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X-1555 FEDERAL tv. RESERVE 322 BOARD STA'l'EMEN!' FOR THE PRESS Released for afternoon papers Thursday, May 29, 1919. During the month of May, there bas been a noticeable upward trend in business, with evidences of great activity in certain lines, especially those· closely related to the leading retail trades which have felt the release of buying power held back during the war and in the first months after the armistice. Practical~ uniform reports fran all Federal Reserve ~nts. point to a summer and autumn of unusual activity with many indications of "business prosperity'' especia.lly in agriculture and merchandise, and to some degree, in nunufacturing. The country now seems to be passing through a period of free expenditure or reaction from the enforced restrictions of the war ps·riod. econ~ and business If the present activity should prove to be based principally on these causes, a reaction therefrom may be looked for · when these 'forces have spent themselves. From District No. 1 it is reported that "manufacturers and merchants in practical~ all lines_are doing a large business and buyers who withheld orders awa.it.ing lower prices are now purchasing heavily before costs advance further",. From District No. 2 it is reported tba.t business readjustment bas gone forward despite prices and t~t the pressure of the retail purchaser, working from the bottom, has forced activity into the br~nches of industr.y where doubt in the future and disinclination to go ahead bad prevailed because of the high cost of materials a.nd labor. District No. 3 repQ)rts that the business situation continues to show improvement in many lines and tba.t further increases are expacted as the year advances. District No. 4 reports that "we are no longer awaiting prosperity, it is already with us. :Business is 323 X-1555 - 2 - breMhing easier .n From the Fifth District it is reported tha.t 11 improving conditions in trade have developed rapidly **** few unfavorable comments are heard, and optimistic reports are so general as to excite caution as to accepting them without qualifications"" In the Sixth District "business iw. a.l- most all lines has continued active, retail trade is still on the increa.se, and wholesale merchants also report a.n increased volume of trade." In the . t. Seventh District "the volume of business *** is sufficiently large *** to indicate the enormous buying power which high farm prices, wages, and the production of the war period has created~~ The Ninth District reports that "industrially speaking, the outlook is for a.n a.ctive year. is active and retail trade is very satisfactory~ Wholesale business Collections are good." In the Tenth District correspondents of the Federal Reserve Agent "a.re more optimistic **** than· a.t any tizre this year" a.nd there is "cheerfulness part of bankers, merchants, farmers, llldllufa.cturers and wage-earners." on the All correspondents regard conditions a.t this time as favorable to a. continuance of prosperity for many months to came. In the Eleventh District general and careful investigation tends to confirm earlier predictions that •business has reached a. period of prosperity which was not only believe, is not fully appreciated." w~erFected but, we The Twelfth District states that "manu- fa.cturing and industry have been active in most of the centers of the district. Wholesale and retail trade are good and collections va.ry from good to fair ****· ta~or except Utah." is now Q~ost ful~ employed in a.ll sections of the district 324 X-1555 - 3 .,. The price and reconstruction practically ~ situ~tion continudtion of that Prices in some districts are at ~lready "~bout throughout the country is noted during the month of April# the same level for corresponding months of l~st ye~rlri while eisewhere business men are reaching the conclusion that the return from war to normal conditions does not necessarily mean the pre-w~r level, but that "far-reaching and permanent ecqnomio c~gesn have been ; . produced, Tra.de in some sections has "reached the conclusion that most of its fears have not been realized and were without "merchants for ~ny **** years." . One Federal Reserve Ba.nk finds drop in prices and is reconciling· itself to the pre-war prices may never again be reached." pre-~r while are in a. condition of solvency which they have not enJoyed adjusting itself to the convictiou. that there a good fo~tion,• th~t "the public is alowly is to be no prob~biltty .~t r~pid post-wdr that the old would have been accepted volume of business is much less likely to be ac~eptable as sufficient volume for our reconstruction work. The Bo~rd 1 s index b.;~.sed upon that of the Department of I.a.bor, shows that prices luve exhibited ·no tendency to ~r·:;tl'agra:de, but on the whole are moving slightly upward, the figure rising from 200 to 203 in April. The effect of this condition bas been to bring about grea-ter confideme and to develop .1. ~ condition.of latent buying power which Wd.S aP- parently only awaiting decision as to the probabilities of the coming months before ~king· itself felt. incre.J.se in the prices of r.;~.w The increase is due entirely to the Illo3.terials and consumers t goods, the index nunhers for the groups in questi.on rising from 197 to 200 d.D.d from 206 to 210 respectively. On the other hand, the index number for the GS X·-1555 - 4group of producers 1 goods decUned from 190 to 186, while c..roorl~i•· the sub-groups included under the hea.d. of r"''w materials the index r.:JIDber for the mineral products group likew·:tse decHneC. from 171 to 169. however, wh:~.chr did not serve to offset cons:J.dera.ble incrca.sec in t:1e lJrices of both fQrm a.nd a.niiilal products t the index numbers for the la.tter g1.•oups increasing from 235 to 243 and from 216 to 223 Reports respectively. th~t.this of Federal Reserve Agents develop the conspicuous fact increase in prices has brought about a. general belief th~t slight the time has came when business men may proceed actively with further commitments without running the risk which they bad some months ago predicted of const<a.ntlt shrinking values for ra.w Ill;;l.terial.· stocks. Agricul tura.lly, the remarkable promise of the : · early spring appears to be sustained in an unusual degree. to warrant the forecast of a wholly Winter whea.t still continues unprecedente~ made known by the Department of A.gricu1tu!'e. winter wheat Weo.ther f;X0¥i0TS cond.~tions a.re durl.ng have been beneficial in checking the too rank growth which was ®de by wheat in the early spring. not Jn the Ka.nsa.s City :3istrict is reported in excellent cond.:".. tion and · counting on the l..::l.rgest yield in history .. ~y yield which has been be much increased, dU$ to The spring wheat ~creage prob~bly will weather conditions, but the prospects 326 - 5- X-1555 for a large yield are said to be of the best. that "soil and out the month." moi~ture conditions ~ve The Ninth District st~tes been generally favorable through- In districts where crops ha.ve been poor fort wo years pa.st the outlook is very s~tisfactory. In the ccrn-p:t"Oducing States \.'. the prospect is thus far very favorable and in the cotton region the outlook is for a"hopeful growing season"• Diversification due to org~ized effort is. making progress and the cash returns to farmers are expected to be unusual.. On the Pacific Coast the staple crops hd.ve "made s~tis fa.ctory advancement and are in good condition" although r.nn is needed .. Some losses of fruit crops have occurred but the food outlook is promising.. Gra.in movements to primary uarkets have for the most part been slightly heavier in April than in February and March, but shipments have been more than three ttmes the volume of receipts. Flour production during the month of April a.mounted to 11,274 1000 ba.rrels a.s c.ompared wit·h 10,498,000 during the pre7.ious month, though stocks a.t mills ~t the close of the month on the other hand, show a slight decrease. In consequence of the increases in the price of flour which recently occurred, steps were ta.ken by the Grain Corporation to check the rise, though the efforts inc erta.in loca.lities at any rate appear as yet to hd.ve met with little success. As a result of stimulated prices milling operations since April 1, have been about double those of the same period last yea.r, but has been th~s increased activity experienced only by those mills which were able to obtain allot- ments from Government wheat stocks. It is reported from certain centers tha.~ the mills have booked sufficient orders to absorb the present stocks of whea.t which are available but are unwilling to make further commitments in view of the decrease in wheat stocks. It has been remarked that during the pa.st X-1515 - 6 .,. . yeartthe United States raised insufficient corn to supply domestic re~uire- ments, due largely to the increased de!l.k:l.nd for feeding purposes. Speculative trading in the COID!ll~d.i ty has 'been exceedingly heavy of late with specta..cula.r movements in prices and marked on the whele by a considerable increase. it Fran Chicago/is reported t~t prices of cattle are considerab~ higher than a year ago, while prices of sheep are lower. while mutton and ~b have slightly fallen. Beef S~ller principal markets have resulted in a decrease in the lard. Kansas City, however, reports t~t ~s therefore advanced receipts of hogs at the stocks of pork and the cattle trade has been rather dull with prices slightly weaker, although they still show a. considerable margin over paying ~ a. year ago. Hogs, however, have continued to advance, speculators to $21. In Kansas City there was a decrease during April of 34% in the receipts of cattle, an . increase of 34% in receipts of calves, a. decrease of 7tfc .in hogs, an increase of 29% in sheep and a.n increase of 58% in horses and mules. Receipts of cattle during April at fifteen head as compared with 1,094,614 during prin~3pa.l M~rch, markets were 1,255,379 the respective index numbers being 125 and 109 as compared with 1,533,147, corresponding to an index number of 152 a year ago. Receipts of hogs decreased from 2,842,663 head during March to 2,823,484 head during April, the respective index numbers being 129 and 128, while receipts during April ·1918, were 2,942,449 head, corresponding to an index number of 134. increased from 847,842 to Receipts of sheep on the other hand 970.070, with respective index numbers of 62 and. 71, as coapa.red with 733,709 a year ago, corresponding to 54. ~n index number of It is expected t~t the export movement will continue on a large scale for some time to came. -7- . X-1555 In steel and iron the reports for the month Show a reduction of output to what are said to be the lowest figures for a good while past. In spite of this fact prices of steel stocks as quoted on the exchanges have materially advanced. A notable development during the month has been the establishment of an open market for steel through the abandonment of the effort to stabilize values and . prices, aided by the entrance of the Railway Administration into the market.as a large buyer of rails and equipment. Bids for 400,000 tons of railway steel were 200,000 tons hGve been ~llotted. requested by the Railway Administration on May 8 and A much better tone in the steal and iron ~arket is reported at various points, although the mill activity is said to be only about 70% of normal in the establishments of the United States Steel Corporation and 50% at independent mills. Pig iron production shows a continued decrease from 3,090,243 tons during March to 2,478,213 tons during April, the respective in~ex numbers being 133 and 107. The latter is the lowest figure since February, 1918. Steel ingot production likewise shows a decrease from 2,662,265 tons during March to 2,239,711 tons during April, the index numbers respectively being 110 and 93. The unfilled orders of the United States Steel Corporation have also decreased from 5,430,572 tons at the close of March to 4,800,685 tons at the close of April, the index numbers respectively being 103 and 91, while the figure at the close of April, 1918 7 was 8,741,882 tons, corresponding to an index number of 166. The figure for the close of April, 1919, is the lowest since June, 1915, at the end of which month the total was 4,673,196 tons. Although pig iron trade in the Atlanta district is dull as it is elsewhere, the steel mills are active and ra.ils are being rolled in preparation for a considerable trade. The high freight rates heretofore prevailing out of the Atlanta district have been a handicap. but a recent ruling by the Interstate Commerce Commission seems likely to give them access to trade in northern territory which has up to the present been i~possible, ~fuile the bituminous coal industry is reported to be at present depressed _and unsatisfactory, with an output less than 70% of that of a year ago, and while there has be :m a large accumulation of fuel, -3- X-1555 'coal operators are optomistic for the future. The current use of fuel is in excess of production and stocks are being consumed, while an increase in the production of bituminous coal since the opening of May is notes. Shipments of anthracite for the month of April show a substantial recovery from the low figures for the two previous months, the tonnage for April being 5,224,715 as compared with 3.938,908 for March, the respective index nurr.bers being 93 and 70. The production of beehive coke on the other hand continues to decline, the output for April being 1,316,960 tons as compared with 1,768,449 during March, the corresponding numbers being 50 and 68. It is reyorted from the New York market that after several weeks of almost no demand the copper market shows a slight inprovement. Quotations have been_ reported as high as 16¢, while producing companies are operating on a 50% basis. Production of four large companies 'uring the first four months of 1919 amounted to 122,541,610 tons as compared with 180,425,458 tons during the last four months of 1918. In spite of the reduced domestic output, stocks have continued to incre2se due in considerable measure to continued heavy importations. The lead market is somewhat firrrer than it has been for some time past and the tin rrarket is dull. From Kansas City it is reported that considerable reductions have occurred in the prices paid for zinc and lead ores and there has bean a decrease in their production. It is reported that production in the lead industry, however, is at a considerably higher level than in the copper. zinc and iron industries. During the month of April more than 1000 new petroleum wells were completed with new production of about 43,600 barrels daily in the Kansas City district. A substantial gain in production is now expected. General rra.nufacturing is showing decided improvement. The wool market is strong with prices in favor of the seller. ta.rge orders have been placed with the mills both for yarns and finished goods. Weavers have operated fre:oly in purchasing wool at Government auctions in the Philadelphia district, -9- X-1555 Woolen and worsted mills are going back to full time with a large • orders. While fine wool is in considerable de~and volume of and comrr.ands high prices, low-grade wool on the other hand is in relatively little demand and a lower trend in prices is indicated. Fall orders for wcolen underwear and high-grade hosiery are appearing in good volume. Very decided improvement has occurred in cotton milling ~:md orders are being booked well into the fall. The demand is for the finer goods ani prices have be3n advanced until they even exceed winter levels. There has be m active buying from the new wool clip in the West. These conditions are reflected in the demand for dry goods and shoes which is one of the most marked symptoms of trB,de recovery in the month under review. Foreigners who are leaving the country ,in considerable numb,ers are reported to be carrying with them many pairs 6f shoes to meet needs abroad. Prices are being ~arked up for fall delivery, the outlook now being for an increase of 25 to 50¢ a pair for retailers. . '·· Retail trade practically throughout the country is assuming unprecedented volume, while prices continue abnor~ally high. Retailers in most sections have made little or no adjustment but continue to demand :-'rices based Ul)On war conditions. In New York large establishments report a volume of business twothirds greater than a year ago and in Chicago returns range from 25 to 50~ in excess of 1918. The demand is largely for the highest class of goods with prices a secondary consideration only. In the Soutfr there is said to be ''no contraction in the public buying power" while a greater proportion of cash sales is reported. In the Richmond District there is an "active trade, consumers buying freely without question as to prices." The effect of this active purchasing thro1::.ghout the country is being reflected in the activity of wholesale business, advance orders for goods for autumn being reported satisfactory in volume, although still less than a year ago. Prices for cotton and wpol goods have again advanced and retail stocks have in many cases been reduced to a low point. Retailers in sorre sections are actively placing orders for imrrediate delivery. The high X-1555 -10- wages prevailing in most parts of the country and the increasing vol~~e of • employment creates a condition of rerrarkable strength in local business, both volume of sales and receipts of cash surpassing past records. Manufacturing is already feeling the impetus furnished by this contin11ation of strong purchasing power. In building there has been a distinct revival throughout the countr~ and particularly in the principal population centers warked advancement is now noted. Chicago shows a gain in building permits of 169% compared with a year ago, and similar or larger gains are reported in most of the large cities of the Middle West. In New York building has been retarded, although the need is very great, an obstacle being presented by the difficulty of obtaining satisfactory building loans, but the realty market is better than for the past eighteen months. The value of building contracts awarded in the Seventh District for the year thus far is about double those awarded in the same period of 1918. Advancement in building has been less noticeable in the far South, but sucp reports as are available point to a coming revival, while in some places the greater activity is a1ready very encouraging. On the Pacific Coast reyorts from nineteen principal cities for April show an increase of 31% over March and 47% over April, 1918. In the states of the southern and eastern seaboard building is progressing rapidly. The Fifth District reports that the housing ~lestion is urgent and that there is considerable activity"in ho:re sites and building, particularly apartment houses in cities". Real estate values are said to be hardening and in some places there is a decided boom, while sales of farm lands are on the incre~-se. Labor and employment conditions have made further progress toward normal. In the principal manufaco~ing centers it appears for the most part to be true that labor is fairly well employed. Skilled labor is generally in demand throughout the country and at unprededentedly high wages. Notable advances of wages have occurred in the co~ton wages of labor there being fully textile mills of New Englttnd 1 100% above pre-war figures. th·~ present Ther~ is an X-1555 -ll- increasing shortage of laborers on farms and of skilled mechanics in shipyards • • and although the supply of farn, labor in many sections now equals the demand, an increasing deficiency is ei~e~ted v~thin the next few weeks. Unerrployment is most frequent at 1)oints of disembarkation where returning soldiers are being mustered out of the military service, but even at these points good progress is being wade in the process of absorbing the floating supply of labor. In the Southwestern cotton region the past ninety days has witnessed almost a complete reversal of previous conditions, and there is a greater demand for corrmon labor than heretofore. Few strikes are now in progress, although here and there labor difficulties have been reported. This is particularly noticeable in the New England district, where i_t is stated that the increased cost of living, as well as the higher scale of living to Which workmen have become accustomed, has had the effect of rendering the new rates of remuneration less satisfactory than the old ones, and as a result some unrest is reported in that district. A rerrBrkable feature of the business situation is the continuance of an enormous favorable export balance. This balance, according to official reports for the month of April amounted to the unprecedented total of $442,000,000. While the shipments still consist largely of food stuffs and raw materials there are some indications of an advance in sales of manufactured goods and these are ex- pected to increase from now on, granting that favorable provision is made for financing sales to foreign couu·~ri9s. Trade with the Scandinavian countries has shown spec:i:al advancement, but business with South America, Japan and China has been partially cheCked. From the New York district it is reported that 75% of shipments now going forward r6?resent orders placed and largely paid for some time ago. Shipping facilities have irrr2ro-;ed somewhat during the past month, but sailin~ 0 dates of vessels are still very unreliable. Plans are in prospect for the developn:ent of methods of financing and facilitating the growth of export trade, The month of May has witnessed some important, not to say remarkable, fidevelopments. nancial The stock market has be8n passing through a speculative era -12- 333 XJ:!l555 only comparable to that of three years ago. Transactions on the New York .. .. Exchange in the week ending May 17 were the largest for any week since 1901. The heavy purchases are attributed largely to the presence of out of town buyers who are in possession of large amounts of funds. In interest rates, however, despite this rerra~able speculative activity, there has been a distinct down- ward trend during the month. This trend has been noticeable in almost all classes of paper, but particularly in the case of commercial paper sold in the open market, and also in the case of interbank loans, as well as a fractional decrease for indorsed bankers' accep~ces. Prevailing rates for customers' prime comrr.ercial paper on the whole show decrease, '""bile collateral loans on the other hand remain relatively firm. In the call money rate, however, there has been at tirr.es a distinct upward trend and on ~ne accasion the rate reached a level of 7~ in New York. This figure, however, was maintained only for a few hours. The rate for paper collateraled by Liberty loan bonds has been slightly advanced in places, due to the desire on the part of banks to encourage customers to li~idate their obligations for overdue subscription payments. Liberty loan bonds themselves have commanded decidedly better prices during the latter part of the month of May, this result being attributed to the popularity of the fifth Victory notes whose value was in a measure reflected upon other classes of Government securities. The banking position of the country is reported reeerve as on the whole sound, present circumstances considered, anc: .. · percentages of the Federal Reserve system have shown an ability to hold their own. Transactions at clearing house ?anks which report to the Board show essential stability with a slight tendency toward an increase in volume. A remarkable feature of financial developrrents during the month has been the sharp decline in quotations of most foreign currency. Lire and francs have established new low rates going respectively to 8.}6 and 6.70 up to May 20, while sterling, which had shown some ability to reach higher levels, has again fallen off.
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