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MONTHLY REVIEW OF B U S IN E S S C O N D IT IO N S Federal Reserve A gent Federal Reserve Bank o f San Francisco Vol. X V I I I San Francisco, California, October 20,1934 No. 10 T W E L F T H F E D E R A L R E S E R V E D IS T R IC T C O N D IT IO N S Tw elfth District business was somewhat less active in September than in August, when a substantial upturn had taken place largely as a result of recovery from effects of labor contro versies terminating during July. Excluding the canning industry, industrial employment in the district was maintained near the highest levels of the year during Septem ber. Operations at canneries reached a seasonal peak earlier than usual this year because of the early agricultural season, and were reduced by substantially more than is customary in Sep tember. Decreases in lumber operations and flour milling followed sharp gains in August. Residential building in the larger cities of the district showed a moderate increase. Contract awards for public works construction tended downward from the relatively high levels of July and August. Freight carloadings decreased by slightly more than the seasonal amount during Sep tember as a result of declines in both California and the Pacific Northwest. Department store sales increased and seasonally adjusted indexes for most of the larger cities of the district showed some advance. Sales in agricultural areas also continued substantially above those of last year or 1932. Movement of intercoastal traffic through the Panama Canal expanded further during September. Harvesting activities during September were attended by favorable weather conditions, and previous estimates that the yields of most crops would approach those of other recent years ap peared to be substantiated. Volum e of mar keting has been larger than is customary for this time of year, reflecting in part the early maturity of crops as well as increased demand resulting from short crops elsewhere in the United States. Although averaging higher in September than in August, prices of farm prod ucts have tended downward moderately since mid-September. Continued lack of rainfall has intensified the critical shortage of feed and stock water in a large part of the district where livestock raising is important. Commercial loans of reporting member banks remained unchanged from September 19 to October 17 follow ing steady expansion since mid-July. Loans on securities and investments in Government securities were reduced slightly. Total deposits increased further because of a continued expansion in demand deposits. Re serve balances at the Federal Reserve Bank of San Francisco increased substantially during the four weeks ending October 17 to the high est point on record. Reserves in excess of legal requirements also increased. This expansion in Twelfth District banking reserves resulted from Federal Government disbursements in excess of local collections and from an inflow of funds through commercial and financial transactions with other districts. Agriculture A s in preceding months, climatic conditions during September were favorable for the ma turing, harvesting, and drying of crops. Con tinued deficiency of rainfall, however, resulted in further deterioration of range feed and pas tures and delayed the seeding of winter wheat in large parts of the district. As measured by the newly revised United States Department of Agriculture index, prices received by farmers for their products rose from 96 percent of the 1909-1914 average in August to 102 percent in September, at which figure the index was 28 percent higher than a year ago. The chief increases from August to September were in the meat animals and chick ens and eggs groups, which were responsible for approximately 22 percent of farm income in the Twelfth District during 1931, 1932, and 1933. Marketing of this district’s crops was seasonally active during September and prices received were considerably higher than those received a month earlier or in September 1933. The spring wheat crop in W ashington, Ore gon, and Idaho turned out to be larger than had been expected, and it is estimated that the district harvest of all wheat totaled 84,555,000 bushels, or only 16 percent below last year’s harvest. W heat prices in important Pacific 74 MONTHLY REVIEW OF BUSINESS CONDITIONS Coast markets were fairly steady during Sep tember at a level about 20 percent above that a year ago, but declined somewhat in early O ctober as there was little demand by local millers and practically no export business. A s had been forecast earlier in the season, barley production this year turned out to be moderately smaller than in either 1933 or 1932. Exports of barley in September were considerably smaller than the large volume shipped during August and slightly smaller than in September 1933. Notwithstanding a firm tendency on the part of growers to hold their remaining stocks, prices for barley de clined slightly during September. It is reported that this resulted in part from substitution of relatively cheap wheat for feed barley. The combined California and Arizona cotton crop was forecast on October 1 to be 334,000 bales, 7 percent larger than output last year and 3 percent larger than average annual pro duction from 1927 through 1931. Picking and ginning progressed rapidly, except for slight local delays from showers. Although cotton prices declined steadily during September and early October, growers are receiving from 25 to 35 percent more for their crop than they did last year at this time. Yield of beans in some parts of California was reduced by insect dam age, high temperatures, and brisk winds in early September, but on October 1 the crop was estimated to be 3,331,000 bags, compared with a forecast of 3,268,000 bags on Septem ber 1 and an average harvest of 3,412,000 bags during the five years from 1927 to 1931. Con firming trade reports of a larger outturn of hops than was anticipated earlier in the season, the O ctober 1 estimate of the United States Department of Agriculture placed this year’s production of hops in California, Oregon, and W ashington at 39,745,000 pounds, which is about 3,000,000 pounds more than the Septem ber 1 forecast and slightly above last year’s production. Carryover of the 1933-1934 crop as of September 1 amounted to 8,658,000 pounds, compared with a carryover of 1,789,000 pounds on September 1, 1933. These heavy stocks of hops and the large new crop have resulted in considerable market weakness during the past few months, although sales have not yet been in sufficient volume to permit the establish ment of opening prices. Harvesting of rice in California is progressing satisfactorily. Yields are averaging somewhat higher than in other recent years and milling quality is improved over a year ago. Prices have remained un changed during the past year. Unusually high temperatures in September injured citrus fruit in several localities in Cali fornia. Estimated production of the 1934 California Valencia orange crop was reduced 800,000 boxes and on O ctober 1 was placed at October 1934 16,365,000 boxes, compared with last year’s Valencia crop of 20,058,000 boxes. The new 1934-1935 Navel orange crop in California, which is maturing from two to three weeks earlier than usual, was provisionally estimated on October 1 to be somewhat less than 12,000,000 boxes, which is about the same as the crop in the preceding season. Although average prices received and the volume of oranges marketed declined during September, grow ers’ aggregate income this year will prob ably be higher than in 1933 or 1932. September prices and shipments of the 1933-34 California lemon crop, which latest forecasts indicate will approximate last year’s crop, were lower than in August of this year, or September 1933. Cool weather in eastern markets was the chief factor reducing demand for lemons. W ith the exception of apples, practically all California deciduous fruit crops are now har vested. Drying of fruits was completed in most sections by the end of September. V olum e of out-of-state shipments of Bartlett pears, regu lated by the California Deciduous Tree Fruit Marketing Agreement, was 36 percent larger than in 1933. Average prices were somewhat higher than those received last season. Inas much as the volume of pears canned is reported to be at least as large as last year, and since prices paid for pears by canneries were much higher this year than in 1933, a considerable increase in total income of pear growers is indicated. Opening 1934 crop walnut prices were slightly lower than opening prices last year because of heavy stocks and a large new crop. As the quality of this year’s crop is exceptionally good the price differential be tween the best grade and second grade nuts was reduced in order to move the better qual ity nuts to market more rapidly. Although the early season this year makes direct year-to-year comparisons somewhat un satisfactory, eastern shipments of grapes dur- Agricultural Marketing Activity — (------- September-------- , -----------Season Carlot Shipments Deciduous Fruits Citrus F r u i t s ... Vegetables .......... Exports W h ea t (b u .) . . . Barley ( b u . ) ____ Receipts C a t t l e ...................... H ogs ...................... Sheep ...................... E g gs (cases) . . . Butter (lbs.) . . . W hea t (c a rlo ts). Barley (ca rlo ts). Storage Holdings (end of month) W heat (b u .) . . . Beans (bags) . . . Butter (lb s .) . . . E g gs (cases) . . . 1934 18,388 5,247 6,722 1933 19,795 5,888 5,727 106,581 633,707 5,399 661,022 1934 52,249 67,397 64,029 to Date-----1933 41,073 65,927 58,162 2,608,397 1,669,122 7,167 1,584,979 152,530* 55,267* 852,374 t 553,069199,365* 158,720* l,7 2 2 ,9 3 8 t 1,887,4831497,157* 501,143* 3 ,4 7 9 ,7 2 5 f 3,376,468f 105,999 101,915 1,424,795 1,285,965 5,192,216 6,124,748 60,407,855 58,612,938 5,161 4,290 20,671 17,204 624 401 1,513 1,621 f 1934-------------- , -------------------- 1933-------------- N September August September August 6,046,000 5,187,000 7,950,000 6,254,000 1,869,000 657,000 754,000 246,000 5,120,000 7,155,000 11,032,000 11,492,000 483,000 620,000 562,000 724,000 * Excludes receipts at L o s Angeles, Angeles since June 30. f Excludes receipts at Los October 1934 FEDERAL RESERVE AGENT AT SAN FRANCISCO ing the current season appear to be moderately larger than for the corresponding period in 1933, but considerably under the large shipments of 1932. Prices received at eastern markets have averaged higher than in either of the two pre ceding years. The wine grape harvest in Cali fornia was active during the period under re view. Prices paid by wineries are reported to be higher than in 1933 for those varieties of grapes used for sweet wine purposes but lower for varieties used for making dry wines. The condition of the apple crop declined in the Pacific Northwest during September due to increased damage by codling moth worms. In Oregon, W ashington, and Idaho the com mercial apple crop, or that part of the total crop sold for fresh consumption, was estimated at 27,625,000 bushels on October 1, a figure 9 percent larger than output in 1933, but 22 percent lower than annual average production for the five years 1927-1931. Marketing of this crop is reaching a heavy volume earlier than is usual. Recent adjustment of import quotas in the various foreign outlets has improved the marketing outlook abroad. The farm price of apples in mid-September was approximately the same as a year earlier. Pasturage, range forage, hay, and other feed crops are below normal requirements in this district except in W ashington, parts of Oregon, northern Idaho, and in a few irrigated sections. The shortage of stock water is acute in parts of southern California and on the desert ranges in Utah. It is anticipated that large numbers of cattle will be marketed during the next two months to prevent heavy winter losses. The condition of cattle in Twelfth District states ranges from poor to fair and, according to the condition estimates of October 1, was some what lower on that date than a year ago and considerably below the ten-year average for this season. Cattle prices at Chicago and at principal Pacific Coast markets fluctuated con siderably during September and the first half of O ctober with a slight net loss for the period, The Federal Government has been buying old ewes in drought areas of the district allowing growers to hold a few more of their ewe lambs. Sheep have been moved to winter ranges un usually early, although feed and water pros pects are poor. Lamb prices strengthened dur ing September but declined subsequently and by m id-October were approximately 10 percent lower than in October 1933. In d u stry 75 workers' strike in July. Total industrial em ployment in California declined 12 percent from August to September and was 8 percent lower than in September 1933. Both these de creases resulted from the fact that canning activity reached a seasonal peak in September 1933, whereas the peak came in August this year because of the early maturing of fruits. Excluding reports from the seasonally erratic canning industry, neither employment nor payrolls changed materially from the preced ing month after allowance for the customary seasonal changes. This bank’s seasonally ad justed index of employment which excludes canning, remained at the highest point reached this year, 83 percent of the 1923-1925 average. Average weekly earnings were 4 percent lower in September than in August, this decrease ap proximately offsetting an increase in the pre ceding month. Contract awards for public works in the Twelfth District totaled 11 million dollars dur ing September. Although awards during Sep tember were smaller in value than in either August or July, the total of $67,000,000 for the entire third quarter represented a substantial increase over both the first and second quar ters of this year, and was about 70 percent greater than the value of contracts let in the third quarter of 1933. Decreases during both August and September resulted from smaller awards for Federal Government projects, the immediate program for which has now largely been completed. Non-Federal works partly or wholly financed by the Federal Government continued to increase. Privately financed new construction showed little change, an increase Employment— t ---------- N o. of Firms Industries Californ;ta---------- N r OregonN o. of N o. of /— Employees — f— Employees —> N o. Sept. Sept. Sept. of Sept. 1933 1934 1933 Firms 1934 All Industries* Stone, Clay, and Glass Products. 191,346 112 20,475 ( - 1 2 .0 ) 5,749 ( + 1 0 .6 ) 5,198 3 193 ( + 60.8) 120 14,411 (— 1.1) 1,132 (— 17.3) 14,571 42 7 9,798 (— 18.7) 1,179 (— 11.6) 12,049 1,368 10,722 (— 1.9) 10,926 143 (— 4.7) 150 57,746 (— 27.9) 80,044 45,526 ( + 3.0) 71,982 ( + 9 .1 ) 44 13,893 ( + 4 .6 ) ( -8 .2 ) 53 Lum ber and W o o d Manufactures . . 113 13 Clothing, Millinery, and Laundering. 142 Food, Beverages, and Tobacco . . 295 Public Utilities . . 49 44,218 Other Ind ustries!. 472 65,951 Miscellaneous 13,288 ... 6$ ^ 23,274 1,334 28 4,543 (— 5.7) 4 ,8 1 7 26 4,619 (— 3.9) 4 ,8 0 4 W holesale and Industrial output declined somewhat in the T welfth District during September. A large part of the decrease took place in those indus tries which had been particularly active in August as a result of the ending of the marine 214 31,144 ( + 2 .5 ) 30,376 *Public utilities, wholesale and retail figures not included in this total. t Includes the following industries: M etals, m a chinery, and conveyan ces; leather and rubber g o o d s ; oils and pain ts; printing and paper goods. JLaundering only. Figures in parentheses indicate percentage change from Sep tember 1933. MONTHLY REVIEW OF BUSINESS CONDITIONS 76 in residential building about offsetting a de crease in non-residential building. A ctivity at lumber mills declined by more than the seasonal amount during September in contrast with an unusually sharp expansion in the preceding month. After seasonal adjust ment, operations in the Douglas Fir producing area remained larger than in most other recent months, but seasonally adjusted output in the W estern Pine region, which has tended down ward steadily since May of this year, was lower than at any time since mid-1933. Lumber shipments and the volume of new orders were smaller in September than in August. Ship ments continued to exceed production, how ever, with a consequent decrease in inventories. Daily average output of crude oil in California decreased considerably between August and September to 468,000 barrels, the smallest aver age for any month since February. Despite this decline, the excess of production over allot ments increased because of a sharp reduction in proration allowables. Refinery activity also decreased during September. Production of crude oil expanded slightly during the first three weeks of October. Grape crushing was seasonally active during September throughout California, although preliminary estimates of wine production in dicate the likelihood of a considerably smaller vintage than in 1933. California production totaled approximately 56,453,300 gallons last year, of which 36,268,600 gallons were dry wines and 20,184,700 gallons sweet wines. P ro duction this season is now estimated at 38,000,000 gallons, of which 25,000,000 gallons will be of sweet varieties. The relatively high volume of sweet wine production anticipated for the current season reflects the failure of dry wine sales to meet expectations during the Industry — Indexes of daily average production, adjusted for seasonal variation (1923-1925 daily average=100) 1933 -------------1934-----■\ . Aug. July June Sept. Aug. July General Carloadings- -Industrial. 52ÏÏ 49 152 Manufactures Lumber .......................... 52 52 Refined Mineral Oilsf 128 Flour .............................. 103 H 116 Slaughter of Livestock. Cement .......... ....................... 53 60 W ool C onsum ptiont............ Minerals Petroleum ( California)! 71 75 Lead (United States)$. Silver (United States) $ Building and Construction# 64 Total .............................. 51 Building Permits— Value 10 10 Larger Cities ............ Smaller Cities .......... 17 15 Engineering Contracts Award ed— V alue Total ...................... I l l 140 Excluding Buildings 209 286 47 149 42 147 49 141 48 146 55 141 37 131 95 58 80 40 130 89 110 61 84 54 134 72 116 57 93 57 137 74 115 46 103 61 136 124 113 54 95 78 53 40 78 56 45 74 57 39 76 36 28 74 36 34 64 39 26 33 28 10 16 9 15 14 13 14 13 14 13 69 234 77 151 46 78 61 113 50 83 fNot adjusted for seasonal variation. ^Prepared by Federal Re serve Board. #Indexes are for three months ending with the month indicated, Preliminary. October 1934 past year. This situation may be explained in part by consumer preference for the higher alcoholic content wines and by the continuance of home manufacture of light wines. Representative price quotations at which sales of wine have been made are not readily obtainable, but reports from the trade indicate that a decided price recession has taken place since the first of the year. Current weakness is due in part to sales by some producers to make cooperage available for the new vintage. Trade Department stores in the district as a whole reported moderately more than the usual in crease in value of sales during September, the seasonally adjusted index advancing from R E T A I L T R A D E —Twelfth District Percentage changes in value o f sales and stocks t --------------1934 compared with 1933-------------- \ ,--------- N E T S A L E S ----------N S T O C K S J a n .1 to end of End of September September September Department Stores . . . . Los Angeles .............. Other So. California.. Oakland ...................... San Francisco .......... Bay R e g io n ................ Central California .. . Portland! .................. Spokane ...................... Salt Lake C i t y .......... Apparel Stores .............. Furniture Stores .......... All Stores ...................... 5.5 ( 73) — 1.5 ( 6) — 3.2 ( 9) 9.0 ( 5) 5.2 ( 8) 6.7 ( 18) 8.9 ( 5) 10.1 ( 8) 8.6 ( 4) 24.0 ( 5) 17.1 ( 4) 3.6 ( 33) 3.6 ( 34) 5.1 (140) - 4.2 ( — 5.6 ( 14.2 ( 0.7 ( — 4.3 ( — 3.3 ( — 11.6 ( 4.2 ( 4.9 ( 16.1 ( — 0.2 ( — 1.3 ( 7.7 ( 4.4 ( 7.8 3.0 7.4 3.7 6.6 6.4 12.8 10.4 11.9 28.5 14.5 11.3 9.9 8.4 54) 6) 6) 5) 7) 16) 5) 7) 4) 5) 3) 19) 26) 99) f Includes five apparel stores which are not included in district department store total. Figures in parentheses indicate number of stores reporting. 76 percent of the 1923-1925 average in August to 78 in September. Sales of reporting Cali fornia stores, which constitute the bulk of dis trict sales, increased slightly, and there was a considerable rise throughout the Pacific North west and in Salt Lake City. Total value of sales was 6 percent larger in September of this year than in the corresponding month last Distribution and Trade — Carloadings$ Total .................. Merchandise . . . Intercoastal Trade Total .................. W e stb o u n d ........ Eastbound ........ Retail Trade Automobile Salesî Total .............. Passenger . . . . Commercial .. Department Store Salesî* .......... Stocks§ .......... Collections# Regular . . . Installment. ,---------------- 1934---------------- \ , 1933------------ x Sept. Aug. July June Sept. Aug. July Indexes adjusted for seasonal variation (1923-1925 average=100) 671T 7811 69 83 72 92 67 90 63 74 61 69 62 68 80 81 78 74 66 78 48 75 41 64 67 62 81 93 76 76 92 73 63 100 55 69 63 115 71 65 129 68 62 127 74 69 120 59 56 87 55 52 86 57 53 98 78 76 73 74 72 73 81 63 62 63 65 66 61 57 (--------------------- Actual Figures --------------------45.6 45.6 44.6 47.1 42.0 41.6 41.9 17.6 19.3 17.2 17.3 16.2 17.0 16.0 IDaily average. §At end of month. #Percent of collections dur ing month to amount outstanding at first of month. JfPre liminary. ^Revised series. FEDERAL RESERVE AGENT AT SAN FRANCISCO October 1934 year. The Fairchild index of prices at depart ment stores, at 88 on October 1 (January 1931 =3 100), was the same as on September 1, and was 2 percent above the index a year ago. Seasonally adjusted sales of new automobiles decreased somewhat during September, off setting an increase in the preceding month. New passenger car sales declined by more than the usual substantial amount, and sales of com mercial vehicles also decreased, although they usually expand in September. Total sales were 15 percent larger than in September 1933. W H O L E S A L E T R A D E —Twelfth District Percentage changes in value of sales September 1934 t— compared with — \ Aug. 1934 Sept. 1933 Agricultural Implements . . . Automobile Supplies ............ Drugs ...................................... Dry G o o d s .............................. Electrical S u p p lies................ Furniture ................................ Groceries ................................ Hardware ................................ S h o e s ........................................ Paper and Stationery .......... All Lines ................................ — 4.6 —■ 2.8 — 0.1 — 11.1 — 3.6 — 0.3 — 4.4 — 4.4 — 22.2 2.5 — 4.0 30.2 7.0 12.1 3.2 14.7 — 15.7 13.6 12.7 — 10.2 — 2.2 8.6 Cumulative 1934 compared with 1933 69.3 11.1 24.5 14.2 39.6 3.3 15.2 28.6 16.7 20.4 21.5 Value of wholesale trade declined moder ately during September, in contrast with a sharp expansion in the previous month. Sales were 9 percent larger than in September 1933. Railway freight carloadings decreased by somewhat more than the seasonal amount dur ing September. Merchandise and miscellaneous traffic declined, although a slight increase is Bank Debits* — September 1934 Arizona Phoenix .......... $ September 1933 First nine months 1933t 1934 15,505 $ 222,099 $ 154,365 9,407 14,644 19,630 21,983 488,616 176,800 15,189 71,196 5,594 27,441 650,247 19,273 8,180 14,609 6,315 11,567 15,021 20,835 495,552 149,827 17,312 24,256 4,233 27,775 620,828 16,362 7,116 12,040 75,960 169,058 150,422 203,174 4,791,016 1,450,932 161,683 528,950 50,281 263,317 6,091,407 146,479 71,983 123,673 59,669 103,596 109,732 200,070 4,483,074 1,419,923 161,177 240,802 40,684 256,534 5,466,076 120,176 62,774 95,793 12,760 10,109 103,051 77,306 7,918 5,621 66,188 42,834 4,532 134,444 3,455 108,363 35,500 1,098,038 26,290 882,772 15,992 47,127 11,710 41,535 111,119 417,199 80,826 347,621 5,048 5,299 140,344 33,480 22,856 4,178 13,300 4,923 5,693 135,187 24,236 21,020 3,769 8,474 41,466 46,112 1,2'19,226 265,372 198,596 36,893 89,543 35,999 41,611 1,059,394 183,839 162,224 27,002 56,962 21,594 $ California Bakersfield Berkeley ............ Fresno ............ . Long Beach Los Angeles . . . Oakland ............ Pasadena .......... Sacramento San Bernardino. San Diego ........ San Francisco. . . San Jose ............ Santa Barbara.. S to c k t o n ............ Idaho Boise .................. Nevada Reno .................. O regon Eugene .............. Portland ............ U tah Ogden ................ Salt Lake C ity.. W ashington Bellingham . . . . Everett .............. S e a ttle ................ Spokane ............ Tacoma .............. Walla W a lla .... Y a k im a .............. Total ..............$2,011,681 $1,828,639 $18,228,737 $15,999,125 *In thousands of dollars. fMarch 1933 figures were incomplete for some cities during the banking holiday period. 77 customary between August and September. In dustrial loadings, however, did not recede as much as usual. Shipments originating in both California and the Pacific Northwest were lower than a month earlier, after allowance for seasonal factors. W ater-borne intercoastal traffic expanded slightly further during September, follow ing a sharp upturn last month which had practically restored volumes to pre-strike levels. Since there is ordinarily a decrease during the month, the seasonally adjusted index of inter coastal shipments increased from 74 (1923-1925 average = 100) in August to 80 in September. The increase came entirely in westbound traffic through the Panama Canal, which had decreased in the preceding month, Pacific to Atlantic Coast freight having changed little. Prices Changes in prices of agricultural com m odi ties, which are now being marketed actively, accounted for most of the rise and the subse quent decline in wholesale price indexes for the United States during September and the first half of October. Farm products prices, as measured by the Bureau of Labor Statistics index, were 23 percent higher and food prices 16 percent higher than a year earlier. The index of “ other commodities” is now about 1 percent higher than early in October 1933. A m ong prices of commodities not discussed elsewhere in this Review canned fruit prices increased moderately between mid-September and mid-October, apricots showing the largest advance. Quotations for dried apricots and raisins advanced slightly while moderate de clines were reported for other dried fruits. Although the code price for domestic “ blue eagle” copper remains at 9 cents per pound, copper for export continues to be sold at a substantial discount from this price. New York quotations for the latter on October 20 were 6.65 cents per pound, compared with 6.85 cents per pound a month earlier. Zinc and lead prices declined slightly and at present are consider ably lower than a year earlier. The spot price of foreign silver at New York rose to 5 5 ^ cents per ounce on October 16, the highest quotation since April 1929. The producers of newly mined domestic silver continue to receive 64^2 cents per ounce. The Credit Situation Between September 19 and October 17, com mercial loans of Twelfth District city member banks showed no change, whereas they had increased steadily from mid-July to midSeptember. Investments in securities other than obligations of the United States Govern ment also remained unchanged during the 78 latest four-week period. M inor reductions in loans on securities and in holdings of United States Government securities were reflected in a slight contraction in total loans and invest ments of reporting banks from the three-year peak reached on September 19. Demand de posits increased moderately during this fourweek period, while there was a slight reduction in time deposits. Reserve deposits of Twelfth District mem ber banks increased 24 million dollars to the highest level on record during the four weeks ending O ctober 17. This increase, most of which came in the last of the four weeks, was the largest change in the volume of reserve deposits of Tw elfth District banks since last May. It reflected not only a continuance of local disbursements by the United States Treasury in excess of collections in this area, but also a movement of funds from other parts of the United States into the Tw elfth District during the first half of October. From the time of the banking holiday in March 1933 through April 1934, Federal Gov ernment disbursements in the Twelfth District exceeded local collections by $183,000,000. This gain of funds was offset only in part by an outflow of funds to other districts, and member bank reserve deposits increased stead ily. B y M ay 1934 these reserves had reached the record level of $230,000,000 of which about $80,000,000 represented reserves in excess of legal requirements. D uring the period from May 1934 to the end of September, reserve deposits of member banks fluctuated irregularly around the $230,000,000 level. In this period, net United States Treasury disbursements contributed ap proximately $115,000,000 and purchases of gold by the San Francisco Mint and the Seattle Assay Office about $40,000,000 to district bank ing reserves. Slightly over $20,000,000 of these funds was used bv banks to secure currency from the Reserve Bank to meet public require ments, leaving about $135,000,000 for use in other ways. This entire amount was trans ferred to other areas, partfy by the banks them selves in payment for securities purchased in eastern markets, and partly by or for customers of banks, largely in settlement of indebtedness incurred in the purchase of securities, com m odi ties, et cetera, outside the Twelfth District. Some indication of the amount transferred by banks for their own accounts is to be found in the increase in investments of city institutions, which were $77,000,000 higher on October 17 than on M ay 16, holdings of United States Government securities having increased $26,000,000 while other investments were increased $51,000,000. A large part of these additional securities was bought outside the Twelfth D is October 1934 MONTHLY REVIEW OF BUSINESS CONDITIONS trict. These figures do not indicate what addi tions may have been made to investments of country banks, although it is probable that the amount such banks purchased outside the Twelfth District was small. 1929 1930 1931 1933 1933 1934 M E M B E R B A N K R E S E R V E S —Twelfth District (M onthly averages of daily amounts. October figures preliminary.) The fact that most of the gain in banking reserves coming into the district because of United States Government operations was off set by payments of funds to other areas be cause of commercial and financial transactions and by a moderate increase in demand for cur rency within the Twelfth District, explains why member bank reserve deposits showed no net change during the period from mid-M ay to the end of September. Although total reserve deposits showed no change during this period, the proportion of those reserves representing an excess over legal requirements declined be cause deposits at banks were expanding stead ily during this period and thus raising the amount of required reserves. The decline in excess reserves came entirely at city banks, country banks having increased their deposits at the Federal Reserve Bank of San Francisco sufficiently since May to provide for additions to their reserve requirements. N ot only did country member banks increase their reserve deposits during this period, but they also built up their deposits with city banks, thus provid ing indirectly part of the funds with which city banks purchased investments. The sharp ex pansion in member bank reserve deposits dur ing the first half of O ctober was sufficient to offset most of the decrease that had taken place in excess reserves of Twelfth District member banks between the middle of M ay and the end of September. FEDERAL RESERVE AGENT AT SAN FRANCISCO October 1934 79 SUMMARY OF NATIONAL CONDITIONS P rep a red by the F ederal R eserv e B oa rd Volum e of industrial production remained unchanged in September when there is usually a seasonal increase and factory employment and payrolls declined. An important factor in the decrease was the strike in the textile in dustry. Retail trade in rural districts showed a large increase, and sales at department stores in cities also increased, though somewhat less than seasonally. Deposits at banks and com mercial loans continued to increase. Production and Employment. V olum e of in dustrial production, as measured by the Board’s seasonally adjusted index, declined from 73 percent of the 1923-1925 average in August to 71 percent in September. There were substantial declines in activity at cotton and woolen mills, reflecting the influence of the textile strike, and in the output of shoes, automobiles, and lumber. A fter the termina tion of the strike textile production increased. Steel mill operations, which had declined sharply during the summer, have been at a higher level in recent weeks than in the early part of September. Production of beef and lamb increased further in September, reflect ing in part the disposal of animals bought in the drought areas by the Federal Govern ment. W heat flour production and sugar melt ings also were larger in September. Output of anthracite and bituminous coal showed a larger than seasonal increase. Factory employment and payrolls declined considerably in September, largely as a result of the textile strike. The number of workers employed was substantially reduced in the automobile, iron and steel, and shoe industries, as well as in the basic textile industries. There was a larger than seasonal increase in employ ment in clothing industries, while in the non-ferrous metals, building materials, food products, and paper and printing industries employment was sustained. A m ong non-manu facturing lines, employment increased season ally from August to September at coal mines and in retail trade. There was a substantial increase in number of persons provided with work by the Emergency W ork Program of the Federal Relief Administration, while employ ment on public works decreased somewhat. The value of construction contracts awarded, as reported by the F. W . D odge Corporation, continued in about the same volume during Sep tember as in other recent months. Department of agriculture crop reports for O ctober 1 indicated a cotton crop of 9,443,000 bales as compared with a yield of 13,047,000 bales last year. The corn crop, which aver aged 2,516,000,000 bushels from 1927 to 1931, is estimated at 1,417,000,000 bushels this year. Hay and pasture conditions improved in Sep tember and weather in the first half of October was generally favorable for forage crops. The S O U R C E S A N D U SE S O F B A N K I N G R E S E R V E S Twelfth District Changes in millions of dollars during the weeks indicated F E D E R A L R ESE R VE B A N K OF S A N F R A N C IS C O (in millions of dollars) t-------------------- Condition--------------------- ^ SOURCES O F FU N D S W eek Ending 1934 August 8.......... August 15.......... August 22.......... August 29.......... September 5 . . . September 12. .. September 1 9 ... September 26. .. October 3 ........ October 10........ October 17........ Reserve Bank Credit . . . . . . , . , + -f— + + — -r — — + + 1.1 -1 1.9 .3 1.4 .2 .6 .3 1.8 .5 4.0 Commercial Operations Treasury Operations Total Supply — 5.0 +- 4.0 — 2.5 — 8.9 + 11.0 — 1.2 — 7.6 — 9.9 + 9.8 — 8.1 + 11.7 + 9.3 + 5.0 + 13.4 + 3.7 — 16.0 + 11.7 + 1.7 + 10.4 + 3.3 + 8.9 + 5.4 + 9.1 + 9.0 — 4.9 — 3.6 + 10.3 — 5.3 + *2 + 11.3 + 1.3 + 13.4 — 2.3 W eek Ending 1934 August 8. .. August 15 . . . August 22. . . August 2 9 ... September 5 September 12 September 19 September 26 October 3. . October 10. . October 17. . Demand for Currency + + + + -4— — — + ~f— 3.5 1.0 1.0 .7 7.9 .5 3.6 2.3 5.7 .7 .4 * Change less than $50,000. + + 4— — + — + + 2.0 9.3 4.8 5.2 3.5 9.6 1.9 3.2 5.8 * f 14.5 Oct. 17 Oct. 10 Sept. 19 Oct. 18 1934 167 1934 167 1934 167 ” i 166 338 277 ” i 166 323 259 ’ i 166 317 255 1933 166 4 214 214 212 162 265 181 216 8 68.9 68.4 67.7 66.7 R E P O R T IN G M E M B E R B A N K S —Twelfth District U SE S O F F U N D S Member Bank Reserve Deposits Total Bills and Securities.......... Bills Discounted .................... Bills Bought ............................ United States Securities........ Total Reserves ............................ Total Deposits ............................ Federal Reserve Notes in Circulation .............................. Federal Reserve Bank Notes in Circulation .............................. Ratio of Total Reserves to De posit and Federal Reserve Note Liabilities C om bined... (in millions of dollars) Other F .R .B . Accounts — — + — — + + — — + - .1 1.2 3.2 .4 3.0 1.2 -2 .7 .2 .6 .7 Oct. 17 Total Demand + 5.4 + 9.1 + 9.0 — 4.9 — 3.6 +10.3 — 5.3 + .2 + 11.3 + 1.3 + 13.4 Loans and Investments— Total. Loans— T o t a l .......................... On Securities .................... All Other ............................ Investments— Total .............. United States Securities.. Other Securities .............. Reserve with Reserve Bank . . . Net Demand D ep osits.............. Time D e p o sits............................ Due from Banks ...................... Due to Banks ............................ Borrowings at Reserve Bank. . 1934 ,880 900 214 686 980 598 382 161 721 935 186 206 -C on ditionOct. 10 Sept. 19 Oct. 18 1934 1,874 900 213 687 974 593 381 153 703 937 186 196 1934 1,889 904 216 688 985 603 382 144 699 943 174 198 1933 1,673 893 220 673 780 459 321 96 579 862 134 135 MONTHLY REVIEW OF BUSINESS CONDITIONS 80 yield of white potatoes is estimated at 362,000,000 bushels, about equal to the average for 1927-1931. Distribution. Daily average railroad freight carloadings increased from August to Septem ber by about the usual seasonal amount, but declined slightly in the first half of October. Sales at department stores increased from August to September by somewhat less than within recent weeks prices of textile products and scrap steel declined slightly and gasoline prices showed a considerable decrease. The open market price of silver advanced sharply in the first half of October. Bank Credit. Excess reserves of member banks have shown no material change during the past month and on October 17 amounted to about $1,750,000,000. A reduction in Treasury I N D U S T R I A L P R O D U C T IO N W H O L E S A L E P R IC E S Index numbers of industrial production, adjusted for seasonal varia Indexes of the United States Bureau of Labor Statistics. By months 1929 to 1931; by weeks 1932 to date. tion (1923-1925 average »»100). the estimated seasonal amount, while retail sales of general merchandise in rural districts, as shown by reports of mail order houses and chain stores to the Department of Commerce, increased considerably. Com m odity Prices. W holesale prices of farm products and foods, which had advanced PER CEN T I October 1934 (1926=100). cash and deposits with the Federal reserve banks somewhat more than offset a seasonal increase of $57,000,000 in the volume of money in circulation and a continued expansion in re quired reserves arising from a growth in de posits. Volum e of reserve bank credit out standing showed little change. B IL L I O N S O F D O L L A R S 25 f EM F•L O Y M E N T R x . PAiY R O L L S / V v ' 'v * ' 1929 1930 1931 1932 1933 1934 F A C T O R Y EM P L O Y M E N T A N D PAYROLLS M E M B E R B A N K C R E D IT Indexes of factory employment and payrolls, without adjustment for seasonal variation (1923-1925 average=100). Wednesday figures for reporting member banks in 90 leading cities. sharply in August and the first week of Sep tember, subsequently declined somewhat. The weekly index of wholesale prices of the Bureau of Labor Statistics, which had advanced from 74 percent of the 1926 average at the beginning of June to 78 percent early in September, stood at 76 percent in the second week of October. Recent declines occurred principally in those products which had increased most rapidly in preceding weeks, such as wheat, cotton, live stock, and meats. Prices of commodities other than farm products and foods have in general shown little change since last January, but A t reporting member banks in leading cities there was a further growth in deposits and in loans and investments. Between September 19 and October 17 total deposits of the banks in creased by about $500,000,000. Commercial loans to customers and member banks’ hold ings of United States Government securities increased further, while security loans declined. Short-term money rates continued at low levels during September and the first three weeks of October. Yields on Government se curities declined in October, follow ing an increase in August and September. Latest figures are for October 17.
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