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JÌL&wtkLty (Qt&œwT W E L F T H F E DE R A L R E SE R V E D I S T R I C T FEDERAL RESERVE BANK OF SAN September 1956 FRANCISCO Review of Business Conditions . . . . 110 Recent Developments in the Money and Capital M arkets........................113 Personal Income in the Twelfth District, 1955 .................................. 117 District Bank Net Profits R is e ..............120 REVIEW OF BUSINESS CONDITIONS f t e r a brief hesitation in July the level of l total business activity in the Twelfth Dis trict rebounded sharply in August and from all indications will rise further in September. The July hesitation was compounded of the direct and indirect effects of the national steel strike, strikes in some other District industries, and a lag in the usual seasonal upswing in the proc essing of food products owing to late harvests in some areas. These depressing forces were no longer operative in August and significant gains were registered in other lines of activity. Em ployment in metal and metal product lines rose sharply in August, following the July strike, and job losses were restored in metal fabricating lines where steel shortages had slowed opera tions. A ircraft employment, which has been ris ing steadily for the past fourteen months, re corded a sizable gain from July to August in plants in both California and W ashington. Most other industrial lines will undoubtedly show gains more or less in keeping with the rise in over-all activity when complete data become available. The m ajor exceptions to this picture of rising levels of economic activity are in resi dential construction and in the very im portant D istrict lumber and plywood industries. Recent cutbacks in auto assembly are related to factory shutdowns for new model conversions, and a sharp rebound in jobs may be expected when production of 1957 cars is initiated. The underlying economic situation would ap pear to be one of continuing substantial strength. This is evident in both the moderate effect of the steel strike during July and the apparent sharpness of the rebound in August. W hile shortages of basic steel items have been intensi fied, there does not appear to have been any sig nificant slowing in the construction of new pro ductive facilities or in intentions to proceed with announced expansion plans. W age increases ne gotiated in the steel industry and the subsequent rise in rates of pay in other lines will augment consumer incomes and, barring a radical shift in buying attitudes, will place an upward press ure on retail markets. W ith business and con A 110 sumer demands high and rising and with back logs of needed community facilities growing larger, the existing basic strength of the economy seems likely to continue. As mentioned earlier, there are two m ajor segments that have shown a significant decline from year-ago levels in activity, which is excep tional in an economy showing such strong ex pansionary tendencies. The fundamental causes of the lowered level of activity in the two areas, residential construction and lumber and plywood, are the same since it is the level of activity in house building that largely determines conditions in the market for lumber products. Conditions in housing markets have received much attention as the reduction in the rate of new housing starts is nationwide and involves all areas to a greater or lesser degree. The factors most commonly cited as contributing to the lower level of hous ing activity are mortgage money tightness and sharply increased costs of construction. Money m arket tightness has grown recently, as evi denced by the continued rise in interest rates, which has further reduced the availability of funds for mortgages — particularly fixed-rate governmentally assisted mortgages. Construc tion costs also are still rising as wage rates go up and added demands for materials other than lumber cause further price advances. In an attem pt to stimulate the building of new housing the Housing and Home Finance Agency announced, on September 20, some easing in terms for moderately priced homes. This action involved the lowering by 2 percent of the down payment minimum under F H A insured m ort gages for houses costing less than $9,000. In ad dition, the action also made some additional funds available by raising borrowing limits of savings and loan associations from Federal Home Loan Banks and by easing the require ments for the sale of mortgages to the Federal National M ortgage Association (F N M A ). W hether or not this easing will actually result in a significant increase in new housing starts will depend largely upon lenders’ reactions, and these will take some time to manifest themselves. September 1956 MONTHLY REVIEW Lumber and plyw ood markets show increasing softness The markets for the output of District lumber and plywood mills have shown signs of consid erable weakness throughout most of the current year. New order receipts, shipments, and pro duction are all off from last year for the first seven months and prices have slipped markedly for some types and grades. M arket weakness stems from the sustained slide-off in the con struction of new residential housing throughout the nation. In July, the number of new privately financed nonfarm housing starts was 1.1 million units at a seasonally adjusted annual rate which compares with a rate of 1.4 million units in June 1955, a decline of more than 20 percent. This loss in the number of units put into construction has had a m ajor impact upon the demand for D istrict lumber output. District lumber products are used extensively in new house construction and for some types and grades this use is nearly the sole source of demand. The three principal lumber producing regions in the District have been affected in varying de grees by the slump in new residential construc tion. H ardest hit have been the producers of Douglas fir lumber, whose shipments for the first seven months fell 7 percent behind the same period last year. New orders for Douglas fir have fallen even more, 9 percent, while output has declined by the same degree as shipments. Recent official price quotations are unavailable, but industry sources report prices for random length green dimension construction lumber down some 18 percent in early September from prevailing prices in the opening months of the year. W estern pine and redwood producers have been somewhat less affected by developments in residential construction nationally. These woods are not used quite so extensively in housing con struction alone and in addition are used in hous ing for doors, cabinets, and decorative purposes. T he latter factor is of substantial importance as the pronounced tendency for new house buyers to demand larger houses and higher quality con struction, including more extensive use of nat ural woods, has cushioned the decline in demand to some extent. Redwood shipments in the first seven months were off only slightly from a year ago (less than 1 percent) and western pine ship ments fell 5 percent in the same period. Price weakness has not yet been noticeable, although a decline in new orders of 7 percent in western pine and 11 percent in redwood may be indica tive that some softness may soon develop. Plywood producers are facing roughly the same situation as are the operators of the lumber mills. Price weakness is more pronounced for plywood than for lumber generally. In the third week of September the price (per thousand square feet) of the so-called index grade (J4 inch interior) fell to $67, which is $21 below the price this grade commanded last spring. Ply wood prices have typically been extremely vola tile in the past and apparently are undergoing another sharp swing. A considerable part of this volatility stems from the fact that the indus try does not maintain producers’ stocks that could serve as a buffer against wide shifts in de mand. In addition, capacity may have expanded beyond the ability of the market to absorb the large new supplies within the recent range of prices. Reversal of inventory and price trends in District petroleum The District petroleum industry has been plagued for a long time with recurrent imbal ances in stocks of refined petroleum. The indus try currently appears to have completed its most recent full cycle of inventory change. In the late summer of 1954 total petroleum stocks reached an unusually high level, which resulted in a break in prices in June and July of that year. The de mand for W est Coast fuel oils was expanded sharply as the result of reduced prices and the severe weather in the eastern states in the win ters of 1954-55 and 1955-56. This outward movement of petroleum (largely residual fuel oils) continued in some measure through the first quarter of the current year. Since the first quarter of this year, however, stocks have been increasing, although in moderate amount. Prices have firmed and in July were nearly 12 percent ahead of July last year and were almost 16 per cent above the low point reached in late 1954. Ill FEDERAL RESERVE BANK OF SAN F R A N C IS C O The volume of crude oil imports has continued to expand at a fairly rapid pace. In the first six months of this year crude oil imports reached a rate of 153,000 barrels per day compared with 75,000 barrels per day during the correspond ing six months of 1955. This doubling in the rate of crude oil importation reflects in part the opening late last year of the new refining facili ties in W ashington that utilize crude oil from Canada. Im ports to this area are likely to con tinue to grow as additional refining facilities now under construction are brought into opera tion. In the absence of the development of sub stantial new crude oil production (particularly high gravity) within the District, added imports will also be needed to satisfy the growing m ar kets resulting from the vast industrial expan sion and population advance in all District states. Since technical processes for refining the pre dominantly heavy crudes produced in this Dis trict are not subject to rapid change, imports of light crudes from areas outside the District will still be needed to secure a balanced supply of re fined products. The current crisis over the Egyptian nation alization of the Suez Canal will have only a re mote effect upon the Twelth District petroleum industry. It is conceivable, however, that some added demand for local oil supplies will be felt. This will come through the increased shipment of oil from the Gulf Coast areas and Middle A t lantic states to European countries, leaving a possible shortage for consumers in the eastern United States. W hile producers in these areas are likely to increase production somewhat to accommodate European needs, there is some pos sibility of California producers being called upon to supply more oil to markets in the eastern states, especially should the weather in that area be colder than average during the coming fall and winter seasons. This would be a factor in de laying any excessive build-up of residual fuel oil stocks by District producers and would alle viate the severity of the recurrent cycle in in ventories mentioned earlier. N onferrous metals exhibit m ixed trends The demand for District output of all the nonferrous metals continues exceedingly strong. 112 This is not surprising in view of record indus trial production and the sharp increase in busi ness expenditures for new plant and equipment. Employment in District nonferrous metal mines is substantially above year-ago levels even after allowance is made for the effect of strikes which interrupted activity during the summer of 1955. District mine production of recoverable copper and lead in the first 7 months of this year was up 14 and 1 percent respectively from the iden tical period last year. Zinc production in terms of recoverable metal was off some 5 percent, re flecting in part the long-term trend toward a lower metallic content of a given volume of ore. Prices, contrary to the general rising trends in activity at District mines and mills, show somewhat divergent trends as between particu lar metals. Aluminum producers in mid-Septem ber were receiving 27.1 cents per pound for the prim ary metal, which compares with 24.4 cents per pound at the same time a year ago. Lead and zinc prices, up only one cent and one-half cent per pound respectively from last year, have been steady with no indication of pressures develop ing for a change either up or down. The price of copper, however, has shown a fairly sharp de cline since June, which has lowered the per pound quotation from 46 cents to 40 cents by mid-September. It should be recalled that much of the rise in copper prices between January 1955 and June of this year, from 30 cents per pound to 46 cents per pound, was induced by supply shortages following m ajor labor disputes here in the District as well as in other domestic and foreign operations. The pressure stemming from uninterrupted world production was the prim ary cause of the July break in prices and the subsequent downward movement since then. However, recent new labor difficulties in the large copper mines in N orthern Rhodesia, com bined with some disruption of normal ore move ments stemming from the Suez Canal dispute, are factors adding strength to copper prices cur rently. W hether or not this combination of events will create sufficient pressure to cause the price to rise once again will depend upon the duration of the interruption to the normal flow of the metal into productive and distributive free world channels. September 1956 MONTHLY REVIEW Recent Developm ents in the M oney and Capital M arkets u r in g the late spring and early summer, our D economy seemed to have come to a halt in its long postwar expansion. W ith interest rates and stock prices dropping, with industrial pro duction and profits easing off, with new hous ing starts on the decline and inventories build ing up to ever higher levels, some people began to wonder if the long postwar boom and infla tion had begun to falter. Today it seems clear that this was only a momentary pause and that the basic movement of the economy is still up wards. Inflationary pressures and possible boomperiod excesses, rather than any likelihood of a recession, appear to remain the chief dangers ahead, at least for the immediate future. It may be of interest to consider both the rea sons for this change in outlook and the nature of the problems that monetary policy currently has to deal with. A review of recent develop ments in the money and capital markets will provide a convenient starting point for the analysis. The money market Total outstanding loans of commercial banks increased about $4 billion during the first half of 1956, nearly three-fourths of the increase or $2.9 billion being in the form of business loans. The months of M arch and April alone saw an increase of about $2.7 billion in total bank loans by commercial banks. As a result of this large demand for credit, money market rates soared in April to their highest levels since the early 1930’s. During May and June, the increase was about $2.3 billion; but during July there was a decline of about $0.2 billion. This decline un doubtedly reflected the steel strike as well as the normal summer lull in business activity. Since the latter part of July there has been a pro nounced increase in loans to business, amount ing probably to well over $600 million. The end of the steel strike and the beginning of the usual fall pickup in business activity probably share responsibility for this increase, but there has also been another important factor, which will be discussed below; namely, business borrowing for capital expansion purposes. Reflecting these changes in borrowing, short-term interest rates declined appreciably between April and July and then rose sharply during the late summer to new highs. The magnitude of these changes may be better appreciated by considering some individual in terest rates. That on outstanding Treasury bills, for instance, which had risen to a 14-year high of 2.76 percent in April and then dropped to as low as 2.24 percent in July, reached a new high of 2.95 percent on September 19. The rate on 90-day bankers’ acceptances, which dropped % percent in June, recovered this the following month and then tacked on another % percent in August to reach 2% percent. The rate on 4-6 months prime commercial paper reached 3 ¿4 percent in May, dropped to as low as 3 ^ per cent in July, and then rose to 3 y2 percent. Ninety-day time money, which was 3% -3 } i per cent in April has risen ¿4 percent since then. The prime bank rate, which was 3^2 percent early in the year, was raised J4 percent at the end of April and another percent last month to 4 percent, the highest level since the early 1930’s. The other money market rates have gen erally followed one of these two patterns this year—either a persistent rise or else an increase until April, followed by a small decline, and then a resumption of the rise during the late summer. Federal Reserve policy actions have been guided by these m ajor developments in the money markets, although with adjustments to meet customary variations in reserve needs of a seasonal or temporary nature. The general pol icy of credit restraint that the System had pur sued during the previous 12 months was con tinued through the summer. However, reserves were supplied to the banking system in June and again late in August to meet seasonal needs for additional credit (including the demand for tax payment purposes in June). The volume of member bank rediscounting increased rather sharply around the beginning of August and has 113 FEDERAL RESERVE BANK OF SAN F R A N C IS C O since leveled off at roughly the average for the past year. Excess reserves of member banks dropped to $448 million on September 5, which is nearly as low as they ever go. However, in the succeeding two weeks they were above $700 million, largely as the result of an increase in float. The capital market Long-term interest rates in the capital m ar ket generally fluctuate much less than the short term rates in the money market, and the spread between the two sets of rates has greatly nar rowed during the past two years. Nevertheless, their patterns of movement have been fairly similar. In April most of the long-term rates reached their highest levels since 1953 and were nearly as high as they were in the early 1930’s. They sagged a bit during May and June but then resumed their rise and by August were at new highs. F or instance, the average effective yield on United States Government bonds call able in 12 years or more, after rising early in the year to a high of 3.12 percent in April, dropped to 2.97 percent in June. It has risen al most steadily since then, reaching a level of ap proximately 3.25 percent during the middle part of September. Moody’s index of Aaa corporate bond yields rose from 3.07 percent in M arch to 3.31 percent early in May, remained close to that level for two months, and then soared to 3.6 percent in September. The effective rates on new bond issues have been going up too, of course. In recent weeks new issues by large cor porations have generally carried tabs of 4 per cent or m ore; for example, $73 million in de bentures of the Pacific Telephone and Telegraph Company sold at a 4.23 percent yield in August, and $30 million in debentures of the Associates Investment Company will pay Ay2 percent. The rising interest rates in the capital market reflect a shortage of savings relative to the growing demand for long-term funds. Some cor porations have been deterred from issuing new bonds by the prevailing high interest rates. Among the announced issues that have been cancelled or postponed recently have been $30 million by the Consolidated N atural Gas Com 114 pany, $20 million by W ilson and Co., and $40 million by Southern California Edison Co. Still others have been reduced in amount before being offered to the public. In some cases, firms that have withdrawn proposed bond issues have been able to obtain the needed funds from banks instead. In other cases, however, there have probably been cancellations or postponements of expansion plans for which the funds had been intended. One of the most significant recent monetary developments has been the tendency for corpo rations needing funds for capital expansion to obtain them from banks rather than through se curity issues. Bank loans are normally for much shorter periods than bond issues, of course, and do not enable the borrowers to complete long term investment programs. Nevertheless, the borrowing firms hope and presumably expect that conditions will ease in the capital market soon, enabling them to issue bonds at more fav orable rates and then repay their bank loans. Data on the volume of bank lending for plant and equipment expenditures are not available, but the amount is probably considerable. Despite the high interest rates, new corporate security issues reached a record high of $3.0 billion during the second quarter of 1956. Of this amount, $2.3 billion consisted of bonds and notes (the remainder being common or preferred stock), which was about the same as in the fourth quarter of last year and the third quarter of 1954, but considerably more than in any other recent quarter. This figure of $3.0 billion may be compared with one of $2.2 billion for the previous quarter and $2.4 billion during the sec ond quarter of last year. Prelim inary figures for July and August indicate that around $2.2 bil lion in new capital was raised through security offerings, about 22 percent more than during July and August of last year. New issues con tinued at a high level during September. Expenditures on plant and equipment These developments in the financial and money markets have been closely connected, of course, with the level of business activity and in particular with business expenditures. September 1956 MONTHLY REVIEW Business expenditures on plant and equip ment have been one of the principal props of our present boom. Such expenditures amounted to about $7.5 billion during the first quarter of 1956, as compared with $5.8 billion during the first quarter of last year. F o r the second and third quarters of this year, they have been estimated by the Securities and Exchange Commission and the Departm ent of Commerce at $8,9 and $9.6 billion respectively. During the comparable pe riods of last year, they amounted to $7.0 and $7.4 billion. F or the entire year 1956, the total is expected to come to around $35 billion, an in crease of some $6 billion from last year’s record level. Most of this increase has been in the field of manufacturing, although all other main branches of the economy have shared in it to some extent, too. The greater part of plant and equipment ex penditures is financed out of the internal re sources of business firms, that is, out of retained earnings and depreciation allowances, and hence does not directly involve the capital market. Nevertheless, during the first half of this year nearly $3 billion out of the $16.6 billion in new plant and equipment expenditure was financed through security issues. An additional $2.2 bil lion was raised in this way for working capital, debt retirement, and other purposes. Of this total of $5.2 billion, $4 billion was in the form of bonds and notes, the remainder being stock. In addition, more than $3 billion in new state and municipal bonds was sold. The volume of debt issues, therefore, is large enough to have an ap preciable effect on expenditures. Any serious curtailment of such financing would very likely curtail expenditures too, unless the funds could be raised from alternative sources. A nother type of business expenditure which depends to an important extent on borrowing is inventory accumulation. Total inventories in manufacturing and trade have been increasing steadily (on a seasonally adjusted basis) since the beginning of last year. A t the end of July 1956 they amounted to $85.7 billion, an increase of $6.5 billion or 8.2 percent in the past year. This increase in inventories is probably greater than is warranted by the increase in business activity. To some extent it undoubtedly reflects the speculative accumulation of goods in antici pation of higher prices. Since fluctuations in in ventory holdings provide one of the main sources of instability in our economy, their ex cessive expansion through the use of bank credit is undesirable. Monetary policy Events of the past few months have thus made it clear that we are still in a period of strong in flationary pressures. W ith the economy operat ing at nearly full employment and with its pro ductive resources already taxed to the limit in most fields, any further large increases in ex penditures will be reflected not in increased pro duction but in higher prices. A rising price level is undesirable, of course, on several grounds : It eats away the real value of savings and fixed incomes ; it disturbs the social order by bene fiting some groups and individuals and injuring others; it tends to give businessmen an exag gerated impression of prosperity and profits, leading them to make over-optimistic plans for new investment. O ur present monetary policy, therefore, is concerned mainly, as it has been during the past year, with the need for restrain ing inflationary pressures. The immediate aim of such policy is to hold down over-all expenditures to the level of avail able supplies, which in some fields are inade quate to meet all current demands. As has been noted, a large and in recent months increasing amount of expenditures has been financed through borrowing—either from banks or in the capital market. If such borrowing can be lim ited, it may be possible to hold down spending sufficiently to prevent further price rises. This does not necessarily mean that total expendi tures should be reduced ; it will probably suffice to restrain the rate of increase somewhat. E x actly how much credit the economy needs to keep functioning at a high level of activity but without inflation, over-investment, or specula tive excesses cannot be determined in advance. However, there are no clear indications that credit has been unduly restricted so far. The available evidence—the rise in prices, the con tinued rapid increase in lending, both by banks and others, and in new capital expenditures, the 115 FEDERAL RESERVE BANK OF SAN F R A N C IS C O maintenance of a high level of employment and output—all point to the continuance of inflation ary tendencies. This situation may, of course, change. If it does, our monetary policy would have to be adjusted promptly. The monetary au thorities must remain constantly on the alert to detect basic economic changes or the imminence of such changes. The Federal Reserve System has the primary responsibility in the field of monetary affairs. The System, however, exerts its influence di rectly in the limited area of bank credit, which only indirectly influences the capital market and other aspects of the money market. T here are, however, close connections between the money m arket and the capital market. Although the former is a short-term and the latter a long term market, they are nevertheless alternative sources of funds for some borrowers and alter native outlets for funds of some lenders; and, if left unrestrained, bank credit might be expanded to meet credit demands in excess of current sav ings. Changes in the relative interest rates and availability of funds in the two markets will lead borrowers and lenders to move from one to the other. Consequently, by restraining the ex pansion in bank lending and permitting interest rates to rise in the money market, the System can affect developments in the capital market to a considerable extent. F o r the System to supply additional credit resources in amounts adequate to keep interest rates down in the face of exces sive demands would inevitably lead to price in flation. One way of combating inflationary pressures is for the Federal Reserve System to reduce bank reserves through open market sales. D ur ing the past year, open m arket operations have played a rather passive but nonetheless impor tant part in the anti-inflation program. The Sys tem ’s portfolio of Government securities is today just about the same size as it was a year ago. However, since the demand for credit has con siderably increased, holding the supply fairly constant has acted to tighten credit conditions and raise interest rates. Changes in the rediscount rate have perhaps been used more actively and deliberately as a 116 means of combating inflation during the past year and a half. Six general raises have occurred within this period, bringing the rate up from 1Y2 percent to 3 percent. Raising the rate which the banks must pay when they borrow from the Federal Reserve Banks normally leads them to raise the rates which they charge to their cus tomers, thereby possibly discouraging some bor rowers. However, this may not entirely prevent inflationary excesses from developing. During a boom period, a great many business opportuni ties are or seem to be so promising that a small rise in interest rates will not discourage them. But if the rates continue to climb, eventually they are bound to reach a level where much borrow ing will be postponed in the hope that they will soon drop. The considerable number of proposed bond offerings that have been withdrawn recently indicate that such results are being obtained. There has been some discussion lately as to whether the credit situation has been tight be cause of the actions of the Federal Reserve Sys tem or because of natural m arket forces. Rais ing the rediscount rate does not in itself reduce the supply of loanable funds unless the banks decide to do less rediscounting as a result. If the banks have been unable recently to meet all de mands for credit, it is not because the System has curtailed their ability to lend but because the demand has been increasing. W ith the banks’ ex cess reserves down to about what seems like a practical minimum, no further substantial in crease in bank lending is likely unless the Fed eral Reserve provides them with additional re serves. There are at least four reasons why the de mand for bank credit has been growing recently: (1) The long-run growth and development of the economy which may be expected to require a gradual, but continuing, increase in bank lend ing of several percent each year; (2) seasonal factors, which normally necessitate a substantial rise in credit during the late summer and fall; (3) the pickup in business activity in many in dustries, following the end of the recent steel strike; (4) continuance and even intensification of the postwar boom, which has been responsible for increased expenditures on plant and equip September 1956 MONTHLY REVIEW ment, inventories, housing and many other types of consumer expenditures as well as for a grow ing need for working capital. W hile the first three of these factors may be considered normal and desirable, the fourth one raises the danger of possible excesses. H istory shows that when an economic boom goes too far and too fast, there will eventually be a collapse and a period of painful readjustment. The problem facing the Federal Reserve Sys tem today, therefore, is how to permit sufficient increase in credit to meet normal seasonal and growth needs without at the same time allowing inflationary and speculative excesses to develop. Unfortunately, a complete solution to this prob lem is always difficult. It is conceivable that credit may be excessive in certain sectors of the economy and insufficient in others. F or instance, in recent months the housing market has been hampered by a shortage of mortgage money and many short-term borrowers have had difficulty in obtaining bank loans, while at the same time considerable amounts of bank credit have been used to help finance the rise in plant and equip ment expenditures. Indeed, some concern has been voiced recently over this use of short-term bank loans for long-range investment purposes. A potential danger in this situation is that if capital expansion is permitted to proceed too rapidly relative to the demand for consumer goods, businessmen may find themselves some day with excess productive capacity on their hands. In that case, there would probably be a sharp drop in expenditures on new plant and equipment, which could set off a general decline in business activity. In the absence of selective credit controls, the Federal Reserve System does not have the power (except with respect to purchases of se curities on m argin) to direct credit into or away from particular sectors of the economy in order to keep them developing in harmony with each other. W hether or not it would be desirable to give the System such power is a much-debated question and one that is currently under study with respect to one important type of loans, those to consumers. In the meantime, the Federal Reserve System must try to regulate the over-all amount of credit in such a way as to avoid either a general excess or a general deficiency, hoping that the free workings of the economy will direct this credit into the proper channels. To provide just the right total amount of credit will require a constant and careful attention to changes in the economic currents, a determination to be guided by those currents rather than by political pres sures or particular interests, and avoidance of a rigid or doctrinaire attitude. Personal Income in the Twelfth District, 1955 n n u a l estimates of personal income by state . recently published by the Department of A Commerce indicate the strength of the Twelfth D istrict economy during the 1955 recovery and boom.1 Total personal income in the District reached $42 billion in 1955, about 8 percent above 1954, as compared with a 7 percent rise in the country as a whole. As shown in Table 1, all states in the region shared to varying degrees in the rise. Nevada had the largest percent in 1This article is based primarily upon the estimates which appear in the United States Department of Commerce, Survey of Current Business, August 1956, pp. 8 ff. For a more complete review of employment and output developments underlying the changes in personal income in 1955, see the February 1956 issue of the M onthly Review, pp. 18-29. crease (13 percent) in the region and one of the largest nationally. W ashington and Idaho both registered 4 percent gains, the smallest in the District. Personal income in California increased 8 percent. Quarterly estimates of personal income com piled by the California Department of Finance indicate a continued upward trend in that state’s income during the first half of 1956. (California accounted for about seven-tenths of total Dis trict income in 1955.) California personal in come, seasonally adjusted at annual rates, rose 6 percent in the first quarter and 9 percent in the second quarter, relative to 1955. The sub FEDERAL RESERVE BANK OF SAN F R A N C IS C O stantial increase in the second quarter of this year was accounted for by increases in all m ajor types of income. W age and salary receipts showed the largest rise. Proprietors’ income made only a moderate gain, reflecting a contin ued decline in farm income which was more than offset by a rise in nonfarm proprietors’ income. Both the District and national increases in total personal income in 1955 reflect a decline in farm income which was more than offset by an increase in nonfarm income. The percentage de cline in farm income in the District was signifi cantly smaller than in the country as a whole. At the same time, non-farm income increased relatively more in this region than nationally. Government income disbursements, as well as wage and salary payments by m ajor industries, also showed larger percentage increases in the District. Per capita personal income in the District was 14 percent above the national average in 1955, but the 1954-55 rise in District per capita in come (4 percent) was smaller than the national increase (5 percent). The slower growth of Dis trict per capita income, in spite of a greater than national rise in total personal income, reflects the offsetting influence of more rapid population growth in this area. District population increased by 4 percent during 1955, while the nation’s population increased by only 2 percent. Table 2 shows that Arizona was the only state in which per capita income declined, and this, too, re flects a substantial rise in population. California had the largest percentage rise in the District and was the only state which matched the na tional percentage increase. District has smaller percent decline in farm income than nation Farm income in the nation declined by 5 per cent from 1954 to 1955, but the District decline was only 1 percent. However, there was a great deal of variation among the states. Arizona farmers, registering the largest relative decline in the District, experienced an 18 percent drop in their incomes. W ashington farm income was down 9 percent, while Idaho and U tah showed substantially smaller declines. California farm income, on the other hand, rose 3 percent. Farm 118 T a ble 1 P e r so n a l In com e T w e lfth D is tr ic t an d U n ite d S ta te s, 1954-1955 (in m illions of dollars) A rea A r iz o n a .................................. California .............................. Id a h o .................................... N e v a d a .................................. O regon .................................. U ta h ...................................... W ashington ......................... T w elfth D istrict ................ U nited S t a t e s ....................... 1954 1,486 27,148 861 506 2,903 1,146 4,963 39,013 284,747 1955 1,588 29,438 895 572 3,090 1,238 5,179 42,000 303,391 Percent change ; 1954-55 + 7 + 8 + 4 +13 + 6 + 8 + 4 + 8 -j- 7 Source: United States Department of Commerce, Survey of Current Business, August 1956. incomes in Oregon and Nevada showed no change from 1954 to 1955. The District decline in net farm income from 1954 to 1955 was marked by practically no change in gross cash farm receipts and an in crease in farm production costs. In general, de creases in farm prices of crops, livestock and livestock products, and a small decline in crop output were offset by a substantial rise in the output of livestock and livestock products. M ore over, the price of beef cattle, one of the region’s more im portant farm commodities, declined only slightly on the Pacific Coast. Some of the larger declines in crop output reflect the pressure of acreage allotments and m arketing quotas during the year— District food grain output (especially wheat and rice) was 12 percent lower than in 1954 and cotton output dropped 19 percent. Ow ing in part to more favorable growing condi tions, output of fresh vegetables and deciduous fruits increased substantially in 1955. Slaughter of beef, sheep, lambs, and hogs also rose signifi cantly. These developments in vegetables, deciduous fruits, and beef cattle account in large part for the rise in farm income in California. From 1954 to 1955, California cash receipts from livestock showed no change, while cash receipts from crops (especially truck crops, peaches, walnuts, etc.) rose significantly. On balance, total cash receipts from farm marketings in California rose 4 percent in 1955. MONTHLY REVIEW September 1956 Nonfarm income shows larger percent gains in District than in nation Nonfarm income rose 8 percent in the Twelfth District and 7 percent in the nation from 1954 to 1955. All m ajor areas of nonfarm income showed stronger gains in this region than in the nation generally. Movements among the District states, however, were markedly dispersed. Arizona and California were the only states that had larger relative gains in all m ajor sources of income than the nation. Government income disbursements in the Dis trict during 1955 increased 6 percent, compared with 5 percent nationally. Arizona showed the largest percent gain (13 percent) and Califor nia was second (6 percent). U tah’s relative in crease (3 percent) in government receipts was the smallest in the region. Manufacturing wage and salary disbursements showed the largest percent increase among m ajor industries in the District. Manufacturing payrolls increased 13 percent in this region and only 9 percent nationally. Arizona again showed the largest relative gain (23 percent). Califor nia wage and salary receipts, which account for nearly three-fourths of the District total, in creased 13 percent in 1955. All other District states had 12 percent increases. Available data indicate that the increase in District manufacturing payrolls reflects substan tial rises in most types of industrial production. T P er T w e lfth C a p ita D is tr ic t able 2 P e r so n a l In com e a n d U n ite d S ta te s, 1954-1955 (in dollars) Percent change 1954 1955 1954-55 ....................... ....................... ....................... 1 ,5 7 7 2 ,2 7 1 1 ,4 6 2 2 ,4 3 4 1 ,8 3 4 1 ,5 5 3 1 ,9 8 7 — 1 .............. ........... ........... ................. ....................... 1 ,5 9 8 2 ,1 7 0 1 ,4 4 0 2 ,3 8 7 1 ,7 6 2 1 ,5 0 4 . . . ....................... 2 ,0 3 3 2,110 ............ ....................... 1 ,7 6 7 1 ,8 4 7 + 4 + 5 A rea .............. A r iz o n a C a l i f o r n i a ....................... Id a h o ................................ N evada O r e g o n ............................. U ta h W a s h i n g t o n ................. T w e lfth U n ite d D is t r ic t S ta te s + 5 + + + + 2 2 4 3 + 1 Source: United States Department of Commerce, Survey of Current Business, August 1956. Judging from employment data, aircraft produc tion and automobile assembly operations in creased significantly in 1955. Steel ingot pro duction rose from its 1954 recession level almost to its 1953 peak. Iron ore production showed a sizable increase above its 1954 recession level. Nonferrous metal output also rose substantially in the District. Despite a significant work stop page in the industry, lumber production in 1955 was higher than in 1954. District canners ex perienced a record production year, combined with higher prices to offset higher costs. Wage and salary disbursements in trade and service industries increased 11 percent in the District, in comparison with an 8 percent in crease nationally. All states in the District had larger relative increases in trade and service payroll disbursements than the nation, but Ne vada showed the largest gain (27 percent). This was a m ajor factor in explaining that state’s rise in total personal income. Despite fluctuations in building activity—par ticularly residential building—during the year, wage and salary receipts in contract construc tion in the District increased 11 percent over 1954. This compares with a 7 percent increase nationally. Construction in the region was marked by a continuation of the early 1954 up swing and the beginning of a downswing in the late summer of 1955. Building activity was further depressed near the end of 1955 by a work stoppage in the Los Angeles area. All District states, except Washington, shared in the Dis trict increase. Construction payrolls in W ash ington fell 6 percent. Utah had the largest per centage rise in the region (34 percent). Con struction payrolls in both California and Arizona increased 14 percent. In conclusion, the slightly larger percentage increase in total personal income in the District than in the nation during 1955 is explained by (1 ) particular economic developments during the year; (2 ) differences in economic structure between the District and the nation; and (3) to some extent, the significantly larger rate of population growth in this region than in the country as a whole. The smaller rate of decline in farm income in the District than in the nation is largely accounted for by the fact that although, 119 FEDERAL RESERVE BANK OF SAN F R A N C IS C O in general, prices of the more important farm commodities produced in the region declined only slightly during the year, the output of many of them rose. The larger than national percent- age increase in District nonfarm income reflects, in part, developments in the more important regional industries—aircraft, food and kindred products, construction, and trade and services. Net Profits of District M em ber Banks Rise the first half of 1956 Twelfth District member banks made net profits after taxes of $88.4 million. This represents an increase of 19.5 percent over the net profits earned in the first six months of 1955, and is the largest amount for any half-year period since semi-annual in come data for all District member banks were first compiled in 1948. The record profit re flected mainly a substantial rise in operating earnings that was not offset by a commensurate rise in expenses or net losses, charge-offs, and transfers to valuation reserves. The banks’ pro visions for taxes on net income also contributed toward the retention of larger profits by mem ber banks, since taxes (though higher than in the first half of 1955) did not increase at as fast a rate as net profits before taxes. D u r in g Substantial increase in earnings on loans Total operating earnings of District member banks reached a record high of $480 million dur ing the first six months of 1956, an amount $56.4 million or 13 percent greater than the previous high in the first half of 1955. The sub stantial growth in earnings on loans, $52.2 mil lion, accounted for almost the entire increase in total earnings. Earnings from this source reflect both a rise in the average holdings of loans and a generally higher interest rate structure. Com mercial and industrial loans, which more readily reflect the general fluctuations in interest rates than do real estate loans, represented a larger proportion of the increase in loans outstanding than was the case in the preceding year. W ith their demand for funds continuing the upward trend which began in the latter half of 1955, businesses brought their total outstanding debt at member banks to an all-time high level. Ac cording to weekly reports from a selected group of leading banks in the District, the most pro nounced growth in outstanding debt was made by the metals and metal products producers, 120 public utilities and transportation companies, and wholesalers and retailers. Real estate and consumer loans also rose considerably above the year-ago period. The continued high level of demand for funds by individuals and businesses, coupled with a policy of monetary restraint on the part of the Federal Reserve System, resulted in a rising interest rate level. Surveys of interest rates on business loans made in M arch and June indi cated that there was a fairly large increase in interest charges on short-term business loans, and it seems reasonable to assume that some other types of loans were also affected. As a re flection of the movement in interest rates and the continued growth in those types of loans that ordinarily carry a higher rate of interest, the rate of return on loans in the District was al most one percent above that for the comparable period last year. Although the rate of return on United States Government securities was also higher this year than last, the continued reduction in bank hold ings of all types of Government securities re sulted in an absolute decline in earnings from this source, the first such decrease in five years. In addition to an increase in interest rates on newly acquired securities, there was a shift in the distribution of the member banks’ security holdings which helped to increase the rate of return. Longer-term security holdings, while smaller in absolute amounts, were relatively more im portant than in the year-ago period. “O ther earnings” of member banks showed a moderate increase in the District. While com parisons for each type of earnings are not avail able, a compilation for the fourteen largest banks1 J The comparison is made between fifteen banks in 1955 and four teen in 1956 because two of the fifteen largest banks merged in early 1956 to form one bank. Adjustments have been made for the effects upon the data of this merger and others which involved the fifteen largest banks with respect to the percentage changes cited in this article and in Table 1. September 1956 MONTHLY REVIEW gives some indication of the probable trends in the “O ther earnings” categories. The largest dollar gain occurred in charges on demand de posit accounts. This resulted primarily from an increase in the average level of demand deposits, though a small part may have been accounted for by a rise in the charges levied against the account holders. T rust departments also experi enced a substantial rise in returns compared with the year-ago period, indicating a growth in trust accounts. Earnings on securities other than United States Government securities (primarily state and municipal issues) was one of the two categories to show a decline. As in the case of earnings on United States Government securi ties, these smaller earnings reflect a reduction in average holdings rather than a decline in the rate of return. (14.2 percent) than did earnings. Detailed ex pense data were compiled only for the fourteen largest banks. These data indicate that the aver age amount of compensation paid to officers and employees has continued its post-W orld W ar II growth and that the number of employees and officers has increased. The other m ajor expense item, interest on time and savings deposits, has also grown considerably, primarily as the re sult of higher deposits. The largest percentage increase, however, occurred in interest on bor rowed money. This represents money borrowed from the Federal Reserve Bank in the form of discounts on loans and funds borrowed from other banks. Daily average borrowings from the Federal Reserve Bank by Twelfth District mem ber banks were substantially above the year-ago first-half figure as banks borrowed to expand their loan portfolios and maintain their reserve position. These increased borrowings plus the higher discount rates charged by the Federal Reserve Bank and the higher charges for inter bank loans by commercial banks account for the sharp increase in this expense category. O perating expenses rose less than total earnings Total operating expenses, while rising above the first half of 1955, did not increase at as fast a rate as total earnings. Consequently, net cur rent earnings had a greater percentage rise T S elected E T w elfth D a r n in g s a n d is t r ic t a n d U E n it e d able 1 xpense Item s of M em ber B anks S t a t e s, J a n u a r y - J u n e , 1955 and 1956 -T w elfth D istrict— -A ll b a n k sls t half 1st half 1956p 1955 All (in m illion s) -P ercen t change14 largest O ther U nited States percent change All banks E a rn in g s on loans1 ......................................... In te re s t on G overnm ent securities ......... O th e r earnings ............................................... 298.9 78.3 102.8 246.7 79.8 97.1 + 21.2 — 1.9 + 5.9 + 22.5 — 3.9 + 4.5 + 15.6 + 6.3 + 11.9 + 22.5 — 0.5 + 8.9 T o tal earnings ............................................. T o tal expenses ........................................... 480.0 304.5 423.6 269.9 + 13.3 + 12.8 + 13.4 + 12.6 + 13.0 + 13.6 + 14.6 + 12.7 N e t c u rren t earnings .................................... T o tal recoveries and profits ....................... T o tal losses and charge-offs ....................... 175.5 14.0 153.7 11.7 25.0 + 14.2 + 14.7 + 11.9 + 17.5 — 14.4 161.1 72.7 — 13.3 140.4 66.4 + 14.7 + 9.5 + 16.0 + 10.8 + + 9.1 3.9 + 10.4 + 7.7 N e t profits a fte r taxes ................................ C ash dividends declared2 ............................. 88.4 42.6 74.0 39.4 + 19.5 + 8.1 + 20.4 + 7.9 + 14.6 + 9.8 + 12.8 + 9.1 U n d istrib u te d profits .................................... 45.8 34.6 + 32.4 + 36.1 + 18.1 + 16.3 N e t recoveries and profits ..................... . , . Profits before income taxes ....................... 1 United States loan earnings figures include service charges and other fees on loans; Twelfth District figures include interest and discount only. Service charges and fees on loans in the Twelfth D istrict are included in “ Other earnings.” 2 Figures include common stock dividends only. p Preliminary. 121 FEDERAL RESERVE BANK OF SAN F R A N C IS C O O ther charges against income show only m oderate rise N et current earnings of District member banks during the first half of 1956 were reduced by $14.4 million through net losses, charge-offs, and transfers to valuation reserves. Those banks which use valuation reserves built up their re serves to compensate for possible losses on their larger volume of loans and to offset possible losses on sales of securities during a period of falling security prices. In addition to transfers to valuation reserves there were the actual losses which occurred as the banks sold off some of their holdings of securities. However, because there was also a growth in the amount of re coveries, profits, and transfers from valuation reserves this year, the net losses, charge-offs, and transfers to valuation reserves were only $1.1 million higher than last year. Provision for state and federal income taxes also increased by only a moderate amount. Be cause tax items had a slower rate of increase than did net profits before taxes, realized net profits grew at a faster rate than did total earn ings (19.5 percent above the first six months of 1955). N et profits after taxes were at what was undoubtedly a record level in this District, al though actual figures for the comparable sixmonth periods prior to 1948 are not available. Member banks declared dividends of $42.6 million (48 percent of their net profits) and re tained $45.8 million. This is in contrast to the prior year when they paid out 53 percent of their profits in dividends. The net return on capital—the ratio of net profits after taxes to average total capital accounts— increased ap proximately 1 percent. This increase is a direct result of the rise in net profits, inasmuch as the average capitalization of member banks is greater this year. N et profits greater for larger-size banks The fourteen largest banks fared better than the smaller banks with respect to their profit position. N et profits after taxes for the larger banks were 20.4 percent above those made in the first half of 1955 compared with a 14.6 per cent gain for the smaller banks. This difference in the growth of net profits after taxes between 122 T able 2 E a r n in g s R a t io s T w e l f t h D is t r ic t of M em ber B a n k s U n it e d S ta t e s and (percent ratio s, an n u al basis) F irs t half § F irst half 5 1956 I 1955 ----------------------------------------------------------- i--------------j------------- U n ited S tates R e tu rn on l o a n s ........................................... 4.89 R e tu rn o n G overnm ent sec u rities ............ 2.29 18.02 C u rren t earnings to capital accounts. N e t profits after tax to capital account 8.38 D ividends declared to capital account 3.88 T w elfth D istrict R etu rn on loans ........................................... 5.92 R etu rn on G overnm ent sec u rities............ 2.29 C u rre n t earnings to capital accounts. * 22.27 N e t profits after ta x to capital accounts 11.22 D ividends declared to capital acco u n ts. 5.41 4.68 2.01 16.20 7.85 3.76 5.09 2.07 21.32 10.26 5.46 the large and small banks reflects the different experience of these two groups with respect to expenses and to net losses, charge-offs, and transfers to valuation reserves. Total expenses of the smaller banks grew at a faster rate than for the larger banks, thus offsetting the increase in earnings to a greater extent than in the case of the larger banks. The increase in net losses, charge-offs, and transfers to valuation reserves on loans and securities realized by all District member banks as a group was accounted for by the smaller banks. The fourteen largest banks had the same net loss in these accounts this year as last. This year both the larger and smaller banks retained one-half or more of their net profits after taxes. In the first half of 1955, however, the larger banks paid out more than half of their profits in the form of dividends. The smaller banks, on the other hand, paid out less than half. Net profits increased more in the District than in the nation W hile in the nation as a whole the experience of member banks was generally the same as for the District, there were some differences in the magnitudes of change. Nationally, the percent age increase in total operating earnings was larger, reflecting a greater rate of growth in earnings on loans and “O ther earnings” and a smaller decline in earnings on Government se curities. The rate of return on loans rose by a September 1956 MONTHLY REVIEW smaller amount nationally than in the D istrict; but because of a larger increase in average loan holdings in the nation as a whole, earnings on loans increased at a faster rate than in the Twelfth District. Total expenses increased by about the same percentage as they did in the D istrict so that net current operating earnings increased more in the nation. However, a more favorable experience in net losses, charge-offs, and transfers to valuation reserves in the Dis trict resulted in a greater gain in net profits than occurred nationally. The distribution of profits was the same na tionally as in the Twelfth District. Dividends declared amounted to 48 percent of net profits after taxes. The ratio of profits after taxes to average total capital accounts in the nation in creased ; but, as is customary, it remained con siderably below that of the District. Correction: In Table 2 on page 99 of the August 1956 the subheading “Farms, consumer, etc.” under the heading “Other” should read “Trans portation, communication, etc.” M o n t h l y R e v ie w , 123 FEDERAL RESERVE BANK OF SAN F R A N C IS C O B U S IN E S S IN D E X E S — T W EL FT H D ISTRIC T1 (1947-49 a vcrage =10 0) Year and m o n th T o ta l nonagri T o ta l C a r R etail D e p ’t c u ltu r a l m f ’g loadings store food E le c tr ic em ploy* em ploy* ( n u m sales prices 3> 4 C o ppe r3 power m ent b e r)2 m ent (v a lu e )2 W a te rb o rn e foreign trade3** In d u s tria l p ro d u c tio n (p h y s ic a l v o lu m e )2 Lum ber P e tro le u m 3 C ru d e R e fin e d C e m e n t Lead3 1929 1933 1939 1947 1948 1949 1950 1951 1952 1953 1954 1955 95 40 71 97 104 100 113 113 116 118 112 122 87 52 67 100 101 99 98 106 107 109 106 106 78 50 63 98 100 103 103 112 116 122 119 122 54 27 56 96 104 100 112 128 124 130 133 145 165 72 93 94 105 101 109 89 86 74 70 73 105 17 80 106 101 93 113 115 112 111 101 117 29 26 40 90 101 108 119 136 144 161 172 192 1955 July A ugust Septem ber October N ovem ber D ecember 119 123 118 116 110 123 106 106 106 105 106 106 128 127 132 129 123 120 157 160 159 155 128 130 71 67 70 72 67 63 40 91 128 131 128 119 1956 J an u a ry F ebruary M arch A pril M ay Ju n e Ju ly 129 125 117 119 118 117 115 106 106 105 105 105 105 105 130 128 128 122 129 125 132 135 145 149 160 173 161 70 77 77 82 74 81r 78 134 129 131 140 135 135r 110 E x p o r ts Im p o r ts '*99 102 99 103 112 118 121 120 125 ‘ *55 100 102 97 105 120 130 137 134 141 102 52 77 106 100 94 97 100 101 100 96 104 30 18 31 99 104 98 105 109 114 115 113 122 64 42 47 96 103 100 100 113 115 113 113 112 190 110 163 129 86 85 91 186 171 140 131 164 308 260 307 191 196 196 197 206 198 125 126 126 126 128 128 141 142 141 142 145 146 99 106 107 104 98 98 123 122 126 126 125 123 113 111 112 112 112 112 171 189 174 152 143 164 368 349 363 348 325 328 199 204 219 203 211 215 212 129 130 130 130 131 132 132 146 146 146 146 147 148 148 107 99 103 105 107 105 102 130 124 128 131 122 126 132 112 111 112 113 113 114 115 136 126 150 175 183 354 323 395 397 519 124 72 95 81 98 121 137 157 200 B A N K IN G A N D CREDIT ST A T IST IC S — T W EL FT H D ISTRIC T (amounts in m illions of dollars) M e m b e r ba nk reserves and related ite m s C o n d itio n Item s of all m e m b e r banks* Year a nd m o n th 1929 1933 1939 1947 1948 1949 1950 1951 1952 1953 1954 1955 Loans U .S . a nd G o v ’t d is c o u n ts s e c u ritie s Dem and T o ta l deposits tim e a d ju ste d 7 deposits 2,239 1,486 1,967 5,358 6,032 5,925 7,093 7,866 8,839 9,220 9,418 11,124 495 720 1,450 7,247 6,366 7,016 6,415 6,463 6,619 6,639 7,942 7,239 1,234 951 1,983 8,922 8,655 8,536 9,254 9,937 10,520 10,515 11,196 11,864 1,790 1,609 2,267 6,006 6,087 6,255 6,302 6,777 7,502 7,997 8,699 9,120 1955 A ugust Septem ber O ctober N ovem ber D ecem ber 10,392 10,559 10,665 10,931 11,115 7,407 7,375 7,487 7,238 7,298 11,163 11,312 11,465 11,665 11,876 9,021 9,054 9,067 9,005 9,084 1956 Jan u a ry Feb ru ary M arch A pril M ay Ju n e Ju ly A ugust 11,193 11,323 11,476 11,669 11,837 12,030 12,157 12,173 7,143 6,819 6,731 6,730 6,566 6,482 6,396 6,439 11,794 11,233 11,112 11,530 11,144 11,262 11,392 11,356 9,070 9,095 9,103 9,099 9,139 9,294 9,233 9,286 Bank rates on s ho rt-term business loans8 Factors affecting reserves: Reserve bank c re d it9 _ — + 3.20 3.35 3.66 3.95 4.14 4.09 4.10 + + + + + + — 4.17 + 4.25 + + + 4.34 + + 4.44 + — + 34 2 2 302 17 13 39 21 7 14 2 38 C o m m e r c ia l“» T reasuryw 0 - 110 - 192 - 510 + 472 - 930 -1 ,1 4 1 -1 ,5 8 2 -1 ,9 1 2 -3 ,0 7 3 -2 ,4 4 8 -2 ,6 8 5 23 150 245 698 482 + 378 + 1 ,198 + 1 ,983 + 2 ,265 + 3 ,158 + 2 ,328 + 2 ,757 23 17 43 46 8 - 253 148 245 81 434 + + + + + 84 87 71 82 22 5 6 4 - 322 76 178 270 233 405 143 315 + + + + + + + + + + + + M o n e y in c irc u lation* _ Bank debits Index 31 eitles»*« Reserves11 <1947-49*. 100)2 + 6 18 31 206 209 65 14 189 132 39 30 100 175 185 584 2,202 2,420 1,924 2,026 2,269 2,514 2,551 2,505 2,530 42 18 30 95 103 102 115 132 140 150 168 172 200 276 174 205 417 + + + + + 8 18 15 18 17 2,415 2,541 2,417 2,575 2,530 177 173 171 181 183 136 95 188 371 217 341 240 247 99 7 35 7 47 + 32 + 8 — 103 2,554 2,488 2,516 2,578 2,498 2,404 2,519 2,565 188 179 183 190 182 186 197 201 __ + __ __ __ + + + — __ + 1 A djusted for seasonal variation, except where indicated. Except for departm ent store statistics, all indexes are based upon d a ta from outside sources, as follows: lum ber, N ational Lum ber M anufacturers Association and U.S. B ureau of the Census; petroleum , cem ent, copper, and lead, U.S. B ureau of M ines; electric power, Federal Power Commission; nonagricultural and m anufacturing employm ent, U.S. B ureau of L abor S tatistics and cooperating state agencies; retail food prices, U.S. B ureau of L abor Statistics; carloadings, various railroads and railroad associations; and foreign trade, U.S. B ureau of th e Census. 2 D aily average. # 8 N ot a djusted for seasonal variation. 4 Los Angeles, San Francisco, and S eattle indexes combined. 6 Com m ercial cargo only, in physical volume, for Los Angeles, San Francisco, San Diego, Oregon, and W ashington cus tom s d istricts; startin g w ith Ju ly 1950, “ special category” exports are excluded because of security reasons. 8 A nnual figures are as of end of year, m onthly figures as of last W ednesday in m onth. 7 D em and deposits, excluding interbank and U.S. G ov’t deposits, less cash item s in process of collection. M onthly d a ta p a rtly estim ated. 8 Average rates on loans m ade in five m ajor cities. * C hanges from end of previous m onth or year. 10 M inus sign indicates flow of funds out of the D istrict in the case of commercial operations, and excess of receipts over dis bursem ents in th e case of T reasury operations. 11 E nd of year and end of m onth figures. 18 D ebits to to ta l deposits except in terb an k prior to 1942. D ebits to dem and deposits except U.S. G overnm ent and in terb an k deposits from 1942. p— Prelim inary. r— Revised. 124
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