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THE BUSINESS REVIEW FEDERAL RESERVE RANK OF PHILADELPHIA \ DECEMBER 1, 1943 Distribution and Ownership of Demand Deposits . in the Third Federal Reserve District One of the most significant developments in the field of banking over the war period has been the unprecedented expansion of bank de posits. Since the outbreak of war in 1939, demand deposits of individuals and business concerns in the United States have more than doubled. This tremendous growth has many implications for the policy decisions of the individual banker, who asks— How has my bank shared in this expansion? In the event that his deposits have gone up markedly, as has been the case in most instances, the next question may well be— How permanent are these new deposits? Answer to the second question leads to an anal ysis of the position of the bank with respect to future demands— How have my investment and loan policies been administered in viezv of the demands that may be made upon my bank during the post-war period? In his position of public trust, the banker naturally gives primary consideration to the safety of deposits; as the focal point for local financial requirements, he has a responsibility for meeting the sound credit requirements of his community; and, as the operator of a going concern, he must have an eye to the proper rela tionship of income and expense, and the main tenance of earning power. This unique com- /VV 5 bination of responsibilities calls fyr the exercise of sound judgment, and the evolution of an ade quate policy and program. • . , '/^j The development of an effective banking pol icy and program is always important to the proper functioning of the economy, and it is essential under current and prospective domes tic and world conditions. To the extent that bank management evolves and applies progres sive banking standards and methods, it will be able to sustain and enlarge its position of strength and usefulness in the community both in promoting savings and in facilitating the growth of business which is the prime source of employment and income. This consideration is of the utmost importance to individual banks and the banking system as a whole if savings of the community are to be properly directed into productive channels and made a contributory force in maintaining high levels of production and high standards of living. The Over-all Picture Growth of deposits. Expansion in the volume of deposits during the thirties and early forties was the result chiefly of a tremendous inflow of gold, which terminated in 1941, and the flood of new securities offered by the Treasury, no small part of which was taken by banking insti tutions. Between June 1939 and June 1943, a period mainly of intensive defense and war effort, the amount of Governments hfl>ld ’ v com- Pt , O/tj GROWTH AND DISTRIBUTION OF DEMAND DEPOSITS GROWTH OF DEMAND DEPOSITS FEDERAL RESERVE DISTRICTS Member Banka -20 Changes in each District (June 1939 "June 1943)---are related to increase of 113% at all Member Banks -40 - Not* . D«mand «f individual! and busin«t* mercial banks and the Federal Reserve Banks increased $41 billion, accounting for 44 per cent of the total rise in outstanding interest-bearing obligations of the Federal Government. Deposits at commercial banks, exclusive of interbank balances, increased by about the same amount; $29 billion of this was in demand deposits of individuals and business enterprises. The striking difference in relative growth of deposits at member banks in the northeastern section of the country as con trasted with other sections is portrayed in the chart. Because of these various rates of expan sion, the distribution of deposits over the coun try has changed considerably over the war period. DISTRIBUTION OF DEPOSITS OF INDIVIDUALS AND BUSINESS CONCERNS—MEMBER BANKS Federal Reserve Districts: Distribution—June Increase 1939-1943 1939 1943 New York............................................ 7.5% 3.0 3.4 3.6 7.1 3.6 13.6 1.8 3.1 5.6 6.3 41.4 10.3% 3.9 4.2 4.1 8.0 4.0 14.8 2.0 3.2 5.4 5.9 34.2 191% 173 166 147 141 135 132 131 123 106 99 76 UNITED STATES..................... 100.0% 100.0% 113% San Francisco..................................... Richmond........................................... Dallas................................................... Cleveland............................................ Kansas City........................................ Chicago................................................ Minneapolis........................................ St. Louis.............................................. Philadelphia....................................... The growth of 106 per cent in demand de posits of individuals and businesses at member banks in the Third Federal Reserve District was the third smallest of any Reserve District, and compared with an average of 149 per cent in the nine districts outside of the northeast. In the Page Two June figures June 1939=100 Distribution 1939 1941 1943 1939 1943 Third Fed. Res. District All members............................ Reserve city banks............ Country banks................... 100 100 100 139 141 135 206 200 214 100.0% 59.4 40.6 100.0% 57.8 42.2 United States All members............................ Central reserve city banks Reserve city banks............ Country banks................... 100 100 100 100 140 142 138 138 213 172 236 258 100.0% 43.9 32.6 23.5 100.0% 35.5 36.1 28.4 initial phases of the war effort, the Third Dis trict, a highly developed industrial area, was relied upon for immediate production of war materials, and at that stage the proportion of war contracts placed here was high. In time, however, new plants were constructed and con versions were completed in other areas, reducing the share of total war contracts and Govern ment expenditures received by the district. Further evidence of the geographical expan sion of the war effort is found in the figures of deposits classified by location of bank—in cen tral reserve cities (New York and Chicago), in reserve cities, and in areas outside the more important urban centers of the country. In the first two years of war, deposits at banks in cen tral reserve and reserve cities increased as rap idly or more rapidly than at banks located else where. This was reversed subsequently, so that now the so-called “country” banks show the greatest gains. In part this may represent the sharp growth in farm incomes, but a factor which probably is of equal or greater impor tance has been the spread of war contracts, sub-contracting, development of plants in areas away from the seaboard, and building up of military establishments. Changes in this district and in the United States, based on 1939 as 100, are shown in the table above. Ownership of demand deposits. While expan sion in deposits depends mainly upon national fiscal policies with respect to taxation and bor rowing from others as against borrowing from banks, the ownership of deposits hinges in large part upon the decisions of individuals and busi nesses regarding the use of their incomes. Since little was known about the ownership of de posits, the Federal Reserve System initiated an analysis of the subject in May and conducted another and more complete survey in July. As of the close of July, 217 banks in the Third Federal Reserve District supplied the Federal Reserve Bank of Philadelphia with data show ing the ownership of demand deposits of indi viduals, partnerships, and corporations. Ninetynine banks with less than $2 million of such deposits classified accounts of $3,000 to $10,000, and those over $10,000; 112 banks with deposits of from $2 million to $100 million re ported on accounts of from $10,000 to $100,000 and those over $100,000; 6 larger banks gave data on deposits of $25,000 to $100,000 and over $100,000. Since the reporting banks were distributed widely over the area, and since they held 75 per cent and classified 52 per cent of the total at all banks, the sample was deemed sufficiently complete to estimate the distribution of the nearly $3 billion of demand deposits held by all banking institutions in the Third Federal Reserve District. OWNERSHIP OF DEPOSITS _ Demand deposits of individuals, partnerships, and corporations July 1943 Domestic business: Nonfinancial: Manu. and mining............. Public utilities, transpor tation, and communica tions..................................... Retail and wholesale trade and dealers in commodi ties....................................... All other nonfin. business, incl. constr. and services. Third Federal Reserve District United States Amount (millions) % of total Amount (billions) % of total $ 790 26.5% $18.4 33.1% % District of United States 4.3% 264 8.8 3.4 6.1 7.8 348 11.7 7.5 13.4 4.7 155 5.2 3.5 6.3 4.4 Total nonfinancial. . . Financial business................ $1,557 405 52.2% 13.6 $32.8 6.0 58.9% 10.7 ~ 4.8% 6.8 w Total bits, deposits. . . Nonprofit associations, clubs, churches, etc............... Personal,including farmers.. Foreign accounts..................... $1,962 65.8% $38.7 69.6% 5.1% 2.5 25.7 2.2 6.5 6.5 .2 GRAND TOTAL......... $2,981 89 927 3 3.0 31.1 .1 100.0% 1.4 14.3 1.2 $55.6 100.0% 5.4% Although the distribution of deposit owner ship in the Third District differs somewhat from that in the country as a whole, the preponder ance of demand deposits in both areas is in the accounts of business concerns. Variations in the distribution reflect in large measure differences in the economic composition of the two areas, and the varying degree of expansion during the war years. In the accompanying table, district proportions of national totals in manufacturing and mining, trade, and personal accounts are compared with percentages showing the dis trict’s share of activities which may be presumed to give rise to the bulk of such deposits. As may be seen from the table, the district’s share of business demand deposits is scarcely consistent with its share of country-wide eco nomic activity. This is particularly true in de posits of manufacturing and mining enterprises. Although the principal balances of some of the Relative importance: Percent Third Federal Reserve District to United States Manufacturing (value added by manufacture—1939).. Mining—1939: Value of coal production: b Economic Demand activity deposits 5.9% 6 1 81 1 5.8 100 0 - 4.3% } Gash farm income—1942 (3 states: Pennsylvania, New 634-7 3.7 , 1 4.7 6.5 large corporations operating in this district are kept in New York City, in a normal period busi ness deposits might be expected to correspond more closely with the district’s portion of na tional enterprise in manufacturing and mining lines. But the influence of war activity upon the growth of deposits has been considerable, owing largely to the increasing placement of contracts for war materials in other sections. Accounts of public utility, transportation, and communi cations enterprises and those of financial insti tutions (which include many trust accounts), constitute larger proportions of the country’s totals in these classifications, as might be ex pected in view of the fact that this area is closely settled and has had a long period of development. Whereas locally 31 per cent of demand de posits is estimated to be in personal accounts, including those of farmers, nationally 26 per cent is so classified. Higher per capita incomes in the district than in the country make this appear natural. Denser population and more accessible banking facilities may also be con tributing factors. The district’s proportion of such deposits throughout the country is 6.5 per cent, while income payments to individuals are estimated to be 6Y2 per cent or more of the national total. Deposits Within the Third Federal Reserve District The foregoing discussion gives an over-all appraisal of deposit ownership and the relative growth in the Third Federal Reserve District, but to the individual banker the survey becomes immediately significant when growth and own ership are broken down into areas of the district and by size of bank. The banker is thus enabled to compare the position of his bank with others of similar location and size. Areas. Examination of total deposits by counties, as indicated on the map, shows the unPage Three The various groups agree in one important characteristic: classified deposits, covering the large accounts, are predominantly owned by business concerns. These classified balances ac count for proportions ranging from a high of 75 per cent in the area covering Philadelphia, to a low of 46 per cent in the case of the area in which Johnstown and Altoona are located. Un classified smaller deposits may be presumed to be principally personal accounts. THIRD FEDERAL RESERVE DISTRICT EXPANSION IN TOTAL DEPOSITS Hftjvy lines in Penn* indicate boundariec ol Penn*. Bankers Ann. groups evenness of expansion within the Third Federal Reserve District. The greatest relative expansion has occurred in the southeastern metropolitan section of the district, while the smallest took place in the anthracite region. But because the growth of time deposits at the country banks has on the whole been negligible, many of the differences in growth of total deposits among the various areas are a reflection of the impor tance of demand deposits. Returns from the 217 reporting banks as of the close of July were divided into nine area groups, corresponding to those shown by the heavy lines in the map. The areas in the case of Pennsylvania are seven groups of the Pennsyl vania Bankers’ Association; the nine southern counties of New Jersey and the entire state of Delaware are the other two areas. In most cases the sample was sufficiently large to give a rea sonably accurate indication of the ownership of classified large deposits. OWNERSHIP OF DEPOSITS BY AREAS Area Philadelphia........................ Southeast — Reading, Chester, Norristown, Pottsyille............................ Northeast — Scranton, Wilkes-Barre, Allentown. N orth-central—W i lli amsSouth - central — York, Harrisburg, Lancaster.. . Southwest — Johnstown, Northwest—Bradford. . . . State of Delaware............... Southern New Jersey (nine counties)............................. Total............................... Page Four Demand deposits of individuals, part., and corporations Unclass reportClassified large deposits ified banks Nonfin. Finan. Per Other smaller deposits sonal business business 23 49% 16% 8% 2% 25% 26 37 10 7 2 43 53 45 9 7 2 37 24 37 7 7 2 47 37 37 11 7 2 43 23 4 4 30 47 37 5 2 15 9 12 15 2 8 3 54 31 30 30 13 8 2 47 46% 14% 8% 2% 30% 23 217 _ Emphasis has been placed on changes in the ownership and distribution of demand deposits *' for the reason that changes have been almost entirely in this classification. In this district time deposits have declined over the war period at city banks and have shown little expansion at country banks. For the first time many of the country banks find themselves with a prepon derance of deposits withdrawable on demand, a factor to be reckoned with in framing bank policy. ^ Size of bank. While deposit gains since 1939 have been general, their distribution among size groups has shifted materially during the war period. From 1939 to 1941 balances at member banks with total deposits of $20 million or more increased relatively twice as fast as at the smaller banks, but in the following year gains at the smaller banks were much more rapid than at the larger banks. * By far the greatest number of banks have demand deposits of less than $100 million each (and most have less than $5 million), but these smaller banks hold only 56 per cent of total de mand deposits and an even smaller share of total business deposits. Our estimates indicate that in proportion to total demand deposits business accounts comprise only 40 per cent at ^ banks with less than $2 million in deposits, 52 per cent at those with $2-$5 million of demand deposits, 64 per cent at banks with $5-$100 mil lion, and 79 per cent at larger institutions. This reflects the concentration of business balances in comparatively large accounts. The importance of not underemphasizing the place of the smaller banks, however, is indi cated by the fact that three-fourths of personal * demand deposits is in banks with less than $100 million in deposits. Personal and trade deposits decline in importance as size of bank increases. In the case of accounts over $100,000, to be found principally at large banks, 93 per cent of OWNERSHIP BY SIZE OF BANK Classified by size of demand deposits of individuals & business concerns Domestic business: Nonfinancial: Manufacturing and mining... . Public utilities, transportation and communications................ Retail and wholesale trade and dealers in commodities............ All other nonfinancial business, includ. construction & service Less Over than $2-$5 $5-$100 $100 $2 million million million million 10.7% 19.1% 21.4% 35.0% Total 26.5% 3.1 3.1 5.1 14.7 8.8 16.0 15.5 13.0 8.4 11.7 6.7 6.0 5.5 4.4 5.2 Total nonfinancial............. Financial......................................... 36.5% 43.7% 8.5 3.2 43.0% 16.1 62.5% 16.4 52.2% 13.6 Total business...................... Nonprofit associations, clubs, churches, etc................................... Personal,including farmers.......... Foreign accounts............................. 39.7% 52.2% 64.1% 78.9% 65.8% 3.2 32.6 .1 2.4 18.6 .1 3.0 31.1 .1 3.8 56.5 3.6 44.2 GRAND TOTAL.................. 100.0% 100.0% 100.0% 100.0% 100.0% total dollar volume was classified as business and only 5 per cent as personal. The converse of this is found in relatively small balances— those of less than $10,000 or $25,000, depend ing upon the size of the reporting bank; here business accounted for only 32 per cent, as against an estimated 65 per cent classed as personal. Banking Policy: Significance of Survey 4k * « In analyzing the significance of these devel opments to future bank policies, it is convenient to divide the problem into two parts, namely, the future of bank assets and liabilities as a whole and the share of the individual bank in the entire structure. As to the deposit structure as a whole, further expansion is in prospect during the war to the extent that Government fiscal requirements are met through direct absorption of Government securities by commercial banks or indirectly by an increase in bank credit to facilitate the distribution of these securities to other investors. In any event, the country will enter the post-war period with a vast volume of deposits. The trend of deposits after the war will depend largely upon the extent to which Government debt is in the hands of the banks. Even a decline in gross debt would not necessarily result in smaller holdings by banks since cashing in of securities by the public might result in still larger bank portfolios with accompanying increases in deposits. Any rise in loans also would tend to increase deposits. One of the important factors that will affect the post-war demand for loans is the liquidity of business and individuals. Available evidence indicates that business in general is becoming more liquid, as partly indicated by in creases in bank balances and holdings of Treas ury securities. These accumulations represent largely retained earnings. War industrial facil ities have been largely financed by the Govern ment—over three-fourths of the total cost through March 1943. In less essential lines re placement of capital equipment has been diffi cult, resulting in the accumulation of funds in reserves and amortization accounts. Other fac tors have been the reduced operations of many concerns as a result of scarcity of labor and ma terials, and inability to replace inventories. Some part of the accumulation of deposits and securities, of course, is in anticipation of taxes and will be used for that purpose. The magnitude of business funds suggests that many concerns will be able to finance post war conversion costs out of their own re sources. The ability of many others to do so will depend upon the speed with which the Government effects a settlement of claims aris ing under the tens of billions of dollars of out standing contracts. In the case of those busi nesses which are low in cash and securities and high in inventories and receivables, increased demands for loan accommodation are likely to be made upon the banks. At the member banks in the Third Federal Reserve District, business paper in loan port folios increased from $352 million in June 1939 to about $500 million late in 1941, but by the middle of the present year there had been a decline to $330 million. A moderate increase from this exceptionally low level may since have taken place, but it is likely that business loans now account for only about 8 per cent of the outstanding credit of these banks. Although consumer expenditures for goods and services have been larger than ever before, they have fallen far short of income payments to individuals. In the third quarter income pay ments in the United States were at an annual rate of $144 billion; personal taxes and con sumer expenditures absorbed $18 billion and $91 billion respectively, leaving $35 billion (an nual rate) as net savings of individuals, accord ing to the Department of Commerce. What this means in terms of accumulated purchasing power is suggested by estimates that $60 billion of the $113 billion of deposits and currency out standing last August belonged to individuals, trust funds, and nonprofit organizations. This does not take into account the $26 billion of savings bonds outstanding at the end of Oc Page Five tober, most of which are held by individuals. Moreover, consumer indebtedness has been greatly reduced; consumer credit, now less than $5 billion, is only about one-half of that reported in the early fall of 1941. It is against this general background that the individual banker must shape his own policies. Just as the uneven stimulus given by the devel opment of war industries and military centers has resulted in uneven distribution of deposits, so shifts of deposits after the war are to be expected. For the individual banker the impor tant thing is to analyze the position of his com munity in the post-war world. His community will tend to gain deposits as its businesses and individuals sell their products and services out side and will tend to lose deposits as they buy elsewhere. The community’s net position will be influenced by such factors as changes in pop ulation and working force, the adaptability of local productive facilities to the satisfaction of post-war demand, the expenditures of inhabi tants, especially for durable consumers’ goods, the needs of business establishments for recon version and placing operations on a peacetime basis. Along with the analysis of his deposits the banker will wish to study his prospect for loans. He will then be in a position to determine his investment policies. Some banks are now in a fully invested position. An indication of this is a consistently low proportion of excess to required reserves. Recent figures for member banks in Philadelphia show that this excess has been averaging about 4 per cent; this contrasts with figures for the country banks in the district, which have been carrying balances about 30 per cent above requirements. Virtually all banks have large volumes of Treasury securities, which can be used as a basis for borrowing from the Reserve Bank. On Oc tober 18 members in this district had $2,959 million invested in Governments, an amount four times as large as before the outbreak of war in Europe. That the bulk of this investment was in bonds is indicated by the more detailed figures as of June 30, showing, in the case of direct Treasury issues: bonds, 59 per cent; notes, 10 per cent; certificates, 18 per cent; and bills, 13 per cent. Four-fifths of the banks had money invested in bills or certificates or both types of securities; in the case of three-fifths of the members, the amount held was equal to more than 40 per cent of reserves. Page Six The growth and distribution of deposit own ership also have broader significance than their effects upon individual bank asset policy. From the standpoint of the economy in this district, as well as other reserve districts, questions may be raised as to whether the large gains in deposits are permanent or temporary; the extent to which deposits may be shifted in peacetime from one district to another and from one type of ownership to another; the areas in the economy that may be subject to the greatest inflationary pressures by reason of the use and possible change in ownership of deposits; and the possibility that individual and business pref erences for liquidity have undergone funda mental changes. To such questions may be added even broader considerations, including growth of new industries, relocation of existing industries, and technological changes within in dustries. All such changes are bound to be re flected in deposits and are of crucial importance from the standpoint of banking and the devel opment of appropriate banking policies. The survey of deposit ownership provides the es sential background that our banks must have to facilitate business growth, employment and income. BUSINESS AND BANKING Manufacturing. The demand for factory products in this district continues near the highest levels reached in the war period. Fre quent cut-backs are reported in outstanding contracts for certain types of munitions, but in some cases they are offset by additional place ments in other categories, whose relative impor tance in the total war effort has been increased by developments on the battle fronts. A scarcity of raw materials and limited productive facilities still restrict the production of certain goods, in cluding some textiles and leather manufactures for non-war use, but the greatest single factor preventing increased operations is the shortage of manpower. Factory employment in Pennsylvania has fluc tuated narrowly in recent months, while payrolls have continued to advance to new peaks. The number of wage earners in October, estimated at nearly 1% million, was little larger than in September, and only 3 per cent greater than a year ago. Wage disbursements increased slightly in October to a new high of $52 million a week, exceeding those of a year earlier by 17 per cent. The total number of employee-hours worked was INDUSTRIAL AND TRADE ACTIVITY FACTORY THIRD FEDERAL RESERVE DISTRICI PERCENT PAYROLLS PENNSYLVANIA PERCENT CAPITAL GOODS 'J \! PRODUCTION DEPARTMENT SALES GOODS 1938 * A * 193 9 1940 1941 1942 1943 about 8 per cent above October 1942. In the three and one-third years of defense and war production, employment has risen 39 per cent, payrolls 139 per cent, and working time 84 per cent, reflecting in large part the tremendous ex pansion in durable goods lines, which supply the bulk of the war materials. Average weekly income of factory workers at reporting plants in Pennsylvania increased to a record level of $46.06 in October, from $45.82 in September and $40.70 a year ago. Hourly earnings averaging nearly $1.02 were about the same as in the preceding month, and compared with 95 cents in October 1942. Average working time increased in October to 45^4 hours a week per employee, the highest reported since the spring of 1930. The output of manufactured goods in this dis trict failed to show the customary increase from September to October, but with most munitions plants operating close to capacity and producers of civilian goods making full use of the raw ma terials and manpower currently available, sea sonal changes have lost most of their former sig nificance. Total production was 13 per cent greater than a year ago, owing principally to gains in the heavy industries. In the ten months ended October, the output of durable goods was 30 per cent above the 1942 level, as against an increase of only 2 per cent in the case of lighter products, manufactured chiefly for civilian use. Coal and other fuels. The demand for solid fuels continues to exceed the supply, necessitat ing the continuance of restrictions on deliveries to consumers for heating purposes. Substantial 1938 1939 1940 1941 1942 1943 tonnages of anthracite and bituminous coal, tem porarily frozen at the mines to meet emergency requirements, have been released for distribution to dealers. Reserves of fuel oils have increased from exceptionally low levels prevailing earlier this year, but stocks in the Eastern rationing area still are below the estimated normal for this season, according to latest official reports. Operations at collieries in both the hard and soft coal fields slackened considerably during the latter part of October, and production was dras tically curtailed in early November, when wide spread shutdowns resulted from the failure to negotiate a new contract. Mines were reopened after the WLB on November 6 approved a higher pay scale plan worked out by the Secretary of the Interior, acting as Government custodian of the mines, and representatives of the United Mine Workers. Subsequently, the Office of Price Administration authorized temporary increases in the retail prices of anthracite and bituminous coal, in view of a rise in production costs under the new agreement. Output of anthracite averaged about 213,000 tons a day in October, as against the 1943 peak of 218,000 reached in July, and some 197,000 reported a year ago. Total production in the first ten months, approximating 51 million tons, was only 1/2 million tons greater than in the same period of 1942. Requirements for the full year 1943 have been estimated at 65 million tons, a goal that in all probability cannot be reached, since it would necessitate an increase in output of about 2 million tons a month during November and December. Page Seven Production of bituminous coal in Pennsylvania decreased in October for the second successive month but continued above the level of a year ago. The volume of soft coal mined in the ten months ended October was 4 per cent less than a year earlier, reflecting several shutdowns oc casioned by failure to negotiate a new contract to replace the one that expired last April. It has been estimated that the country’s soft coal requirements this year will approximate 600 million tons, as against the 580 million produced in 1942. Building. Operations in the building industry are directed almost entirely toward the comple tion of emergency construction, which includes both civilian and military installations. An in creasingly large part of new building in the civil ian category consists of housing and recreational facilities in or near centers of munitions produc tion to care for the heavy influx of workers and their families from other areas. Factory con struction has been declining for some time, and expansion programs undertaken by public util ity companies will soon be completed. It appears unlikely that the severe restrictions on nonessen tial building can be eased in the near future, owing to a critical shortage of manpower throughout the industry and the continuing scar city of steel, lumber, and other construction materials. Awards of building contracts in this district have increased from exceptionally low levels prevailing over the summer. New contracts in October approximating $1414 million, although 50 per cent greater than in the two preceding months, were less than one-half the dollar vol ume reported a year earlier. All classes of con struction except family houses and educational buildings showed substantial declines from 1942. The value of contracts awarded in the ten months ended October was just under $150 mil lion, as against last year’s record of over $300 million. The sharpest declines were in place ments for factory buildings and public works and utilities, which reached exceptionally high levels last year. The value of retail sales in most lines continues above 1942 levels in this district and in the country, reflecting to a large extent the influence of higher prices. Increases in the sale of clothing have been especially pronounced and more moderate gains have occurred in the case of many other non-rationed soft goods items in Trade. Page Eight BUILDING CONTRACTS THIRD FEDERAL RESERVE DISTRICT MILLIONS TOTAL INDUSTRIAL , v 1939 ; il / ! *■J 1940 1942 1943 adequate supply. Declines from a year ago in most types of consumers’ durable goods have become steeper month by month, as distributors’ inventories neared depletion. At reporting department stores in this district dollar sales in October were 8 per cent larger than a year earlier. Much sharper gains were shown by establishments specializing in men’s and women’s apparel, but sales of leather foot wear, curtailed by rationing, were smaller than in 1942. At furniture stores, volume was appre ciably less than a year ago; cash sales increased but credit purchases declined sharply over the twelve months. Active buying of holiday goods, influenced in part by the fear of shortages later in the season, was largely responsible for an un usually sharp rise from September to October in sales of general merchandise and women’s ap parel. Preliminary reports indicate that con sumer purchases in these lines expanded further in early November. Department store inventories in October again failed to reflect the increases that are usual in advance of the Christmas buying sea son, further emphasizing the difficulty of accum ulating reserves in the face of continuing short ages in certain lines. Stocks at the close of Oc tober were down considerably from a year ago at department and shoe stores, but at establish ments specializing in women’s apparel increased about one-fifth. Although outstanding commit ments for merchandise have declined somewhat since mid-summer, at the end of October they were over twice the dollar volume reported at the same time last year. « $ * ^ Activity in wholesale lines slackened some what from September to October, the sharpest decline in sales—28 per cent—occurring in the case of shoes. The total value of sales in eight reporting branches of the trade was 2 per cent larger than a year ago, a much smaller increase over 1942 than was reported earlier this year. Inventories at wholesale establishments showed only a slight decline in the month, but they were considerably below 1942 in most lines. Rail freight shipments continue exceptionally heavy throughout the country, according to the latest report from the Association of American Railroads. Class I carriers handled 3 per cent more ton-miles of revenue freight in October 1943 than a year earlier. In the first ten months, the increase over 1942 was 15 per cent and in comparison with 1941 it exceeded 50 per cent. Traffic in this district, measured in number of cars loaded, shows substantial gains over the past twelve months in the movement of less than carlot freight, solid fuels, grain products, and livestock. Banking conditions. Plans are now being laid for the Fourth War Loan Drive, scheduled to start January 18 and continue until February 15. An over-all goal of $14 billion from non banking investors has been set. Special em phasis will be placed upon subscriptions from individuals; this class of investor is assigned a quota of $514 billion; it supplied $5.4 billion last time. The securities to be offered during the Fourth Drive will comprise Series E, F, and G savings bonds, Series C savings notes, % Per cent cer tificates of indebtedness, 2*4 per cent bonds of 1956-59, and 2% per cent bonds of 1965-70. Commercial banks will be given an opportunity to invest a limited portion of their time deposits in the 214 ar d 214 per cent bonds, but otherwise cannot own ;hese securities until 1946 and 1954 respectively All member banks in the Third Federal Re serve District held a record $2,959 million of United States Government obligations on Octo ber 18, according to preliminary tabulations. This investment was four times as large as be fore the outbreak of war in Europe; it consti tuted 69 per cent of total earning assets, as against 33 per cent in June 1939 and 8 per cent in 1929. As the chart shows, gains in late years INVESTMENTS IN U.S. GOVT OBLIGATIONS MEMBER BANKS THIRD FED. RES. DISTRICT MILLIONS 1600 PHILADELPHIA BANKS '■ 1200 1939 1940 1941 1942 1943 1944 have been large at both the Philadelphia and country banks. Since October the investment in Governments has decreased somewhat. Reports from a group of banks in leading cities show that there was a decline of $69 million to $1,658 million at these institutions between October 20 and No vember 24. Holdings of United States bonds increased further, but declines were reported in shorter term issues, the largest being $75 million in Treasury bills, of which only $176 million are now held as against a peak of $308 million seven months earlier. The current re duction in the bill portfolio was due partly to sales to maintain reserves in the face of a decline in deposits. United States Government balances at the reporting banks decreased $159 million and interbank deposits also were down somewhat. Further gains approximating $100 million in the demand balances of individuals and business concerns reflected in part the re turn of a portion of the funds withdrawn and spent by the Government. For the district as a whole, there was a de cline of $3 million to $612 million in member bank reserves during the five weeks ended No vember 24. Approximately $8 million of re serves was absorbed by operations of the Treas ury, and a substantially greater amount through currency demand. These losses, however, were largely compensated for by gains in interdistrict commercial transactions and an increase in Re serve Bank credit. Treasury bills held by the Bank under repurchase option expanded $24 million to $258 million, despite the large amounts resold or redeemed at maturity. Page Nine BUSINESS STATISTICS Production Employment and Income Philadelphia Federal Reserve District in Pennsylvania Adjusted for seasonal variation Per cent change Indexes: 1923-5-100 Oct. Sept. Oct. 1943 1943 1942 Oct. 1943 irom 1943 from 10 mos. 1942 Year ago Mo. ago INDUSTRIA LPRODUCTION 153p 156 136 - 2 MANUFACTURING............ 139 - 2 157p 161 259p 269 221 — 4 Durable goods...................... Consumers9 goods.............. 86p 87 83 — 1 Metal products..................... 175 179 157 - 2 Textile products................... 65 + 2 67p 66 Transportation equipment 750 781 579 r - 4 Food products....................... 107p 108 95 - 1 Tobacco and products........ 85 92 116 - 8 Building materials............... 38p 37 52 + 5 Chemicals and products. . . . 161 164r 136 - 2 Leather and products.......... 98p 100 97 - 2 Paper and printing.............. 96 97 r 90 0 Individual lines Pig iron................................... 109 116r 110 - 6 Steel......................................... 143 149 r 130 - 4 Silk manufactures................ 83 81 78 + 3 Woolens and worsteds........ 54p 54 54 0 Cotton products................... 48 52 59 - 7 Carpets and rugs.................. 53r + 6 49p 46 Hosiery.................................... 70 74 74 - 5 Underwear............................. 140 146 139 - 4 Cement................................... 42p 40 77 + 5 Brick........................................ 55 54 r 69 + 2 Lumber and products......... 27 25 29 + 7 Bread and bakery products + 1* 107 110 98 - 3 Sugar relining. 121 44 +24 98 115p 127 96 r -10 Cigars............................. 115 - 9 83 91 Paper and wood pulp. 84 83 r 82 + 2 99 99 92 - 1 Shoes....................................... 112 112 119 0 Leather, goat and kid......... 85p 88 77 - 4 Paints and varnishes........... 92 103 83 -10 Coke, by-product................. 165 171 163r - 4 COAL MINING..................... 81 83 76 r - 2 Anthracite.............................. 80 74r - 1 81 Bituminous............. .............. 93 101 r 88 - 8 CRUDE OIL............................ 388 403 458 - 4 ELEC. POWER—OUTPUT. 400 414 365 - 3 Sales, total............................. 440 443 371 - 1 Sales to industries................ 383 347 290 +10 BUILDING CONTRACTS TOTAL AWARDSt............... 42 49 126 -14 Residential!........................... 38 36 45 + 5 Nonresidentialf. .. v>... .. 38 59 243 -36 Public works and utilities!-. 55 47 110 +17 + + 44+ + + + — + + + Not adjusted + + + + + 12 13 17 4 11 3 30 12 27 27 19 1 7 + + — + + Oct. Sept. Oct. 1943 1943 1942 2 8 3 2 5 7 2 3 40 12 9 10* 7 48 28 11 0 3 5 11 b 2 1 1 4 11 155p 156 160p 160 139 142 182 69p 718 120p 104 41p 163 104p 97 181 66 740 117 106 39 163r 109 96 163 68 554 104 141 56 137 104 91 109r 141 81 58 49 46 74 146 46 55r 27 116 112 84 165 106 83r 98 128 92 98 165 83 81 103r 403 406 438 368 109 130 79 59 61 56 r 81 152 86 70 30 110 102 37 131 141 83 93 129 80 89 159 76 74 95 458 376 371 282 48 42 56 43 130 52 233 116 _ 101 + + 7 1 — 19 — 8 — 5 0 — 46 — 20 — 6 + 7* + 9 +176 + 19 28 + 3 + 7 6 + 10 + 11 + 2 + 8 + 8 + 5 — 15 + 9 + 19 + 32 _ + — + + 15 + 21 108 143 85 58p 50 50p 77 152 47p 56 28 118 111 102 169p 102 86 100 121 88p 99 162 82 80 100 388 412 440 372 _ 67 _ 17 — 84 ' 50 34 _ 2 _ — 47 " 38 43 43 37 58 * Unadjusted for seasonal variation. p—Preliminary ! 3-month moving daily average centered at 3rd month. — — — + — — + + + + + — — + + + + Employment 11 GENERAL INDEX Manufacturing.................... Anthracite mining............. Bituminous coal mining.. . Building and construction. Quar. and nonmet. mining. Crude petroleum prod....... Public utilities..................... Retail trade.......................... Wholesale trade.................. Hotels.................................... Laundries. . ......................... Dyeing and cleaning.......... Wilkes-Barre.... Williamsport.... Wilmington........ York..................... - 1 0 - 4 0 -14 + 3 +21 - 5 Sept. 1943 Building permits value Oct. 1942 Sept. 1943 Oct. 1942 Sept. 1943 Oct. 1942 + 3 - 24 - 87 +199 - 70 - 65 - 67 + 30 + 64 - 36 - 9 + 43 0 +238 - 8 - 78 +265 + 182 - 91 +241 +128 +17 -10 - 8 -13 15 -15 -13 b!2 1-13 + 9 + 7 +10 +13 0 +13 + 9 +12 +19 +18 +15 +11 +10 + 3 + 9 -12 - 9 -17 -12 - 6 -19 -13 -47 - 9 - 9 - 8 -12 -13 + 7 + 8 - 1 - 2 +15 +11 + 11 + 8 +13 +13 -18 +12 + 9 +14 +14 + 4 +16 +21 +21 +11 +27 + + 6 1 7 2 -31 +13 +33 + 4 + 52 - 18 +348 - 88 * Area not restricted to the corporate limits of cities given here. Page Ten Debits Sept. 1943 2 1 3 1 3 1 1 4 326 484 91 346 132 317 219 140 158 147 163 157 167 +1 +1 + 2 - 2 - 8 0 - 3 0 + 8 0 + 4 + 2 + 9 + 14 +17 + 8 +12 - 7 +10 + 6 + 3 +15 — 3 + 5 Payrolls* TOTAL...................................... Iron, steel and products.. . Nonferrous metal products Transportation equipment Textiles and clothing......... Textiles............................ Clothing........................... Food products..................... Stone, clay and glass......... Lumber products............... Chemicals and products... Leather and products........ Paper and printing............ Printing............................ Others: Cigars and tobacco........ Rubber tires, goods........ Musical instruments... . 119 131 195 150 83 75 112 121 90 51 124 77 103 95 0 0 +1 0 0 0 0 0 + 1 0 0 - 1 + 1 + 1 + 3 + 4 + 2 +20 - 6 - 6 - 8 +1 - 4 - 3 + 5 -16 + 3 + 4 197 280 411 258 122 114 165 178 133 81 213 113 146 128 + 1 + 1 + 4 0 + 5 + 5 + 4 + 2 + 3 + 5 + 1 0 0 - 2 +17 +19 +17 +25 + 8 + 9 + 5 +16 + 6 + 14 +20 - 8 +13 +12 58 143 100 - 1 + 2 + 4 -15 +29 +31 80 284 173 - 1 + 4 + 3 - 7 +55 +42 * Figures from 2906 plants. Hours and Wages Oct. 1942 + + + + + + + + 0 + 3 -19 -15 - 9 -18 - 3 - 3 + 3 + 7 + 3 - 9 - 7 Per cent Per cent Oct. change from Oct. change from 1943 1943 index Sept. Oct. index Sept. Oct. 1943 1942 1943 1942 Indexes: 1923-5-100 October 1943 and per cent change from year ago Retail Sale +1 0 0 - li -10 - 2 - 1 - 1 + 9 0 + 1 + 1 + 1 Employment* -Revised. Local Business Conditions* Factory payrolls 135 184 50 82 51 96 138 99 118 106 102 100 97 Manufacturing Factory Workers Percentage Factory change— employment October 1943 from Sept. Oct. month and 1943 1942 year ago Allentown........... +1 - 2 Altoona............... 0 +10 Harrisburg.......... +1 - 8 Johnstown.......... - 1 - 3 Lancaster............ +1 + 8 Philadelphia.... +1 + 8 Beading............... 0 - 3 Scranton.............. 0 +14 Payrolls Per cent Per cent Oct. change from Oct. change from 1943 1943 index Sept. Oct. index Sept. Oct. 1943 1942 1943 1942 Indexes: 1932-100 17 19 30 2 12 3 57 13 9 22 15 7 3 + Industry, Trade and Service TOTAL............................ Iron, steel and prods.. Nonfer. metal prods... Transportation equip.. Textiles and clothing.. Textiles........................ Clothing....................... Food products............. Stone, clay and glass.. Lumber products......... Chemicals and prods.. Leather and products. Paper and printing. . . Printing........................ Others: Cigars and tobacco. . Rubber tires, goods.. Musical instruments. Weekly working time* Hourly earnings* Weekly earnings! Aver Aver Aver age Ch’ge age Gh’ge age Ch’ge hours 45.5 47.0 46.0 47.5 40.3 41.4 37.7 44.4 41.2 44.5 45.1 40.9 43.4 40.7 + 5 $1.018 + 8 $46.06 + 6 1.086 + 6 51.02 + 6 .956 + 8 43.97 0 1.157 + 5 54.98 + 3 .739 +11 28.68 + 4 .763 +11 31.53 + I .679 +11 25.65 + 5 .781 +11 34.79 + 6 .883 + 3 36.29 + 3 .746 +14 33.09 +10 1.027 + 4 46.16 + 3 .723 + 8 29.33 + 5 .869 + 5 38.01 + 6 1.014 + 5 41.31 +13 + 13 +15 + 5 +11 +16 +13 + 16 +10 +18 +16 +10 + 8 + 8 41.8 44.2 48.1 + 2 + 4 + 7 +10 +20 + 9 * Figures from 2754 plants. .601 + 9 .998 +15 .945 + 2 25.08 44.09 45.42 ! Figures from 2906 plants. Distribution and Prices Wholesale trade Unadjusted for seasonal variation Per cent change 1943 from October 1943 from Month Year ago ago Sales Total of all lines.................... Boots and shoes.................. Drugs..................................... Dry goods............................. Electrical supplies.............. Groceries............................... Hardware............................. Jewelry.................................. Paper..................................... Inventories - 3 -28 + i - 4 - 7 +1 +1 + 2 -30 Paper..................................... +n +ii + 4 +19 +23 +13 -10 - 8 - 6 05 - 4 + -31 +16 - 7 -21 +25 + — + - -16 -26 -42 + 5 - 3 -31 -21 0 Electrical supplies.............. 10 mos. 1942 1 2 4 3 1 2 8 Basic commodi ties (Aug. 1939 =100). . . Wholesale (1926 = 100)............................. Farm........................... Food............................ Other.......................... Living costs (1935-1939=100)... United States........... Philadelphia............. Food....................... Clothing................ Rent........................ Fuels...................... Ilousefurnishings. Other...................... Per cent change from Oct. Month Year Aug. 1943 ago 1939 ago 0 + 5 + 78 103 122 105 97 0 - 1 0 0 + 3 +12 + 2 + 2 + 37 + 100 + 56 + 21 124 124 137 131 107 106 125 116 0 + 1 + 1 0 0 0 0 + 1 + + + + + + + + + + + + 178 5 5 » 4 0 + 2 + 2 + 3 26 26 47 32 4 10 24 15 Source: U. S. Bureau of Labor Statistics. Not adjusted Per cent change Indexes: 1935-1939=100 Oct. 1943 RETAIL TRADE Sales Department stores—District.... Philadelphia Women’s apparel............................ Men’s apparel.................................. Shoe.................................................... Inventories Department stores—District. . . . Philadelphia Women’s apparel............................ Shoe.................................................... Source: U. S. Department of Commerce. Prices Adjusted for seasonal variation FREIGHT-CAR LOADINGS Total........................................... Merchandise and miscellaneous Merchandise—l.c.l...................... Coal.................................................. Ore.................................................... Coke................................................. Forest product............................ Grain and product...................... Livestock........................................ MISCELLANEOUS Life insurance sales___ Business 1 iquida tions Number...................... Amoun t of liabilities, Check payments........... Sept. Oct. 1943 1942 150p 147 147 151 130p 138 136 137 150 138 139 137 123 117 143 140p 156 136 157 180 182 88p 87 160 163 148 103 136 129 85 135 185 188 102 152 132 138 131 87 145 183 200 109 131 123 133 128 75 124 189 174 114 136 121 105 109 220 * Computed from unadjusted data. October 1943 from Month Yeur ago ago + + + 61 - 8 + 7 +20 +29 - 9 -10 -12 8 + 9 + 7 -13 1943 from 10 mos. 1942 Oct. Sept. Oct. 1943 1943 1942 + l71p 171 168 169 l46p 6 +6 +20 + 5 - 2 -16 -1 +1 +22 1 +3 149 146 160 135 157 159 159 141 131 161 165p 165 162 165 212 188 193 181 94 111 154 142 90 160 295 212 137 130 148 143 135 79 138 271 197 134 136 142 220 -15 95p 2 - 3 - 2 - 7 +16 + 7 + 8 - 2 + 8 -11 -111 + 61 +12 + 9 + 5 +12 147 137 90 148 266 214 119 152 154 75 - 3 +40 +10 109 96 78 -71* +58* +14 -65* 15 29 164 12 6 146 + 25* +368* - 24 51 19 143 - + - 13 +131 - 7 + 61 - - +20* +19 198 p—Preliminary. BANKING STATISTICS MEMBER BANK RESERVES AND RELATED FACTORS Changes in— Reporting member banks (000,000’s omitted) Nov. 24, 1943 Assets Commercial loans................... $ 245 43 11 Other loans to carry secur... 41 Loans on real estate.............. Other loans.............................. 103 Five weeks One year +$ i Sources of funds: Reserve Bank credit extended in district........ Commercial transfers (chiefly interdistrict).. . — 2 2 -$ 8 + 18 * 6 - 2 * Total loans............................ $ 443 -$ 5 -$ 16 Government securities.......... $1587 Obligations fully guar’teed.. 71 Other securities...................... 180 —$68 - 1 - 6 +$679 + 8 - 65 Total investments............... $1838 —175 +$622 Total loans & investments. $2281 Reserve with F. R. Bank.. . 373 Gash in vault.......................... 28 Balances with other banks.. 77 62 — $80 + 9 - 1 - 5 Liabilities Demand deposits, adjusted. $1594 Time deposits.......................... 163 U. S. Government deposits.. 494 Interbank deposits................ 330 Borrowings............................... 3 12 Capital account...................... 225 +$96 + 1 -159 - 19 + 3 +$ 99 + 5 + 460 - 60 + 3 + i + ♦Figures not available. Philadelphia Federal Reserve District Oct. 27 (Millions of dollars) +$606 - 56 + 1 - 34 — 4 6 Changes in weeks ending— Nov. 3 Nov. 10 Nov. 17 Nov. 24 Changes in five weeks +15.9 - 5.7 -14.1 -49.1 +30.3 +36.8 +34.0 - 9.8 - 2.3 - 5.7 + .8 + 1.5 +28.5 + 10.4 -30.4 +23.6 +26.0 - 8.5 - 3.9 +18.0 +21.9 - 3.4 + 8.5 +41.1 Uses of funds: Currency demand.................................................... Member bank reserve deposits........................... “Other deposits” at Reserve Bank................... Other Federal Reserve accounts........................ + 6.5 -11.0 + 0.6 - 0.0 + 11.0 + 6.0 + 1.4 - 0.4 +12.7 + 7.2 + 2.0 - 0.0 + .7 - 1.2 - 2.9 + 0.0 +13.9 - 4.1 - 1.3 + 0.0 +44.8 - 3.1 - 0.2 - 0.4 Total.......................................................................... - 3.9 +18.0 +21.9 - 3.4 + 8.5 +41.1 Member bank reserves (Daily averages; dollar figures in millions) Held Re quired Ex cess Phila. banks 1942: Nov. 1-15.. 1943: Oct. 1-15.. Oct. 16-31. . Nov. 1-15. . $393 347 351 360 $337 329 336 347 $56 18 15 13 Country banks 1942: Nov. 1-15.. 1943: Oct. 1-15.. Oct. 16-31. . Nov. 1-15. . 235 272 263 264 170 196 200 204 65 76 63 60 Ratio of excess to re quired 17% 6 5 4 39 39 32 29 Federal Reserve Bank of Phila. (Dollar figures in millions) Changes in— Nov. 24, 1943 Five weeks One year Bills discounted.... $ 4.1 Bills bought.............. 0 Industrial advances. 4.4 U. S. securities......... 706.6 +$ 3.4 0 + 0.0 + 45.6 +$ Total......................... Note circulation.. . . Member bk. deposits U. S. general account Foreign deposits... . Other deposits.......... Total reserves........... Reserve ratio............ +$49.0 + 39.8 - 3.1 15.7 + 16.3 - 0.2 - 9.3 - 1.8% +$333.3 + 281.3 - 32.2 + 23.8 + 58.1 6.6 - 11.7 - 13.9% $715.1 1100.2 611.6 24.0 125.3 3.5 1161.3 62.3 2.9 0 0,6 + 331.0 Page Eleven National Summary of Business Conditions INDUSTRIAL PRODUCTION Federal Reserve index. Monthly figures, latest shown are for October, 1943. DEPARTMENT STORE SALES AND STOCKS 1937 1938 1939 1940 1941 1942 1943 Federal Reserve indexes. Monthly figures, latest shown are for October, 1943. COST OF LIVING 1937 1938 1939 1940 I943 Bureau of Labor Statistics’ indexes. Last month in each calendar quarter through September, 1940, monthly thereafter. Mid month figures, latest shown are for October, 1943. MEMBER BANK RESERVES AND RELATED ITEMS 1939 Wednesday figures, latest shown November 17, 1943. Page Twelve are for Industrial activity was maintained in record volume in October and the early part of November. Value of department store sales continued at an exceptionally high level. Industrial production. The total volume of industrial production continued to increase slightly in October and the Board’s seasonally adjusted index was at 245 per cent of the 1935-39 average, as compared with 240 in July and 227 in January. War production in the machinery and transportation equipment in dustries showed a further rise, reflecting largely a new high level of production of aircraft, aircraft engines, and parts. The total number of planes accepted during the month was 8,362, or 11 per cent more than the average in the third quarter. Deliveries of cargo vessels from merchant shipyards continued at an annual rate of 20,000,000 deadweight tons. Steel mills operated during October at the highest monthly rate during the war period. Production of nonferrous metals also continued to rise. Announce ment of permission to use aluminum in additional types of war products and some essential industrial products followed rapidly increasing output of this metal. Lumber production declined somewhat more than usual at this season and the prospective supply situation remains critical notwithstand ing reduced demand for lumber for building purposes. Output of stone, clay, and glass products as a whole showed little change and was at about the level of a year ago. Cement production in October was down 40 per cent from last year but production of other stone, clay and glass products, like glass contain ers and asbestos and abrasive products, was considerably higher than last year.Output of most nondurable goods showed little change from September to October. Food manufacturing as a whole continued in large volume allowing for seasonal changes, although butter and cheese production declined. Output of butter was 11 per cent below last year in October and declined further in the early part of November. Meatpacking, however, was at an exceptionally high level in October and continued to increase sharply in the first three weeks of November. There was also a rise in production of wheat flour and other manufactured foods in October. Output of textile and leather products remained at the somewhat reduced rate of recent months, while production of rubber products and industrial chemicals increased. Coal production declined 6 per cent in October and dropped sharply further during the first week of November, but increased in the middle of November. The value of construction contracts awarded in October, according to reports of the F. W. Dodge Corporation, continued at the low level of other recent months. Total awards this year have been 60 per cent smaller than in the corresponding period of 1942, when they were at the highest level of the war period. Distribution. Department store sales in October and the first half of November were 10 per cent larger in dollar volume than in the same period last year, and, allowing for seasonal changes, sales were somewhat higher than in the third quarter of this year. Total consumer expenditures for commodities and serv ices in the third quarter were at about the peak level prevailing in the first half of this year and were substantially larger than a year ago. Carloadings of railway freight in October were slightly less than in Sep tember, reflecting chiefly declines in shipments of coal and ore. Loadings of grain increased sharply to a level 20 per cent greater than in October 1942, and livestock shipments were the highest in recent years. Commodity prices. Grain prices advanced in the early part of November, while prices of livestock declined as livestock marketings expanded sharply. Prices of certain industrial raw materials, such as cotton, wool, and nonferrous metal scrap, have also declined somewhat since the middle of October reflecting larger supplies and uncertainties as to the extent of demands for these mate rials in war production. The total cost of living which had declined 1.4 per cent during the summer, according to the Bureau of Labor Statistics, rose .8 per cent from mid-August to mid-October. There were increases in prices of food, clothing, and a number of miscellaneous items. Bank credit. The average level of excess reserves at all member banks was around 1.1 billion dollars in mid-November reflecting some decline from the comparable October period. During the four weeks ending November 17 reserve funds were supplied to member banks by an increase of over 900 million dollars in the Government security portfolio of the Reserve Banks; increased holdings consisted largely of bills purchased under option and in part of certificates. The effect of these security purchases on excess reserves was more than offset, however, by a currency demand of 540 million dollars and a continued increase in required reserves as Treasury disbursements transferred funds from reserve-exempt war loan accounts to private deposits. Following substantial bank purchases of special Treasury offerings in midOctober, Government security holdings at reporting member banks in 101 leading cities declined somewhat over the following month. The principal decrease was in holdings of bills at banks outside New York. Commercial loans while decreasing during the past two weeks, showed a net gain for the four week period, while loans on securities, which rose to a high level during the Third War Loan Drive, declined substantially.