TEXAS BUSINESS REVIEW Bureau of Business Research The University of Texas Vol. XI, No. 8 Septeinber 29: 1937 A Monthly Summary of Business and Economic Conditions in Texas and the Southwest Bureau of Business Research, The University of Texas, Austin, Texas Entered u eecond clasa matter on May 7, 1928, at the post office at Austin, Texas, under Act of August 24, 1912 MILLIONS 01=' e,AR.R.!;_LS 01= 42 U.S. GALLONS 0 100 200 300 4(?0 500 600 790 800 900 1000 1100 1200 l~O 1400 I D[TR..OL[UM PRODUCTION 29 !l I I I I I I I I I TE. X A 5. 0 KLA., CAL I F .. I I I JANp I I Q. E. S T OF U.5 . I I I I I f)uQ.. ~ t>.U or f:>u.1•Nl.tJ Q.. t/ E.A. ll.C "" Tu E:. u N I v l Q. I I T y o r TE. ~ A J I I./ou ~c~ I T\.I( Oil \.VC,cE:l(l'I' J• "I '~ IQ~7 BT E.XAS m OK.LAuoMA ~ CALI FOil UA D IH.St~1~ ~.S. ~ JE ~\\ ~ ~­I ~ ~ . ;~ .TEN CENTS PER COPY ONE DOLLAR PER YEAR TEXAS BUSINESS REVIEW INOE.XE.~ OF f>USINE.5$ ACTIVITY IN TE.XA& AYt.R.AGf. MONTM Of 19)()•aooi. TwL u~1vt,.Q~lf'V Or TL'(A.~ AUGUST EMPLOYMENT AND PAY ROLLS IN TEXAS CLASSIFIED BY CITIES AND EMPLOYMENT GROUPS Pay Rolls Ending Nearest Fifteenth of Month Workers Pay Roll No. of Number Percentage Change Dollars Percentage Change Average Weekly Wage Estab­from from from from per Worker lish· August August July August August July August August July meats 1937 1936 1937 1937 1936 1937 1937 1936 1937 + 18.3 -3.9 Amarillo-----------------38 1,059 + 22.l + 0.7 30,166 +45.9 + 2.3 Abilene~------------------­18 276 + 14.5 -1.4 $ 6,252 Austin__________________ 21 549 + 5.6 + 0.2 11,449 + 5.0 + 4.0 Beaumont ______________________ 3-3 3,257 + 3.9 + 1.7 97,815 + 32.8 + 7.6 Corpus Christi_________________________________ _____ __ __________________ 6 296 + 14.3 + 1.7 3,888 + 10.7 + 6.3 Dallall·-------------------------171 10,562 + 3.2 -1.6 239,826 + 13.4 + 2.8 Denison_________________ 8 844 + 37.7 + 4.1 17,011 + 85.3 + 21.3 El Paso_______________________ 69 2,575 + 30.3 + 1.5 58,482 +56.8 + 6.4 Fort Worth____________ ----74 6,146 + 6.7 -2.9 148,489 + 28.1 -3.3 Galveston_________________ 18 573 0.0 -5.1 15,809 + 12.4 + 1.2 Houston____________________ 147 12,732 + 14.9 + 4.1 326,163 + 30.4 + 5.1 Laredo________________________ 12 206 + 17.7 -1.0 3,049 + 16.7 + 3.3 Port Arthur____________________ 9 8,Q?j'8 + 9.0 -0.1 252,437 + 30.5 + 4.5 San Angelo______________________________________________________________ _ 8 155 + 3.3" + 2.0 2,557 + 9.5 -2.7 San Antonio_______________________ 129 4,937 + 6.4 + 2.3 103,349 + 12.7 + 2.3 Sherman___________________________ 14 788 + 4.5 + 1.0 15,445 + 0.5 + 10.6 Waco___________________________________ 36 1,849 + 12.5 -0.3 34,430 + 17.7 + 3.6 Wichita Falls____________________________ 25 713 + 16.7 + 9.7 16,493 + 29.0 + 11.6 All Other Cities_____________________ 965 35,687 + 5.1 -1.9 950,831 + 21.1 + 0.2 STATE__________________________ 1,801 91,282 + 7.9 -0.3 2,3•33,941 + 23.9 + 2.3 $25.57 $22.27 S24.93 BUILDING MATERIALS 97 8,536 + 9.8 -1.4 181,195 + 25.9 -0.6 21.23 18.52 21.06 Brick, Tile, Terra Cotta__________ 12 609 + 0.2 -3.0 8,158 + 11.3 -0.3 13.40 12.06 13.03 Cement_______ 8 1,319 + 11.5 + 0.2 31,245 + 29.l -5.6 23.69 20.45 25.13 Foundries, Machine Shops______________ 25 2,335 +31.0 +H 63.146 + 42.3 + 2.7 27.04 24.89 Z7.24 Millwork_______________________ 15 608 +13.6 -2.7 12,474 + 17.0 -4.1 20.52 19.93 20.82 Saw Mills___________ ___ 13 2,828 -0.1 -4.2 45,902 + 13.8 -1.6 16.23 14.24 15.80 Structural Iron Works_________________________________ 10 706 -1.4 -5.1 17,113 + 18.4 + 2.7 24.24 20.18 22.40 All Other Building Materials________________________ 14 131 + 13.9 -2.2 3,157 + 21.1 -1.7 24.10 22.66 23.98 CHEMICALSll _____ -----------------------------------29 701 + 8.9 -3.4 15,817 +21.5 -0.7 22.56 20.21 21.94 CLOTHING AND TEXTILES______________ 37 3,812 + 2.6 + 5.6 49,080 + 8.7 + 12.0 12.88 12.15 12.14 Cotton Textile Mills_____________ 8 2.046 + 13.0 + 9.3 27,990 + 27.4 + 18.7 13.68 12.14 12.60 Men's Work Clothing ____ -----------------------_____ 13 1)35 -17.4 -2.2 12,314 -23.9 + 1.7 10.85 11.77 10.43" Other Clothing and Textiles____________________________ 16 631 + 18.6 + 9.2 8,776 +25.5 + 7.7 Vl.91 13.15 14.10 COTTON OIL MILLS ___ -------------------------________ 31 73-1 + 2.2 +50.4 11,243 + 13.7 + 52.9 15.38 13.83 15.13 DISTRIBUTION____________________ 568 17,443" + 7.2 + 0.9 378,272 + 15.6 + 2.9 21.69 20.12 21.27 Retail Trade_ _____ 355 12,108 + 6.9 + 0.6 229,933 + 14.5 1.0 18.99 17.73 18.91 Wholesale Trade_ _______________ 213 5,335 + 7.9 + 1.7 148,339 + 17.3 _L 6.0 27.80 25 .58 26.68 FOOD PRODUCTS__ 104 7,607 + 9.7 -4.7 178,859 + 30.2 -2.5 23.51 19.81 22.98 _L Bakeries_______________________________ 22 751 + 11.6 + 1.2 15,285 + 18.l + 4.8 20.35 19.23 19.66 Beverages_____________________ 16 463 + 9.2 + 1.5 11,:J.10 + 8.1 + 8.0 24,_43 24.67 22.97 Flour Mills_____________________________ 8 544 + 14.3 + 0.2 13,267 +30.4 -4.6 24.39 21-38 25.62 Ice Cream Factories __ ___ _____ __ _________ ___ ____ 6 350 + 11.5 -8.1 7,271 + 23.6 + 3.0 20.77 18.74 18.53 Meat Packing, Slaughtering_______________ 10 3,742 + 12.7 -1.5 100,296 + 40.0 -3.4· 26.80 21.58 27.32Other Food Products__________________________ ___________ 42 1,757 + 1.7 -14.5 31,420 + 19.8 -6.2 17.89 15.19 16.29 FOREST PRODUCTS_____ 29 1,449 + 1.1 + 0.6 27,224 + 9.6 + 2.8 18.79 17.33 18.38 Furniture Manufacturing______________________________ 6 -2.3 474 + 2.6 9,922 + 7.5 + 7.7 20.93 19.02 19.94 Paper Products ___ -----------------------------------------12 515 + 0.8 -1.3 10,096 + 9.1 + 0.8 19.6o 18.11 19.18 Other Forest Products____________________________________ 11 48l + 5.3 + 0.7 7,206 + 13.5 -0.8 15.67 14.53 15.90 PETROLEUM________________________ 59 25,146 + 7.5 + 0'.6 847,531 + 31.7 + 4.6 33.70 27.51 32.41 Crude Petroleum Producing_______________ ____ 25 5,489 + 5.6 + 0.7 199,453 + 18.3 0.5 36.34 32.46 36.42 ...i... Petroleum Refining__________________ 34 19,657 + 8.0 + 0.6 648,078 + 36.5 + 6.0 32.97 26.09 31.29 PRINTING AND PUBLISHING____________ 56 1,516 + 5.6 -1.7 48,194 + 14.0 0.0 31.79 29.45 31.24 Commercial Printing____________ 33 498 + 5.1 -5.0 11,952 + 8.1 -3.8 24_00 23.32 23.72 Engraving _ ____ ____ ____________________ ________ _ __ _ 7 -3.8 -1.9 51 2,325 + 16.7 -7.7 45.59 37.58 48.46 Newspaper Publishing_____________________ 16 967 + 6.4 0.0 33,917 +16.0 + 2.0 35.07 32.17 34.4-0 PUBLIC UTILITIES________________________________ 507 13",250 + 6.5 -2.7 372,640 + 17.2 -1.7 28.12 25.55 27.82 Power and Light__________________________ 441 7,652 + 7.9 -0.5 218,812 + 16.3 -2.0 28.60 26.52 29.02 Steam Railroad Repair Shops ________ ____ _______ 20 2.837 + 10.3 -1.7 80,838 + 29.5 + 4.1 28.49 24.26 26.92 Other Public Utilities _ _____________ _ _______ 46 2,761 -0.7 -9.4 72,990 + 8.2 -6.7 26.44 24.26 25.66 QUARRYING & NON-METALLIC MINING __ 29 879 -6.7 -20.3 21,669 + 7.4 -16.1 24.65 21.42 23.42 SERVICE_________________________ _ 133 5,464 + 3.6 -1.8 80,915 + 6.3 + 0.2 14.81 14.43 14.51 Business and Personal Service________ 25 307 + 5.1 -0.6 7,635 + 6.6 -1.9 24.87 24.53 25.19 Hotels________________________ 28 2,578 -0.2 -2.Z 32,463 + 3.3 -1.4 12.59 12.16 12.49 Ice_______________________________ 55 l,~48 + 10.7 -3.7 21,833 + 8.7 + 6.9 19.02 19.37 17.13 Laundries, Dyeing and Cleaning_____ ___ 25 1,431 + 4.9 + 0.4 18,984 + 8.6 -3.1 13.27 12.81 13.75 ALL OTHER INDUSTRIES 122 4,748 + 30.6 + 4.3" 121,302 + 46.2 + 8.8 25.55 22.82 24.50 JI Chemical and Allied Industries not elsewhere classified. Stati~~:.= Prepared from reports from Texas industrial establishments to the Bureau of Business Research, coOperating with the United States Bureau of Labor Business Review and Prospect Improvement in industry and trade in the country at large this fall is now expected to fall short of earlier expectations. The sharp declines in the security and commodity markets may not only forecast a change in the trend of business activity, but, if sufficiently pro­longed, may actually contribute to bring about a decline. It has frequently been pointed out in these columns that rising costs, especially if these should exceed the rise in incomes, hold a menace to continued business improvement. Whether the present slowing down in business improvement, at the time when a substantial pick-up was logically to have been expected, is a result of the sharp rise in costs represented by increases in wages, commodity prices, and the like earlier in the year cannot be proved. It nevertheless seems probable that the marked rise in steel prices, for instance, last winter, with a corresponding increase in wages is now being reflected in the announced increases in automobile prices. What the effect will be on demand for cars is yet to be determined and constitutes for the time being a cloud on the business horizon. The same general sit­uation prevails in the building industries in which pres­ent activity is far below earlier indications, influenced no doubt, in a measure at least, by the sharp increase in costs. Some of the factors which are currently serving as a depressant to business sentiment should really have the opposite effect; among these is the decline in commodity prices. It surely was not to be expected or desired that the high drouth-induced prices of grains and feedstuffs should be maintained at the level which prevailed prior to the new crop year. This situation would have been disastrous to the main pillars of American agriculture­the live stock industries. Again, the decline in prices of industrial metals should be viewed with approval rather than pessimism, from the standpoint of its future effect on American industry. Of course, the decline could go too far but there are no present indications that this will take place. There is every indication that consumer buying power will be well maintained for many months ahead. Farm buying power undoubtedly is on the upgrade ; urban buying power, as represented by employment and pay rolls, remains well above last year and is at the highest point since 1930. Under these circumstances it is diffi­cult to vision a serious decline in business this fall and early next year. On the contrary, it appears more likely that the upward trend of business will soon be resumed unless interrupted by adverse domestic or international political developments. TEXAS BUSINESS Texas business continued during August the steady upward trend which has prevailed with but minor inter­ruptions since the spring of 1935. After adjustment for seasonal variation, the composite index of Texas busi­ ' J l t 102 4 · A t A ness rose frOID loo·1 Ill U Y 0 ' Ill Ugus ' S pointed out in previous issues of the REVIEW, this index represents a percentage, using the aYerage month in 1930 as a base. In August, 1936, the index was 89.5. The improYement in Texas business oYer August last year was more than 11 per cent. All of the components entering into the composite index were well aboYe August last year. For employ­ment the gain was from 86.0 to 94.4: pay rolls, from 78.0 to 98.9; carloadings, 76.7 to 81.4; runs of crude oil to stills, 144.8 to 166.1; department store sales, 99.8 to 110.0; and electric power consumption, 102.2 to 123.2. There was a decline in the index of runs of crude oil to stills from July to August-173.5 to 166.4--and the index of employment showed virtual!Y no change. The remaining three indexes showed substantial gains from July to August. Not only do the elements which enter into the busi­ness index discussed above justify a moderately optimis­tic attitude toward Texas business, but a number of others not included in the index point in the same direc­tion. Texas cement statistics during August were quite favorable; the number of new corporations chartered during the month increased slightly, while the capitaliza­tion of these new firms increased sharply; and building permits in the majority of Texas towns and cities made favorable comparisons. As is shown below, the farm cash income of Texas continues favorable, and along a number of lines of agricultural activity the outlook is bright. TEXAS FARM CASH INCO:\IE Farm cash income in Texas during August maintained the wide margin of improvement over a year ago which has prevailed for several months. Using the aYerage monthly farm cash income in Texas for the sixty months from 1928-32, inclusive, as a base and adjusting for seasonal variation, farm cash income in August this year was 135.2 per cent of this base compared with 69.6 per cent during August a year ago. More significant, however, than the comparative fig­ures for the State as a whole are the corresponding indexes for the various crop reporting districts. These are shown in the following table: I DEX OF AGRICULTURAL CASH INCOME August August July District 1937 1936 1937 1-N ·---··--·------------·--·-­ 155.8 51.9 173.0 1-S ------·---------·---­ 111.6 97.7 134.4 2 -·----· -----------------------­ 109.0 65.7 162.6 3 ····-­ ·------·-----------­ 155.5 76.7 196.8 4 -·--------------------­ 134.1 80.l 187.7 5 ---------­---------·-­--­ 105.1 51.9 160.3 6 --------------------­ 189.3 99.5 123.4 7 ----·-------------­ 137.0 50.4 154.9 8 -·-·---------------­ 108.9 49.4 94.6 9 -------·---·--------­--­ 107.8 50.2 79.8 10 --­ -· .. -­ ----------205.6 129.3 91.3 •10-A -· ---· --------------­ 317.5 96.2 139.8 STATE __ ·-------­ 135.2 69.6 135.2 • Lo cluded in District 10. . ·oTE : f or crop reporting dl etricto, oee map, pagea 4 &lld 5. (Continued on page 6) For Other Texas Data, See Statistical Tables at the End of This Publication INDE.X· Of AGR.ICULTUR.AL CAS~ INCOME.· IN ·TE.XAS · Bv ·01s1R.1crs L l!.Gl!.ND MONTHLY · IN.Dt.~­TWLLVL MONTMa M0VIM6 lva.&Mt.­ 1tit Ur11vLll..ldV Qt lt.•A=> AVl!.RAGI!. MONTH or 192& -19:12 • 100% INOE.X Or ·AGR.ICULTUR.AL· CAS~ INC 0 ME.· IN· TE.X AS · l)y · 0 IS TR. IC TS LLGl.NO MOHTMLV IHDL X ­T\YL LVI, MONT MS · "OV ING ·AvU.A(ll ­THL ur11Vlll~1lf Ot lt ll"~ fW LA. •GI. · MON TM· Of 192& -19~2 • 100"/. (Continued from page 3) It is unnecessary to do more than mention the fact that the crop reporting districts of Texas delineate areas having relatively homogeneous characteristics in the mat­ter of natural factors affecting agricultural production. As a result of this fact a high degree of agricultciral specialization prevails in the various districts. In district 1-N, for example, wheat and grain sorghums are the main cash crops, while livestock and livestock products also furnish a substantial part of the cash income of the region. In district 1-S cotton and grain sorghums are the main cash crops, with the income supplemented to an important extent by livestock and livestock products. In districts 3, 6, 7, and 10 livestock and livestock prod­ucts constitute the main sources of income, and it is noteworthy that in these districts the percentage gain in farm income over the base period was most pronounced. District 1-N also benefited from the large production and good price of wheat. Districts 2, 5, and 8, pre­dominantly cotton producing districts, made relatively less favorable showings. District 4, although primarily a cotton district, produces wheat in the northern portion and derives considerable income from livestock and live­stock products. Proximity to good local markets also gives district 4 advantages; and, as a result of these factors, the index of farm cash income in this district approached quite closely that of the more distinctly live­stock districts. Moreover, the actual farm cash income in this district during August amounted to more than one-fourth of the total for the State. District 10-A is composed of the four counties in the lower Rio Grande Valley. An unusually large cotton crop in this district, which was marketed before the sharp break in cotton prices occurred during recent weeks, caused the sharpest rise in the farm cash index of any region of the State. The actual computed farm cash income in these four counties during August totalled $5,226,000, compared with only $1,584,000 during August last year. F. A. BUECHEL. Petroletim The outstanding fact regarding petroleum in 1937 has been, and is, the increased production over that of previous years. Throughout 1936 petroleum production for the United States as a whole was greater than for 1929-the record year up to that time-and the 1929 production level was not exceeded until 1936. In 1929 petroleum production in the United States passed the billion-barrel mark and attained a level more than two and one-half times what it had been a decade earlier in 1919. Throughout 1937 petroleum production has averaged an increase of about 18 per cent over the preceding record year of 1936 and has been about t\renty-seven per cent greater than for the year 1929. Everyone knows that the two major fuel and power raw materials in the United States are bituminous coal and petroleum. Since the World War, coal in the United States has been an industry severely affected by condi­tions of chronic overcapacity, and often has been re· ferred to as a chronically sick industry. Recently there has been established in the Department of the Interior at Washington a National Bituminous Coal Commission, directed by law to study, among other things, the "com­petitive relationships between the bituminous coal and other forms of fuel and energy." So far as the oil in­dustry is concerned, this new set-up reflects national recognition of the fact that "fuel oil in some localities and for some purposes is a very active competitor of bituminous coal. ..." The facts are that most of the petroleum produced is, after refining, used "in the form of gasoline, kerosene, and lubricants, for which purposes coal cannot well compete, except at vastly higher levels of oil prices than now prevail. "For this reason," states the Commission, "only a limited part of the production of oil may be con~iclercd as directly competitive with coal." Comparing, however, the production trends of bitumi­nous coal and petroleum, two significant items stand out: (a) From the longer point of view, there has been the steady increase in petroleum production almost from its very beginning in 1860 to the level attained in 1937, during which time the weekly production of petroleum converted into its bituminous coal equivalent has aver­aged more than five million net tons, whereas the weekly bituminous coal production in the United States has averaged around eight million net tons. These data reflect roughly, for certain comparative purposes, the high position petroleum has attained in this country as a producer of fuel and energy materials. Were the com· parison carried further so as to show the utility of gaso· line, kerosene, and lubricants, the comparative sig· nificance of oil would bulk much larger indeed. ( b) Comparing short-time production trends of bitu· minous coal and petroleum, the amazing fact is the obvious uniformity of petroleum production during the year, from week to week, from season to season, when contrasted with the sharp and strong fluctuations that have characterized bituminous coal production whether in 1929, in 1936, or thus far in 1937. It is obvious that these trends of development have immense significance to Texas, supplying as this State does some forty per cent of the national output of petroleum and a like share of the gross production of natural gas of the country. The economic significance of Texas is further shown in the value of mineral products of the various States in a report issued in the :11inerals Yearbook, 1937, by the Bureau of Mines. These values for 1936 are not yet available, but in 1935 Texas for the first time led all other States with a mineral products value of more than $528,000,000. The great coal producing state, Pennsyl· vania, came second with mineral values in excess of $520,000,000. California ranked third with a value of S360,000,000. Oklahoma and West Virginia each had less than half the value of the Texas mineral output. ELMER H. JoHNSON. Financial In general, the pos1t10n of the commercial banking system has changed but little during the summer months. Perhaps the most significant developments have been a further shifting from investment securities to customer loans and a sharp drop in deposit balances carried by domestic correspondent banks. Both of these trends were in evidence last spring and both reflect a widening demand for commercial credit. The adjusted demand deposits of the reporting mem­ber banks decreased from $15,425,000,000 on May 19, to $14,811,000,000 on September 8. The shrinkage of some $600,000,000 represented for the most part a with­drawal of balances from metropolitan institutions by country correspondent banks which needed the funds either to meet reserve requirements or to accommodate a growing demand for credit from their local customers. Reflecting the increasing demand for commercial credit, bank loans have continued to expand. Real estate loans and loans to security brokers and dealers have increased slightly during the past four months. The most sig­nificant expansion, however, has occurred in the cate­gory of "commercial, agricultural, and industrial loans," which increased from $4,189,000,000 on May 19, to •$4,688,000,000 on September 8. Over the same period, these banks decreased their holdings of Federal govern­ment obligations from $9,476,000,000 to $9,322,000,000 ·and their holdings of "other securities" from $3,201,­000,000 to $2,952,000,000. Since September 9, 1936, the reporting member banks have reduced their govern­ment bond portfolios by $1,165,000,000 and their in­ vestments in "other securities" by $367,000,000. This substantial liquidation of bonds has been largely :concentrated in two periods. During last March and April, heavy sales were effected in an effort to meet the increased legal reserve requirements ordered by the Fed­ eral Reserve Board to be effective March 1 and May 1. Mid-summer selling has again been in evidence occa­.sioned, apparently, by a desire to meet a growing de­:mand for commercial credit with the proceeds of such sales, rather than through borrowings from the reserve banks. In both instances the bond market, including .the government list, weakened noticeably. Short term ·money rates, however, have thus far shown little in­dination to rise. This recurrent weakness in the bond market, espe­'cially in the prices of Treasury obligations, explains almost wholly the recently announced changes in Fed­.era! Reserve Bank discount policy. Since August 3, all of the reserve banks except the Cleveland Bank have reduced their discount rates, the reduction in each in­stance amount to one-half per cent. Eleven of the re­·ierve banks now have in effect a discount rate of one md one-half per cent and the New York Bank a rate of )Ile per cent, which latter is reported to be the lowest :ate ever used by a central bank. The object of this )Qlicy is not only to keep money market interest rates .ow but to induce member banks to meet demands for ~redit by borrowing from the reserve banks rather than :1elling government obligations, which tends to depress .he market for such securities. On September 11, following a two-day meeting of the federal Rcsen·e Open :\larket Committee, it was an­nounced that two additional steps looking toward credit ease would be taken. The Treasury had agreed to ·'de­sterilize" $300,000,000 of gold and the Open Market Committee indicated that the federal Reserve System would buy Treasury bills and notes in the market from time to time ,,·hene,·er such action appeared to be de­sirable. \\.ithin the next several days $300,000,000 of gold was sold to the Reserve System, but the reserve banks as yet have not indulged in open market purchas­ing of securities. The announced objectiYes of these two moves is to prevent a probable seasonal tightening of the short term money market. Since the .;\lay 1 increase in legal re­ser\'e requirements, excess reserve balancs of the mem­ber banks haYe ranged between $100,000,000 and S950,. UUU,000, standing on September 15 at approximately $88U,OUO,UOU. It is anticipated that these loanable funds will be depleted by $30U,000,000 before the year-end because of the normal seasonal expansion of currency in circulation. l Since ]ul y 28, a currency expansion of $130,0UO,OOO has already occurred.) Further depletion of excess reserves is expected as a result of the autumn increase in commercial lending. It is entirely possible that these two trends will more than exhaust the present excess reserves of the member banks, especially those of the metropolitan banks. Should this situation develop, it is reasonable to expect short term money rates to rise and goYernment security prices to fall, as commercial banks liquidate these obligations (probably Treasury bills and notes which provide exteremely low yields) in order to restore their reserve positions. The Treasury sale of hitherto sterilized gold will tend to presene easy money conditions by adding eventually perhaps 15 per cent of the $300,000,000 to member bank resene balances. The i::_eserve banks paid for this gold merely by crediting the Treasury's checking account on their books. As the Treasury spends this credit for its innumerable operating expenses, the fund will be paid into circulation whence it will inevitably drift into com­mercial banks and eYentually be added to member bank resene accounts. The open market buying of securities by the reserve banks operates in a similar manner. Re­serve bank purchases are paid for by cashier's checks or mere credits ( in the case of member bank sellers) to deposit accounts. In either event, the amount paid is sooner or later added to member bank reserve balances. Both gold selling and open market buying result in in­creasing the supply of loanable funds and easing the money market and are inflationary in character. It is unnecessary to elaborate on the inherent contra­dictions imohed in our present central bank discount policy. It is contradictory to announce a policy, as was done last December, of sterilizing all gold imports by holding them in an inactive gold account, and then, sub­sequently to start selling this gold to the reserYe banks. It is e,·en more contradictory to raise legal reserve re­quirements in the spring to check credit inflation and in the fall to buy securities in the open market to keep interest rates easy. The real concern of the Treasury, for the Treasury and the Federal Reserve Board are one and the same for all practical purposes, is to maintain at all hazard.s an artificially high market for Federal Government obli­gations. Any tightening of the money market at the present time would seriously embarrass the Treasury, which has outstanding a floating debt of some $14,000,­000,000 in the form of notes and bills, a sizable portion of which must be renewed within the next six months. Rising money rates would increase substantially the in­terest cost of this debt and render more difficult the flotation of new security issues to finance the steadily accruing Treasury deficit. Already during the first two months of the pres~nt fiscal year, i.e., during July and August, a net deficit of $272,000,000 (gross deficit of $352,000,000) has been incurred, despite an increase of 35 per cent in tax revenues over the corresponding period last year. This experience, it should be remembered is recorded in the fifth year of business recovery. Just' so long as the Federal Government refuses to put its fiscal affairs in order, it seems certain that the central bank discou.nt policy will be shaped to fac~l!tate Treasury financmg rather than to reflect the leg1t1mate business needs of the country. J. c. DOLLEY. The Furniture Industry in Texas The manufacture and sale of household furnishings in the United Stales are accelerated as new homes are built to overcome the shortage of family dwellings. Be­cause residential building has been greatly below nor­mal for at least six years, it is estimated by Dr. A. P. Haake, Managing Director, National Association of Fur­niture Makers, that it will be necessary to build as many as 4.00,000 new homes every year for the next ten years to supply the country's housing needs. The rise or decline in the volume of furniture manu­factured and distributed is directly related to the activ­ity in residential building. As building is one of the first industries to suffer during depression years and one of the slowest lo recover, the decrease in building per­mits in the United States from 1930 to 1935 is par­ticularly significant as one factor in the condition of the furniture market during this period. Although resi­dential building is still more than 50 per cent below the peak reached in 1928, the Bureau of Labor Statistics reports that the amount spent for residential building in the United States during the first six months of 1937 totaled $410,761,413 as compared with $290,023,698 for the corresponding period in 1936, or a gain of 41.6 per cent, and provided new homes for 29,016 more families than were provided for during the first six months of 1936. The Statistical Abstract of the United States for 1936 estimates the cost of new residential building in this country at $1,859,430,000 for 1928 compared with $211,988,000 for 1935. In his analysis of the 1935 Census of Manufactures covering the furniture industry, Mr. J. T. Ryan, Secre­ tary of the Southern Furniture Manufacturers Associa­ tion, High Point, N.C., inc:luOrts from Texas chambers of commerce to the Burl'!au o{ Uusine'le Research. AUGUST CREDIT RATIOS IN TEXAS RETAIL STORES (Expressed in Per Cent) Ratio of Ratio of Ratio of Number of Credit Sales Collections to Credit Salaries Stores to Net Salce Outstandings to Credit Sales Reporting 1937 1936 1937 1936 1937 1936 All Stores------------------------------------------------------------------------------------------62 57.3 55.5 36.3 35.6 1.6 1.6 Stores Grouped by Cities: Abilene____________________ __________________________ ------·-------3 59.5 58.7 28.7 26.0 2.1 2.1 Austin____________________________________________________------------5 54.5 55.9 38.3 36.4 1.6 1.5 Dallas _____ --------------------------------------------------------7 63.2 59.8 37.9 38.3 1.3 l.4 Fort Worth---------------------------------------------------8 53.5 51.6 34.4 32.4 1.9 1.8 Galveston-------------------------------------------3 58.6 59.0 36.8 38.2 3.1 2.9 Houston.-----------------------------------------7 64.2 61.9 37.5 36.5 1.7 1.8 San Antonio----------------------------------------------·-··---5 46.3 46.7 41.7 41.8 1.3 1.1 Waco_____________________ 4 60.6 57.1 26.0 25.l 1.8 1.8 All Others...-------------------------------------20 53.7 52.8 33.8 32.1 2.1 2.2 Stores Grouped According to Type of Store: Department Stores (Annual Volume Over $500,000) _____________ -----12 51.8 50.8 38.7 37.3 1.6 1.6 Department Stores (Annual Volume Under $500,000) _______ ----13 57.1 56.5 31.3 29.5 2.2 2.4 Dry Goods-Apparel Stores___________________________ ----5 55.2 56.7 31.3 27.9 2.7 2.8 Women's Specialty Shops------------------------------------12 66.6 62.9 32.0 32.5 1.0 1.1 Men's Clothing Stores__________________________________ --· --20 66.3 63.6 37.0 37.6 2.0 2.0 Stores Grouped According to Volume of Net Sales During 1936: Over $2,500,000____________________________________________________ -6 54.8 50.6 38.9 4-0.9 1.4 1.5 $2,500,000 down to $1,000,000_______ ------------·-----.. 3 55.2 55.8 36.0 38.7 1.5 1.5 $1,000,000 down to $500,000 ----------------7 61.2 60.3 40.l 38.2 2.6 2.3 $500,000 down to $100,000 -----------------32 57.8 56.0 33.7 34.0 2.4 2.8 Less than $100,000 9 52.3 47.4 36.2 46.9 4.7 4.1 Non: The ratios shown for each year, in the order lo which they appear from left to right, are obtained by the followin.g oomputation9 :. (I) Credit sale.s _divided by net sales. (2) Co11ections during the month divided by the total accounts unpaid on the first of the month. (3) Salaries of tho credit department d1v1ded by ered~h:S-1:~ are reported to the Bureau o( Businea1 Research by Tex81 retail Jtores, BANKING STATISTICS (In Millions of Dollars) Auguot 1937 Dallas United District States DE.BITS to individual ac.counts--.-----------------------------------------­-------------------------------------------969* 4-0,597* Condition of reporting member banks on-Sept. 1, 1937 ASSETS: Loans and investments-total------------------------------------------------------------------------------------­ Loans-total________________ __ _____ _ __________ __ _________________________________ __ ____________________________ 508 22,319 Commercial, industrial, and agriculturnl loans: 234 10,027 On securities------------------------------------------------------------------------------------------------------13 595 Otherwise secured and unsecured_____________________________________ __ __ _ ________ _ _____________ 134 4,043 466 z~:s~:t~~k~:.~:~d·d-~~l~~-i~-~~~-~iti~::::=-:::::::::::::=::.-_~-=-·:::::=::::::::=::::::::=::.=:::::= ~ 1,392 Other loans for purchasing or carrying securities________________ _ _____________________________ _ 16 W3 Real estate loans________________ -----------------------------------------------------------------------------------21 1,164 Loans to banks_______·-------------------------------------------------------------------------------------------------1 135 Other loans: On securities_________ ------------------------------------· ----------------------· --------------------------------9 717 Otherwise secured and unsecured_ ____________________________________________________ ______ _ ___ 34 812 U.S. Government obligations-----------------------------------------------------------------------------------· 196 8,193 Obligations fully guaranteed by U.S. Government___________________________________________ _ ____ 29 1,130 Other securities ---------------------------------------------------------------------------------------------------· 49 2,969 Reserve with Federal Reserve Banks _·--------------------------------------------------------------------111 5,186 Cash in vault -----------------------------------------------------------------------------------------------------9 281 Balances with domestic banks ____ .. ··----_------------------------------------------------------------------142 1,638 Other assets-net_________________________________________________________________________________________________________ 28 1,302 LIABILITIES: *Five 1Not Non:: Demand deposits-adjusted______________________________________________________ _ _________________________387 14,924 Time deposits·--------------------------------------------------------------------------------------------------------124 5,268 U.S. Government deposits·----------------------------------------------------------------------------------------19 591 Inter-bank deposits: Domestic banks·-------------------------------------------------------------------------------------------------181 4,883 Foreign banks----···--------------------------------------------------------------------------------------------· 585 Borrowings____________________________________________________________________________ __ ___ ___________ ______ 1 15 Other liabilities -------------------------------------------------------------------------------------------5 845 Capital account_______________ ·--------------------------------------------------------------------------81 3,615 weeks. available. From Federal Reserve Bonrd. CONTENTS August 1936 July 1937 Dallas United Dallas United District States District State• 815* 39,8ll* 810 35,572 Sept. 2, 1936 July 29, 1937 468 22,263 494 22,283 204 8,4..54 223 9,784 t t 13 581 :j: + + 126 3,844 :j: t 3 464 2 1,163 3 1,363 t :j: 16 701 23 1,145 21 1,163 1 65 2 150 :j: t 8 721 + + t 31 797 178 9,263 191 8,283 36 1,236 29 1,188 48 3,310 51 3,028 97 5,082 llO 5,231 9 371 10 311 175 2,272 149 1,753 27 1,307 26 1,265 359 14,867 4-01 15,033 120 5,032 121 5,268 37 820 10 430 179 5,860 172 5,020 407 1 601 4 32 6 805 4 862 75 3,500 80 3,597 PAGE Business Review and Prospect, F. A. Buechel ----------------------------------------------------------------------------------------------------------­ 3 Financial, J. C. Dolley____________ ----------------------------------------------------------------------------------------------------------------------------------------­ 7 Petroleum, E. H. Johnson ----------------------------------------------------------------------------------­----------------------------------------------­------------­ 6 Rise of the Agricultural Problem and the Cotton Problem, A. B. Cox -10 The Furniture Industry in Texas, Clara H. Lewis --------------------------------------------------------------------------------------------------------­LIST OF CHARTS }~~=~~f jg~~~i~~~-=1fc~~~t~n~~nTei~a;:e~-~~--~~--~'.~'.1:'.~~~-::=::::::_::_=:::_::_:::=_:_:_:::=::::::::::::::::::::::::::::::::::::::=::=:::::::·::·:::::~::::::::~:····· PeLroleum Production-Texas, Oklahoma, California and Rest of United States·-··----------------------------------·---------------------------­LIST OF TABLES Banking Statistics . . . ----····-. --------. ______ -__ -------"-----------------------------------------------------------------------------------------------······ 8 4, ~ I l~ Building Permits -------------------------______ ------------------------------------------------------------------------------------------------------------------------------------------------· 14 ~=~~~~ Movemen~-o_~_!:'o_t'.~~-~y--~n~~--~::_~_::::::::-:::=::::::=::::::::::::::=::::::::::=::::::::::=::::::::::::::::::=::::=::::::::::=::::::::::=::::=:::::::::::=:::::=::·--------··· 14 Charters ____ _______ . ________ -----------------.. ---------------------------------------------------------------------------------------------------------------------·· li Commercial Failures ____ .. ___________ -------------_________ ··-··------------------------------------------------------------------------------------------------------------ 14 Commodity Prices ______ ______ __ ---------------------------·----------------------------------------------------------------------------------------------------------------····· lZ Consumption of Electric Power___________ ----------------------------------------·-··----------------------·----------------------------------------------------·--------------------···-· I Cotton Balance Sheet ____ ____________________ -·--·------------------------------------------------------------------------------------------------------------------------·· !5 Credit Ratios of Retail Stores __________ ---------------------------------------------------------------------------------------------------------------------------------------····· !2 Lumber _ __ . . ___ _ __________ _ ... __________________ -----------·------------------------------------------------------------------------------------------------------------J4 Petroleum --------·----------------------__ ------------------------------------------------------------------------------------------------------------------------------------------------JS ~~~~~i tr~:i~~ i;