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52 R-1?3 BOARD OF' GOVERNORS OF THE FEDERAL RESERVl~ SYSTEM S'l'ATEMENT FOR THE PRESS For release in morning papers, Thursday, Jnnu:.iry 2?, 1938. The following summary of general business and financial conditions in the United States, based upon statistics for December and the first three weeks of January, will appear in the February issue of the Federal Reserve Bulletin and in the monthly reviews of the Federal Reserve banks. Industrial ou·tput declined further in December and, according to preliminary reports, showed little change in the first three weeks of January. Prices of raw muterials, which had declined sharply in October aud November, have been maintained since that time. Production Volu.rne of industrial production declined further in December and the Board's seasonally ndjusted index was at 84 percent of the 19231925 a-vflrage 2.s compared with 89 in November. 'I'h e decline reflected chiefly a continued sharp curtailment of activity in the durable goods industries. St;;;el ingot production averaged about 26 percent of capac- ity, output of automobiles ana plate glass was reduced considerably, and production of' lumb0r nondurable goods declined and. cement also declined. $e~sonall.y. Total output of There wns a sharp decresse in outp"ij.t ot eilk mills., r.md cotton consumption declined furtber. At W()(l:l,G¥1 1\11.l.l11 ~.ti $hoe t~nto:ries, however, output wes me.in.ta.ined, fol- lowing a eonsiderable period of sharp decline. fineries increased further. Miner~l ActJ.vity at sugar re- production in December, as in -2- other recent months, was at a high level. R-173 Output of crude petroleum and bituminous coal declined seasonally, while anthracite production 1ncreased somewhat. In the first three weeks of January output of steel and automobiles increased somewhat from the extreme low levels reached in the latter part of December. Value of construction contracts awarded in December continued in about the same volun1e as in the preceding three months. During this period there was a decline in awards for privately-financed projects, reflecting in large part further reductions in residential building, while ~ublicly-financed work increased. Employznent Factory employment and payrolls showed further declines between the middle of November and the middle of December, and employment at mines, on the railroads, and in the construction industry also continued to decrease. The decline in the number employed at factories was larger than in eerlier months in industries prouucing durable goods, and was particularly marked in the steel, machinery, and automobile industries. For the nondurable goods industries as a group, the decline in December was about the same as in each of the previous three months, after allowance for sea.sonal changes. There was some increase i.n employment at shoe fac- tories and little change at r>lants vroducing tobacco products, while most other industries in this group showed further decreases. Distribution Department store sales increased in December by about the usual 53 54 R-173 -3- seasonal amount, and the Board's adjusted index was 90 percent of the 1923-1925 average as compared with 91 percent in November and an average of 93 percent in the first ten months of the year. Mail-order business and sales at vRriety stores showed somewhat more than the seasonal increase, while sales of automobiles declined substnntially. Preliminary reports indicate that in the first half of Jenuary sales at depnrtment stores were at about the same level as a year ago. Railroad freight-car loadings continued to decline in December, and in that month were 18 percent lower than the average for the first balf of the year, making allowance for usual seasonal change. Com.'!lodi ty prices Wholesale prices of basic co~rrodities, after declining sharply in the autumn, showed little change in December and the first three weeks of January. Grains, cotton, print cloths, steel scrap, and bituminous co11l increased somewhat, while leather, rayon, and woodpulp prices were reduced. Prices of a wide variety of finished industrial products showed further declines, and livestock products continued to decrease sharply. Bank credit Excess reserves of member banks increased in the four weeks ending January 19 from $1,010,000,000 to $1,3?0,000,000 and were la.rger than at any ti'ne since May 1. The post-holiday decline in money in cir- culation, which accounted for this growth of excess reserves, was larger than tho increase that occurred before Christmas. The volume of loans at reporting member banks in 101 leading cities declined sharply in the five weeks ending January 19, while their holdings 55 -4- of' investments showed little net change. R-173 Declines occurred in loans to security brokers and dealers and in commercial loans, which decreased both in New York City and in other leading cities. Interbank balances were built up during the period, while other deposits deereased somewhat, reflecting largely the repayment of bank loans, partly offset by a return flow of currency from circulation. Money rates and bond yields The average rate on new issues of 91-day •rreasury bills continued in Je.nuary at less than 1/8 of 1 percent, and yields on Treasury notes end bonds declined to new low levels for recent months. Yields on the highest-grade corporate bonds also declined soraewhat, while those on the lower-grade railroad issues rose.
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