FARM PURCHASING POWER

Prices of farm products rose more rapidly during 1934 than did the prices of articles which farmers purchase, with the result that the exchange value per unit of the former improved materially during the year as is set forth in the chapter on commodity prices, and indicated in chart 14.

Figures prepared by the Agricultural Adjustment Administration. indicate that farm prices of 14 so-called "basic commodities" were close

Chart 14.-Trend of farm prices and prices paid by farmers with ratio of prices paid to prices received (United States Department of Agriculture).

Chart 15.-Indexes of parity prices and farm prices of 14 "basic" commodities (United States Department of

Agriculture).

to pre-war parity prices at the beginning of 1935, if allowance is made for benefit payments. (See chart 15.) Farm prices of these 14 commodities had advanced by January 15, 1935, to 106 percent of the pre-war average and, if the adjustment payments of the 7 commodities upon which processing taxes are levied are added to the prices of these commodities, the price index of the 14 commodities advanced to 124 percent, or 2 points less than the parity price level of 126.

Processing taxes collected under the Agricultural Adjustment Act reached a sum of $641,871,000 by the end of 1934. Of this amount $527,502,000 had been distributed as benefits to those cooperating under the act. These taxes at the end of the year were being levied upon wheat, 30 cents a bushel; cotton, 4.2 cents a pound; corn, 5 cents a bushel; hogs, $2.25 per hundredweight; tobacco, varying rates up to 9.5 cents a pound; sugar, 1⁄2 cent a pound; and peanuts, 1 cent a pound. Compensatory taxes are also levied on certain paper and jute products which compete with articles produced from cotton.

133434-35

MANUFACTURING AND MINING

Output of manufacturing industries increased in both quantity and value in 1934. The trend of production during the year was irregularly upward, conforming somewhat to the same pattern as in 1933, but without the extremes of the earlier period when variations in production were in an important measure influenced by the adoption and inauguration of far-reaching governmental policies affecting the manufacture and distribution of goods. The physical quantity of manufactured goods produced in 1934 increased only moderately in comparison with 1933, but price rises caused a much larger increase in the value of such products.

Following the slump in manufacturing industries which followed the termination of the precode rush of activity in the midsummer of INDEX NUMBER (MONTHLY AVERAGE 1923-1925-100)

Chart 16.-Manufacturing production (Federal Reserve Board index adjusted for seasonal variation).

1933 and which extended into November, a rising movement started which lasted until May 1934. The succeeding decline, while not as severe as the one a year earlier, was of substantial proportions and extended over a period of about 4 months. In the final quarter of the year a renewed upward surge of activity took place and the year ended with a rising tide of production and employment, thus duplicating the movement underway a year earlier. Chart 16 portrays the progress of recovery to date and the extent of the intermediate swings.

The aggregate output of manufacturing industries in 1934, according to the Federal Reserve Board's index, was 4 percent above that of 1933. There was, however, a wide variation in the rate of change among the various industries in 1934, which is another indication of the irregular nature of the recovery during the past 2 years. Some

industries, which went ahead at a rapid rate in 1933, suffered a recession in 1934 while others which were slow in benefiting from the reversal of the downward movement have in more recent periods moved forward at an accelerated pace. The textile industry was the major industrial group to show a reduction in output in 1934; this was due partly to the rapid rise in 1933 as well as to the usual 2-year cycle of production in the industry.

As was true in 1933, the automobile industry was in the forefront of the rise in the past year. Output of cars was 45 percent higher than in 1933, and in the final quarter of the past year this industry

Chart 17.-Percentage change in production of selected industries and all industries combined, 1933 to 1934 (Federal Reserve Board indexes).

was the leader in the expanding volume of physical production which featured those months. The experience of the past 2 years has confirmed the opinion of most observers, that the large potential market for cars developed during the depression represented a reservoir of unfilled wants which would be satisfied as promptly as the purchasing power became available. The extent of the change in some of the principal industry groups in 1934 as compared with 1933 is set forth in chart 17.

The lagging tendency of the durable goods industries received increased attention throughout the year, but the problem has not yielded itself to ready solution. Those industries which are dependent on the expansion of plant and equipment, construction activities, etc., had declined to about one-fourth of the 1929 level in the latter part of 1932 and early 1933. Although the durable goods industries have expanded by a relatively large percentage since that time, they were operating at the end of the year at a rate only about half that of the peak in the middle of 1929, while the output of nondurable goods was within 10 percent of the 1929 top. (See chart 18.)

Further evidence of this condition is provided by the employment and pay-roll statistics. While these cover a larger cross-section of industry than does the production index (particularly in lines of advanced manufacture), they show much the same condition. The actual figures are given in the employment and pay-roll section. The situation at the end of the year was substantially the same as for the year as a whole.

While the output of manufacturing industries in 1934 was far below the 1929 level, there were a number of important industries in which production was higher and others in which it was only moderately below 1929. Although not meant to be inclusive, the following list indicates some of the industries in these two groups. Rayon, glass containers, refined methanol, beverages, butter, meat packing, electric refrigerators, hand vacuum cleaners, and a number of other electrical appliance industries reported a larger output in 1934 than in 1929 and the output of the cigarette, shoe, and petroleum refining industries was only slightly below the 1929 level.

Despite the favorable results enjoyed by individual industries, the per capita consumption of all industrial products generally is considerably lower than in the several years of relatively large consumption prior to the advent of the depression, and is expanding but slowly. Chart 19 shows production in selected lines of manufactures in 1934 as compared with the average output for the three years, 1927-29.

It will be noted that the composite index of the manufacturing groups for 1934 was 30 percent below the average levels of these respective indexes in the 3 years, 1927-29. Lumber production in 1934 was 65 percent below the average yearly output for the years indicated, cement production 55 percent below, and iron and steel production 50 percent. Only 3 of the 15 items show increases on this basis: Leather products, boots and shoes, and tobacco products. These comparisons of output in 1934 with the average for 1927-29 would be even more striking if reduced to a per capita basis, since the population of the country has increased by more than 8,000,000 since 1927.

Despite the low level of production in 1934 as compared with 192729, the recoveries from the depression low of 1933 have been marked. The index of manufactures for the 12 months ended December 1934 averaged almost 40 percent above the March 1933 low. The automobile and related series show sharp gains on this basis, while cotton consumption and silk deliveries have increased to only a minor degree, and wheat flour production has declined. In such comparisons the greater stability of industries of the character of the flour milling industry should be kept in mind.