached early in August; there was a gradual rise later in that month followed by a sharp ad vance in the first two weeks of September as most companies began volume pro duction on new models. Lumber production, which had declined in July, rose con siderably in August. Textile mill activity continued to increase in August and was at the highest level since last January. Cotton consumption advanced considerably further and silk deliveries rose from the small volume of recent months. Activity at wool textile mills increased seasonally, following a sharp rise in July, while at rayon mills activity showed a less than seasonal increase but continued at a high level. Mining of bituminous coal in August was maintained in large volume for the season, while production of anthracite declined. Output of crude petroleum de clined somewhat further. Value of new construction work undertaken in August was at about the same level as in July, according to reports of the F. W . Dodge Corporation and the Federal Reserve Bank of San Francisco. The volume of contracts for public projects continued unusually large and the amount of new private work started was larger than in July. Residential building was at the highest level in recent years, on a seasonally adjusted basis, reflecting further increases in both private and public contracts. D istribution Distribution of commodities to consumers increased considerably from July to August. Sales at department stores and by mail order houses showed a sharp rise and there was a less than seasonal decline in variety store sales. In the early part of September department store sales continued to increase. Freight-car loadings advanced from July to August when little change is usual. Shipments of coal and miscellaneous freight increased while loadings of grain showed more than a seasonal decline. P IN DU STRIAL PRODUCTION Index of physical volume of production, adjusted for sea sonal variation, 1935* 1939 average—100. By months, January 1934 to August 1940. F A C T O R Y EM PLOYM ENT Index of number employed, adjusted for seasonal varia tion, 1923-1925 average = 100. By months, January 1934 to August 1940. DEPARTM EN T STORE SALES A N D STOCKS Indexes of value of sales and stocks, adjusted for seasonal variation, 1923-1925 average=100. By months, January 1934 to August 1940. MILLIONS OF DOLLARS MILLIONS OF DOLLARS Commodity P rices Prices of several industrial materials, including copper, zinc, steel scrap, lum ber, hides, and print cloth, advanced somewhat from the middle of August to the middle of September and owing partly to seasonal developments, prices of food stuffs were also higher. Prices of most other commodities showed little change in this period, although some paper items were reduced and several new models of automobiles were announced at advanced prices. A griculture Production prospects for most major crops increased during August, according to the Department of Agriculture. On the basis of September 1 conditions the cotton crop was estimated at 12,772,000 bales, about 1,340,000 bales more than was indicated at the beginning of August. Preliminary estimates by the Depart ment indicate that cash farm income, including Government payments, will be about $8,900,000,000 for the calendar year 1940 as compared with $8,540,000,000 last year. Bank Credit Commercial loans increased somewhat at banks in New York City and in 100 other leading cities during the four weeks ending September 11, while their hold ings of investments showed little change. CONSTRUCTION CON TR AC TS A W ARDED Three-month moving averages of F. W. Dodge Corporation data for value of contracts awarded in 37 Eastern States, ad justed for seasonal variation. Latest figures based on data for June and July and estimate for August. U nited States Government Security P rices United States Government security prices increased in the last half of August and the first week in September and were steady in the second week in September.
@FedFRASER