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MONTHLY REVIEW TWELFTH O FEDERAL RESERVE DISTRICT Fe d e r a l R e s e r v e B a n k 1951 cto ber S a n Fr a n c i s c o of REVIEW OF BUSINESS CONDITIONS A s h a r p e x p a n s io n in th e m o n e y s u p p ly , r e s u lt in g p r in cord ed c ip a lly b a n k s . T h i s t r e n d c o n tin u e d in to th ir d fro m q u a rte r ten d ed to of r e m a in seaso n al th e fo r c e s , year. sta b le occu rred th e p r ic e s , h ow ever, u n til m i d -S e p t e m b e r . G r o w in g in d u s tr ia l d e m a n d f o r r a w W h o le s a le d u r in g in th e v o lu m e o f d e p o sits and cu rren cy o u ts id e S e p te m b e r , b u t th e in c r e a s e w a s s o m e w h a t le s s . D u r i n g J u ly , T r e a s u r y s p e n d in g in e x c e s s o f r e c e ip ts m a te r ia ls , r e fle c tin g s te p p e d - w a s th e p r in c ip a l f a c t o r c o n t r ib u t in g to th e in c r e a s e in th e u p d e fe n s e o u tp u t, h a s b e e n th e p r im a r y fa c to r u n d e r ly m o n e y s u p p ly . I n A u g u s t a n d S e p t e m b e r , h o w e v e r , b a n k in g th e p r ic e r ise sin c e th e n . I n v ie w o f th e la r g e in c r e a s e le n d in g in t h e m o n e y s u p p ly , it is s ig n i f ic a n t t h a t w h o le s a le p r ic e s tu te d th e p r in c ip a l s o u r c e s o f n e w d e p o s its . D e s p it e a $ 1 .5 have not r is e n m ore s h a r p ly . C o n s e r v a tiv e b e h a v io r b y c o n s u m e r s a n d m o d e r a tio n in in v e n to r y a c c u m u la tio n b y b illio n b u s in e s s h a v e t e n d e d to a c t a s o ffs e t s to th e g r o w t h in th e m ent m oney p eared to p r ic e s ta b ility m o d ify th e sin c e e a r ly in fla tio n a r y th is th r e a t. year In has fa c t, ap som e w e ll b e lo w c e ilin g le v e l. A c t u a lly , h o w e v e r , c e ilin g p r ic e s a r e b a s e d to a la r g e e x te n t o n p e a k o r n e a r p e a k p r ic e s s in c e th e o u tb r e a k o f h o s tilitie s in K orea. T h e fa c t th a t s o m e p r ic e s a r e n o w b e lo w th o s e lo ft y le v e ls , w h ic h w e r e r e a c h e d a s a r e s u lt o f p e r s is te n t s c a r e b u y in g , c a n n o t b e regarded as assu ran ce been overcom e. A s th a t th e in fla tio n a r y th e d e fe n s e p r o g r a m th re a t has reach es a m a ss p r o d u c tio n le v e l, c o n s u m p t io n o f g o o d s f o r m ilit a r y p u r poses w ill in c r e a s e a n d T r e a s u r y e x p e n d it u r e s w ill r is e . p u rch ase and of G overn m ent in v e stm e n t S e p te m b e r, a n d s e c u r itie s s u p p ly by th e in c r e a se d c r e a s e in fu n d s h e ld by s e c u r itie s e x p a n s io n by c o n s ti c o m m e r c ia l in c r e a s e d h o ld in g s o f G o v e r n F ederal o n ly th e R eserve $900 S y ste m , m illio n . T reasu ry A th e la r g e o ffs e t to in a m a jo r e x te n t th e m o n e y c r e a te d b y th e b a n k in g s y s te m . e a s in g o f th e p r e s s u r e s w o u ld s e e m to b e in d ic a te d b y th e c u r r e n t c o u r s e o f a n u m b e r o f c o m m o d it y p r ic e s a t p o in ts lo a n b a n k s in m o n e y s u p p ly . R e la tiv e and T h e u s u a l s e a s o n a l d e m a n d fo r fu n d s b y b u s in e s s a n d th e q u a r t e r ly c o lle c t io n o f t a x e s w e r e d o m in a n t in flu e n c e s in th e m o n e y m a r k e t d u r in g th e th ir d q u a r te r o f th e y e a r . Loans b y b a n k s in c r e a se d th e q u a r te r . I n $ 1 .3 m o n e y m a r k e t w a s c r e a te d w h ic h th e b illio n by T reasu ry ra n a b o v e e x p e c ta tio n s . T o m oney n a tio n a lly d u r in g S e p t e m b e r , c o n s id e r a b le p r e s s u r e o n th e m a rk e t, th e F ederal ta x c o lle c tio n s , e a se th e c o n d itio n R eserve S y ste m in pu r c h a s e d o v e r $ 9 0 0 m illio n in G o v e r n m e n t se c u r itie s d u r in g S e p te m b e r a n d e a r ly O c t o b e r , th e p u r c h a s e s c o n s is t in g p r im a r ily o f s h o r t-te r m p ap er. T h e r e s u lt in g r e s tr ic tio n s o n s u p p lie s o f g o o d s f o r c iv ilia n T h e t h ir d q u a r t e r in c r e a s e in th e m o n e y s u p p ly , t h o u g h c o n s u m p tio n , th e c o n tin u e d h ig h le v e l of s p e n d a b le in c o m e , a n d th e p o s s ib le c o n t in u e d e x p a n s io n o f th e m o n e y s u p p ly w ill a lm o s t c e r t a in ly c r e a te a d d itio n a l in fla tio n a r y la r g e ly s e a s o n a l, o f f e r s c o n s id e r a b le fu e l f o r fu r t h e r in fla tio n . H a d in th e ra te th is e x p a n s io n of s p e n d in g n o t b e e n o f f s e t b y a d e c lin e r e la tiv e to in c o m e , p a r tic u la r ly p r e s s u r e s . W h e t h e r th e s e d e v e lo p m e n ts b r in g a b o u t fu r b y c o n s u m e r s , p r ic e s m ig h t h a v e r is e n c o n s id e r a b ly . T h e t h e r in fla t io n a r y p r ic e a d v a n c e s w ill d e p e n d la r g e ly u p o n th e w illin g n e s s o f in d iv id u a ls a n d b u s in e s s o r g a n iz a tio n s e x is te n c e o f a r e c o r d m o n e y in g to e x e r c is e r e str a in t. d e fe n s e dem ands w ill s u p p ly c o u p le d w ith g r o w r e q u ir e , h o w e v e r , e ith e r c o n tin u e d m o d e r a t io n b y c o n s u m e r s a n d b u s in e s s in th e ir e x Money supply reaches record high A t th e end of p e n d itu r e s S e p te m b e r th e n a tio n a l m o n e y s u p p ly , w h ic h in c lu d e s d e p o s its a n d c u r r e n c y o u ts id e b a n k s , t o tro l th e o r stro n g m oney fis c a l a n d m o n e t a r y s u p p ly . H ow w e ll th e a c tio n to econom y in th e fir st q u a r te r o f th e y e a r b e c a u s e o f T r e a s u r y ta x in g m o s t o f th e s e c o n d q u a r te r . B o t h liq u id a tio n o f T r e a s u ry b a la n c e s a n d in c r e a s e d b a n k le n d in g c o n tr ib u te d to th e s e c o n d q u a r t e r g a in . D u r i n g J u ly a n d A u g u s t s h a r p in c r e a s e s — $ 1 .1 and $ 1 .2 b illio n , r e s p e c t iv e ly — w e r e re be s t a b iliz e d is s till a p r o b le m , a n d th e s p r in g o f n e x t y e a r , ta le d a lm o s t $ 1 7 8 b illio n , a n e w h ig h . A f t e r a s h a r p d r o p c o lle c tio n s , th e m o n e y s u p p ly e x p a n d e d m o d e r a te ly d u r con can Also in This Issue Has the Dollar Shortage Returned? The 1951 Farm Income Picture 76 FEDERAL RESERVE B A N K OF S A N F R A N C ISCO w hen d e fe n s e d e m a n d s w ill a p p r o a c h a peak, m ay o ffe r t h ir d -q u a r te r Bank loans in the Twelfth District expanded seasonally c o m m e r c ia l, c r e a s e in d e m a n d f o r in d u s t r ia l r a w m a t e r i a l s f o r u s e in th e r a p id ly e x p a n d in g d e fe n s e p r o g r a m . A c c o r d i n g to th e a r e a l te s t o f th e p o lic ie s a d o p t e d s o fa r . T o ta l October 1951 re p o rt o f th e O ffic e of D e fe n se t i o n , t h e e c o n o m y is j u s t n o w e m e r g i n g f r o m M o b iliz a th e to o lin g - u p p e r i o d a n d is e n t e r i n g u p o n t h e m a s s p r o d u c t i o n p h a s e in d u s t r ia l, and a g r ic u lt u r a l lo a n s o f th e d e fe n s e p r o g r a m . I t is e x p e c t e d th a t a fu r t h e r s u b o f r e p o r t in g m e m b e r b a n k s in th is D is t r ic t r o s e b y a lm o s t s ta n tia l in c r e a s e in th e r a te o f a c tu a l p r o d u c t io n a n d d e $ 1 5 0 m illio n d u r in g th e th ir d q u a r te r o f th e y e a r a n d a re liv e r y o f m ilit a r y g o o d s w ill ta k e p la c e in th e fo u r t h q u a r now te r w h ic h w ill t e n d to p la c e a d d e d p r e s s u r e o n th e p r ic e a b o u t $ 6 5 0 m illio n a h e a d o f th e e n d o f S e p te m b e r a year ago. T h e lo a n e x p a n sio n y e a r w a s c o n s id e r a b ly fo r th e t h ir d q u a r te r th is s m a lle r th a n in th e t h ir d la s t y e a r w h e n lo a n s r o s e b y $ 2 6 0 m illio n , r e fle c tin g th e sh a rp u p su rge in dem and w h ic h fo llo w e d stru ctu re. q u a rter c lo s e ly Consumer demand and inventory buying moderate upon th e K o r e a n o u tb r e a k . C o n s u m e r d e m a n d , w h ile c o n tin u in g a t a h ig h le v e l, r e m a in s S e a s o n a l r e q u ir e m e n ts o f th e fo o d p r o c e s s in g in d u s tr y p r o v id e d th e m a in s o u r c e o f d e m a n d f o r fu n d s in t h e D i s la tio n tr ic t, a c c o r d in g to d a ta s e le c te d m em ber s p e c ia l w e e k ly ban k s. Loans r e p o r ts o b ta in e d fo r d e fe n s e and fro m d e fe n s e m o d e ra te com p ared to e x p e n d itu r e s in J u ly and A u g u s t 1 9 5 0 a n d J a n u a r y 1 9 5 1 . I t is a ls o m o d e r a t e in r e to th e c u r r e n t h ig h le v e l of in d ic a te s o m e m o d e s t p ic k u p in c o m e . in P r e lim in a r y r e ta il s a le s d u r in g th e e a r ly p a r t o f O c t o b e r , b o t h in th e D is t r ic t a n d n a tio n s u p p o r t in g a c tiv itie s , w h ic h in c lu d e a s m a ll p r o p o r t io n o f a lly . th e s a le s a s th e fa ll s p o r ts s e a s o n o p e n e d , th e r e h a v e b e e n n o seaso n al fo o d u n in te r r u p te d ly p r o c e s sin g th ro u g h o u t lo a n s , th e c o n tin u e d th ir d to q u a rte r grow and ac c o u n t e d f o r a l m o s t 4 0 p e r c e n t o f t h e in c r e a s e in lo a n s o u t s ta n d in g . N e w b o r r o w in g s b y m e ta l a n d m e ta l p r o d u c ts m a n u fa c tu re r s w ere fe n se ca te g o ry . s tr u c tio n s h a r p ly area Loans fir m s , d u r in g in p a r tic u la r ly and o u ts ta n d in g s a le s th e th ir d w h ic h an im p o r ta n t of fin a n c e w as th e w h o le s a le r s , c o m p a n ie s q u a rte r a n d e x p a n sio n in fe ll p r o v id e d not n o te d de con o ff th e o n ly in recent m o n th s. H ow ever, a sid e lo a n s c o n tin u e d to in c r e a s e de T h e d e m a n d o f b u s in e s s f o r g o o d s a n d c o m m o d itie s to in e x c e s s o f r e p la c e m e n t n e e d s in r e c e n t m o n t h s . I n fa c t, at T w e lfth D is tr ic t c lin e d s te a d ily f r o m d e p a rtm e n t sto re s, d u r in g th e lo a n s , th ir d how ever, w as m uch q u a r te r la st y e a r w h e n s m a lle r new lo a n r e s u lt e d fr o m s u b s ta n t ia lly new hom e c o n s tr u c tio n sta rted in th e fir s t h a lf o f th e y e a r — th e la r g e s t fir s t h a lf o n r e c o r d e x a n d w h ic h q u a rte r. le v e l o f d e m a n d a n d th e h ig h in v e n t o r y p o s it io n in m o s t b u s in e s s lin e s , a s lo w e d fo r c iv ilia n p u r p o s e s . of 1951 in th e th ir d th e m o r e m o d e r a te w e ll a s c u tb a c k s v o lu m e de r e a c h e d a ll-t i m e r e c o r d p r o p o r t io n s in th e s e c o n d q u a r t e r th e $ 2 8 m illio n in c r e a s e th a t o c c u r r e d a t w e e k ly in g m e m b e r b a n k s in th e s a m e p e r io d th is y e a r . A f t e r th e have a lly , th e n e t in v e n to r y a c c u m u la tio n , w h ic h w a s a m a jo r v o l u m e in t h e r e a l e s t a t e fie ld w a s m o r e t h a n t h r e e t im e s re p o rt sto ck s th e h ig h r e a c h e d la st A p r il. N a t io n T h is th ese te le v is io n b e u s e d f o r p u r e ly c iv ilia n p u r p o s e s h a s b e e n o n ly s lig h tly o f th is y e a r , d r o p p e d in in b u yers. of la r g e in c r e a s e s ig n s o f c o n s u m e r s e n te r in g th e m a r k e ts a s r e a lly s t r o n g s p ite th e d r o p in r e s id e n tia l c o n s t r u c t io n a c t iv it y . T h e r a te th a n som e f a c t o r in th e in fla tio n o f 1 9 5 0 a n d e a r ly R e a l e sta te m o r tg a g e in c r e a s e fro m in th e s u p p lie s o f c r itic a l m a te r ia ls a l Industrial production rising but still below second quarter levels T o ta l c e p t f o r 1 9 5 0 — is c o m p le t e d a n d s o ld , th e in c r e a s e in re a l in d u s tr ia l p r o d u c tio n in th e U n ite d S ta te s in A u g u s t a n d S e p te m b e r r e c o v e r e d m u c h o f th e g r o u n d lo st e s ta te lo a n s w ill p r o b a b ly b e e v e n s m a lle r . a t th e b e g in n in g o f th e s u m m e r . D is t r ic t p r o d u c tio n , h o w Prices turn upward once again e v e r , ju d g in g b y th e W h o l e s a le c o m m o d it y p r ic e s , w h ic h h a d r e m a in e d r e la t h a t c o n tin u e d r is e in m a n u fa c t u r in g th r o u g h o u t th e e m p lo y m e n t s u m m e r m o n th s , d id not t iv e ly s ta b le in r e c e n t m o n t h s , tu r n e d u p w a r d d u r in g th e s h a r e in th e J u n e -J u ly d e c lin e a n d s in c e h a s m a in t a in e d m id d le o f S e p t e m b e r a n d h a v e c o n tin u e d to a d v a n c e m o d a ste a d y e s tly in e a c h w e e k sin c e th e n . T h e w e e k ly in d e x o f w h o le t io n a lly w a s m a in ly t h e r e s u lt o f p la n t -w i d e v a c a t io n s in s a le p r ic e s o f th e B u r e a u o f L a b o r S t a t is t ic s , w h ic h r o s e th e n o n d u r a b le g o o d s in d u s tr ie s a n d c u tb a c k s in th e p r o 1 7 p e r c e n t in th e fir st e ig h t m o n t h s fo llo w in g th e K o r e a n d u c tio n o f s o m e m a jo r d u r a b le s , m a in ly a u to m o b ile s . T h e o u tb r e a k , fe ll a b o u t 4 p e r c e n t fr o m r is in g v o lu m e o f d e fe n s e p r o d u c t io n in th e d u r a b le g o o d s to th e lo w reach ed te m b e r th e in d e x in has th e M a r c h m id -S e p te m b e r . r ise n 0 .5 S in c e percen t an d 1951 h ig h m id -S e p is n o w at a le v e l 1 3 p e r c e n t a h e a d o f th e p r e -K o r e a n a v e r a g e . B a s ic ra te o f in c r e a s e . T h e e a r ly s u m m e r d e c lin e n a in d u s t r ie s , a s w e ll a s th e e n d o f th e v a c a t io n p e r io d , a c co u n ts fo r o u tp u t h a s th e recent reco v ery a ls o recovered fr o m in p r o d u c tio n . m id -s u m m e r M in e r a ls c e s s a tio n s c o m m o d i t y p r ic e s , w h i c h a r e m o s t s e n s it i v e t o c h a n g e s in o f a c tiv ity d u e to v a c a tio n s a n d th e e c o n o m ic s itu a tio n , h a v e r is e n a lm o s t 3 p e r c e n t sin c e th e c o u n tr y , a n d in S e p te m b e r w a s e s tim a te d to b e a t a n th e p o s t -K o r e a n lo w r e a c h e d in A u g u s t , a n d n o w a v e r a g e a ll-t im e m o r e th a n 2 5 p e r c e n t a b o v e p r e -K o r e a n le v e ls . T h e m a j o r fa c to r a c c o u n tin g fo r th e r e s u m p tio n o f a n u p w a r d m o v e m e n t in p r ic e s h a s b e e n th e fa ir ly s h a r p in h ig h . C u rren t of h ig h con su m er goods s tr ik e s in s o m e p a r ts o f in v e n to ry pu rch ases p r o d u c tio n , in p o s itio n s m ay som e and r e str ic t cases, to reduced c iv ilia n le v e ls le v e ls d u r a b le b e lo w th o se October 1951 p e r m itte d by red u ced c r itic a l m a te r ia ls a llo tm e n ts . In m o s t c a s e s , h o w e v e r , m a t e r ia ls w ill b e th e c h ie f f a c t o r in d e te r m in in g th e le v e l o f o u tp u t o f c iv ilia n g o o d s . O u t p u t w ill c o n tin u e to fe n se advance s u p p o rtin g an le a d to th e r e x p a n s io n depends 77 M O N T H L Y R E V IE W in d u s tr ie s , e x p a n d in g upon r a p id ly in d e fe n s e how ever, v o lu m e lin e s th e in th e and and th is s h o u ld o f to ta l p r o d u c tio n . co n n e cte d a v a ila b ility of w ith c r itic a l de d e fe n s e F u r o u tp u t m a te r ia ls and seaso n s u ffic ie n t lo g s w ill not have In C a lifo r n ia , b u s in e s s a c t iv it y to e n a b le c o n tin u e s to in c r e a s e , c lin e s in s e a s o n a l in d u s tr ie s a n d in t h o s e c o n s u m e r d u r a b le in d u s tr ie s fo r c e d to c u r ta il a c tiv itie s d u e to m a te r ia l a n d d e m a n d lim it a t io n s . A fa ir ly w id e r a n g e o f m a n u fa c t u r in g in d u s tr ie s s u c h a s p a p e r p r o d u c ts , c h e m ic a ls , a n d th e c a p a c ity o f p la n ts a n d e q u ip m e n t n o w in u s e . A s n e w e le c tr ic a l e q u ip m e n t r e a c h e d n e w a c tiv ity pro cut w ith e x p a n d in g d e fe n s e o u tp u t m o r e th a n o ffs e ttin g d e p la n ts , n o w u n d e r c o n s t r u c t io n , a r e c o m p le te d a n d been m ills to o p e r a te t h r o u g h o u t th e w in t e r m o n t h s . in S e p te m b e r, w h ile a ll-t im e h ig h le v e ls o f such in d u s tr ie s a s a ir c r a ft d u c t iv it y im p r o v e s , th e c a p a c ity lim ita tio n s w ill p r o b a b ly a n d m a c h in e r y b e le s s s e r io u s th a n n o w . W a r I I h ig h s . T h e a u to m o b ile in d u s t r y h a s b e e n th e o n ly D e fe n se B u s in e s s a c t iv it y in th e T w e lf t h in som e D is tr ic t re m a in s h ig h a r e a s a c tiv ity h a s b e e n o r so. In new p o s t-W o r ld a lth o u g h s o m e in c r e a s e w a s n o te d d u r in g S e p te m b e r . varies considerably by area a lth o u g h reach ed in d u s t r y r e p o r t in g r e d u c t io n s in o u tp u t in r e c e n t m o n t h s , Business activity remains high in the District but th e p a st m o n th m a n u fa c tu r in g th e P a c ific c u r ta ile d over N o rth w e st ad verse w e a th e r c o n d itio n s d u r in g th e p a s t y e a r h a v e h a d a d e p r e s s iv e e ffe c t o n e c o n o m ic a c t iv it y in th e a r e a . U n u s u and seaso n al fo o d p r o c e s s in g a c tiv itie s have c o m b in e d to p u s h th e le v e l o f U t a h ’s o u tp u t to n e w h ig h s . T h e o u tp u t in te r r u p tio n s d u e to la b o r d isp u te s a n d s u m m er v a c a tio n s in th e a r e a ’s m in e s k e p t t h e le v e l o f a c t iv i t y in U t a h m er, are no lo n g e r presen t and and s m e lte r s , dow n m ost w h ic h d u r in g th e s u m o f th e s ta te ’s in a lly c o ld w in te r te m p e r a tu r e s d a m a g e d th e w in te r w h e a t d u s tr ie s a p p e a r to b e h e a d in g t o w a r d s n e w h ig h le v e ls o f c r o p , a n d th e h a r v e st o f v a r io u s fr u it c r o p s w a s re d u c e d o u tp u t s u b s ta n tia lly b y e a r ly s p r in g fr o s t s . F i r e h a z a r d s c r e a te d ta b lis h m e n ts by a r e a c o n tin u e to th e e x tre m e su m m er d r o u g h t c o n d itio n s seaso n fo rc e d s e r io u s d u r in g m ost c u r ta ilm e n ts in of th e lo g g in g and e m p lo y m e n t. expand a n d w o o d s o p e r a t io n s . I t is fe a r e d t h a t u n le s s c o n d it io n s m o n th seaso n . or at th e c lo s e la r g e m ilit a r y in t h e S a lt L a k e a n d w ill a b s o r b w h o w ill b e r e le a s e d f r o m a r e m o r e fa v o r a b le d u r in g th e r e m a in d e r o f th e lo g g in g The c o n c e n tra te d s u p p ly es C ity -O g d e n m any w orkers s e a s o n a l o p e r a tio n s in th e n e x t of th e c a n n in g and c o n s tr u c tio n H A S THE D O L L A R S H O R T A G E R E T U R N E D ? changes i g n i f i c a n t S S ta te s b a la n c e of have ta k e n m e r c h a n d is e p la c e tra d e in th e sin c e U n ite d th e fir s t o f th e y e a r . I n c o n tr a s t to th e r o u g h e q u a lity b e tw e e n e x tw een S e p te m b e r im p o rts m oved 1950 s u r p l u s is a g a in e x p a n d i n g . O n c e m o r e w e a r e f a c e d w i t h p e r io d , la r g e ly in th e p r o b le m s of a sh o rta g e of d o lla r s am ong th e o th e r s e e m s to h a v e r e a p p e a r e d a fte r a b r ie f a b se n c e . and Jan uary 1951, e x p o rts o r le s s to g e th e r , and w ith net im p o r t b a la n c e s b e in g r e c o r d e d f o r th e m o n t h s o f O c t o b e r p o r ts a n d im p o r t s d u r in g th e la s t h a lf o f 1 9 5 0 , o u r e x p o r t tr a d in g n a tio n s o f th e w o r ld , a n d th e s o -c a lle d d o lla r g a p 1950 u p w ard m ore th a t and Jan u ary A m e r ic a n 1951. E x p o rts resp on se p r o d u c ts expanded to fe a r s w o u ld be d u r in g in f o r e ig n th is c o u n tr ie s in c r e a s in g ly d iffic u lt to o b ta in a s o u r r e a r m a m e n t p r o g r a m g a th e re d m o m e n tu m of our and a s m a lle r and s m a lle r sh a re o u tp u t be I m m e d ia t e ly f o llo w i n g th e o u tb r e a k o f c o n flic t in K o c a m e a v a ila b le fo r e x p o r t . T h e in c r e a s in g a v a ila b ility o f r e a it w a s r a t h e r g e n e r a ll y t h o u g h t t h a t th e p o s t w a r p r o b d o lla r s , d u e to o u r r is in g im p o r t s , a ls o c o n tr ib u te d to th e le m s a s s o c ia te d w ith a la r g e U n i t e d S t a t e s e x p o r t s u r p lu s s o m e w h a t la te r e x p a n s io n o f o u r e x p o r t s . w o u ld n o lo n g e r b e m a tte r s o f s e r io u s c o n c e r n . T h i s v ie w Expectations in January 1951 w a s s u p p o r te d b y th e b e h a v io r o f U n it e d and im p o r ts fo llo w in g th e S ta te s e x p o rts C o m m u n is t a tta ck on S o u th K o r e a . I m p o r ts , w h ic h h a d b e e n r is in g g r a d u a lly d u r in g M any S ta te s p e o p le im p o r t th o u g h t la s t Jan u ary b a la n c e s , w h ic h th e p o s tw a r p e r io d , t u r n e d s h a r p ly u p w a r d in J u ly 1 9 5 0 . th e s ix m o n th s b e tw e e n A u g u s t T h is w o u ld im m e d ia te r e s p o n s e to th e d e v e lo p m e n ts in K orea c o n tin u e in th e m o n th s occurred th a t th e in th re e U n ite d out 1 9 5 0 an d Jan uary ahead, perhap s of 1951, w ith in r e fle c te d in p a r t p a n ic b u y in g b y U n i t e d S t a t e s im p o r t e r s c r e a s in g r e g u la r ity . I n d e e d , s o m e o f th e m o r e o p tim is tic in ob servers a n tic ip a tio n of p o s s ib le sh o rta g e s of c r itic a l im p o r t ite m s , a n d th e s te p p in g u p o f th e G o v e r n m e n t ’s p r o g r a m sta te d th a t th e year 1951 m ig h t end w ith an im p o r t b a la n c e , w h ic h w o u ld in d e e d h a v e b e e n a n u n u s u a l o f s t o c k p ilin g s tr a te g ic im p o r t ite m s . E x p o r t s , w h ic h h a d d e v e lo p m e n t c o n s id e r in g th a t th is c o u n t r y h a s n o t h a d a n s h o w n a g r a d u a lly d e c lin in g tr e n d s in c e th e p e a k p o s tw a r im p o r t b a la n c e f o r y e a r o f 1 9 4 7 , c o n tin u e d b e lie v e d to d e c lin e d u r in g J u ly a n d A u g u s t o f la s t y e a r a n d d id n o t t u r n u p w a r d u n til S e p t e m b e r . A s a r e s u lt o f th e r a p id in c r e a s e in im p o r t s w h ile ex th a t a any c a le n d a r y e a r c o n tin u e d in c r e a s e in sin c e 1893. im p o r ts They c o u ld be e x p e c t e d a s a r e s u lt o f th e d e m a n d f o r r a w m a t e r ia ls f o r arm am en t p ro d u c tio n and fo r s t o c k p ilin g , and of th e p o r ts c o n tin u e d d o w n w a r d , a s u r p lu s o f im p o r t s o c c u r r e d c o n tin u in g p r iv a te d e m a n d fo r fo r e ig n c o m m o d itie s , in te n in s ifie d b y h ig h in c o m e s a n d d e c r e a s in g s u p p lie s o f d o m e s A u gu st 1950 fo r th e fir st tim e sin c e J u n e 1937. B e 78 October 1951 FEDERAL RESERVE B A N K OF SAN FRANCISCO tic g o o d s . I t a p p e a r e d th a t th e d e m a n d fo r s u c h c r itic a l It ap peared, th en , th a t th e sta g e w as at la st set fo r m a t e r ia ls a s w o o l, r u b b e r , tin , c o p p e r , a n d p e tr o le u m w a s a in s a tia b le a n d th a t, w ith r a p id ly in c r e a s in g p r ic e s in w o r ld th e flo w m a r k e ts , p r o d u c tio n w o u ld b e e x p a n d e d to th e m a x im u m e r e c te d b e c a u s e o f la r g e im p o r t b a la n c e s a n d r a p id ly d e T h ose o f in te r n a tio n a l t r a d e . T h e s e b a r r ie r s h a d b e e n c r e a s in g r e s e r v e s , b u t in th e la tte r h a lf o f 1 9 5 0 th e r e w e r e p o s s ib le le v e l. h o ld in g m e r c h a n d is e r e d u c t io n in o t h e r c o u n t r ie s ’ p o s t w a r b a r r ie r s a g a in s t to th is e x p o rts v ie w c o u ld a ls o c o n te n d e d n o t c o n tin u e th e ir th a t our r a p id in m a n y in s ta n c e s in w h ic h th is ju s t ific a tio n c o u ld n o lo n g e r be o ffe r e d . T h is fa c t w as m ade e s p e c ia lly c le a r by th e c r e a s e . I t s e e m e d o n ly r e a s o n a b le to a s s u m e th a t, a s th e I n t e r n a t io n a l M o n e t a r y F u n d in a r e p o r t p r e s e n t e d t o t h e d e fe n s e p r o g r a m t a r if f n e g o t ia t o r s a t T o r q u a y , E n g l a n d , in th e fa ll o f 1 9 5 0 . r e a c h e d its p la n n e d m a g n it u d e , th e p r o p o r tio n o f o u r o u tp u t a v a ila b le f o r e x p o r t w o u ld d e c r e a s e , I n th is r e p o r t th e I M F s in c e o u r e c o n o m y w a s a lr e a d y n e a r th e fu ll e m p lo y m e n t in r e s tr ic tio n s w h ic h d is c r im in a t e d a g a in s t d o lla r im p o r t s le v e l. T h i s w o u ld b e s o p a r tic u la r ly in th e c a s e o f m a c h in in e r y , w h ic h a c c o u n te d fo r d o lla r r e s e r v e s , p a r tic u la r e m p h a s is b e in g p la c e d o n th e a la r g e p a r t o f th e in c r e a s e o u r e x p o r t s in t h e im m e d ia t e p o s t -K o r e a n in p e r io d . A s a r e s u lt o f th e a n tic ip a tio n o f a d e c r e a s e in e x p o r t s , o r a t le a s t a m uch e x p a n s io n huge th e s lo w e r ra te o f in c r e a se , S ta te s p o s t-W o r ld II p e r io d w o u ld s te r lin g a r e a n o te d c o u n tr ie s . be th in g s o f th e a m o n g th e w o r ld ’ s tr a d e r s . F a v o r a b le b a l a n c e s o f t r a d e , p a r tic u la r ly a m o n g th e r a w m a te r ia l p r o c o u n tr ie s , r e s u lt e d d o lla r b a la n c e s . in In r a p id ly som e in g o ld and t h is c o n n e c t io n , it s h o u ld W e ste rn be H e m i im p o r ts f o llo w in g a s u b s ta n tia l im p r o v e m e n t in th e ir d o l la r p o s it io n s . A s a r e s u lt o f t h e s e v a r io u s c o n s id e r a t io n s it w as hoped th a t m a n d s , w o u ld and in c r e a se s th a t d u r in g th e p a s t y e a r c e r ta in w h ile it r e s u lte d T h e tr e n d o f tr a d e d u r in g 1 9 5 0 p r o v id e d m u c h r e a so n g o ld In had th o u g h t th a t th e a te d r e a r m a m e n t w e r e b e in g r e a liz e d . d u c in g had s p h e r e c o u n tr ie s , s u c h a s C a n a d a , M e x ic o , B r a z il, C u b a , p a s t , a t le a s t d u r i n g t h e p e r io d in w h ic h p la n s f o r a c c e le r fo r o p tim is m th a t a n d V e n e z u e la , h a v e r e la x e d r e s tr ic tio n s o n U n it e d S ta te s a e x p o r t s u r p lu s e s th a t c h a r a c te r iz e d W a r c o u n tr ie s c o n tin u in g and o f i m p o r t s , it w a s g e n e r a lly U n ite d th o se c a lle d f o r a n im m e d ia te r e d u c tio n in c r e a s in g c a se s a id th e im p ro v e m e n t in la r g e p a r t f r o m in tra d e b a la n c e s , u n u s u a l d e fe n s e d e n e v e r th e le s s m a k e a r e d u c tio n in r e s tr ic t io n s p o s s ib le a n d th u s p a v e th e w a y f o r a f u t u r e e x p a n s io n of c o m m e r c ia l tra d e under m ore norm al c ir c u m sta n c es. fo r e ig n under eco The m ovement of trade since January J951 n o m ic a s s is ta n c e p r o g r a m s m o r e th a n c o v e r e d tr a d e d e fi U n fo r t u n a t e ly , h o w e v e r , th e s e e x p e c ta tio n s o f c o n tin u c its a n d th u s p e r m itte d th e a c c u m u la tio n o f r e s e r v e s . T h e i n g i m p o r t b a la n c e s in t h e U n i t e d S t a t e s b a la n c e o f t r a d e , g r o w t h o f fo r e ig n b a la n c e s w a s a ls o fo s te r e d b y r e la tiv e ly or even la r g e -s c a le have U n ite d m o v e m e n ts S ta te s. W h ile of g o ld a c e r ta in and d o lla r s p a r t o f th is out of th e c a p ita l flo w a rough n ot been e q u a lity b e tw e e n r e a liz e d . B etw e en e x p o rts and im p o rts, Jan u ary and A p r il of th is y e a r , U n i t e d S t a t e s e x p o r t s e x p a n d e d r a p id ly , in fa c t w a s o f a w a r p a n i c n a t u r e , it is s a f e t o a s s u m e t h a t m u c h at a m u ch o f it r e fle c t e d g e n u in e in v e s t m e n t . T h i s h a s b e e n p a r tic u E x p o r t s r o s e to a p e a k o f $ 1 ,3 7 2 m illio n in A p r i l, a n d fo r la r ly t r u e in th e c a s e o f la r g e -s c a le in v e s t m e n t b y A m e r i fa ste r 1 9 4 7 . W h ile U N IT E D STA TES EXPO RTS A N D JA N U A R Y 1950— A U G U S T in IM P O R T S , 1951 1 1 1 1 1 1 1 I 1 “ "1 1950. M ay p e r io d reach ed in t h e seco n d q u a rte r th e v a lu e o f o u r e x p o r ts tu r n e d o f th is y e a r , it in c r e a s e d a g a in in of dow n w ard A u g u st. The v a lu e o f o u r im p o r ts r e m a in e d a t a p p r o x im a te ly th e J a n u Millions of dollars ■I d u r in g th e la s t h a lf o f th e s e c o n d q u a r te r o f th is y e a r s to o d n e a r th e h ig h p o in t o f th e p o s tw a r c a n e n te r p r is e in C a n a d a . ra te th a n i ..r t ..... i ...r - r - ' a r y le v e l d u r in g A p r i l a n d M a y , th e n d e c r e a s e d s te a d ily t h r o u g h A u g u s t . A s a r e s u lt, th e J a n u a r y im p o r t b a la n c e of $51 m illio n w as fo llo w e d by a se r ie s of e x p a n d in g e x p o r t s u r p lu s e s in s u b s e q u e n t m o n t h s . T h o u g h t h e v a lu e --------------- - ... .................................................... .— of our e x p o rts tu rn ed dow n tu rn ed e a r lie r dow n w ard and in decreased M ay, im p o rts fu rth e r. The had r e s u lt h a s b e e n th a t, w ith th e e x c e p t io n o f J u ly , th e d o lla r d e fic it o f th e re st o f th e w o r ld — -X a fx h a s in c r e a s e d in e a c h m o n th th is y e a r s in c e J a n u a r y , r e a c h in g a p e a k o f $ 3 8 5 4----------it a n c e in :: :: A u g u st, th e m ost recent m o n th fo r w h ic h of m illio n d a ta are a v a ila b le .1 Im p o rts United States exports W h y h a v e th e e x p e c t e d c h a n g e s in o u r b a la n c e o f t r a d e n ot occu rred ___ L .- .1 . 1 . J __ J J F M A M J I i 1... J A S O N 1950 | \ , .— 1— 1... !.. D J F ...1 M A M J J A 1951 S o u r c e : U n ite d S ta te s D e p a r tm e n t o f C o m m er ce, B u r ea u o f th e C en su s. th u s f a r in 1 9 5 1 ? O u r e x p o r ts , in s te a d of 1 T h e s e e x p o r t fig u r e s in c lu d e m ilita r y s h ip m e n t s u n d e r t h e M u tu a l D e f e n s e A s s is t a n c e P r o g r a m . A c t u a lly s u c h s h ip m e n t s d o n o t c o n t r ib u t e d i r e c t ly t o t h e d o lla r d e fic it s o f r e c e iv in g c o u n t r ie s b e c a u s e t h e y a r e c o v e r e d b y d o lla r g r a n t s . E x c l u d i n g M D A P s h ip m e n t s , e x p o r t s in A p r il w e r e $ 1 ,2 8 9 m illio n , t h e J a n u a r y im p o r t b a la n c e $ 1 0 3 m illio n , a n d t h e A u g u s t e x p o r t b a la n c e $ 2 7 0 m illio n . 79 M O N T H L Y R E V IE W October 1951 le v e lin g o ff a s h a d b e e n e x p e c te d a t th e b e g in n in g o f th e m o s t o th e r c o m m o d it ie s h a v e d e c lin e d s o m e w h a t s in c e t h e y e a r , h a v e r e m a in e d w e ll a b o v e th e J a n u a r y fig u r e in s p ite peaks o f th e r e d u c tio n d u r in g th e s u m m e r . F o r th e p e r io d b e m e ta llic m in e r a ls , h o w e v e r , h a v e c o n tin u e d to in c r e a s e a n d tw e e n th e o u tb r e a k o f th e K o r e a n w a r a n d A u g u s t o f th is h a v e m o r e th a n d o u b le d d u r in g th e s i x m o n th s b e tw e e n year, th e ir v a lu e in c r e a se d about 62 p e rce n t, or by 57 T h e e x p l a n a t i o n f o r t h e h i g h le v e l o f e x p o r t s is s i m il a r to th a t o ffe r e d f o r th e fa ilu r e o f s h o r ta g e s to d e v e lo p in o u r d o m e s tic e c o n o m y , n a m e ly , th e r e la tiv e s lo w n e s s w ith th e r e a r m a m e n t p r o g r a m u n d e r e s tim a tio n of our a b ility m a n d s h a v e n o t in c r e a se d so has p rogressed to produ ce. a n d th e M ilita r y de r a p id ly a s h a d b e e n a n tic i p a te d , a n d o u r e c o n o m y h a s b e e n a b le to k e e p p a c e w ith b o t h m ilit a r y a n d c iv ilia n d e m a n d , a s w e ll a s to p r o d u c e a n in c r e a s in g a m o u n t f o r e x p o r t. T h e e x p a n s io n of our e x p o r t s , p a r tic u la r ly m a c h in e r y , r e fle c te d f o r e ig n b u y e r s ’ fe a r s o f fu tu re d im in is h e d , sh o rta g e s. h ow ever, as Such w e fe a rs have have u n d o u b te d ly c o n tin u e d to expand T h e r a p id in c r e a s e in e x p o r t s d u r in g th e e a r ly p a r t o f th e y e a r r e fle c te d s e a s o n a l in flu e n c e s to s o m e e x t e n t , p a r t ic u la r ly in th e c a s e o f o u r e x p o r t s o f c o t t o n , a n d o f w h e a t a n d o th e r g r a in s . F o r th e e n tir e p e r io d f r o m June 1950 to A u g u s t 1 9 5 1 , a g r ic u lt u r a l c o m m o d it ie s ( e x c lu d i n g t e x a c c o u n te d fo r 3 0 p e r c e n t o f th e to ta l in c r e a s e in e x p o r t s . I n a d d itio n to s e a s o n a l in flu e n c e s , a n o th e r f a c t o r w h ic h te n d e d to r a is e th e le v e l o f a g r ic u lt u r a l e x p o r t s in th e fir s t h a lf o f th is y e a r w a s th e p o o r g r a in h a r v e s ts fo r th e 1950 season in o th e r p a rts m o s t o f th e se s h ip m e n ts sh o u ld o f th e w o r ld . W h ile b e c o n s id e r e d a b n o r m a l, M ay. O u tb o u n d s h ip m e n ts su ch im p o r t a n t fu e ls a s p e tr o le u m w e ll a s s u lp h u r a n d c e m e n t. U n d o u b t e d ly of non and coal as th e m o s t im p o r ta n t fa c to r in th e r e c e n t e x p a n s io n o f e x p o r ts in th is g r o u p h a s b e e n th e in c r e a s e d fu e l r e q u ir e m e n ts in W e s t e r n E u r o p e r e s u lt in g in p a r t f r o m ity a n d in p a r t f r o m h ig h e r in d u s tr ia l a c t iv in c r e a s in g d iffic u ltie s in e x p a n d in g th e ir o w n fu e l p r o d u c tio n a n d in o b ta in in g s u p p lie s fr o m fo rm e r s o u r c e s , p a r tic u la r ly c e s s a tio n fo r e ig n of o il fu e l s h ip m e n ts dem ands in E a ste rn fr o m th e E u rope. Ira n m ay U n ite d A ls o , w e ll S ta te s. th e add A to fu rth e r e x p a n s io n o f e x p o r t s in th is c a t e g o r y c a n b e a n tic ip a te d , p a r tic u la r ly E u rope in v ie w of la r g e -s c a le w h ic h a r e p la n n e d C o n tr ib u tin g p r o d u c tio n . t ile f i b e r s ) and F e b r u a r y a n d A u g u s t o f th is y e a r . T h i s c o m m o d it y g r o u p in c lu d e s p e r c e n t if M u t u a l D e f e n s e s h ip m e n t s a r e e x c lu d e d . w h ic h o f A p r il fu r th e r to in th e e x p o rts of coal to th e m o n th s a h e a d . in c r e a se in e x p o rts have b e e n s h ip m e n ts o f m ilita r y g o o d s u n d e r th e M u t u a l D e fe n s e A ssista n c e P rogram . W h ile such s h ip m e n ts have n o t c o n s titu te d a n im p o r ta n t s e g m e n t o f o u r to ta l e x p o r ts th u s fa r , th e y c a n b e e x p e c te d to in c r e a s e a s r e a r m a m e n t progresses. F rom A u gu st 1951, over $1 b illio n , o r th e ir in a u g u r a tio n M D A P 7 s h ip m e n ts in J u ly 1950 a m o u n te d to u n til s lig h tly O n a m o n t h ly b a s is s u c h s h ip m e n t s h a v e flu c tu a te d b e t w e e n p e rce n t o f o u r to ta l e x p o r ts . 3 p e r c e n t o f to ta l e x p o r ts (M a y (A u g u st 1950) a n d 9 .5 percent 1 9 5 1 ). United States imports s o m e o f th e m , p a r tic u la r ly to I n d ia , a r e e x p e c t e d to c o n Im p o r ts , in ste a d tin u e fo r s o m e tim e . o f c o n tin u in g to e x p a n d a s h a d b e e n e x p e c t e d , r e a c h e d a p e a k in M a r c h M a c h in e r y th e to ta l and in c r e a se v e h ic le s in a cc o u n te d e x p o rts s in c e fo r 39 June percent 1950, a of la r g e r s h a r e t h a n th a t o f a g r ic u lt u r a l c o m m o d it ie s . A b o u t h a lf of th is in c r e a s e c o n s is te d of p eak m o n th o f M a y , e x p o rts m ilita r y ite m s . S in c e th e in th e m a c h in e r y c a t e g o r y h a v e d e c r e a s e d , a lth o u g h n o t so s h a r p ly a s h a v e c e r ta in oth e r m a jo r s in c e M ay c a te g o r ie s . is p r o b a b ly The due d ecrease to in th e se in c r e a s in g e x p o rts s u p p ly s tr in g e n c ie s a s o u r r e a r m a m e n t d e m a n d s ta k e e ffe c t. T e x tile s and im p o r t a n t te x tile c o m m o d ity fib e r s grou p have in been our th e to ta l d e c lin e d . O n e 1951 o f th e im p o r ta n t fa c to r s im p o r ts to fo llo w th e e x p e c te d e r n m e n t’s p r o g r a m a n d h a v e s in c e in th e fa ilu r e of tr e n d r e la te s t o th e G o v o f s t o c k p ilin g s tr a te g ic im p o r t e d r a w m a t e r ia ls . T h e d e ta ils o f th is p r o g r a m a r e n o t m a d e a v a il a b le f o r s e c u r i t y r e a s o n s . I t is k n o w n , h o w e v e r , t h a t it h a s b e e n p r o c e e d in g le s s v i g o r o u s ly s in c e e a r ly th is y e a r th a n in th e p e r io d i m m e d ia t e ly f o llo w i n g th e o u tb r e a k o f c o n flic t in K o r e a . A t t h a t t i m e la r g e s t o c k p ilin g p u r c h a s e s o f s tr a te g ic m a t e r ia ls , p a r tic u la r ly r u b b e r a n d t in , w e r e m a d e th ir d m ost w ith little r e g a r d f o r p r ic e s , th e c r itic a l in t e r n a t io n a l s it u e x p o rts s in c e a tio n b e in g c o n s id e r e d p a ra m o u n t. A s a r e s u lt , m any J u n e 1 9 5 0 . T h i s is t h e o n l y m a j o r c o m m o d i t y g r o u p , h o w p r ic e s sk y r o c k e te d . e v e r , w h i c h is n o t s u b s t a n t i a ll y a b o v e t h e y e a r - a g o fi g u r e . p o lic y has T h e m o s t i m p o r t a n t s i n g l e c o m m o d i t y in t h is g r o u p is u n e a r ly a s F e b r u a r y , th e G o v e r n m e n t h a s w ith d r a w n a s a m a n u fa c t u r e d c o t t o n , a n d th e lo w e r le v e l o f th is c la s s ifi buyer c a t io n r e s u lt s in p a r t f r o m th e ir p r ic e s w e r e a d v a n c in g t o o r a p id ly o r to u n ju s t ifie d In a d d itio n , th e fo r e ig n h ow ever, dem and o u r s m a ll c o t t o n c r o p in 1 9 5 0 . th ere has f o r t e x t ile s been in som e m ore d ecrease in recen t m o n th s. E x p o r t s o f t e x t ile fib e r s , b e c a u s e o f th e in flu e n c e o f c o tto n e x p o r ts , a ls o fo llo w a se a so n a l p a tte r n and are h e a v ie s t d u r in g th e fir s t a n d la s t q u a r te r s o f th e y e a r ; h e n c e , w ith a m uch la r g e r e x p e cte d to crop in c r e a s e in p ro sp e ct, s u b s ta n t ia lly co tto n in e x p o rts th e m o n th s can be ahead. T h e n o n m e t a llic m in e r a ls g r o u p h a s n o t f o llo w e d c lo s e ly th e tren d of th e o th e r m a jo r c la s s ific a tio n s . E x p o rts of of le v e ls . been recen t announced p a r tic u la r T h is In change m o n th s and p o lic y m ore fo llo w e d . c o m m o d itie s in a has w hen it c a u tio u s B e g in n in g has u n d o u b te d ly fe lt as th a t been an im p o r ta n t fa c to r in th e le v e lin g o f f o f th e v a lu e o f U n it e d S ta te s im p o rts. In th e c iv ilia n s e c t o r o f th e e c o n o m y , p a n ic b u y in g o f im p o r t e d c o m m o d it ie s , p a r tic u la r ly r a w m a te r ia ls fo r in d u stry , has m o d e ra te d . F ears of sh o rta g e s and r e str ic tio n s o n th e a v a ila b ility o f fo r e ig n c o m m o d itie s h a v e n o t b e e n r e a liz e d to th e e x t e n t a n tic ip a te d . S im ila r ly , th e d e m a n d f o r f o r e ig n c o m m o d it ie s to r e p la c e e x p e c t e d s h o r t 80 FEDERAL RESERVE B A N K OF SAN FRANCISCO October 1951 U N I T E D S T A T E S B A L A N C E O F T R A D E , B Y M A J O R T R A D I N G A R E A S , J U N E 1 9 5 0 -A U G U S T 1951 Export balance ( + ) , import balance (— ). N o t e : “ Special category” shipments of commodities of military importance are excluded. Source: United States Department of Commerce, Bureau of the Census. a g e s o f d o m e s tic g o o d s h a s m o d e r a te d a s th e se g o o d s h a v e th e r e v e r s e w ill p r o b a b ly c o n tin u e d in g o o d s u p p ly . th e y e a r. T h e d is c u s s io n fo r th a t m a tte r, e v e n so fa r h a s b ee n co n c e rn e d s o le ly w ith c h a n g e s in th e v a lu e o f to t a l e x p o r t s a n d im p o r t s , w i t h n o com m ent upon th e im p o r ta n t e ffe c ts of p r ic e ch an ges. U n t i l th e m o s t r e c e n t m o n th s th e p r ic e s o f b o th im p o r ts a n d e x p o r t s h a v e r is e n s te a d ily s in c e J u n e 1 9 5 0 . T h e D e p a r tm e n t of C om m erce in d e x o f u n it v a lu e o f im p o r ts 1 r e a c h e d a n a ll-t im e h ig h in J u n e o f th is y e a r , 3 7 p e r c e n t a b o v e th e le v e l f o r J u n e 1 9 5 0 . T h e u n it v a lu e o f o u r e x p o r t s 1 r e a c h e d its p e a k in M a y o f th is y e a r , w ith a n in crease o f 2 0 1950. percent over Ju ne C o n s e q u e n tly , th e m o v e m e n t o f th e p r ic e s p a id fo r o u r im p o r ts r e la tiv e to th e p r ic e s r e c e iv e d f o r o u r e x p o r t s w o r k e d t o th e a d v a n ta g e o f th e c o u n tr ie s d o lla r gap in cu rre d has w o u ld d e v e lo p m e n ts s u p p ly in g expanded have le s s our r a p id ly been m uch fa v o r a b le to im p o r ts . in 1951, g re a te r W h ile th e s u p p ly in g th e d e fic its under p r ic e c o u n tr ie s. S in c e t h e p e a k m o n t h s , t h e u n it v a lu e s o f b o t h a ssu m in g no in th e fa c e o ffs e ttin g The d u r in g m o s t o f th e b a la n c e o f th is y e a r . p r ic e s occurred fo r w e r e m o s t in fla te d th o se of B u reau s e le c te d in c r e a s e s , v a lu e of our K o re a n w ar— ru b ber, raw m a te r ia ls w h ose e a r lie r p a r t o f th e w o o l, tin o r e , a n d , to a le s s e r e x t e n t , c o c o a , c o p r a , a n d b u r la p . A t t h e e n d of A u g u st, h o w e v e r , th e d o w n w a r d tr e n d in s p o t p r ic e s w a s a r r e s te d a n d b y O c to b e r 1 2 th e in d e x w a s a p p r o x im a te ly 2 .5 p e r c e n t a b o v e th e A u g u s t le v e l. I f th e u s u a l la g p r e v a ils , th e d o w n w a r d t r e n d in th e u n it v a lu e s o f im p o r t s s h o u ld le v e l o f f . T h i s p r o b a b ilit y is s t r e n g t h e n e d b y t h e f a c t t h a t s p o t p r ic e s h a v e fa lle n t o t h e S e p t e m b e r 1 9 5 0 le v e l a n d , w it h th e rearm am ent p rogram s of th e fre e n a tio n s m o v in g o u t o f th e t o o lin g -u p s ta g e in to th e p r o d u c tio n s ta g e , th e d e m a n d fo r ra w m a te r ia ls s h o u ld r e m a in stro n g . It w o u ld appear th a t th e o f L a b o r S ta tis im p o r ts reach ed a c o n tin u a tio n im m e d ia te ly ahead o f e x p o r t s u r p lu s e s in A u g u st can h ave o f th e s e r io u s e ffe c t s in o t h e r c o u n t r ie s . T h i s is p a r t ic u la r ly t r u e o f t h e p e a k d u r in g th e F e b r u a r y -M a r c h p e r io d w h ile th e in d e x c o u n tr ie s o f W e s t e r n o f u n it v a lu e o f im p o r t s d id n o t r e a c h its p e a k u n til J u n e . p o s itio n o f th e U n it e d T h e in d e x o f s p o t p r ic e s o f im p o r ts d e c r e a s e d 2 3 p e r c e n t r io r a te d very b e tw e e n tio n s. T h is w a s o n e M a r c h 2 a n d A u g u s t 2 1 . T h is d o w n w a r d tre n d m o n th s w ill b e c r itic a l a s fa r a s o u r b a la n c e o f m e r c h a n d is e t r a d e is c o n c e r n e d . A p r ic e s raw d u r in g th e m a g n itu d e o f th a t r e c o r d e d sp ot th e p r in c ip a l d e c r e a s e s in t h e s p o t p r ic e s o f im p o r t e d c o m m o d itie s fo r im p o r te d c o m m o d itie s . T h e of in ex p o rts. U n i t v a lu e s p a id f o r im p o r t s u s u a lly la g b e h in d s p o t p r ic e s in d e x o f m o d e ra te decrease Prospects for future trade I t is p r o b a b le th a t th e u n it v a lu e s o f im p o r t s w ill c o n tic s of im p o r ts a n d e x p o r t s h a v e d e c r e a s e d s lig h tly . t in u e t o d e c lin e d u r in g th e b a la n c e tin u e if im p o r ts r e m a in a t th e ir p r e s e n t p h y s ic a l le v e l, o r The effect of price ch a n g e s The b e tru e d o lla r d e fic it o f o t h e r c o u n t r ie s w ill c o n r a p id ly E u rope. T h e b a la n c e o f p a y m e n ts K in g d o m , fo r e x a m p le , h a s d e te and is a p p r o a c h in g c r is is propor o f th e m a jo r fa c to r s th a t le d to th e in s p o t p r ic e s w a s n o t r e fle c te d in th e a v e r a g e p r ic e s p a id c a llin g fo r th e d e fe a t o f th e L a b o r g o v e r n m e n t. R e c e n t p r e s s u r e o n im p o r ts u n til J u n e and c a n , th e r e fo r e , b e e x p e cte d to in flu e n c e th e to t a l v a lu e o f U n i t e d S t a t e s im p o r t s u n til th e e n d o f th e y e a r. W h ile in th e fir s t h a lf o f th e presen t yea r th e r a p id s e t a p a r t o f o u r e x p o r t s u r p lu s in te r m s o f to ta l v a lu e s , JT h e Department of Commerce indexes of unit value of imports and unit value of exports are measures of the average prices paid for our imports and the average prices received for our exports. p a rt, U n ite d b o th th e F rench la r g e in c r e a s e in a v e r a g e p r ic e s p a id f o r im p o r t s t e n d e d t o o f f th e of fr a n c in F r a n c e ’s S ta te s. th e recen t gen eral The U n ite d a cc en tu a ted b y fre e e le c tio n exchange in c r e a s in g b a la n c e K in g d o m of m a rk e ts tra d e F rance r e s u lte d r e fle c ts , d e fic it p a y m e n ts and recen t ad v erse w h ic h a ls o in th e d iffic u ltie s have s h o r t-te r m w ith in of been c a p ita l m o v e m e n t s . T h i s liq u id a t io n o f s t e r lin g a n d fr a n c b a la n c e s is r e p o r te d to r e fle c t a la c k o f c o n fid e n c e in th e s e t w o c u r October 1951 81 M O N T H L Y R E V IE W re n c ie s . S h o r t -t e r m c a p ita l m o v e m e n t s , h o w e v e r , r e fle c t d o lla r p r o b le m in in te r n a tio n a l tr a d e h a v e not been re a w id e v a r ie t y o f in flu e n c e s a n d m a y b e q u ic k ly r e v e r s e d . a liz e d , a n d th e p o s s ib ility o f a r e la x a tio n D e fic its o f o th e r W e s t e r n t o r y r e s tr ic tio n s a g a in s t d o lla r g o o d s o n c e a g a in a p p e a r s E u ropean c o u n tr ie s h a v e a ls o b e e n g r o w i n g in r e c e n t m o n t h s a n d a r e n o w c o n s id e r a b ly above a year ago. T h e p r e s e n t in c u r r in g L a tin tra d e A m e r ic a n d e fic its w ith to re c e d e in to th e u n c e r ta in fu tu r e . c o u n tr ie s a re a t th e U n ite d S ta te s, O n th e m ore in O n l y in th e c a s e o f c e r ta in r a w m a te r ia l p r o d u c in g c o u n g o o d s a t a h ig h tr ie s in A s i a , O c e a n ia , a n d A f r i c a h a v e e x p o r t s u r p lu s e s T h e e s s e n tia l fa c t o r f o r th e U n i t e d S ta te s to s id e , h ow ever, a num ber of L a tin A m e r ic a , have been im p o r tin g U n ite d S ta te s r a t e d u r i n g t h e p a s t y e a r . I t is p o s s ib le th a t in v e n t o r ie s o f i m p o r t e d g o o d s in m a n y c o u n t r ie s h a v e b e e n a c c u m u la tin g to th e e x te n t th a t n a tu ra l m a r k e t fo r c e s c o n s id e r is t h a t o u r p r e s e n t s u r p l u s w i t h t h e r e s t o f t h e w o r l d , i f it c o n t in u e s a t t h e p r e s e n t r a t e , is l i k e l y t o e x c e e d b y a c o n s id e r a b le m a r g in th e a m o u n t o f U n it e d o p tim is tic fa c to r s s h o u ld b e m e n t io n e d . M a n y c o u n tr ie s , p a r tic u la r ly in c o n t r a s t t o la r g e s u r p lu s e s e a r lie r in th e K o r e a n W a r . w ith th e U n it e d S ta te s c o n tin u e d in r e c e n t m o n th s . o f d is c r im in a w ill b r in g about a r e d u c tio n in d o lla r im p o r ts b e fo r e a tig h te n in g o f r e str ic tio n s b e c o m e s n e c e ssa r y . F i n a lly , r is in g s u p p ly s t r in g e n c ie s in th e U n i t e d S t a t e s S ta te s a id . T h i s a s o u r d e fe n s e p r o g r a m e x p a n d s m a y fo r c e a fu r th e r c u r m e a n s th a t, if o th e r c o u n tr ie s a r e to c o n tin u e to im p o r t t a ilm e n t o f c o m m e r c ia l e x p o r t s , w h ile a t th e s a m e t im e o u r fr o m us at a m o u n ts recent th e y ra te s s e ll to w ith o u t any u s , in e v ita b ly in c r e a s e in th e a la r g e p a r t o f th e ir d e fic it m u s t b e p a id f o r o u t o f r e s e r v e s o f d o lla r s a n d g o ld . T o th e e x te n t th a t th e y w is h to p r e v e n t th is d r a in o f r e serves, th e se c o u n tr ie s w ill a g a in s t d o lla r good s. s h o u ld It tig h te n be a s u b s ta n tia l in c r e a s e in U n it e d fo r e ig n in v e s tm e n t c o u ld th e ir n o te d , r e s tr ic tio n s perh ap s, th e r e s e r v e s . P r iv a te in v e s tm e n t o n th e d r a in s c a le on c o n s is t m a in ly of raw m a te r ia ls , c a n th o se w ho h e ld th e o p tim is tic v ie w th a t th e d o lla r g a p e n th u s ia s tic and p re m a tu re . It w o u ld be p riv a te th e p r o b a b le tr e n d o f o u r m e r c h a n d is e tr a d e b e y o n d r e q u ir e d does ex p e c ta tio n s a t th e b e g in n in g o f th e y e a r o f th e e n d o f th e n e x t fe w e stim a te w ith im p o s s ib le fo r e ig n n o t a p p e a r lik e ly a t th e p r e s e n t tim e , h o w e v e r . T h e be m ig h t r e m a in c lo s e d w e r e n o t so m u c h w r o n g a s o v e r ly th is ju n c tu r e , h o w e v e r , t o S ta te s lo n g -te r m red u ce th a t im p o r ts , w h ic h e x p e c t e d to c o n t in u e a t a h ig h le v e l. I t m a y d e v e lo p th a t at a n y c o n fid e n c e th e m o n t h s w h e n d o lla r d e fic its c a n b e e x p e c t e d t o c o n tin u e , a lt h o u g h p o s s ib ly s o m e w h a t b e lo w th e A u g u s t le v e l. THE 1951 FARM INCOME PICTURE I n 1 9 5 1 , f a r m in c o m e w ill o n c e m o r e m o v e u p w a r d . F o r e a c h o f th e p a st th re e y e a r s, 1 9 4 8 , 1 9 4 9 , a n d 1 9 5 0 , th e n a tio n ’s fa r m e r s fr o m th e have p r e v io u s fo u n d year. th e ir n e t in c o m e A lth o u g h fa r m e rs d r o p p in g e n jo y e d a K orean situ a tio n a g r ic u lt u r a l d u r in g p r ic e s th e u p w ard la tte r w ith h a lf o f th e 1950 gen eral c a r r ie d p r ic e r is e . E x p e c ta tio n s o f h ig h e r p r ic e s , a s w e ll a s G o v e r n m e n t r e q u e sts fo r in c r e a se d p r o d u c tio n , p ro m p te d fa rm e rs to p r o fit a b le s e a s o n in 1 9 4 8 w h e n c a s h r e c e ip ts r o s e to n e w e q u a l o r s u r p a s s t h e ir 1 9 5 0 p la n tin g s in s o m e o f th e m a j o r le v e ls , p r o d u c tio n e x p e n s e s a ls o in c r e a s e d , r e s u lt in g in a crop s. 2 r e s u lt o f t h e c o m b in e d in flu e n c e o f a s o f t e n in g in d e m a n d p e r c e n t d r o p in n e t in c o m e . I n 1 9 4 9 , a n in c r e a s e d v o l P r ic e peaks w ere n o t m a in ta in e d , h ow ever, as a u m e o f m a r k e t in g s w a s n o t s u ffic ie n t t o o f f s e t t h e d e c lin e w h ic h in p r ic e s w h ic h o c c a s io n e d a 1 0 p e r c e n t d e c lin e in n e t in an d p ro sp e cts fo r a n a b u n d a n t h a rv e st. B e tw e e n F e b ru a ry com e. A g a in , and in 1 9 5 0 , n e t re tu rn s c o n tin u e d t o d e c lin e . A l t h o u g h p r ic e s in c r e a s e d s h a r p ly in th e la s t s i x m o n t h s of th e year, th e in c r e a s e w as not enough to overcom e s e t in e a r ly la s t s p r in g , p r ic e c o n tr o l r e g u la tio n s , S e p t e m b e r , t h e p r ic e in d e x o f a ll f a r m p ro d u c ts d e c lin e d 7 p e r c e n t. T h e a ll-c r o p in d e x w a s d o w n 1 5 p e r c e n t, w ith th e sh arpest d e c lin e s in th e p r ic e s of o il-b e a r in g h ig h e r p r o d u c tio n c o s ts , d e c r e a se d v o lu m e , a n d th e lo w e r c r o p s , fr u it a n d v e g e ta b le s , a n d c o tto n . P r ic e s o f liv e s to c k p r ic e s w h ic h p r e v a ile d d u r in g th e e a r ly m o n t h s . and R e c e ip ts m o n th s of fr o m 1951 fa r m have m a r k e tin g s been 15 fo r percent th e above fir s t e ig h t th e sam e p e r io d a y e a r a g o . T h e g r e a te s t g a in w a s s c o r e d b y liv e s to c k a n d liv e s to c k p r o d u c ts — u p 2 5 p e rce n t fr o m The and y e a r ’s r e c e ip ts m a r k e tin g s fr o m sta n tia lly to are not a ll in , fo u r th 1950. q u a rter s o m e m a j o r c o m m o d it ie s w ill a d d s u b to ta l cash re tu rn s. P a r tic u la r ly w ill b e th e r e tu r n s y e t to b e r e a liz e d f r o m liv e s t o c k p ro d u c ts, slig h tly lo w e r , c a u s e d p r ic e s and som e on th e p r im a r ily d ecrease in o th e r hand, b y a sh arp p r ic e s fo r w ere o n ly s lip in w o o l hogs and d a ir y p r o d u c ts. D e s p it e th e g e n e r a l w e a k e n in g in fa r m p r o d u c t p r ic e s d u r in g r e c e n t m o n t h s , le v e ls a r e s t ill s u b s t a n t ia lly a b o v e th o s e th a t p r e v a ile d in b o t h 1949 and 1 9 5 0 . D u r in g th e s ig n ific a n t m o n t h e n d in g O c t o b e r 1 5 , th e d o w n w a r d t r e n d in a g r ic u l a d d itio n a l s a le s tu r a l p r ic e s s e e m s to h a v e b e e n a r r e s te d . A v e r a g e p r ic e s o f liv e s to c k a n d liv e s to c k p r o d u c ts a n d fu tu r e m a r k e tin g s r e c e iv e d b y f a r m e r s w e r e u p 2 p e r c e n t f r o m o f an a b u n d a n t co tto n cro p . b e r le v e ls . T h e c o s t o f g o o d s fa r m e r s b u y h a s le v e le d o f f A l t h o u g h th e p r ic e in d e x o f a ll fa r m p r o d u c ts d e c lin e d s te a d ily b e tw e e n F e b r u a r y a n d S e p t e m b e r , th e d o w n t u r n w a s a c t u a lly a d r o p f r o m over sto ck s and th e a n a ll-t im e h ig h . S m a ll c a r r y expanded dem and in c id e n t to th e m id -S e p te m sin c e M a r c h , f o llo w in g th e g e n e r a l u p s u r g e in p r ic e s th e la s t h a lf o f 1 9 5 0 . T h e p a r ity in d e x r e c e iv e d b y fa r m e r s th re e q u a rte rs to p r ic e s fa r m e r s p a y ) of 1951 has averaged in ( t h e r a tio o f p r ic e s 1 0 7 .5 fo r th e fir s t as com p ared 82 October 1951 FEDERAL RESERVE B A N K OF S A N FRA N C ISCO w ith 99 fo r th e c o m p a r a b le p e r io d la s t y e a r . The r a tio o f 1 0 3 in m i d -S e p t e m b e r , h o w e v e r , w a s a d r o p f r o m F ebruary peak of 113. F oo d d e m a n d high The cu rrent d o m e s tic e c o n o m ic situ a tio n v o r a b le to th e m a in t e n a n c e o f c o n tin u e d ap pears fa stro n g d e m a n d fo r fo o d p r o d u c ts th r o u g h o u t th e r e m a in d e r o f th e y e a r . T h e o v e r r id in g fe a t u r e in th e e c o n o m y — th a t o f c o n t in u e d G o v e r n m e n t e x p e n d it u r e s f o r d e fe n s e — is b e in g r e fle c t e d in r is in g w a g e a n d s a la r y r e c e ip ts a n d e x p a n d in g p e r c a p i ta d is p o s a b le goods and in c o m e . C o n s u m p tio n s e r v ic e s h a v e eased e x p e n d itu r e s so m e w h a t fr o m le v e ls in c id e n t to th e a d v a n c e b u y in g w h ic h C a s h R e c e ip t s F r o m F a r m M a r k e t i n g s — J a n u a r y - A u g u s t Percent change, 1950-51 th e fo r th e h ig h occurred in Livestock and livestock products Arizona ........................ ............................... + 2 0 .0 California ................................................... + 2 1 .0 Idaho ............................................................ + 2 5 .3 N e v a d a .......................................................... + 2 8 .8 O r e g o n .......................................................... + 2 3 .8 U t a h ............................................................... + 2 9 .7 W a s h in g to n ................................................ + 2 1 .3 Crops + 3 0 .2 + 7.4 + 0.1 + 2 0 .4 — 13.5 + 1 9 .8 + 3.5 Total + 2 6 .0 + 1 3 .2 + 1 2 .7 + 2 7 .7 + 4.3 + 2 7 .2 + 1 1 .3 Twelfth D is t r ic t .................................. + 2 2 .3 + 6.1 + 1 3 .5 United S t a t e s ....................................... + 2 5 .0 — 2.4 + 1 4 .6 Source: United States Department of Agriculture, Bureau of Agricultural Economics. tu r e — p a r tic u la r ly beef c a ttle , p o u ltr y , eggs, and d a ir y p r o d u c ts — h a s t h e r e fo r e b e e n m o r e im p o r t a n t in b o ls t e r th e la tte r h a lf o f 1 9 5 0 . C o n s u m e r s ’ e x p e n d it u r e s f o r fo o d , in g in c o m e to th e n a tio n ’s fa r m e r s th a n to T w e lft h o n th e o th e r h a n d , h a v e b e e n s u sta in e d a t a h ig h ra te d u r tr ic t p r o d u c e r s . in g th e fir s t h a lf o f th e y e a r a n d w ill lik e ly c o n tin u e a t th a t m and o u tlo o k D is N e v e r t h e le s s , th e p r e s e n t p r ic e a n d fo r som e im p o r ta n t D is tr ic t de a g r ic u lt u r a l ra te . W i t h in c o m e s a t h ig h le v e ls , th e n a tio n ’s c o n s u m e r s c o m m o d itie s h a v e s h o w n a w illin g n e s s to s p e n d m o r e fo r fo o d . A t th e D is tr ic t presen t p r ic e p r o s p e c t s a r e fa v o r a b le fo r c o t t o n , w h e a t, r ic e , tr u c k m a te ly tim e 26 1 9 3 5 -3 9 th e ir fo o d p u rch a ses p e r c e n t o f d is p o s a b le p e r io d , th e fo o d rep resen t a p p r o x i in c o m e , w h e r e a s b u d g e t rep resen ted 2 3 in th e p e rc e n t. w o u ld fa r m seem in c o m e to over in su r e an year ago. a in c r e a s e in 1951 P r o d u c tio n and c r o p s , a n d liv e s to c k a n d p r o d u c ts , w h ic h t o g e th e r c o n t r ib u te m o r e th a n tw o -t h ir d s o f th e a r e a ’s fa r m in c o m e . I t is h a r d ly to b e e x p e c t e d th a t th e d ie t h a b its — a n d t h e r e fo r e fo o d -b u y in g h a b its — a c q u ir e d d u r in g recen t years o f p r o s p e r it y w ill s h o w a n y s ig n ific a n t c h a n g e in th e n e a r fu tu r e . I n c r e a s in g p o p u la tio n , a s w e ll a s w id e ly d is trib M ajor field crops A s e v e n m o n t h s ’ d e c lin e in th e p r ic e o f c o t t o n w a s a r rested in S e p te m b e r. u te d in c o m e s , w ill a d d to to ta l c iv ilia n d e m a n d f o r fo o d . b in a tio n of T o ta l c o n s u m p tio n d rop a n tic ip a te d is t h e r e f o r e e x p e c t e d t o s e t a r e c o r d d u r in g th e c u r r e n t y e a r . So have fa r d u r in g d iv id e d F arm ers provem ent 1 9 5 1 , fa rm e rs about r e c e iv e d e q u a lly s lig h tly in and th e m a r k e tin g a g e n c ie s c o n su m e r ’s fo o d m ore th a n 50 d o lla r . p e r c e n t d u r in g fa c to rs, in th e T h is m ost w as a t t r ib u t a b le im p o r ta n t d o m e s tic exp ort of p r o d u c tio n dem and. to w h ic h com th e th e im and A verage a w ere p r ic e s re c e iv e d b y f a r m e r s in O c t o b e r , h o w e v e r , w e r e s till s lig h t ly b e lo w a year ago. In co m e fro m c o tto n in th e T w e lfth D is t r ic t p r o m is e s to b e s u b s ta n t ia lly h ig h e r t h a n in 1 9 5 0 th e fir s t f o u r m o n t h s a n d s lig h t ly le s s s in c e th e n . T h i s r e p a n d w ill b e a s t r o n g f a c t o r in a u g m e n t i n g f a r m re se n ts a la r g e r p r o p o r tio n in e ith e r G r o w in g a n d h a r v e s t in g c o n d itio n s h a v e b e e n fa v o r a b le o r 1 9 5 0 . U n le s s m a r k e tin g c h a r g e s in c r e a s e a p p r e a n d p r o d u c t i o n is e x p e c t e d t o b e 8 0 p e r c e n t h i g h e r t h a n c ia b ly , fa r m e r s s h o u ld c o n tin u e to r e c e iv e a p p r o x im a t e ly in 1 9 5 0 — u p 8 4 p e r c e n t in C a lifo r n ia , 7 3 p e r c e n t in A r i th e ir presen t zona. fo o d . P a s t r e la tio n s h ip s in d ic a te th a t th e fa r m e r ’s s h a r e 1949 sh are of o f th e c o n s u m e r ’s fo o d th e th a n th e y a v e r a g e d c o n s u m e r s ’ e x p e n d itu r e s fo r d o lla r is la r g e r w h e n t h e le v e l o f f o o d p r ic e s is h ig h . C o n s u m e r f o o d p r ic e s h a v e flu c tu a te d o n ly m i ld ly s in c e e a r ly in th e y e a r b u t h a v e a v e r a g e d a b o u t B o u n tifu l rem oval of exp ort r e s tr ic t io n s , a n d a h ig h le v e l o f p r ic e s u p p o r t a s s u r e a s u b s ta n tia l in c r e a s e in th e v o lu m e of c o tto n r e c e ip ts over th e 1 9 5 0 to ta l. T h e 1 9 5 1 U n i t e d S t a t e s w h e a t c r o p is t h e s m a lle s t s in c e 1943. A creage 1 5 p e r c e n t h ig h e r th a n d u r in g th e fir s t h a lf o f 1 9 5 0 . p r o d u c tio n , in c o m e . r e str ic tio n s w e r e s t ill in e f f e c t w h e n th e w in t e r c r o p w a s p la n te d . C lim a t ic c o n d it io n s a ls o c a u s e d Twelfth District prospects P r e lim in a r y fig u r e s c o n s id e r a b le a c r e a g e a b a n d o n m e n t in p a r t o f th e n a t io n ’s in d ic a te th a t so fa r in 1951 cash w h e a t b e lt a n d in th e P a c ific N o r t h w e s t . T h e s p r in g w h e a t r e c e ip ts o f D is t r ic t p r o d u c e r s a r e n o t s o m u c h a b o v e la s t c r o p w a s p la n te d a ft e r th e y e a r a s a re th o s e fo r U n it e d S ta te s fa r m e r s g e n e r a lly . F o r e v e r , a n d w a s 2 6 p e r c e n t la r g e r th a n la s t y e a r , b r in g in g th e th e to ta l c r o p c lo s e to fir s t e ig h t m o n t h s o f th e y e a r, ca sh r e c e ip ts f o r th e r e m o v a l o f r e s tr ic tio n s , h o w 1 9 5 0 o u tp u t. P r ic e s , th o u g h b e lo w n a tio n a s a w h o le f o r a ll f a r m c o m m o d it ie s w e r e a b o u t 1 5 th e F e b r u a r y p e a k , h a v e str e n g th e n e d d u r in g th e p a st tw o p e r c e n t h ig h e r th a n f o r th e s a m e t im e la s t y e a r . D is t r ic t m o n t h s a n d a r e n o w a p p r o x im a t e ly a t th e lo a n le v e l. W i t h r e tu r n s fr o m c r o p s w e r e u p 6 p e r c e n t, w h ile th o s e fo r th e a s tr o n g e x p o r t d e m a n d a n d w ith a s u b sta n tia l m o v e m e n t n a tio n in to s to r a g e w h e r e th e g r a in w o u ld b e p r o te c te d b y p r ic e w ere dow n 2 p r o d u c ts h a v e a g a in p e rcen t. L iv e s to c k c o n tr ib u te d and liv e s to c k s u b s ta n tia lly la r g e r r e c e ip ts th a n la s t y e a r to b o th th e n a tio n ’s a n d th e D is t r ic t ’s o p e ra to rs and are th e m a jo r fa c to r in th e h ig h e r s u p p o r t , 1 9 5 1 in c o m e f r o m w h e a t c o u ld b e a b o u t th e s a m e a s la st y e a r . 1951 T h e ric e c r o p w ill b e e x c e p t io n a lly la r g e a n d C a lifo r n ia in c o m e s . L iv e s to c k p r o d u c ts , h o w e v e r , fo r m a la r g e r c o m g r o w e r s a re h a r v e s tin g a r e c o r d c ro p — 2 8 p e rc e n t a b o v e p o n e n t o f U n ite d S ta te s th a n o f D is tr ic t fa r m in c o m e . T h e 1950 c o n t in u in g h ig h le v e l o f p r ic e s in th is s e g m e n t o f a g r i c u l- ca se w ith m a n y o th e r fa r m and n e a r ly d o u b le th e 1 9 4 0 -4 9 average. A s is th e c r o p s , r ic e p r ic e s h a v e fa lle n October 1951 83 M O N T H L Y REVIEW s h a r p l y f r o m F e b r u a r y le v e l s . E x p o r t d e m a n d is e x p e c t e d A l l in a ll, 1 9 5 1 w ill b e a p r o fit a b le y e a r f o r b o t h U n i t e d to b e fa v o r a b le , h o w e v e r . P r ic e s u p p o r t fo r th e 1 9 5 1 c r o p S ta te s w ill a v e r a g e $ 5 . 0 0 c w t . n a t io n a lly , a s c o m p a r e d w i t h $ 4 . 5 6 p e n s e s w ill to ta l a b o u t 1 2 p e r c e n t m o r e th a n la s t y e a r , b u t and D is tr ic t fa r m e rs. F arm ers’ p r o d u c tio n ex c w t. f o r th e 1 9 5 0 c r o p , b a s e d o n 9 0 p e r c e n t o f p a r ity . th e in c r e a s e in f a r m Other crops g r e a te r . A s a r e s u lt, U n i t e d S t a t e s n e t f a r m in c o m e s h o u ld i n c o m e is e x p e c t e d t o b e s o m e w h a t b e a b o u t 1 8 p e r c e n t h ig h e r th a n in P r ic e s have been c o n s is t e n t ly h ig h e r fo r m ost A l l s e g m e n t s o f a g r ic u lt u r e w ill n o t s h a r e e q u a lly , h o w c r o p s d u r in g 1 9 5 1 . T h e d e m a n d fr o m c o m m e r c ia l c a n n e r s a n d fr e e z e r s h a s h e lp e d to m a in t a in p r ic e s . T h e 1 9 5 1 c r o p s o f b o th d e c id u o u s fr u it s a n d tr e e n u ts a r e 1 0 p e r c e n t la r g e r t h a n la s t y e a r . C a s h r e c e ip ts f r o m 1950. tru ck fr u it m a r k e tin g s , h o w e v e r . T h e sh a r p e st in c re a se s w ill be sto ck e n jo y e d p r o d u c ts by th e as a in i n c o m e , it n o w producers w h o le , o f liv e s to c k and co tto n ap pears, and liv e grow ers ; f o r m e r , b e c a u s e o f g e n e r a lly h ig h e r p r ic e le v e ls of th a n in 1 9 5 0 , th e la tte r b e c a u s e o f g r e a tly in c r e a s e d p r o th e g e n e r a lly lo w e r p r ic e s b e in g r e c e iv e d by fr u it in th e e v e r , w ill lik e ly b e c o n s id e r a b ly le s s t h a n in 1 9 5 0 b e c a u s e 1951 d u c tio n . grow ers. AMENDMENT TO REGULATION X The of fo llo w in g p r e s s G overn ors o f th e s t a t e m e n t r e le a s e d F ederal R eserve iz e s th e c h a n g e s in R e g u la t io n X N ovem ber by th e S y ste m B oard su m m ar th a t a r e to b e e ffe c tiv e a n n o u n c e d to d a y a n a m e n d m e n t to R e g u la tio n C r e d it— w h ic h su ch c ir c u m s ta n c e s w ill b e fr o m to a p e r io d th e r e g u la tio n n o t e x c e e d in g w ill a s s is t p erson s o f a n a p p r o p r ia te a p p lic a tio n to a F e d e r a l R e s e r v e b a n k . “ The X — R eal E sta te fr o m m o v in g o n e p a r t o f th e c o u n t r y to a n o t h e r in th e p u r c h a s e s p e c ifie d am endm ent a ls o th e m a x im u m p e r io d e x e m p t lo a n s fo r m a te r ia ls , a r t ic le s , a n d s e r v ic e s u s e d in n e w c o n s t r u c t io n f r o m 36 ceed s fr o m W — C o n s u m e r C r e d i t .” th e s a le o f t h e ir o ld h o m e . S e c o n d a r y b o r r o w changed in c o n n e c t io n w it h o f a n e w h o m e w h e n t h e r e is a d e la y in o b t a in in g th e p r o exem pt p r o v id e d th e c r e d it is lim it e d s ix m o n th s . T h e e x e m p t io n c a n b e o b ta in e d o n th e b a sis 19, 1 9 5 1 : “ T h e B o a r d o f G o v e r n o r s o f th e F e d e r a l R e s e r v e S y s te m in g in c o n n e c t io n w it h th e p u r c h a s e o f a n e w h o u s e u n d e r m o n th s. T h is p a r a lle ls recen t ch a n g es in 3 0 to R e g u la tio n 84 October 1951 F E D E R A L R ESER VE B A N K OF S A N F R A N C IS C O B U S IN E S S IN D E X E S — T W E L F T H D IS T R IC T 1 (1 9 3 5 -3 9 a v e r a g e = 100) In d u s t r ia l p ro d u ctio n (p h y sica l v o lu m e )2 Y ear an d m o n th P e tro le u m 8 Lum ber C ru d e R e fin e d C e m e n t L ead 8 W heat C o p p e r8 flo u r8 T o ta l C a r m f ’g lo a d in g s e m p lo y (n u m E le c t r ic power m e n t 4 ber)2 1929.......... .. 1931_________ 1933_________ 1934_________ 1935_________ 1936............... 1937_________ 1938_________ 1939............... 1940................. 1941............... 1942................. 1943................. 1944................. 1945_............... 1946............... 1947............... .. 1948................. 1 9 4 9 .. J_____ 1950................. 148 77 62 67 83 106 113 88 110 120 142 141 137 136 109 130 147 159 151 171 129 83 76 77 92 94 105 110 99 98 102 110 125 137 144 139 147 149 147 144 127 90 81 81 91 98 105 103 103 103 110 116 135 151 160 148 159 162 167 168 110 74 54 70 68 117 112 92 114 124 164 194 160 128 131 165 193 211 202 227 171 104 75 79 89 100 118 96 97 112 113 118 104 93 81 73 98 109 105 113 160 75 26 36 57 98 135 88 122 144 163 188 192 171 137 109 163 154 142 176 106 101 88 95 94 96 99 96 107 103 103 104 115 119 132 128 133 116 104 94 83 82 73 79 85 96 105 102 112 122 136 167 214 231 219 219 256 284 303 333 1950 Ju ly_________________ August______________ September__________ October_____________ November___________ Decem ber___________ 184 186 176 187 167 168 142 145 148 153 154 154 170 178 177 177 179 173 245 251 248 252 229 229 87 96 104 106 111 118 172 177 175 176 195 195 113 112 105 99 97 120 341 340 339 352 353 345 1951 January_____________ February____________ M arch ______________ April_________________ M a y _________________ June_________________ Ju ly-------------------------August______________ 187 171 168 189 199 190 154 174 154 155 155 155 155 157 156 157 176 187 179 180 179 179 182 187 239 255 246 247 278 266 330 319 101 110 106 101 101 98 90r 72 181 178 180 195 182 175 171r 159 134 121 111 110 106 96 98 106 361 361 380 378 378 378 393 396 W a te rb o rn e D e p ’t fo re ign Re ta il store tra d e 8*• sales food (va lu e )2 prices8*6 E x p o r t s Im p o r t s 135 91 70 81 88 103 109 96 104 110 128 137 133 141 134 136 142 134 126 131 112 92 66 74 86 99 106 101 109 119 139 171 203 223 247 305 330 353 331 353 13 2 .0 1 0 4 .0 8 6 .8 9 3 .2 9 9 .6 1 00.3 1 0 4 .5 9 9 .0 9 6 .9 9 7 .6 1 07.9 1 3 0 .9 1 4 3 .4 142.1 1 4 6 .3 1 6 7 .4 2 0 0 .3 21 6 .1 2 0 9 .6 2 0 9 .8 124 90 72 86 88 86 112 108 107 86 118 76 69 74 103 110 114 82 90 96 '¿ 8 85 57 55 59 55 78 93 115 131 199 207 209r 211 214r 208r 125 135 140 131 131 152 454 374 368 343 345 376 2 0 9 .4 2 1 2 .5 2 1 1 .0 2 1 4 .1 2 1 6 .0 2 2 2 .9 59 48 58 62 68 70 110 141 134 148 167 167 212 218 220r 221 224 226 224 224 130 124 133 152 142 144 123 126 420 375 335 346 348 347 365r 360 2 3 0 .8 2 3 0 .2 2 3 4 .5 2 3 3 .0 2 3 5 .3 2 2 3 .5 2 3 4 .6 2 3 3 .1 75 98 110 122 126 128 146 159 169 174 134 161 140 ” 88 100 112 96 104 118 155 230 306 295 229 181 187 191 183 197 • B A N K IN G A N D C R E D IT S T A T IS T IC S — T W E L F T H D IS T R IC T (a m o u n t s in m illio n s o f d o lla r s ) Y ear an d m o n th 1929 1931 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 C o n d itio n ite m s of a ll m e m b e r b a n k s 7 Dem and Loans U.S. d ep osits an d G o v ’t d is c o u n t s s e c u r it ie s a d ju ste d 8 T o ta l t im e d ep osits 2,239 1,898 1,486 1,469 1,537 1,682 1,871 1,869 1,967 2,130 2,451 2,170 2,106 2,2-54 2,663 4,068 5,358 6,032 5,925 7,093 495 547 720 1,064 1,275 1,334 1,270 1,323 1,450 1,482 1,738 3,630 6,235 8,263 10,450 8,426 7,247 6,366 7,016 6,381 1,234 984 951 1,201 1,389 1,791 1,740 1,781 1,983 2,390 2,893 4,356 5,998 6,950 8,203 8,821 8,922 8,655 8,536 9,254 1,790 1,727 1,609 1,875 2,064 2,101 2,187 2,221 2,267 2,360 2,425 2,609 3,226 4,144 5,211 5,797 6,006 6,087 6,255 6,251 1950 August September October November December 6,418 6,664 6,810 6,963 7,093 6,699 6,495 6,452 6,319 6,381 8,627 8,754 8,871 9,018 9,254 6,210 6,213 6,239 6,194 6,251 1951 January February March April May June July August September 7,152 7,184 7,293 7,367 7,422 7,509 7,473 7,630 7,704 6,071 5,811 5,734 5,696 5,685 5,708 6,005 6,000 5,998 9,190 8,834 8,819 8,828 8,834 8,862 9,052 9,058 9,235 6,337 6,352 6,338 6,332 6,357 6,448 6,510 6,547 6,576 Bank rates on short-term b u sin e ss lo a n s 9 M e m b e r b a n k reserves a n d related ite m s 10 Reserve bank c re d it11 + — + + — + + + + + + + ’ 3.20 * 3.35 + + + ’ 3 .2 9 ’ + — — 3.37 + + + 3.48 ' 3.07* — — — + + — + 3.65 - 34 21 2 7 2 6 1 3 2 2 4 107 214 98 76 9 302 17 13 39 C o in a n d C o m m e rc ia l T re a su ry c u rre n cy in o p e ra tio n s12 o p e ra tio n s12 c ir c u la t io n 11 _ B a n k d e b its incxex 31 citie s8*18 (1 9 3 5 -3 9 - Reserves 100)8 0 154 110 198 163 227 90 240 192 148 596 - 1 ,9 8 0 - 3 ,7 5 1 - 3 ,5 3 4 - 3 ,7 4 3 - 1 ,6 0 7 510 + 472 930 - 1 ,1 4 1 h 23 - 154 - 150 - 257 - 219 - 454 - 157 - 276 - 245 - 420 -1,000 -2,826 -4,486 -4,483 -4,682 -1,329 - 698 - 482 + 378 + 1 ,1 9 8 6 48 + 18 4 + 14 + 38 + 3 20 + 31 + 96 + + 227 + 643 + 708 + 789 + 545 326 — 206 — 209 — 65 14 — 175 147 185 242 287 479 549 565 584 754 930 1,232 1,462 1,706 2,033 2,094 2,202 2,420 1,924 2,026 146 97 63 72 87 102 111 98 102 110 134 165 211 237 260 298 326 355 350 395 2 62 56 24 48 - 102 45 93 21 80 + + + + + 125 72 150 42 131 + + + 18 9 10 3 4 1,863 1,893 1,930 1,983 2,026 421 417 428 425 464 30 32 3 45 13 73 14 159 43 + 59 38 124 200 162 113 342 80 18 + + + + + + + + + 168 6 130 226 150 199 298 86 42 68 21 8 26 36 39 19 41 32 2,284 2,206 2,186 2,180 2,149 2,217 2,186 2,312 2,293 455 444 461 431 449 461 429 443 445 + — + — + + + + + + 1 Adjusted for seasonal variation, except where indicated. Except for department store statistics, all indexes are based upon data from outside sources, aa follows: lumber, various lumber trade associations; petroleum, cement, copper, and lead, U .S. Bureau of Mines; wheat flour, U .S. Bureau of the Census; electric power, Federal Power Commission; manufacturing employment, U.S. Bureau of Labor Statistics and cooperating state agencies; retail food prices, U .S. Bureau of Labor Statistics; carloadings, various railroads and railroad associations; and foreign trade, U .S. Bureau of the Census. ^ 2 D aily average. * N ot adjusted for seasonal variation. 4 Excludes fish, fruit, and vegetable canning. 5 Los Angeles, San Francisco, and Seattle indexes combined. • Commercial cargo only, in physical volume, for Los Angeles, San Francisco, San Diego, Oregon, and Washington customs districts; starting with July 1950, “ special category” exports are excluded because of security reasons. 7 Annual figures are as of end of year, monthly figures as of last Wednesday in month or, where applicable, as of call report date. * Demand deposits, excluding interbank and U.S. G ov’t deposits, less cash items in process of col lection. M onthly data partly estimated. 9 Average rates on loans made in five major cities during the first 15 days of the month. 10 End of year and end of month figures. 11 Changes from end of previous month or year. 12 Minus sign indicates flow of funds out of the District in the case of commercial operations, and excess of receipts over disbursements in the case of Treasury operations. 18 Debits to total deposit accounts, excluding inter bank deposits. r— revised.
@FedFRASER