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ID A H O A LA SKA S H IN G TO N C A L IF O R N IA Review of Business Conditions UTAH A R IZ O N A N EVAD A Review of Business Conditions | h e m ild pessim ism which accom panied the release o f Ju n e d a ta on business indi cators was som ew hat dissipated by the gener ally b e tte r perform ance of the econom y in July. A lthough the July developm ents were view ed by m any analysts as prim arily “sus taining” in c h arac te r ra th e r th an as an indi cation of renew ed buoyance in the econom y, the record fo r A ugust is probably less favor able than had generally been expected. Sev eral of the m ajo r business indicators which h a d ris e n in J u ly w e re little c h a n g e d in A ugust. Industrial production was unchanged in A ugust at 119 percent of the 1957 average; it had been rising gradually since Jan u a ry ex cept fo r a leveling off in June w hen autom o bile o u tp u t was curtailed by a lab o r dispute. A n increase in o u tp u t o f business equipm ent in A ugust was offset by a decline in consu m er goods, including autom obiles, while p ro d u c tion of m aterials was m aintained. T h e value o f new co n struction activity, seasonally ad justed, also rem ained unchanged in A ugust and was slightly below the reco rd level of Ju n e. R esidential construction declined for th e second consecutive m onth, while public construction and som e types of business build ing increased. H ousing starts in A ugust, how ever, rose 5 percent above the revised sea sonally adjusted rate fo r July. T he revision o f the la tte r figure resulted in gains being registered from the p rio r m onth in bo th July and A ugust. A pplications fo r F H A m o rt gage insurance on new houses, an indicato r of fu ture hom ebuilding activity, declined 1 0 p e r cen t in A ugust to the low est seasonally ad ju sted level since July 1957. R equests fo r ap praisals by the V eterans A d m inistration also declined in A ugust, w hereas in m ost years there has been an increase from July to A u gust in the actual num ber of applications. N o n fa rm p a y ro ll e m p lo y m e n t d eclin ed slightly in A ugust on a seasonally adjusted http://fraser.stlouisfed.org/ T Federal Reserve Bank of St. Louis basis, w ith the reduction being con cen trated prim arily in m anufacturing. W hile to ta l u n em ploym ent was sm aller in A ugust th an in July, the drop was m uch less th a n seasonal, and consequently the seasonally adjusted rate of unem ploym ent rose sharply to 5.8 percent of the civilian la b o r force fro m 5.3 p ercen t in m id-July. A m ark ed expansion in the la b o r force c o n trib u ted to this overall result. T he survey w eek fo r collecting d a ta cam e com p aratively late in the m o n th , and this led to the inclusion both in the lab o r force a n d in th e n u m b er of unem ployed a larg er th a n usual n u m b er of prospective teachers w aiting the start o f the new school te rm . 1 In addition, the survey w eek coincided w ith a heavy rate o f layoffs in the autom obile in d u stry ow ing to m odel changeovers. W ith few er people at w o rk in factories and a fu rth e r decline in average w eekly hours, facto ry payrolls fell in A ugust. T h is d ro p served to hold dow n the seasonally adjusted increase in p erso n al incom e to th e sm allest am o u n t since last Jan u a ry , w hen b o th p e r sonal incom e and factory payrolls declined som ew hat. Prelim inary estim ates indicate th a t to tal retail sales declined slightly in A ugust follow ing a 3 p ercent rise in July. A decline in sales of new autom obiles was largely responsible fo r som e falling off in seasonally adjusted sales of durable goods, w hile sales of n o n d u r ables increased at m ost types o f outlets. Sales of d ep artm en t stores, how ever, declined slightly to 114 percent o f the 1957-59 average from 115 p ercen t in July. Follow ing the b reak in the stock m ark et in late M ay, there has been considerable specu latio n as to w hat effect the decline in stock prices w ould have u p o n the spending plans of consum ers and of businessm en. T h e m ost recent q u arterly survey of co n su m er buying 1 Persons waiting for a new job to start within 30 days are con sidered to be in the same situation as those on a temporary layoff and are included in the unem ployment count. September 1962 MONTHLY REVIEW intentions, w hich is conducted by the B ureau of th e C ensus fo r the B oard o f G overnors of the F e d e ra l R eserve System, indicated th a t in Ju ly th e overall buying plans of consum ers w ere little changed from A pril, although there w ere som e variations am ong p a rtic u la r cate gories o f goods. Sim ilarly, the A ugust survey of anticipated p la n t an d equipm ent expendi tures, conducted by the D ep artm en t of C om m erce and the Securities an d E xchange C om m ission, indicated the sam e to tal expenditures in 1962 as revealed by th e survey in M ay. T hese surveys seem to indicate th a t no m eas urab le deterioration in th e spending expecta tions o f consum ers and o f businessm en has occu rred as a consequence o f the stock m ar k et break. A t the sam e tim e, how ever, c u r re n t expectations do n o t point to a n im m inent strong upsurge in consum er o r business spend ing w hich w ould provide a m a jo r stim ulus to o verall business activity. Pacific Coast employment rose, unemployment diminished in August T o tal civilian em ploym ent on the Pacific C oast rose in July and A ugust on a seasonally adjusted basis after a sm all decline in June, w ith b o th farm an d n onfarm em ploym ent gaining in each of the tw o m onths. T h e sea sonally adjusted rate of unem ploym ent, w hich had risen in M ay and Ju n e largely as a conse quence o f the lab o r disp u te in the construc tio n industry in n o rth e rn C alifornia, declined in July and again in A ugust, reaching a level of 5.7 p ercen t in the la tte r m onth. T he n u m b er o f wage and salary w orkers a t n o n farm establishm ents o n the Pacific C o ast increased 0.3 percent from July to A u gust o n a seasonally adjusted basis. G ains occu red in all m ajor categories o f activity ex cep t trade and services, in w hich em ploym ent was unchanged. C o n tra ct construction activ ity h ad the largest relative increase, 2 . 8 p e r cent, reflecting the settlem ent o f the la b o r dis p u te involving iro n w orkers in the Pacific Construction jobs in August up to prestrike level in Pacific Coast States T h a u i o n d i of P a r t o n t Source: State departments of employment. N orthw est as w ell as continued expansion in n o rth ern C alifornia follow ing th e earlier set tlem ent o f the p ro trac te d la b o r dispute there. District employment up in July; insured unemployment down A fter seasonal adjustm ent, n o n farm wage and salary em ploym ent in the T w elfth D is trict (excluding A lask a and H aw aii) rose by alm ost 1 p ercen t in July, w ith th e greatest gain o ccurring in co n tract construction. A fter the settlem ent of th e la b o r dispute in n o rth ern C alifornia in late June, the m id-July level of co nstruction em ploym ent was 4 3 1 ,0 0 0 w ork ers, a gain o f alm ost 9 percent. E ven after this im provem ent, em ploym ent in co n stru c tio n was still 1 p ercen t low er th a n th e p re strike level prevailing in the first fo u r m onths of 1962 because of th e disputes still affecting in d u stry em ploym ent in th e Pacific N o rth w est and N evada. A ll o th er in d u stry divisions except govern m en t show ed m o d erate increases— m anufac tu rin g an d finance rose 0.7 p ercen t each, and trad e an d services gained 0 . 6 p ercen t each. G overnm ent em ploym ent was off slightly; ap p aren tly there w ere g reater th a n seasonal lay offs this y ear in the ed u catio n sector. 17 5 FEDE RAL RESERVE BANK Pacific Coast Manufacturing employment has been getting a boost from defense activity Pire«M ‘ Aircraft, electrical equipment, and ordnance (in California). 2 Labor dispute affecting metalworking industries. 1 Seasonally adjusted. ‘ N ot adjusted for seasonal variation. Seasonal patterns are rela tively insignificant. 6 February 1961 was the trough month in the 1960-61 recession, as dated by the National Bureau of Economic Research. Source: State departments of employment. In the D istrict including A laska and H a waii, average w eekly insured unem ploym ent fell to a seasonally adjusted level of 3 1 0 ,7 0 0 w orkers in July, a decrease of 4.7 percent from June and alm ost 17 percent from July 1961. W ith this reduction in the num b er of unem ployed, the rate of insured unem ploy m ent dro p p ed from 5.7 percent in Ju n e to 5.5 percent in July; how ever, the Ju n e and July rates w ere th e highest since O cto b er 1961. In the first seven m onths o f 1962, D is trict insured unem ploym ent declined by 18.5 p ercent from the com parable period of 1961, in co n trast to a drop of 28 percent in th e n a tion. A verage weekly initial claim s fo r u n em ploym ent benefits fell in July to 44 ,5 0 0 , dow n 6.7 percent from June and dow n 22 p er cent below the recent high of 5 7 ,0 0 0 in M ay. Fewer District labor market areas have “ substantial unemployment” W ith the reclassification of Spokane, W ash area of “m oderate unem ploy ington to an 176 OF SAN FRANCISCO m e n t” in July, there w ere only three m ajo r la b or m ark et areas in the D istrict rem aining as areas of “ substantial u n em p lo y m en t” ( 6 . 0 to 8.9 p ercen t rate of u n e m p lo y m e n t). U nem ploym ent in the three areas— F resn o , San D i ego, and Stockton— represented ap p ro x im ate ly 13.3 percent o f total unem ploym ent in th e State of C alifornia in July 1962, as co m p ared w ith 10.7 p ercent in Ju ly 1961 and 10.4 p e r cent in July 1960. O f the three la b o r m ark et areas, only Stockton has h a d an increase in total em ploym ent from July 1961 to July 1962; how ever, the o v er-th e-y ear decline in the n u m b er of unem ployed in this area was not as im pressive as in F resn o , w here th e rate of unem ploym ent fell from 9.4 p ercent in July 1961 to 7.4 p ercen t this Ju ly despite a slight decline in to tal em ploym ent. In con trast to the im provem ent in the em ploym ent picture in F resno an d Stockton, th e situation in San Diego appears to have w orsened; total em ploym ent declined by 4 ,6 0 0 w orkers from July 1961, and unem ploym ent rose by 4 ,2 0 0 w orkers over the year-ago figure and was 6,500 g reater th a n in July 1960, A irc ra ft and missile em ploym ent at San D iego plants fell by 13,300 w orkers, a decline of 25 p ercen t below the level o f July 1961; this w as the m a jo r elem ent in the total em ploym ent reduction in this area. Construction contracts rose in July T he value of construction co n tracts aw ard ed in Tw elfth D istrict states (less A lask a and H aw aii) reached $ 7 3 4 m illion in July, a 3 p ercent gain from the Ju n e level and an in crease o f 17 percent above co n tract aw ards in July 1961. A fter seasonal adjustm ent, July aw ards show ed a substantial gain over Ju n e, as they often fall off sharply in July. R esid en tial co n tract aw ards show ed the largest rela tive gain above June (5 .5 p e rc e n t), and the n u m b er of dw elling units rep resented also rose by ab o u t the sam e percentage. N onresidential aw ards increased 3.2 p ercen t in July, September 1962 MONTHLY REVIEW while public w orks and utilities construction fell 4 percent. D uring the first seven m onths of this year, the value of residential contract aw ards was 2 2 percent above th a t in the com parable period of 1961, nonresidential aw ards were nearly 5 percent larger, b u t public w orks and utilities fell 1 2 percent below a y ear ago. F o r the second q u a rte r o f 1962, the B u reau o f the C ensus reported th a t the vacancy rate for rental housing units in the W est (in cluding M ontana, W yom ing, C olorado, and N ew M exico in addition to T w elfth D is trict states) stood at 10.3 percent, an increase over the first q u arter rate but som ew hat under th a t o f the A pril-June period of 1961. V acan cies in hom es available only for sale w ere, at 1.7 percent, also above first-quarter levels, as well as above the rate fo r the second q u arter of last year. Growth in savings and loan shares slowed down in July T he dollar increase in savings capital at D istrict savings and loan associations in July was som ew hat below the average in the p re ceding six m onths and well u n d er the June gain. (W ithdraw als of savings follow ing the June dividend are often m ade in Ju ly .) H ow ever, this contrasts w ith an actual decline in savings held by savings an d loan associations in the n ation in the sam e m onth, which had no t o ccurred since 1957. F o r the first seven m onths o f this year, the grow th in savings cap ital of D istrict associations was 23 p er cent larger th an in the com parable period of 1961. M ortgage lending activity also slowed dow n in July; com m itm ents to lend continued to rise, how ever. T he average net price paid in the W est for F H A -in su red 5l percent, 25-year new -hom e A m ortgages rose from the July 1 estim ate of $ 9 7 .0 to $97.1 as of A ugust 1. T his price has been increasing steadily since last D ecem ber, w hen it stood at $96.1. T he F ed eral H om e L oan B ank B oard, in its m onthly survey of interest rates on conventional m ortgages for A ugust, indicated th a t the average rate charged by rep o rtin g savings and loan asso ciations fell from 6 .06 percent in July to 5.97 percent in A ugust; th e A ugust figure is also 5 basis points below rates charged in the sam e m onth of 1961. T he decline from July to A u gust in rates fo r loans on newly built hom es was largely offset by an increase in fees and o th er charges; how ever, these charges are 29 basis points u n d er their level for A ugust 1961. (A lth o u g h this survey does not distinguish rates by area, it is rep o rted as considerably influenced by large associations in the Tw elfth D istrict.) Secondary m arket activities of the D istrict office of the F ed eral N ational M o rt gage A ssociation resulted in a sm all decline in m ortgage holdings in July; holdings were reduced in the preceding tw o m onths as well, but on a larg er scale. Lumber orders rebounded in August but remained below June levels P roduction, orders, and shipm ents of D oug las fir in July declined approxim ately 14, 16, and 18 percent, respectively, from Ju n e bu t all w ere above th eir year-ago levels. T he July decline in orders was ab o u t equal to the d e cline a year ago, b u t the drop in production this y ear was m uch m ilder th an in 1961. A t the en d of July 1961, unfilled o rders w ere equal to 46 p ercen t of inventories on hand. O rders and shipm ents in July this y ear e x ceeded p roduction so th at unfilled orders rose slightly and inventories w ere reduced by 4 percent, raising the ratio of unfilled orders to inventory from about 52 to 54 percent. Prelim inary weekly d a ta indicate th a t A u gust p ro d u ctio n , orders, and shipm ents w ere at about the sam e levels as during the last two weeks in July after the rebound from the July 4 holiday b u t w ere still below Ju n e levels. D uring the first two weeks in A ugust, p ro d u c tion substantially exceeded new orders, bu t 177 FEDERAL RESERVE BANK in the last two weeks of the m onth orders o u t paced production. In Ju ly b o th p ro d u ctio n an d new orders fo r pine fell off about 3 p ercent, while ship m ents d ro p p e d a little over 4 percent. Unfilled o rders rose and stocks declined slightly as shipm ents ra n ah ead of production. U nfilled o rd ers in July w ere about 22 percent above July 1961 while inventories w ere alm ost 17 p ercent below th e ir Ju ly 1961 levels. P ro d u ctio n of C alifornia redw ood in July declined ab o u t 17 p ercen t from Ju n e, while new o rd ers received fell about 2 0 percen t and shipm ents ab o u t 24 percent. A lthough the o u tp u t decline a b o u t m atched the year-ago d ro p , the decline in new orders was about tw ice as large as in July 1961. H ow ever, new orders ra n ahead o f production. O n a cu m u lative basis th ro u g h July, production, new o r ders received, an d shipm ents all were sub stantially below their levels for the first seven m onths o f 1961. Crow’s average lum ber price p e r tho u san d b o a rd feet declined $1.19 from the w eek e n d ed A ugust 2 to the w eek ended A ugust 30. G reen fir and pine species reco rd ed declines of $ 1 .8 4 and $1.08, respectively, while dry fir rem ained unchanged. A t the end of A u gust, how ever, the industry average was up $ 2 .79, o r 3.8 p ercen t, from its year-ago level. Western and national steel production advanced in August R ecovering fu rth er from year-low levels in July, W estern and national steel production rose 3.4 and 5.9 percent, respectively, from the week ended A ugust 4 to the w eek ended Septem ber 1. T he national o u tp u t of 1,672,0 0 0 tons in the latter w eek was the highest since early M ay and brought the unofficial o p eratin g rate to 55.5 percent of estim ated ca pacity. T he weekly ou tp u t level of 106,000 tons produced in the W estern states 1 in the w eek en d ed Septem ber 1 was the highest 1 The Western states included are Arizona, U tah, W ashington, Oregon, and http://fraser.stlouisfed.org/ California. Federal Reserve Bank of St. Louis OF SAN FRANCISCO since m id-June. O verall recovery in national steel o u tp u t from the end of th e holiday week on July 7 to the beginning o f S eptem ber was m uch stronger th an th e recovery in th e W est e rn states, 35 percent co m p ared w ith 17 p e r cent. F o r the entire m o n th of A ugust, national steel p ro d u ctio n n o t only exceeded the July le v e l b u t e q u a lle d th e J u n e o u tp u t le v e l; W estern ou tp u t, o n the o th e r h an d , was b e low its Ju n e level. O utside the D istrict, p ro d u ctio n and sh ip m ents are expected to be only slightly higher in Septem ber th a n A ugust, since excess in ventories are causing p u rch ases by au to m o bile producers to lag behind th eir usual pace in a perio d of autom obile m odel changeover. In th e D istrict the d em an d fo r co nstruction steel and canm aking tin p late should begin easing in Septem ber in response to seasonal influences. August copper orders and shipments higher than in July but below year-ago levels C o p p er p roducers and sm elters have re p o rte d th a t orders fo r S ep tem b er shipm ent are slightly b etter th an A ugust b u t th a t A u gust and S eptem ber shipm ents are below both year-ago levels an d average m onthly ship m ents by pro d u cers in the first h alf of 1962. U nited States stocks of refined c o p p e r rose sharply from 69 ,8 3 8 tons in Ju n e to 100,517 tons in July as shipm ents d u rin g th e la tte r m onths declined from the preceding m onth by ab o u t 24 p ercent while July p roduction fell only ab o u t 5.5 p ercen t from June. T he slow pace of orders fro m co p p er fa b ri cators, w hich include b rass mills, w ire m ills and foundries, not only reflects the fact th at these buyers realize p ro d u cers hold large stocks o f refined co p p er available fo r quick delivery, b u t also th a t th eir ow n stocks o f cop p er are relatively high. T hese c o p p er custo m ers continue to w ork off large inventories bought in the first half o f this y ear as a hedge September 1962 MONTHLY REVIEW against possible co p p er strikes. A low level of inventories currently held by the custo m ers of the brass and w ire mills, fo r exam ple, the autom obile, construction, and electrical equipm ent industries, public utilities and d e fense contractors, offers one encouraging fac to r for fu tu re orders. Follow ing estim ates by c o p p er producers th at A ugust and Septem ber business w ould decline sharply from last y ear and the early m onths of this year, m ajo r producers an nounced curtailm ents in outp u t. T hese c u t backs in m ine p ro d u ctio n are not expected to affect o u tp u t of refined co p p er until about O ctober since approxim ately 90 days are re qu ired from the tim e copper ore is m ined to the tim e it is concentrated, sm elted, and re fined. Department store sales at high level in July and August D istrict d epartm ent store sales during July were 7 percent higher th a n a y e ar ago. H ow ever, after adjustm ent fo r seasonal variation, they w ere unchanged from the record level attain ed in Ju n e o f this year. Prelim inary figures indicate th a t the seasonally adjusted index for the Twelfth D istrict rose slightly in A ugust, w hich co ntrasts w ith the m inor de cline in the national index. Car sales in California fell off in July and August D aily average new autom obile registrations in C alifornia w ere 2,153 during July, 11 p er cent below the Ju n e level; how ever, auto sales usually decline from June to July. A lm ost the entire decline occurred in the last w eek of July w hen the daily average was the low est it has been since the first w eek o f F ebruary . R egistrations during July were the highest they have been during th a t m onth since 1955. D uring the first 20 selling days of A ugust, the daily sales rate dro p p ed 16 percent below the July level. Plentiful supply of canned fruits and vegetables T w elfth D istrict canners are expected to pack ab o u t 150 m illion cases of fruits and vegetables in 1962. W ith the large inventory on h an d at the beginning o f the canning year, a n ear-reco rd supply of canned pro d u cts is in p ro sp ect fo r the 1962 m arketing season. D istrict canners started the season w ith a rec o rd high inventory of canned fruits. O n Ju n e 1, can n ers’ stocks totaled m ore th an 13 million cases. W ith large supplies of raw m aterial in prospect, despite th e trad itio n al “green d ro p ” of cling peaches in C alifornia, canners’ price quotations fo r th eir fru it products are gener ally low er th a n a y ear earlier. T he opening price for freestone peaches is rep o rted to be the low est th a t canners have ever quoted on this item . P rices fo r apricots are an exception to the general dow nw ard adjustm ent in can n ers’ prices. A sm all cro p o f apricots boosted the co n tract price to C alifornia p roducers from $80 a t o n i n 1961 to $135 a t o n i n 1962. A s a result of this increased cost of raw m ate rial to canners, the price of th e canned p ro d uct w as raised som ew hat less th an 1 0 percent. In co n trast w ith the rep o rted dow nw ard m ovem ent in prices for canned tom ato products nationally, the opening price q u o ta tions by D istrict canners w ere about the sam e as a y ear earlier. H ow ever, the pro d u ctio n of tom atoes for processing m ay be larg er in the D istrict th an an ticip ated because o f recent im provem ents in yields. If increased supplies are realized, som e w eakening in canned to m ato prices m ay occur. Near-record output of crops in prospect D espite the rem oval of ab o u t 2 m illion acres of D istrict farm lan d fro m crop p ro d u c tion u n d er F ed eral “ em ergency” farm p ro gram s, the p ro d u ctio n of crops in 1962 m ay exceed the crop o u tp u t in the preceding year 179 FEDERAL RESERVE BANK OF SAN FRANCISCO CHAN GES EN S EL E C TE D BALANCE S H E E T I T E M S O F WEEKLY REPORTBNG M E M B E R BA K K 3 IN LEADSWG C I T I E S (d olla r am ounts in m illio n s) Twelfth District From J u ly 11, 1962 to A u g u st 29, 1962 D o lla rs P e rce n t United States From A u g u st 30, 1961 to A u g u st 29, 1962 D ollars P ercen t From Ju ly 11, 1962 to A ugu st 29, 1962 D ollars P ercen t From A u g u st 30, 1961 to A u g u st 29, 1962 D o lla rs P ercen t ASSETS: Total foam and investmenfs Loans adjusted and invest ments 1 Loans ad justed1 Commercial and industrial loans Real estate loans A gricultural loans Loans to nonbank financial institutions Loans for purchasing and carrying securities Loans to foreign banks Other loans Loans to domestic com m ercial banks U. S. Government securities Other securities — — 0.04 — 161 + <78 — + + 54 + 123 — 62 — 7.02 + 28 + 3.18 + 2.50 2 — 0.83 + — + 0.08 3.38 0.03 — II + 0.14 + 8 ,3 2 6 + 7.19 0.60 1.04 — + 0.36 0.58 + 7,767 + 6,424 + + 6.80 9.24 + 0.93 + 2.10 + 0.49 + 2.06 — 11.13 + 1,966 + 1,641 + 118 + 6.25 + 12.57 + 10.61 + 1,060 + 21.02 11 + 179 + 1,630 — 0.31 + 31.68 + 10.03 0 + 37 + 171 0 + 1.05 — + 150 — 296 — 43 + 64.94 — 4.54 — 1.42 + 609 — 1,162 + 288 + 42.65 — 3.61 + 1.96 + 559 — 2,389 + 3,732 + 37.82 — 7.14 + 33.07 — 194 + 50 + 192 — 1.66 + 0.34 + 1.67 — + + — + 1.43 0.24 + 1.66 — 1,217 + 6,709 + 4,374 — 1.97 + 16.50 + 15.07 LIA B ILITIES : Demand deposits adjusted Tim e deposits Savings accounts 880 114 544 ’ Exclusive of loans to domestic commercial banks and after deductions of valuation reserves; individual loan item s are shown gross. Source: Board of Governors of the Federal Reserve System and Federal Reserve Bank of San Francisco. and ap p ro ach th e record level of crop p ro d u c tion in 1959. A ccording to A ugust 1 p ro d u c tio n estim ates, favorable grow ing conditions fo r m ajo r crops are expected to boost yields substantially from th eir 1961 levels. T he m ost p ro n o u n ced increase is anticipated for the w heat crop in W ashington w here yields are forecast to rise by m ore than one-third. Y ields of tom atoes for processing are also expected to rise sharply in C alifornia; they m ay be even higher th a n indicated by the A ugust 1 re p o rt if yields from early pickings are m ain tained. Farm loans remain high P ro d u ctio n loans outstanding to D istrict farm ers from lending institutions rem ain above a y http://fraser.stlouisfed.org/ ear ago despite the high level of cash Federal Reserve Bank of St. Louis incom e. T he increase in loans stem s in p a rt from the expansion in th e D istrict o f cattle feeding, which relies heavily on th e use of credit, and from the inability o f som e fa rm ers, p articularly p ro d u cers o f spring potatoes, to liquidate com pletely loans c arried over from the extrem ely p o o r 1961 season. Loans of District banks increased from mid-July through August as security holdings and deposits declined D uring th e m id-sum m er perio d from July 11 to A ugust 8 , T w elfth D istrict b anks were u n d er som e reserve p ressu re as th e level of total deposits declined. R eflecting this som e w hat tig h ter position, D istrict b an k s w ere net purchasers of F ed eral funds in ra th e r substan September 1962 MONTHLY REVIEW tial am ounts. T hen, as deposits w ere gained back in the last h alf o f A ugust, the pressure o n reserves was eased and D istrict banks b e cam e net sellers of F ederal funds. W eekly reporting m em ber banks in the D is trict experienced th e usual sum m er slackness in business borrow ing from m id-July to m idA ugust, w hich was follow ed by an increase in loan d em and during th e last half of A ugust. In the la tte r period, the increase in com m er cial and industrial loans was fairly widely dis trib u ted am ong the various categories of busi ness borrow ers. N ondurable goods m anufac tu rers registered the largest gains, m ainly due to seasonal borrow ings by food, liquor and tobacco firms. In the durable goods sector there were gains in loans to prim ary m etal, tra n s p o rta tio n equipm ent, and “ o th er durable goods” m anufacturers. C om m odity dealers increased their borrow ing seasonally, and tran sp o rtatio n , com m unication and public utilities firms also increased th eir b an k debt. B anks continued to seek real estate loans actively from m id-July through A ugust and added ab o u t $ 123 m illion to their m ortgage portfolios. L oans to n o n b an k financial in stitutions also rose as sales and personal fi nance com panies increased their borrow ings. T h e “o th er loans” category show ed a gain as consum ers continued to increase their ban k debt. T he only sizable decrease during this perio d was in agricultural loans, and it was due to a reduction in b an k holdings of C om m odity C redit C o rp o ratio n g u aranteed loans. C hanges from m id-July through A ugust in th e holdings o f U nited States G overnm ent securities of D istrict w eekly reporting banks w ere largely due to the new T reasu ry issues acquired on A ugust 15. C ertificate holdings rose $135 million as of th a t date, and bonds in the over-5-year range increased $138 m il lion. A decline of $228 in T reasu ry bills m ore th a n offset the acquisition of new certificates. T h ere was also a decline of over $500 million in FRASER Digitized forbonds in the 1 - 5-year m aturity range as the 2Vz p ercen t bonds of A ugust 15, 1963 d ro p p ed into the u n d e r-l-y e a r category in m id-A ugust. W eekly rep o rtin g banks had w eekly decreases in their portfolios of se curities o th er th an U nited States G overn m ents th ro u g h o u t A ugust, a reversal of the upw ard tren d prevailing through July o f this year. A s previously m entioned, b anks lost de posits in the first p a rt o f the period u n d er re view as a decline in dem and deposits adjusted was accom panied by low er U nited States G overnm ent deposits, and as w ithdraw als of tim e deposits by States and political subdi visions practically offset the gain in savings deposits. In the la tte r h alf of A ugust, how ever, U nited States G overnm ent deposits in creased as a result of paym ents received fo r the new T reasu ry issues on A ugust 15. D uring this perio d the increase in savings was suffi cient to m ore th an offset continued w ithdraw als in o th er time deposit categories. Growth in time deposits at District banks slowed down in July and August Billions of D o llars I960 1961 1962 N ote: Data are for Twelfth D istrict weekly reporting member banks. Time deposit data from February 1961 through Septem ber 1961 have been adjusted to exclude loan funds of a national retailer temporarily held as time certificates of deposit. Demand deposits adjusted are total demand deposits other than domestic commercial interbank and United States Government, less cash items in process of collection. FEDE RAL RESERVE BANK OF SAN FRANCISCO T able 1 CH ANG ES IN REAL E S T A T E LOANS OF TW ELFTH D IS T R IC T M EM BER BANKS (d olla r am ounts in th ousa n ds) M arch 2G, 1962 to June 30, 1962 D o lla rs P ercen t Total real estate loans 3 1 0 ,8 2 7 Secured by farm lands Not insured by either Sizable growth in District member bank credit during second quarter T he d a ta now available fo r all D istrict m em ber banks as of the C all R e p o rt d ate o f Ju ne 30, 1962 indicate th a t total b a n k credit outstanding increased $902 m illion during the second q u arter, nearly three tim es larg er th a n the grow th in the com parable period of 1961. L oans accounted fo r over tw o-thirds of the gain, w hereas they declined in the sec o n d q u a rte r of last year. D istrict banks co n tinued to invest in higher yielding obligations o f states and political subdivisions b u t re d uced their holdings o f U nited States G ov ernm ent securities by $19 m illion. T here was a second q u a rte r gain of $1,563 m illion in to tal deposits. D em and deposits of individuals, p artn ersh ip s, and corporations and of states and political subdivisions b o th registered in creases d u ring the second q uarter. T w othirds of the $695 m illion increase in tim e deposits was in the savings deposit com po nent. T he do llar increase in savings deposits w as slightly above th a t o f the second q u a rte r of 1961 an d well above th a t o f the first q u a r te r o f this year. Residential mortgages boosted second quarter loan volume D istrict ban k s h ad show n renew ed in ter high yielding real estate loans relatively est in 182 8 1 ,6 5 4 17,054 — 9 .6 7 — 13,288 2.21 — 14,683 — 3.00 1.30 1 2,137 4.28 5 3,5 2 4 Insured by FHA Secured by other properties 4.88 2 10 ,6 5 5 Secured by residential properties Insured by V A D ecem ber 2 9 ,1 9 6 1 to M arch 26, 1962 D o lla rs P ercen t 2,593 — 2 1 ,5 4 7 7.39 — .2 7 — .11 — 4.22 171,814 8.52 10,852 .54 8 3,1 1 8 6 .55 82,805 6.98 du rin g the first q u a rte r o f 1962 as a m eans o f offsetting increased interest costs o n tim e deposits; in the second q u a rte r they c h an neled increased am ounts o f funds in to such loans. N early one-half o f th e to tal lo an in crease fo r the q u a rte r was accounted for by real estate loans. A s T ab le 1 indicates, the increase in real estate loans of D istrict m em b e r banks was m ore th a n 3 V2 tim es greater th a n in the first q u arter o f th e y ear and was equivalent to nearly 75 p ercen t o f the d o llar increase in savings deposits d u ring the q u ar ter. T he largest d o llar increase was in resi d ential m ortgages, conventional and F H A insured. T his was a reversal o f th e experi ence in the first q u a rte r w hen m ost of the do l la r gain was in n onresidential m ortgages; this la tte r type o f m ortgage show ed fu rth e r siz able gains in the second q u arter, how ever. Business loans also rose B usiness loans rose $215 m illion in the second q u a rte r in co n trast to only a nom inal increase in the co rresp o n d in g p erio d o f 1961 and a decline o f $ 105 m illion in th e first q u a r ter of this year, a period w hen seasonal re paym ents are usually in excess o f new b u si ness borrow ings. T h e increase of $218 m il lion in co n su m er loans in th e second q u arter was fo u r tim es th a t o f the first q u a rte r, with passenger autom obile in stalm en t loans ac September 1962 MONTHLY REVIEW th e consum er borcounting for half the gain in consumer b o r rowing. L oans row ing. Loans to farmers registered a larger farm ers than than seasonal gain during the second quarter q u arter and continued well above the year-ago level. The increase in loans to nonbank financial The n o n b an k p articu larly institutions, w hich was particularly heavy which around mid-year, was nearly twice that of a ro u n d m id-year, th a t second q u a rte r the second quarter of 1961. 183 FEDERAL RESERVE BANK OF SAN FRANCISCO BANKING AND CREDIT STATISTICS AND BU SIN ESS IND EX ES— TWELFTH DISTRICT’ ( I n d e x e s : 1 9 4 7 - 1 9 4 9 = 1 0 0 , e x c e p t ■where o t h e r w is e in d ic a te d . D o lla r a m o u n t s in m illio n s o f d o lla r s ) Condititn items of all member banks2’ 7 Bank rates Bank debits index 31 cities’ ’ 6 Demand deposits adjusted* Total time deposits 495 720 1,450 6,619 6,639 7,942 7,239 6,452 6,619 8,003 6,673 6,961 8,278 1,234 951 1,983 10,520 10,515 11,196 11,864 12,169 11,870 12,729 13,375 13,060 14,163 1,790 1,609 2,267 7,502 7.997 8,699 9,120 9,424 10,679 12,077 12,452 13,034 15,116 42 18 30 140 150 153 173 190 204 209 237 253 270 17,779 18.028 17,901 18,212 18,499 7.863 7,955 8,190 8,182 8,278 13,212 13,317 13,901 13,944 14,163 14,656 14,786 14,867 14,874 15,116 262 277 291 265 293 18,646 18,622 18,906 19,070 19,328 19,625 19,669 20,017 8,082 7,820 7,776 7,811 7,582 7,689 7,532 7,309 13,671 13,163 13,235 13,706 13,945 13,101 13,535 13,255 15,448 15,647 15,939 16,091 16,352 16,511 16.587 16,655 294 289 300 311 304 315 315 300 Year and Month Loans and discounts 1929 1933 1939 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 2,239 1,486 1,967 8,839 9,220 9,113 11,124 12,613 13,178 13,812 16,537 17,139 18,499 1961 A u g u st S e p te m b e r O cto b er N ovem ber D e cem b er 1962 J a n u a ry F e b ru a ry M a rc h A p ril M ay J line J u ly A u g u st U.S. Gov't securities Total nonagri cultural employ ment 1 1 short-term business loans8* 7 1929 1933 1939 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 J a n u a ry F e b ru a ry M a rc h A pril M ay J une Ju ly Refined 7, 1 84 86 85 90 95 98 98 104 106 108 82 86 84 90 96 101 96 103 103 102 .... 10S 108 109 109 109 103 103 104 105 105 93 95 100 '.02 101 113 118 115 118 120 126 125 126 127 126 110 106 106 106 107 106 106 107 107p 107 106 104 101 99 100 106 119 120 123 118 121 523 123 124 127 5.45 5^42 110 111 111 111 111 112 112p 5]50 5.52 18 11 19 73 74 74 82 91 93 98 109 110 115 64 42 47 115 113 113 112 114 118 123 123 125 127 128 128 128 128 129 128 Waterborne Foreign Trade Index7 8 1 * ’ 0 Exports Cement Retail food prices Steel7 Copper1 Electric power Total Dry Canjo Imports Tanker Total Dry Cargo 128 7 '97 Tanker 95 40 71 113 115 116 115 122 120 106 107 116 110 109 87 52 67 106 107 109 106 106 105 101 94 92 91 92 78 50 63 112 116 122 119 124 129 132 124 130 134 140 55 27 56 128 124 131 133 145 156 149 158 174 161 169 103 17 80 116 115 113 103 120 131 130 116 99 129 136 29 26 40 136 145 162 172 192 209 224 229 252 271 190 110 163 186 17k 14 1 133 166 201 231 176 188 211 150 247 2i 146 139 158 128 154 163 172 142 138 154 171 io7 194 201 138 141 178 261 308 212 223 305 243 175 130 145 123 149 117 123 123 138 149 124 72 95 162 204 314 268 314 459 582 56 4 686 808 140 141 163 166 187 201 216 221 263 26!) 57 733 1,836 4,2 3 9 2,912 3,614 7,180 10.109 9,504 11,699 1 4,209 110 111 111 110 113 106 91 91 92 92 92 92 143 140 142 144 144 141 157 160 163 171 182 152 183 ISO 174 LSI 167 107 124 107 138 149 147 145 293 300 295 310 305 294 271 247 217 209 256 273 365 322 317 310 331 371 138 140 76 67 118 134 1,026 805 841 872 756 725 297 277 277 307 261 272 20,025 14,586 15.542 15,613 13,573 12,529 106 113 114 112 113 90 90 91 91 92 92 92 139 142 137 135 139 141 147 165 153 175 192 181 160 176 IS t 187 176 151 161 149 128 142 159 150 100 156p •310 295 300 245 272 203 212 266 325 353 306 300 360 130 157 166 86 133 762 572 734 856 839 259 219 299 2 73 322 13,870 8,993 12.085 16,029 14,295 1961 J u ly A ugust S e p te m b e r O cto b er N o v e m b er D e ce m b er Crude Dep’ t store sales (value)5 1 * 1 3.95 4.14 4.09 4.10 4.50 4.97 4.88 5.33 5,62 5.46 Petroleum7 Lumber Car ioadings (number)5 1 * 1 109 59 87 108 108 103 112 112 103 96 101 95 94 Industrial production (physical volume)5 Year and month Total mf’ g employ ment u . •. 1 A d ju ste d fo r se a so n al v a ria tio n , e x c e p t w here in d ic a te d . E x c e p t for b an k in g a n d credit, a n d d e p a r tm e n t sto re s ta tis tic s , all indexes a re based u p o n d a ta from o u tsid e sources, a s follow s: lu m b e r, N a tio n a l L um ber M a n u fa c tu re rs ’ A sso ciatio n , W est C o a st L u m b e rm a n ’s A sso ciatio n , a n d W e s te rn P in e A ssociation; p e tro le u m , cem en t, a n d c opper, U.S. B u re a u of M ines; steel, U.S. D e p a r tm e n t of C o m m erce a n d A m erican Iro n a n d S te e l I n s t i tu t e ; e le ctric po w er. F e d e ra l P o 'v er C om m ission; n o n a g ric u ltu ra l a n d m a n u fa c tu rin g e m p lo y m e n t, U .S. B u re a u of L ab o r S ta tis tic s a n d c o o p e ra tin g s ta te agencies; re ta il food prices, U .S. B u re a u of L ab o r S ta tis tic s ; carioadings, v a rio u s ra ilro a d s a n d ra ilro a d asso c iatio n s; a n d fo reig n tra d e , U.S. D e p a r tm e n t of C o m m erce. 2 A n n u al figures a re as of e n d of y e a r, m o n th ly figures as of la st W ed n e sd a y in m o n th . 3 D e m a n d d e p o sits, e x clu d in g in te rb a n k a n d U .S. G o v e rn m e n t d e p o sits, less cash ite m s in process of collection. M o n th ly d a ta p a r tly e s tim a te d . i D e b its to to ta l d e p o sits ex c e p t in te rb a n k p rio r to 1942. D e b its to d e m a n d d e p o sits ex cep t U .S. G o v e rn m e n t a n d in te rb a n k d e p o sits from 1942. * D a ily a v e ra g e . 6 A verage ra te s on loans m a d e in five m a jo r cities, w eig h ted b y lo an size categ o ry . 7 N o t a d ju s te d for seasonal v a ria tio n . a Los A n g eles, S a n F ra n c isco , a n d S e a ttle indexes com bined. s C om m ercial cargo only, in ph y sical volum e, for th e P a c id c C o a st c u sto m s d is tr ic ts p lu s A la sk a a n d H a w a ii; s ta r tin g w ith Ju ly 1950, “ special c a te g o ry ” e x p o rts a re excluded because of s e c u rity reasons. 10 A laska a n d H a w a ii a re in clu d e d in indexes b eg in n in g in 1950. u In d e x : 1957-1939= 100. p —P re lim in a ry . r — R evised. 184
@FedFRASER