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W IlSSlflflrtlPil HU .A..*..% 1 iiilS : px ■ \4 HUH / ZjRevietie Atf Me i^erteta/ yiebetve &$an/( of>f(Mieag(i _ CC .......... if1 \ ^ r.f' v> IMv! ifi 1 111 ,1 m ,tf' ■ v ■ .- APRIL 1942 | J , 1 «■ Business Conditions in the Seventh Federal Reserve District Business in the Seventh Federal Reserve Dis trict during* February and the first half of March reflected the transition to a full war economy. Production and employment rose in some indus tries and fell in others as the combination of capital, materials, equipment, and men united quickly on new products or encountered delays because of changeover problems, restrictions, and shortages. The result has been a decrease in employment and in payrolls, although both were of slight proportions. Retail trade was har ried by occasional stampedes of buyers who were alarmed by announcements of future rationing or impending restrictions. The shifting of the automobile industry to war production has resulted in considerable idleness and has been the principal cause of a decline in the index of total manufacturing employment in the District. Payrolls generally held up better than employment as skilled, higher-paid workers are generally retained. Wage rates continued to advance and operating schedules were length ened. Employment this February, in manufac turing industries as a whole, exceeded that of last year by 9 per cent, while the corresponding wage payments showed a gain of 23 per cent. Each month the steel industry crowds produc tion to new levels and exceeds its rated capacity by larger amounts. The estimated production for the month of March is 1,360,000 net tons. Of special importance to the industry and, there fore, to the entire war production program was the opening of Great Lakes navigation on March 19. This date marks the earliest opening of those shipping lanes in history. Output of bituminous coal in the producing States of the Seventh District was at a slightly lower rate in February than in January and showed a further decline in the early part of March. The output continues above that of a year ago, but the difference has narrowed from 16 per cent in January to 9 per cent in February, and will probably disappear altogether in the final reports for March, as this month last year was greatly affected by the anticipated closing of the mines in April. Transportation problems have been engaging the attention of the oil industry in this District and in the nation. There has been a decline in the output of crude oil in the Illinois territory during March and the daily average for the week of March 14 went below that for the correspond ing week of last year. This is the first time such a decline has been recorded in 1942. Runs of crude oil to refineries and the production of gas oline reported for the Illinois-Indiana-Kentucky area continue greatly in excess of the corre sponding volumes of a year ago. While stocks of gasoline in this reporting area have been rising this year, those of fuel oil have been declining sharply. Despite the limitations that have been imposed on the construction industry by scarcity of mate rials and priority regulations, the volume of con tracts awarded so far this year has been substan tially higher than in the corresponding months of 1941. Contracts awarded in the first half of March, however, were considerably below those of a year ago when industrial plant expansion was at a peak. Orders received during February by furniture manufacturers in this District fell off consider ably from the peak reached a month earlier, while shipments registered a substantial increase. Un filled orders at the end of the month totaled 8 per cent less than at the close of January, but remained at a level about 35 per cent higher than a year ago. Hog* marketings have been reduced sharply in recent weeks, while a continued strong demand for pork and lard brought a marked increase in hog prices during February and early March. The temporary price ceiling on wholesale pork prices became effective March 23 at levels pre vailing March 3-7. Marketings of slaughter cat tle decreased from the January level, but were considerably larger than for February of last year. Federally inspected slaughter of cattle showed a corresponding decline from January but an increase of about one-fourtli over Febru ary 1941. Retail trade, as reported to the Federal Re serve Bank of Chicago, has been holding to a gain of about 20 per cent over corresponding weeks of a year ago. This margin has been main tained for the past seven weeks. The increased dollar volume of sales, however, has been ac counted for in the most part by the rise in retail prices. The level of retail prices on February 1 was 17 per cent over that of a year ago and on March 1 the increase was more than 18 per cent. The weekly reports of department store sales show no indication that the income tax payments interfered with sales. Rising Pork Prices Checked by OPA Rapidly rising pork prices were put in check by the Office of Price Administration on March 10 when that agency announced that ceilings would be effective March 23 on wholesale pork products. Spurred by increasing consumer de mand, lend-lease purchases, and buying for the armed services, prices recently have climbed rapidly, abetted by seasonal declines in market ings. The basis of the ceilings is the highest of the prices received by sellers during the period March 3-7. These prices are those shown by the verified price lists of sellers, who were also re quired to submit verified lists for the period February 24-28 as a check against the possibility that lists for the later period may have carried precautionary rises in the knowledge that some ceiling was pending. Sellers may also be re quired to “verify” the lists by showing that sales were actually realized at the listed prices. The ceiling is a temporary measure, expiring at the latest 60 days after March 23, and is sub ject to amendment in the interim. The OPA an nounced that the temporary ceiling will be fol lowed by a permanent one, and extensive con sultation with leaders in the industry has already been held with respect to the permanent ceiling. At these conferences competitive and individual problems were considered with respect to the temporary ceiling. Packers asked that a ceiling also be put on live hog prices, but OPA officials have made no announcement with regard to live animal ceilings. At the time the temporary order was issued it was felt that wholesale prices had been selected in preference to live animal prices in order to force the packing industry to bid the hogs up, thus policing its margins and saving the OPA this administrative problem. The perma nent ceiling is expected to be effective May 1, somewhat ahead of the 60-day legal limit to the temporary ceiling. Retail prices are not regulated by the ceilings. The OPA said on announcing the temporary ceil ing that, for the present, retail margins would be watched, and that it hoped that the competition between retailers would keep the margins in line with replacement costs. However, on March 27 the agency called on butchers and retail meat markets not to raise prices above the mid-March levels, since they were protected by the March 10 ceiling from rising wholesale costs. OPA also called upon consumers to report directly to the agency any marked rises in retail prices and urged consumers to buy less pork because large supplies are needed for military and lend-lease requirements. An amendment to the temporary ceiling was announced on March 24 by which sellers were allowed a two-cent markup above the March 3-7 levels for sales to government purchasing agen cies. This was to correct a situation not covered by the original order, a situation in which sellers incurred additional costs for selection and cut ting to government specifications. Since recovery of such costs was not covered in the temporary price ceiling, the government agencies were find ing difficulty in obtaining sufficient supplies to carry out their purchase programs. Similar cor rections were made for canned and packaged spiced hams and luncheon meats made entirely of pork for government order. On March 31 the ceiling order was further amended to alleviate the financial hardship on those dealers (mostly small sellers) who had to buy on the “replacement cost” basis from other sellers, that is: at the March 3-7 level, and whose custom is to quote and sell on “first in, first out” inventory basis. This meant that these dealers quoted and submitted lists of such quotations, based upon the lower price levels of February 24-28, whereas prices to them were on the higher basis of March 3-7. Thus a disadvantageous sit uation had been frozen into their “ceiling” prices. The adjustments allowed in the amend ment ranged from l<f to li</t on eight different types of nonperishable processed, cured, smoked or salt pork products. Prior to the ceiling announcement, hogs at Chi cago had climbed steadily from an average just above $11 in mid-January to $13.55 the day be fore the ceilings were announced. In the two weeks after the March 10 announcement the av erage remained at or below $13.50, with the top prices at or below $13.65. But extremely short supplies and heavy demands forced a rise in Chicago prices beginning March 27, which brought a 16-year record top of $14.55 on April 8 and an average of $14.30. All buying interests were complaining that such prices brought live animals entirely out of line with the wholesale ceilings as set by March 3-7 levels, when the maximum top was $13.50 and the average $13.25. The situation is expected to change shortly when spring mar ketings get under way, increasing supplies avail able. Page 1 The Automobile Conversion The Detroit area is currently the nation’s con version laboratory, as the automobile industry struggles from a peace to a war footing. Con tracts involving $12 billions of annual output have been awarded to this industry. Approxi mately two-thirds of this amount is to be let out for sub-contract, mostly to parts manufacturers who have had long-standing “sub-contract” re lations with the industry. Production in 1942 is expected to aggregate between $5 and $6 billions, the great bulk of it from new plants built for war purposes. In terms of actual physical goods, the industry has been made responsible for 50 per cent of America’s airplane motors, 54 per cent of machine guns, 91 per cent of tanks and tank parts, 100 per cent of all trucks and motor ized vehicles, as well as a host of smaller items. In general, the larger concerns with the greater research facilities are undertaking the more dif ficult branches of production (aircraft and tanks) while the smaller companies are specializing on trucks, combat cars, and other vehicles more sim ilar to civilian output. The industry considers its war effort as roughly equivalent to the pro duction of 15 million civilian cars and trucks a year; the industry’s record production in peace time was 5.4 million in 1929. The first step in this task was the drastic cur tailment of civilian production. Output of civil ian passenger automobiles stopped February 10. Production of trucks for civilian use continues, but is limited to the assembly of parts already fabricated. Functional replacement parts are be ing produced through June 30 on a scale which is planned to equal 150 per cent of the entire 1941 output and provide a stockpile through 1943. After that date, parts production will cease as well, unless material shortages prevent achieve ment of the production goal. Buses of over 15-person capacity are permitted unlimited pro duction, with output running at 238 per cent of last year’s. The savings in materials resulting from the curtailments have been estimated on the basis of a normal model year of 3 million vehicles (1941 model production was 5.1 million) as enough steel and rubber for 125,000 medium tanks, enough tin for 3 billion cans of average size, enough aluminum for 42,857 fighter planes, enough nickel for 150,000 tons of nickel steel for armor plate and projectiles, and enough zinc and copper for more than 7 billion cartridge cases. But curtailing civilian goods is only the first step in producing war implements. New plants must be built, and old ones converted drastically. Pago 2 Thousands of men must be temporarily deprived of employment on civilian production. Detroit is getting the goods produced, and as this is written, the employment crisis seems to be past. The dreaded priorities unemployment, which affected 110,000 people in Detroit and 130,000 in the rest of Michigan at the beginning of Febru ary, has subsided. Perhaps 70,000 in Detroit and 50,000 elsewhere in Michigan remain unemployed. (These estimates include not only persons filing claims against Michigan for unemployment com pensation, but also in-migrants unable to find work, and unemployed persons who do not reg ister for benefits.) The Detroit Board of Com merce index of Detroit employment rose to 109.9 on a 1923-25 base for March 15, after falling from 126.7 in June 1941 to 102.7 in the last half of January and 102.5 in the first half of February, when civilian production of pas senger cars was halted. The balance of inter regional migration, which was against the Detroit area for both January and February, and against the State of Michigan in February, has turned again in March. Even at its worst, Detroit’s priorities unem ployment was not so severe as anticipated. The principal reasons for this were the acceleration of replacement parts production, the retention of skilled employees despite lack of work, and absorption of workers by new plants. Thus, a decline of 20.5 per cent in Michigan’s automobile employment between January and February re sulted in only a 7.3 per cent decrease in employ ment in all Michigan manufacturing industries. Detention of skilled men is reflected in the much smaller decline in manufacturing payrolls of only 5.2 per cent from January to February. Mean while the State of Michigan has raised the maxi mum level of unemployment compensation from $16 to $20 weekly, lowered the waiting period from two weeks to one, and raised the benefit period from 18 weeks to 20. The demand for Federal aid for the priorities unemployed has subsided following defeat of two proposals by Congress. Detroit war plants are estimated to be hiring some 25,000 workers a month gross, or 12,500 net (decrease in civilian employment ac counting for the remainder), and this number will increase before the end of the year. July is now the most probable date at which the (former) automobile industry will employ approximately as many men as at its peak in June 1941—543,000 for the entire United States. But conversion will not have been accomplished by this date. _ Large segments of the automobile plants will still be unused, with completely new plants furnishing most of the industry’s employ ment. The most optimistic estimate of the date of complete conversion is September 1. The slowness of conversion is basic to the fric tion between the automobile companies and the United Auto Workers (CIO). The union accuses the companies, particularly the “Big Three”— General Motors, Chrysler, and Ford—of attempt ing to minimize conversion, so that they may secure competitive advantage when civilian pro duction is resumed. It demands a voice in man agement primarily for the purpose of speeding conversion. It refuses to modify its demands for wage increases, greater vacation pay, time-and-ahalf for overtime work, etc., until given evidence of management’s sincerity in accelerated conver sion. However, the union has already voted to abandon its claim for Sunday double-time within the forty-hour week, after it had been granted by an arbitrator, and has agreed to the outlawing of strikes. The management, on its part, blames the slowness of conversion on material bottle necks, and points to the pooling of machines and processes between the companies as evidence of its abandonment of competitive practices. Among management’s demands to the union are a cessa tion of criticism in the union press and the elim ination of slowdowns. These controversies are brought to a head by the current negotiations regarding revision of the Auto Workers’ collec tive bargaining contract with the General Motors Corporation. A similar revision of the union’s contract with Chrysler will occur later this spring. With automobile employment scheduled to ex ceed 800,000 by the coming winter and a million next spring, a labor shortage is expected to be added to the existing bottlenecks. The size of this shortage is estimated at 190,000, chiefly in skilled trades. This estimate makes no allowance for persons leaving the Detroit area permanently as a result of priorities unemployment. Such permanent out-migration is not expected on a serious scale, because Detroit wage-rates are comparatively high. There has been a substantial efflux of unemployed workers to the smaller towns of Michigan and to Kentucky, Tennessee, Missouri, and Arkansas (traditional sources of labor for Detroit factories). This movement is not unusual, can be explained by desire to escape Detroit’s high living costs during the period of unemployment, and is already being reversed. Indeed, the anticipated shortage is already real for many small concerns, who are not willing to hire unemployed workers with seniority at the larger plants for fear of losing them before they are acclimated to their new duties. Plans to in crease the labor force are in operation. There is a relaxation of age restrictions; “old at 45” is no longer the rule. Women are being trained for skilled and semi-skilled occupation. A program of training has prepared for the up-grading of perhaps 100,000 workers, 80,000 of whom have had their training within industry. The union will permit the employment of these up-graded workers, but will allow them seniority rights only in their previous occupations or as unskilled labor. Rather than the automobile workers, the na tion’s 44,000 dealers and their employees have been the principal victims of the automobile con version. Much publicity has been given par ticular dealers who have the equipment and con nections requisite for conversion to defense sub contractors, who have gone into alternative lines such as selling beer or refrigerators, who have utilized their vacant space for bowling alleys or roller rinks. The fact remains that the great ma jority of dealers depends for survival upon usedcar sales and on repair business. In the Chicago area, perhaps half of these is expected to go out of business within a year. There are from 400,000 to 480,000 new cars available for rationing among the American pub lic, following the delivery in February of vehicles purchased but not delivered prior to the ration ing order. The corresponding figure for trucks is approximately 130,000. The stock of used cars on hand is about 560,000, a 2f-month supply un der normal conditions. Dealers are dissatisfied with the working of the rationing program for new automobiles. The Office of Price Administration originally planned to distribute some 145,500 cars in the first three months of rationing (March 2-May 31), over 35 per cent of the entire year’s total of 340,000 cars to be distributed. (This early distribution was designed to lessen dealers’ storage charges.) These cars were to be priced as of last October, with an additional one per cent (not over $75) added for each month of storage. These were to be distributed by areas according to 1941 regis trations, the total distributions for 1942 in Sev enth District States being as follows: Illinois, 8,789; Indiana, 3,970; Iowa, 2,071; Michigan, 8,289; Wisconsin, 2,923. Difficulty has arisen from the requirement that claimants prove need for new cars, which is al most impossible in view of the available stock of (Continued on page 1) Page 3 Finding the Tools for the Farm Widespread conversion to war production has been in order for the farm machinery and equip ment industry in the past several months. In addition to the mass needs of the war being sup plied in part by this industry, the needs on the part of agriculture are probably the most acute of any time in the history of the industry. The needs for agriculture spring from two sources. In the first place, labor shortage on the farm presents a serious problem to producers for the current year. The selective service draft and the rapidly expanding industrial demand for labor have transferred a substantial part of the farm labor supply from the farm to training camps and urban industrial centers. This shift comes at a time when national production goals call for expanded output in 1942 in nearly all lines of agriculture. The expansion of production in cer tain commodities, such as dairy products, soy beans, peanuts, and poultry, called for by these goals requires substantial additions to available equipment and machinery. This program of ex panded production is the second source of need for agricultural machinery and equipment. Restriction of materials available for produc tion of agricultural items is the most important problem of the industry. As a result of many conferences, the industry, the Department of Agriculture officials, the War Production Board, and other governmental agencies worked out a schedule for 1942 machinery production. This was announced around the first of the year and applied to the industry’s operating year, Novem ber 1, 1941 to October 31, 1942. Strategic mate rials, mostly iron and steel, were “allocated” to permit 83 per cent of the 1940 production of new farm machinery, and about 150 per cent of the 1940 tonnage of repair parts. The schedule set forth permitted production for each and every type of farm equipment. Since the schedule was framed with the 1942 agricultural production goals in mind, the most generous parts of it were for those items of equipment needed to meet the expanded goals for such items as dairy products and oil crops. For example, milking machines and medium sized cream separators were scheduled at a per mitted production more than double the 1940 figures, while milk coolers and butter-making Page 4 machinery were permitted substantial increases over the 1940 base. The largest single increase was for hay press combines, which were sched uled at more than three and a half times the 1940 production. But substantial increases ranging up to double the 1940 output were scheduled for tworow tractor-drawn combination corn and cotton planters, for listers with planting attachments, for one-row corn pickers, and for peanut pickers. Under these schedules the tonnage of critical materials available was expected to be 1,124,000 tons for new machines for domestic use, 497,000 tons for domestic repair parts, and 172,600 tons for new machines and repair parts for export. According to figures released by the Farm Equip ment Institute, the 1940 use of these critical ma terials was 1,355,000 tons for new domestic ma chines, 330,700 tons for domestic repair parts, and 182,700 tons for export uses. The magnitude of the problem of supplying agriculture’s needs may be seen from a compari son of these 1942 allocations with some of the production records. The 1940 output of machin ery and equipment went to farms where labor shortage was not a serious problem. A few cases will illustrate the difficulties involved in trans lating 1940 bases into 1942 needs. In 1940 a total of 41,450 combines (family-sized, 6-feet and un der) was produced, of which 34,500 were sold. The schedules for 1942 permit 92 per cent of the 1940 total to be produced, if material can be obtained, which would be roughly 38,100. How ever, 1941 sales of this size combine amounted to 51,800. The 1942 needs for this item will be even greater because of the expanded soybean goals. Farmers could get at most, under the schedule, less than three-fourths of the 1941 supply. In the case of the “all purpose” tractor, under 30horse power, on rubber, the 1940 production was 193, 000. Permitted production for 1942 is to be 156,000, while in 1941 actual sales amounted to 251,000 units. This means that if all the per mitted production is realized farmers will be able to buy less than two-thirds as many in 1942 as in 1941, to meet the growing labor shortage, a situation in which this size tractor would be particularly helpful. But aside from the impos sibility of getting even the allotted critical mate rials, further complications have arisen in con nection with this item. Rubber shortage has led to a WPB order prohibiting the production of farm tractors requiring rubber after May 1. Meanwhile, output of rubber-tired tractors was reduced for March to 55 per cent of the JanuaryFebruary output, and April production was or dered reduced to 40 per cent of this output. This order called for a changeover to steel-wheeled equipment as rapidly as possible. This has ne cessitated substantial revision of designs, with changed rear-axle gear ratios on the smaller models, reinforcement of frame and chassis, and considerable changes on even the larger models. It is reported in the industry, however, that only about one-half the materials allotted for fulfilling these schedules is obtainable. Demands for machinery are greatest for those pieces, such as tractors and dairy equipment, needed to re lieve labor shortage and for special crops such as peanuts. Shortages will be most acute in com bines. It is estimated in the industry that 8,000 combines are badly needed over and above the quota set up in the schedules. Additional allocations of 25,000 tons of strate gic materials were made on March 31 by WPB to the farm equipment and machinery industry. This is in addition to the 1,794,000 tons previ ously allocated. A total of 17,000 tons in this order was for irrigation equipment; 1,733 tons for 3,600 peanut pickers needed in the expanded oil production program; 4,800 tons for one-row trac tor drawn or mounted cultivators; the remainder of the allocation is for various items, such as beet cultivators, drills and lifters, potato planters, and steel plow shares. Shortages are expected to be particularly acute in those areas where the spot increases in pro duction under the food goals are the greatest. Some of this situation is attributable to the na ture of the industry’s forward planning, under which orders and delivery anticipate needs by several months. Spot increases in output of equipment are only now going into the hands of farmers who had no chance to have their needs covered last fall when the forward planning of the industry was carried out. Some companies in some instances have re serves of materials which are more than sufficient for this year’s production, but in most cases these will be carried over to serve next year’s production where they are not drawn on to meet war needs. Estimates in the industry are that about 40 to 50 per cent of the man-hour produc tion of the plants, taken as a whole, is now con verted to war production. In view of the mate rials situation many comments have been made indicating that plastics and other substitutes were receiving wide use in the industry. Contrary to such opinion, the substitution of materials has been very much limited. It has been the expe rience of the industry that as soon as substitu tion has been attempted a tight situation has developed in the substitute materials as acute as that of the basic critical materials. As yet there is no serious labor shortage situa tion in the industry, although this is reported to be getting tighter. The industry is teaching such skills as are needed, and at present skilled labor appears to offer no serious bottleneck. Stocks of repair parts for the 1942 season are in general reported to be ample, due largely to forward buying by farmers. The governmentsponsored repair program is believed to have moved the buying date up for most farmers, al though this may leave the ability to meet needs later in the season a question, with the possibil ity that dealer’s supplies will be “spotty.” Shortages in repair parts may develop for rub ber items, valves and pistons, and other preci sion-made parts. Local blacksmith and machine shops are expected to make the bulk of repairs needed during the operating season. Replace ments of wearing parts are believed to be gener ally ample unless unusual seasonal conditions develop, such as occurred in 1941 when heavy soil put a burden on such items as corn-pickers. Retail prices of machinery and equipment have been the subject of a request by the OPA to dealers. In general this request included sug gestion that prices be no higher than manu facturers’ suggested price lists or “mark-ups,” elimination of unjustified trade-in margins and unnecessary charges and expenses, and sales of services and parts at “reasonable” rates, uni form to all customers. It is probable, according to observers in the industry, that suggested mark-ups will be met for the first time in several years in the face of a “seller’s market.” Page 5 Money Market in March Treasury operations dominated money market developments in March. Income tax receipts and war expenditures rose to new peaks. Careful preparation prevented any strain on the money market around the quarterly tax date. TREASURY BILLS OUTSTANDING AND HELD BY WEEKLY REPORTING MEMBER BANKS MARCH 11-APRIL 1 (In millions of dollars) Increase or Decrease in Week Ending Treasury Finance War expenditures in March amounted to $2,797 million, as compared with $2,201 million in Feb ruary and $2,101 million in January. Income tax receipts in March were $3,083 million. In March last year such receipts amounted to $1,208 million. In March total sales of defense savings bonds in the nation were $558 million, as compared with $703 million in February and $1,061 million in January. Sales of Series E bonds amounted to $338 million in March and $398 million in Febru ary. March sales of Series F and G bonds amounted to $41 million and $179 million, respec tively. The decline in sales of savings bonds in March probably was the result of payment of in come taxes. In March, the Treasury received in payment of taxes $505 million of Treasury tax notes. Sales of tax notes in March amounted to $235 million. On March 31, tax notes outstanding amounted to $2,536 million, as compared with $2,807 million on February 28. On April 6, Secretary of the Treasury Morgenthau announced the offering for cash subscrip tion of $1,500 million or thereabouts of | per cent Treasury certificates of indebtedness. The cer tificates will be dated April 15, 1942 and will be payable on November 1, 1942. Mar. 11 Mar. 18 Mar. 25 April 1 Outstanding............................ Holdings?of weekly reporting member banks: N ew|YorkjjCity........... Chicago........................ 99 other cities............. Holdings of others than weekly reporting member banks.................................... 0 —300 0 + 150 + 13 +28 —2 —112 —1 —58 —33 —56 —55 +3 —285 +39 —39 —129 + 144 +393 Excess reserves of all member banks declined from $3,270 million on April 11 to $3,160 million on March 18 and $2,850 million on March 25, but rose to $3,000 million on April 1. From March 18 to March 25, excess reserves of New York cen tral reserve city member banks declined $55 mil lion, excess reserves of Chicago central reserve city member banks rose $75 million, and excess reserves of reserve city and country member banks declined $330 million. Currency in circulation declined $58 million in the two weeks ending March 25, but rose by $131 million to a new record high of $11,593 million on April 1. Federal Reserve holdings of Govern ment bonds declined $18,250 thousand from March 4 to March 25. Illinois Tax Date Movements in excess reserves, deposits, and bill holdings of Chicago banks in the last week Strain on the money market in the quarterly of March reflected the approach of April 1, the tax period was averted by drawing down of assessment date for personal property tajxes Treasury deposits with the Federal Reserve levied on bank deposits in the State of Illinois. banks to a very low level through heavy war ex Gross demand deposits of Chicago central re penditures and payments of interest on the pub serve city member banks declined $383 million lic debt before the tax date, and payment in cash, from March 25 to April 1. This decline was due without replacement, for three maturing issues in part to purchase of Treasury bills and in part of Treasury bills on March 16, 17, and 19, to a transfer of balances to other States. Hold amounting to $450 million. The net result of ings of Treasury bills of weekly reporting mem these operations is reflected in the level of Treas- ber banks in Chicago declined $56 million in the ui’y deposits with Federal Reserve banks. Such week ending March 25 and $285 million in the balances declined from $798 million on February week ending April 1. To a great extent, the de 25 to $59 million on March 18. In the following cline in Treasury bill holdings of Chicago mem week, Treasury deposits with Federal Reserve ber banks was due to sale of Treasury bills to banks rose to $472 million, as a result of income non-bankers in Illinois. Excess reserves of Chi tax receipts in excess of expenditures, but de cago central reserve city member banks declined clined to $362 million on April 1, as a result of from $333 million on March 28 to $276 million on the continued high level of war expenditures. April 1. Excess Reserves Page 6 The Automobile Conversion HOG-COEN RATIOS (Continued from page 3) used ones. Rationing boards have, therefore, been more stringent in their restrictions than was originally planned, new car sales have been less than anticipated, and the dealers’ problems have been greater. Demand for used cars, too, has fallen off at least temporarily, because of gasoline and tire restrictions. While a late-model car with good tires continues to find a ready market at a price comparable to that of a new car, the generality of used cars is piling up in dealers’ stocks. The peacetime rate of scrappage (5000-6000 a day) seems to be undergoing the expected decline be cause of the reduction in driving. Even the vol ume of repair work is reported to have decreased at least temporarily since Pearl Harbor, for the same reason. Eventually, of course, the demand for repairs and for used cars will turn upward again, but the rate is difficult to forecast. The automobile manufacturers are attempting to aid dealers and maintain dealer goodwill, by encouraging frequent repairs and overhauling of cars. Some of the companies are buying back stocks of new cars from the dealers, and assum ing storage charges themselves. This relief meas ure is adopted chiefly by companies who have sold to dealers on credit and maintain substan tial equities in dealers’ stocks. The dealers, speaking through the National Association of Automobile Dealers, desire a government-owned corporation to purchase these stocks at a cost midway between manufacturers ’ and retail prices, as well as stocks of other frozen commodities. Senator Murray of Montana and Representative Patman of Texas have introduced this bill into the Senate and House, respectively. March 1942 February 1942 March 1941 1940 Illinois........................................ Indiana....................................... Iowa................................ Michigan.................................... Wisconsin............................ 17.1 15.9 17.6 15.2 15.8 16.5 15.6 16.7 14.8 15.1 13.2 12.9 14.7 11.7 12.7 9.6 9.6 10.0 9.4 8.7 United States..................... 15.7 15.2 12.4 8.7 Source: Bureau of Agricultural Economics, United States Department of Agriculture. SALES OF INDEPENDENT RETAIL STORES SEVENTH FEDERAL RESERVE DISTRICT Per Cent Change February 1941 to February 1942 Illinois Total All Groups*............... Apparel Group...................... Drug Stores........................... Eating and Drinking Places Food Group.......................... Furniture-Household-Rad io Group.................................. Hardware Stores................. Jewelry Stores...................... Lumber and Building Materials............................ Motor Vehicles Dealers___ Indiana Iowa +10 +33 +13 +14 +15 +u +38 +17 +17 +21 +14 +34 +13 +10 +18 + 4 +23 +18 +18 +18 +15 +38 +12 +14 +16 +24 +36 +14 +11 +56 +35 +30 +50 +17 + 5 +31 +5 +35 +47 +29 + 1 —73 +14 —69 —62 + 6 — 8 —77 +11 —63 Michigan Wisconsin ♦Includes classifications other than those listed. WHOLESALE TRADE SEVENTH FEDERAL RESERVE DISTRICT Per Cent Change February 1941 to February 1942 Commodity Net Sales Drugs and Drug Sundries_ _ Electrical Goods..................... Groceries................................... Hardware.................................. Jewelry...................................... Meats and Meat Products_ _ Paper and Its Products.......... Tobacco and Its Products__ Miscellaneous............................ +18 +38 +30 +62 +38 +66 +21 + 8 +31 1-20 K57 1-23 1-18 H20 b66 1-47 b45 - b22 Total........................................... +37 +26 Accounts Outstanding Collections Stocks * +16 +41 +21 +17 —17 +77 +28 + 9 +27 H b25 - b57 [-33 h46 b25 b90 b46 bl3 K42 +22 +43 Source: Bureau of the Census, United States Department of Commerce. DEPARTMENT AND APPAREL STORE TRADE SEVENTH FEDERAL RESERVE DISTRICT Total Net Sales Locality Per Cent Change February 1942 from Per Cent Change January and February 1942 from January and February 1941 Orders Outstanding Per Cent Change February 1942 from Per Cent Change February 1942 from Open Book Sales Instal ment Sales Cash and C. O. D. Sales January 1942 February 1941 January 1942 February 1941 + 7 — 4 +18 +17 +28 +32 +140 +19 + 13 +36 +24 +54 +io +ii6 +24 +ii3 +26 + 9 +ii +io +54 +21 +18 +16 +3i +29 +36 +204 + 63 +30 +14 +10 +25 +23 +35 +37 +22 +37 +14 +28 January 1942 February 1941 Chicago......................................... Peoria............................................. Fort Wayne.................................. Indianapolis.................................. Des Moines................................... Sioux City..................................... Detroit........................................... Flint............................................... Grand Rapids.............................. Lansing.......................................... Milwaukee..................................... Other Cities.................................. —18 — 7 —13 —17 —16 — 11 — 9 — 6 —19 —15 —13 —10 +14 +19 +37 +27 +17 +11 +28 — 9 +12 +12 +31 +23 +25 +26 +48 +34 +28 +16 +36 + 2 +27 +27 +36 +33 Total.............................................. —14 +21 Apparel Stores.............................. —24 +29 Stocks on Hand (End of Month) Per Cent Change February 1942 from February 1941 +30 +24 +1 +25 +161 +43 +100 Page 7 EMPLOYMENT AND PAYROLLS SEVENTH FEDERAL RESERVE DISTRICT RECEIPTS AND SHIPMENTS OF GRAIN At Interior Primary Markets in the United States (In thousands of bushels) March 1942 March 1941 Per Cent Change Mar. 1942 from Mar. 1941 Ten-Year Average March 1932-41 Per Cent Change Mar. 1942 from Ten-Year Average Week of February 15, 1942 Industrial Group Wheat: 17,565 11,167 12,870 9,293 -f36.5 4-20.2 11,713 9,252 +50.0 +20.7 24,533 17,736 18,738 9,231 4-30.9 4-92.1 15,309 7,689 +60.3 +130.7 5,346 5,426 Receipts— Shipments. 4,641 3,811 4-15.2 4-42.4 4,694 5,308 4-13.9 4-2.2 Per Cent Change from January 15, 1942 Wage Number Number Payments Number Wage of of of (In Reporting Employes thousands Employes Payments Firms of dollars) Durable Goods: Receipts__ Shipments. Source: Daily Trade Bulletin. Note: Not strictly comparable between dates because of changes in number of reporting markets. UNITED STATES FEDERALLY INSPECTED SLAUGHTER (In thousands) February 1942 Hogs.................... Cattle.................. Calves................. Lambs and Sheep February 1941 Average of 5 Years February 1937-41 3,892 891 392 1,407 3,725 717 384 1,391 Per Cent Change Feb. 1941 to Feb. 1942 Per Cent Change Feb. 1942 from 5-Year Average 4- 4.5 4-24.3 + 2.1 + 1.2 24,277 15,337 681 1,680 41,975 +0.6 —12.8 —2.7 +0.5 —4.0 +2.8 —8.6 +4.4 +3.0 —1.6 Textiles and Products....... Food and Products............ Chemical Products........... Leather Products............... Rubber Products............... Paper and Printing............ Total..................................... 414 1,008 305 171 37 676 2,611 73,709 123,643 41,433 34,751 18,986 88,965 381,487 1,726 3,789 1,524 969 640 2,981 11,629 +2.1 -0.1 +0.9 +2.4 —4.8 —1.3 +0.1 +6.3 —2.4 +16 +6.8 —4.8 —2.6 -0.2 5,539 1,369,868 53,604 —2.9 —1.3 Merchandising........................ Public Utilities...................... Coal Mining............................ Construction........................... Oats: 599,978 306,094 21,585 60,724 988,381 4,782 957 47 729 142,706 106,955 7,576 11,524 3,527 3,951 288 451 -0.7 —1.2 —1.0 -0.1 +0.4 +0.3 Total Non-Mfg., 4 Groups... Receipts__ Shipments. 1,826 390 268 444 2,928 Total Mfg., 10 Groups.......... Corn: 6,515 268,761 8,217 —0.9 +0.3 Total, 14 Groups.................... 12,054 1,638,629 61,821 —2.6 —1.1 Metals and Products1....... Transportation Equipment Stone, Clay, and Glass— Wood Products................... Total..................................... Non-Durable Goods: —1.5 4-17.5 4-26.9 — 1.0 + 3.4 3,313 702 396 1,361 JOther than transportation equipment. ‘Increase of less than one per cent. ... . . . . Data furnished by State agencies of Illinois, Indiana, Michigan, and Wisconsin. BANE DEBITS Debits to deposit accounts, except interbank accounts Source: Agricultural Marketing Administration, United States Department of Agriculture. (In thousands of dollars) Per Cent Change Mar. 1942 from Mar. 1942 Feb. 1942 Mar. 1941 Feb. 1942 Mar. 1941 Illinois: MONTHLY BUSINESS INDEXES Data refer to Seventh District and are not adjusted for seasonal variation unless Feb. otherwise indicated. 1942 1935-39 average = 100 Manufacturing Industries: Durable Goods: Employment........................................... Payrolls.................................................... Non-Durable Goods: Employment........................................... Payrolls.................................................... Total: Employment........................................... Payrolls.................................................... Pig Iron Production: * Illinois and Indiana.................................... Automobile Production (U. S. and Canada): Passenger Cars and Trucks..................... Casting Foundries Shipments: Steel—In Dollars....................................... In Tons............................................ Malleable—In Dollars............................... In Tons.................................... Furniture Manufacturing: Orders in Dollars....................................... Shipments in Dollars................................ Paper Manufacturing:* Tonnage Production.................................. Petroleum Refining—(Indiana, Illinois, Kentucky Area):* Crude Runs to Stills.............................. Gasoline Production.............................. Bituminous Coal Production:* Illinois, Indiana, Iowa, and Michigan Building Contracts Awarded: Residential.............................................. Total......................................................... Department Store Net Sales:* Chicago.................................................... Detroit..................................................... Indianapolis............................................. Milwaukee............................................... Other Cities............................................ Seventh District—Unadjusted........... Adjusted................ *Daily average basis. Page 8 Jan. 1942 Dec. 1941 Feb. 1941 Jan. 1941 Dec 1940 143 195 148 196 153 192 132 159 131 152 130 152 114 139 114 140 118 143 102 113 102 111 105 117 133 178 137 178 141 177 122 145 121 140 122 142 207 205 208 193 187 184 16,276 17,825 19,458 4,484,963 13,091 27,841 11,287 12,354 87,773 48,225 34,129 13,595 16,503 15,817 3,380,025 10,857 23,456 9,219 10,675 70,437 40,114 26,322 14,505 15,081 18,612 3,998,980 11,713 24,416 9,279 10,176 69,790 38,204 30,275 49,640 23,075 12,443 321,765 66,941 31,179 42,168 21,445 11,068 281,648 48,729 27,751 37,616 20,187 10,472 253,103 56,067 27,342 -18 - 8 -12 -14 -37 M2 +32 + 14 +19 +27 +19 +14 Cedar Rapids................... Clinton.............................. Davenport....................... Des Moines.................... Dubuque........................ Mason City........................ Muscatine...................... Sioux City...................... Waterloo........................ 38,217 8,601 29,830 154,714 12,759 16,451 4,976 57,301 30,536 33,215 7,533 24,869 110,163 11,500 12,795 3,857 52,308 25,682 32,482 7,076 27,346 121,069 10,505 11,157 3,830 41,114 21,398 +15 +14 +20 +40 +ii +29 +29 +10 +19 +18 +22 + 9 +28 +21 +47 +30 +39 +43 Adrian................................ Battle Creek................. Bay City........................... Detroit............................. Flint................................ Grand Rapids............... Jackson........................... Kalamazoo............. Lansing....................... Saginaw.......................... 5,836 20,006 16,718 1,488,989 42,173 72,593 23,834 33,747 35,125 27,467 4,984 20,069 13,714 1,290,604 30,754 64,024 19,949 27,777 32,086 26,243 5,536 16,448 13,638 1,360,193 37,366 67,955 19,780 28,759 29,544 28,023 +17 +22 +15 +37 +13 +19 +21 + 9 + 5 + 5 +22 +23 + 9 +13 + 7 +20 +17 + 19 — 2 Green Bay..................... Manitowoc......................... Milwaukee............ Oshkosh............................. Sheboygan......................... 22,423 10,381 459,530 12,848 29,393 18,703 8,891 345,151 10,822 29,214 17,154 8,265 341,811 10,677 20,514 +20 + 17 +33 +19 + 1 +31 +26 +34 +20 +43 7,932,713 6,274,736 6,927,458 +26 +15 49,175,000 41,550,000 44,558,000 +18 +10 Bloomington................... Champaign-Urbana— Chicago.............................. Decatur.............................. Elgin..................................... Moline................................ Rockford............................. Springfield........................... +20 + 8 +23 . +33 +21 +19 +22 +16 +25 +20 +30 +12 +18 + 5 +12 +12 +14 +22 +21 +26 +26 +13 Indiana: Fort Wayne....................... Gary..................................... Hammond.......................... Indianapolis........................ South Bend....................... Terre Haute........................ Iowa: 46 78 90 152 156 151 449 223 202 164 468 245 205 164 480 246 230 188 195 160 162 148 196 169 164 150 178 160 167 158 141 170 199 149 110 195 161 143 193 108 101 139 Michigan: 147 139 139 120 115 108 188 170 181 172 163 157 147 135 141 134 140 134 152 159 138 136 136 142 325 189 171 147 137 121 178 110 146 130 171 122 106 126 124 116 114 113 135 117 128 135 123 118 121 154 203 219 248 217 223 213 126 92 101 98 89 93 94 112 87 91 98 90 84 89 112 192 203 21S 193 203 197 117 Wisconsin: Seventh District: 41 Cities............................... United States: 274 Cities............................. ‘Decrease of less than one per cent. INDUSTRIAL PRODUCTION TOTAL INDUSTRIAL PRODUCTION National Summary of Business Conditions MANUFACTURES (By the Board of Governors of the Federal Reserve System) MACHINERY TRANSPORTATION Industrial activity increased further in February and the first half of March. Retail trade was sustained at high levels and commodity prices continued to advance. DURABLE AND PRINTING MINERALS^ TOBACCO NONDURABLE Federal Reserve monthly index of physical volume of pro duction, adjusted for seasonal variation, 1935-1939 average = 100. Subgroups shown are expressed in terms of points in the total index. Latest figures shown are for February 1942. MEMBER BANKS IN 101 LEADING CITIES 1942 Wednesday figures. Commercial loans, which include industrial and agricultural loans, represent prior to May 19, 1937 so-called ‘‘Other loans” as then reported. Latest figures shown are for March 11, 1942. WHOLESALE PRICES Production—In February the Board’s seasonally adjusted index of industrial production rose from 171 to 173 per cent of the 1935-39 average. As in other recent months, activity in the durable goods manufacturing industries, where the majority of military products are made, continued to advance, while in industries making nondurable goods and at mines activity was maintained at about the levels reached last autumn. Steel production rose to 96 per cent of capacity in February and increased further to 98 per cent in the third week of March—which corresponded to an annual rate of nearly 87 million net tons. Lumber production also increased, following less than the usual seasonal decline during the previous two months. In the machinery and transportation equipment industries, now engaged mainly in armament production, activity continued to advance rapidly as plant utilization increased and capacity expanded. Conversion to armament production in the automobile industry, where output of civilian products was discontinued in early February, is apparently being effected much more rapidly than had been antici pated earlier. There were further increases in output at cotton textile mills and at chemical factories, reflecting an increasing amount of work on military orders. At meat packing establishments activity was maintained near the high rate reached in January. Shoe production increased by less than the usual seasonal amount. Anthra cite production rose sharply in February and bituminous coal production was maintained near the high rate of other recent months. Output of crude petroleum, which had been at record levels in December and January, declined somewhat in the latter part of February and in the first half of March, reflecting transportation difficulties. Construction—Value of construction contract awards increased considerably in February, according to figures of the F. W. Dodge Corporation, owing mainly to a sharp rise in awards for public projects. Total awards in February were half again as large as last year, and public awards were about three times as large. In nonresidential building, awards for public projects increased materially, while those for private projects continued to decline. There was a slight rise in awards for public utility construction. In residential building, contracts for private work changed little from January, while those for publicly-financed projects increased sharply and amounted to about half of the total for the first time on record. For the past six months there has been a noticeable shift in privately-financed housing activity from building for owner-occupancy to building for sale or rent; in February, awards for the former constituted only about one-fifth of the small-homes total. This shift is attributable mainly to the activity in defense areas and to legislation enacted last spring mak ing possible the insurance of mortgages taken out by builders. Distribution—Value of retail trade continued large in February. Sales at general merchandise stores and variety stores increased more than seasonally, while sales at department stores declined. In the first half of March department store sales in creased by about the usual seasonal amount. Freight-car loadings, which in January had been unusually large for this time of year, declined somewhat in February owing to smaller shipments of coal, grain, and miscellaneous freight. Bureau of Labor Statistics’ weekly indexes, 1926 average = 100. Latest figures shown are for week ending March 21, 1942. MEMBER BANK RESERVES AND RELATED ITEMS FACTORS USIN6 RESERV E FUNDS - ME ME ER BANK RESERV 8ALANCES rN ^M/l o y MONEY b-y~ CIRCULAT TREASURY CAS AND DEPOSITS ...-■-'nonmember DEPOSITS 1 V' "V 1940 Wednesday figures. 11, 1942. Latest figures shown are for March Commodity Prices—Wholesale prices continued to advance from the middle of February to the middle of March, particularly those for finished consumer goods such as meats, fruits and vegetables, shoes, clothing, and household items. Tem porary maximum price orders were issued covering wholesale prices of some of these products, including pork, canned fruits and vegetables, finished cotton and rayon fabrics, cotton rugs, and bedding equipment. These orders, according to statute, used as maximums the prices prevailing within five days prior to issuance. They are effective for only 60 days and may be replaced by regular schedules. Treasury Financing and Bank Credit—In March income tax receipts by the Treasury for the first time reflected the higher schedule of rates. The effect of these receipts on the money market was largely offset by redemption of Treasury bills previously issued to mature during the tax collection period, by tax-anticipa tion notes turned in on payment of taxes, and by continued heavy Treasury expen ditures. As a consequence a record volume of Treasury operations was effected with little influence on conditions in the market. Excess reserves of member banks showed no large change and on March 18 amounted to about $3.2 billion. United States Government obligations held by member banks in leading cities showed little change during the first three weeks of March following a sharp rise in February. Commercial loans increased further. United States Government Security Prices—Prices of United States Govern ment bonds advanced steadily from the middle of February to the middle of March. Long-term taxable bonds yielded 2.35 per cent compared with an average of 2.39 per cent in February. Prices of short-term securities have held steady since the first of the year, with Treasury bills selling at around .20 per cent. SEVENTH FEDERAL IOWA RESERVE DISTRICT
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