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BUSINESS CONDITIONS A Review by the Federal Reserve Rank of Chicago S3SifV: JUNE, 1942 Review of Seventh District Business Consumer conversion to a war economy high lighted the business picture in the Seventh Federal Reserve District during May as over-all price ceil ings were established, the list of consumers’ goods banished from the production lines was broadened, and the rationing of sugar brought the war program definitely into every American home. Trade activity declined from the high level cf previous months, as anticipatory buying receded and price declines were recorded. Industrial production moved ahead under the pressure of war needs, checking the decline in employment and holding payrolls at the level at tained earlier. The conversion order issued by the War Produc tion Board on April 9 brought the construction industry even more closely into line with the war program. While priority in procuring critical ma terials had been limited to essential projects since last October, the April order is more stringent in that it requires all construction, with the exception of repairs, maintenance, and low-cost extension, to be authorized by the Government before construc tion may be started. It also provides that projects already under way may be stopped in case the materials to be used are required for more essential war purposes. The severe decline that occurred in April in the volume of construction for which contracts were awarded, both in the Seventh Federal Reserve Dis trict and in the country as a whole, was due to a decrease in the volume of Federally financed projects, which were responsible for the unusually great vol ume recorded in February and March. During May such financing again expanded and contributed mere than three-fourths of the total valuation in this District, whereas in April it amounted to less than one-half of the total. Privately-financed awards were one-fourth lower than in April and three-fifths less than in May 1941. Expansion of industrial production reflects the growing output of war materials in quantity more than sufficient to offset the decline in civilian out put. Production of many products for civilian use has been sharply reduced either by direct order or by shortages of materials or transportation facilities. Although steel production in the Chicago area hit a new high during April, still another upward re vision of production records was indicated at the end of May. The plants turned out steel at the rate of 105 per cent of capacity during the month, as compared with 104.6 per cent during April. The operating rate for May indicates that some one-anda-half million tons left the plants in the four-week period. Although the flow of scrap at present is good, it is not great enough to permit the building up of anything like a stock-pile. The mills are still operating on a very definite hand-to-mouth basis. Scrap consumers are in the unpleasant position of contemplating a repetition of last winter’s lean months. The output of furniture was maintained in large volume. New orders booked by furniture manufac turers in May were on a level with those of March after an increase of 37 per cent in April. Coal production averaged slightly lower in May than in April but continued to show a heavy gain in comparison with the output of a year ago. Cumu lative production for the five months of this year has been approximately 24 per cent ahead of the same period last year. Crude oil production in the Illinois-Indiana terri tory continued to show a slight downward trend through April and May. Average production in the four weeks ended May 30 was approximately 2 per cent lower than in the corresponding period of a year ago, whereas runs of crude oil to Seventh Dis trict refineries from all fields continued substantially higher than last year. Stocks of gasoline have been declining from the peak of March but remain above those of a year ago by more than 10 per cent. The upward climb of department store sales was halted during May when a decline in the year-toyear comparison was recorded for the first time since February 1939. Instalment sales were off 37 per cent from the volume attained in May 1941. Charge accounts receded 10 per cent, but cash sales increased 12 per cent. Moreover, there was a con tra-seasonal decline in May from April, both in dollar and physical volume. Effective May 18, retail prices of most commodi ties were limited to the highest levels reached dur ing March. Similar restrictions on wholesale prices became effective May 11. Wholesale prices of most farm products and basic foods which are exempt from direct control by legislative action showed little change. Further control over retail sales went into effect May 6 with the amendment of Regula tion W, which was broadened to include charge accounts, and many types of consumer goods not formerly regulated. The fractional per cent gains in employment at manufacturing plants of the District during April and May, the first recorded since the decline that started last September with the conversion of pro duction from civilian to war needs, seem to indicate that a point has been reached where losses and gains due to this conversion process practically off set one another. Moderate increases in wage pay ments in these months reflect a more stabilized condition with regard to overtime and wage-rates, both of which factors had been instrumental in expanding aggregate payrolls during the period of decline in employment. Victory Fund Committees to Aid Treasury A concept born of the need of enormous borrow ings by the Federal government brought into being, May 14, nation-wide machinery for mobilizing the sales power of the banking and investment indus tries in support of the Treasury in raising the huge sums necessitated by growing war expenditures. Stemming from Secretary Morgenthau himself, the sales efforts are being effectuated through the twelve Federal Reserve District, State, and regional committees, which will ultimately reach into every city, town, and village of the country. The rate of war expenditures has more than doubled since Pearl Harbor. They amounted to 3.6 billion dollars in May and only 1.8 billion dollars in December 1941. Such expenditures in the fiscal year 1943 are estimated at 70 billion dollars. Realizing the tremendous sales effort that would be needed to finance a sizable portion of such ex penditures outside of the commercial banks, the Secretary of the Treasury accepted the offer of the investment industry and the commercial banks to join with the Treasury in a nation-wide sales cam paign to sell Treasury offerings to corporations and individuals. In announcing the plans for the Vic tory Fund Committees, Mr. Morgenthau said: “Be cause the nation’s war needs have increased tre mendously the money-raising responsibility of the Treasury, the Secretary of the Treasury has ac cepted the offer of the banking and securities in dustries to coordinate their efforts in helping to distribute government securities.” The committee that was then formed is directed nationally by the Secretary of the Treasury, the presidents of the twelve Federal Reserve Banks, and Marriner S. Eccles, Chairman of the Board of Governors of the Federal Reserve System, who serves as liaison officer between the Treasury and the Federal Reserve Banks. The president of each of the Federal Reserve Banks is chairman of a district Victory Fund Com mittee which will coordinate the money-raising ability of the investment securities business and the commercial banks. Outstanding leaders in the financial community SALES OF UNITED STATES SAVINGS BONDS SINCE MAY 1,1941 (In millions of dollars at issue price) May Illinois Series E.., F... G... Total........ Indiana Series E... F... G... Total........ Iowa Series E... F... G... Total........ Michigan Series E... F... G... Total........ Wisconsin Series E... F... G... Total........ Five States Series E... F... G... Total........ United States Series E... F... G... Total........ June 7.2 .54 40.0 52.6 7.5 1.7 1.8 0.6 3.5 5.9 12.6 21.8 July Aug. 11.4 2.5 12.9 26.8 10.6 1.9 0.4 1.7 4.1 2.5 0.7 1.4 0.3 1.9 0.3 2.6 5.8 1.8 1941 Sept. 9.5 1.5 10.7 1942 Oct. Nov. Dec. Jan. Feb. Mar. April 10.2 8.9 1.5 9.0 19.4 29.8 4.9 16.5 51.2 52.7 7.9 32.8 93.4 27.9 26.6 25.4 2.5 0.4 8.3 12.9 7.7 4.6 2.9 12.4 2.2 6.1 21.2 1.7 6.1 9.5 2.1 10.9 23.2 21.6 21.6 2.1 0.4 1.5 3.9 2.3 0.7 1.3 4.2 2.3 1.6 1.5 0.3 1.7 0.3 1.1 0.2 1.0 9.3 0.6 1.5 4.4 1.8 1.3 0.9 2.3 4.5 2.8 3.2 3.0 2.6 3.0 2.9 3.1 5.0 5.1 4.4 4.7 1.0 5.0 4.1 6.0 1.0 8.3 2.7 8.4 2.5 9.5 2.4 0.5 1.8 4.7 2.7 0.4 4.7 2.5 0.4 1.5 4.4 2.0 6.8 1.1 1.0 1.0 1.1 0.3 1.1 1.1 2.8 0.8 0.8 2.1 12.0 10.1 4.3 10.5 2.0 2.6 2.8 0.7 2.3 5.5 0.7 5.7 2.3 0.4 1.8 4.4 18.4 4.1 21.7 44.2 23.7 5.2 23.0 51.9 20.9 3.9 18.1 42.8 20.4 3.8 17.3 41.5 22.8 4.3 16.1 43.3 20.6 3.2 15.3 39.1 102.5 28.9 183.1 314.5 145.3 27.4 169.5 342.1 117.6 20.3 127.7 265.6 105.2 18.1 109.0 232.3 122.9 23.0 124.9 270.7 109.5 19.0 105.0 233.5 1.2 4.3 7.6 15.4 10.1 56.9 82.5 100.6 37.8 211.4 349.8 2.2 1.6 7.9 1.2 0.6 1.0 May 52.2 7.9 7.6 14.9 5.9 9.9 9.3 2.5 9.2 3.7 14.2 16.4 2.5 5.9 24.8 25.8 3.5 7.6 36.9 16.2 9.0 14.0 4.1 6.7 24.9 7.6 114.8 18.7 57.0 190.5 65.2 67.7 65.5 341.1 667.4 33.3 77.6 154.2 315.6 528.6 1,060.5 398.0 51.8 253.4 703.2 337.6 41.1 179.2 557.9 326.7 40.0 163.8 530.5 1.0 4.1 14.1 69.6 10.2 31.9 111.6 13.9 15.8 16.2 26.2 7.5 7.1 12.3 421.8 42.5 170.1 634.4 Page 1 in every principal city have been selected by the Federal Reserve Bank presidents on the district committees. Each district in turn has been sub divided into States and regions for which local com mittees were likewise appointed, thus breaking the organization down into a dynamic working force which will be in a position to come into direct con tact with the purchasers of securities. Headquarters have been established in the Fed eral Reserve Bank of each of the districts, and an executive manager has been placed in charge who will direct the selling ability of the financial organ izations of his district. The particular field of operations of these com mittees will be with buyers of securities not pres ently reached by the War Savings Staff, whose principal interest is the current income of indi viduals of comparatively moderate circumstances. The Victory Fund Committees will thus supplement but not supplant the work of the War Savings Staff, which has been particularly charged with the re sponsibility of selling War Savings Bonds E, F, and G. The Victory Fund Committees, while cooperat ing in the sale of Series F and G War Savings Bonds, will devote their energies principally to the sale of other Treasury issues such as bills, notes, certificates of indebtedness, non-market “tap” issues, and regular market offerings. The emphasis of the June campaign was placed on Series F and G War Savings Bonds, as those securities can be bought by corporations and asso ciations as well as individuals, and are purchased with capital funds rather than out of current earn ings. For that reason, the membership of the Vic tory Fund Committees was asked to assist the War Savings Staff in reaching the enlarged quota for June, which was set at 800 million dollars for the entire country and at 138 million dollars for the five States which lie wholly or in part in the Seventh Federal Reserve District. The May quota for the entire country which was set at 600 million dollars, was exceeded by 34 million dollars. Present plans call for raising one billion dollars during July and each month thereafter. The raising of the limit on Series F and G Bonds from 50 thousand dollars to 100 thousand dollars, which may be purchased in any one calendar year by any one person or cor poration, will be helpful in meeting the quotas. The Seventh District Victory Fund Committee con sists of the following: Page 2 COMPARISON OF ACTUAL SALES OF WAR SAVINGS BONDS—SERIES E, F, AND G By States, May 1942, with Quotas Established for May, June, and July 1942 (In thousands of dollars at issue price) June, 1942 July, 1942 May 1942 Per Cent Actual Quota Sales to Quota Quota 49,300 10,926 9,000 21,647 11,977 105.9 136.5 154.1 121.2 102.5 65,409 14,876 12,000 29,783 16,271 Five States.... 119,527 102,850 116.2 138,339 United States. . 634,356 600,000 105.7 800,000 Actual Sales Illinois............. Indiana............ Michigan......... Wisconsin........ 52,227 14,910 13,870 26,240 12,280 Quota 1,000,000 Chairman C. S. Young President, Federal Reserve Bank Chicago Executive Manager Francis F. Patton (on leave) A. G. Becker & Co. Robert W. Baird Wisconsin Company Chicago . Milwaukee Edward E. Brown President, First National Bank . Chicago Philip R. Clarke President, City National Bank & Trust Company Emmett F. Connely First of Michigan Corporation Walter J. Cummings Chairman, Continental Illinois National Bank and Trust Company Paul H. Davis Paul H. Davis & Co. Howard W. Fenton President, Harris Trust & Savings Bank Charles F. Glore Glore, Forgan & Co. Edward B. Hall Harris, Hall & Co. Herbert L. Horton President, Iowa-Des Moines National Bank & Trust Company William G. Irwin President, Indiana National Bank Walter Hasten President, First Wisconsin National Bank Walter S. McLucas Chairman, National Bank of Detroit Solomon A. Smith President, Northern Trust Company Lawrence F. Stern President, American National Bank & Trust Company Harold L. Stuart Halsey, Stuart & Co. Jay N. Whipple Bacon, Whipple & Co. Chicago Detroit Chicago , Chicago Chicago Chicago Chicago Des Moines Indianapolis Milwaukee Detroit Chicago Chicago Chicago Chicago Price Advances Since 1939 Substantial rises in prices are common to almost of living figures for June 2 are based upon a special every war period. Rises in the United States since survey made by the Bureau of Labor Statistics, in the outbreak of hostilities in late 1939 have been a order to ascertain the immediate effect of the Gen principal problem of concern to both Government eral Maximum Price Regulation which became ap and citizens. plicable in retail trade on May 18. It is a common characteristic of changing price Farm Prices levels that prices of basic prime products move Sharpest rises have occurred in farm prices. The most quickly and rise or fall farthest. Wholesale United States Farm Price Index of the United prices move somewhat more slowly within a nar States Department of Agriculture indicates that on rower range, while retail prices are the most slug May 15, 1942 the level of farm prices was 55 per gish and have the narrowest amplitude. This be cent above that of September 1939. Not all groups havior has been the pattern for the general rise of farm commodities have enjoyed this rise, while that has occurred since the fall of 1939. others have exceeded it. Livestock were 62 per cent Because of its central position in this pattern of above the 1939 level, crops (grains) were up 45 per price behavior, the wholesale price level is usually cent, dairy products showed a net rise of 43 per taken as a rough measure of the extent of price cent, while poultry prices were 31 per cent above changes. Since this war began, the level of whole the 1939 point. Cotton and cottonseed have more sale prices in the United States, as measured by the than doubled in the period. Fruit crops are up Bureau of Labor Statistics index of hundreds of nearly two-thirds, while truck crops show a rise of commodities, has advanced 32 per cent to May nearly 40 per cent. 1942. Cost of Living From the beginning of the War in 1939 to April of this year the cost of living in the nation has risen by about 15 per cent, according to the index of the cost of living published by the Bureau of Labor Statistics. Indexes of costs by groups of items show that clothing costs of the average worker have risen by more than one-fourth, rent has advanced nearly 5 per cent, while food costs are up more than 21 per cent for the period. If these rises are considered in terms of required ad ditional expenditures by the “average” worker’s family, the figures indicate that half the increased costs have been for food, a little more than onefifth for clothing, and about 6 per cent for rent. After nineteen months of increase, the cost of living on June 2 was slightly lower than on May 15. This was the first time that the cost of living index had shown any decrease since November 1940. There was an increase of 0.8 per cent in the cost of living index for wage earners and lowersalaried workers in large cities between April 15 and May 15, but a drop of 0.1 per cent between May 15 and June 2. The net advance in the cost of liv ing from the outbreak of war in Europe to the beginning of June was 17.5 per cent. These cost Prices Paid By Farmers While farm prices have been showing these rather sharp advances, the increases in farmers’ production and living costs have tended to be over looked by many. Indexes of prices paid by farmers for commodities and services used in living and production do not include wage rates paid to hired farm labor. For April of this year farm wages were 40 per cent above the level paid in the fall of 1939. The level of prices of other items of expense to the farmer has advanced considerably more than the cost of living to urban workers. Items used in family maintenance on the farm were 23 per cent above the 1939 level: foods are up 22 per cent, clothing shows a rise of 33 per cent, furniture and furnishings are 20 per cent above the 1939 level, building materials for the farm home have risen by 18 per cent, while miscellaneous operating expenses are up 8 per cent. Of the increased expenditures for living, 35 per cent is due to higher food costs, 31 per cent to higher clothing costs, with the bal ance of the burden about equally distributed over such items as furniture and furnishings, household operating expenses, and building upkeep. Turning to strictly production costs, they too are up nearly one-fourth above the levels of the fall of 1939. The greatest rise for any group is that for Page 3 the costs of seeds, which have advanced 51 per cent, while feeds have advanced 37 per cent. Farm build ing materials costs are up 19 per cent, while fer tilizers, equipment, and supplies are up 11 per cent to 12 per cent. Again speaking in terms of the bur den added to the costs of production (excluding labor), the bulk of the rise has been in feed costs, since feeds represent a substantial part of agricul tural production costs. The rise in building ma terials costs has likewise contributed substantially to the burden of production expenses. Parity Figures for April and May farm prices received and paid by farmers indicate that, taking agricul ture as a whole, farm products will buy the same amount of physical goods and services as they did in the pre-World War I period, 1909-1914. That is to say, the ratio of prices received to prices paid by farmers is the same as it was in the early period. This, however, is only an over-all figure, taking all farm-produced commodities and farm cost items (except labor) into consideration. While parity for agricultural prices in general is now at 100 per cent, prices for classifications of agricultural prod ucts vary considerably from 100 per cent. Meat an imals are 26 per cent above parity, due chiefly to the heavy demand and buying of meat animals for lend-lease shipment and for use in the military serv ices. In a relatively much less favorable situation are the grain producers, whose prices are in gen eral 21 per cent below parity. Producers are sell ing chickens and eggs at prices which are 13 per cent below the parity level. Fruit growers’ prices are 22 per cent short of the parity objective, while truck crops and cotton and cottonseed are each at prices that exceed parity by 5 per cent. Price Ceilings The effectiveness of various recent price controls on wholesale prices may be judged in part from the behavior of the Bureau of Labor Statistics daily index of 28 basic commodities traded in upon or ganized commodity markets. Beginning in August 1939 as 100, the index of the 28 commodities rose to 160 by the end of 1941, from a level of approxi mately 120 for the beginning of 1941. This was a rise of one-third during the calendar year 1941. By breaking the list of 28 commodities into two groups, •Wheat, flaxseed, barley, corn, butter, hogs, steers, cotton. ••Zinc, copper, lead, scrap steel, hides, print cloth, silk, rubber, sugar, tin burlap, coffee, cocoa beans, tallow, lard, shellac, rosin, cottonseed oil and wool tops. Page 4 the first consisting of 8 commodities* not under price control, and the second consisting of 20 items** subject to price control, a rough measure of the effects of price control is available. Dur ing 1941, the “controlled” group rose above the “uncontrolled” group. As one after another of these 20 commodities was put under control during the year, the rise was checked. By the end of the year, all but lead and zinc were under control. These two were put under control in January of 1942, and since that time the index of this group has remained fairly constant around 162. Meanwhile, the index of the “uncontrolled” items has continued to ad vance, rising from 163 the last week of December to 183 on May 22. On May 11, the wholesale price ceilings imposed under the April 28 General Maximum Price Regula tion became operative, and on May 18 retail ceilings were required. These ceilings were to be no higher than the maximum price at which the same or close ly similar merchandise sold during March 1942. A number of items were excepted from these ceilings. Principal agricultural exceptions were: any raw and unprocessed agricultural commodity, while it remains in substantially its original state; eggs and poultry; all milk products except fluid milk and cream at retail, and ice cream; flour; mutton and lamb; living animals. The exceptions also include books and magazines; domestic ores; stumpage, logs, and pulpwood; used automobiles; securities. These ceilings are expected to result in a slowing-up of the rates of price rises that have occurred in the past year or so. This general ceiling with other forms of price measures brings under some form of control a very substantial proportion of all prices in the nation. It is estimated that about fourfifths of the commodities in the Bureau of Labor Statistics wholesale price index are included; about three-fourths of the goods and services in the same agency’s cost of living index are covered; approx imately three-fourths of the items priced in the in dex of prices paid by farmers are under ceilings; and the commodities processed from about 60 per cent of the farm products used in computing the index of prices received by farmers are under ceil ing restrictions. Since not all items are under ceil ings, with certain prices and wages excluded, further rises in price levels need not be unexpected, but the effective enforcement of the existing ceil ings can be of material help in greatly slowing down the rate of price advances. Department Store Sales Decline ► ► ► The upward climb in the dollar volume of de partment store sales in the Seventh Federal Re serve District was halted during May when a de cline in the year-to-year comparison was recorded for the first time since February 1939. The drop of 7 per cent is all the more significant since retail prices are estimated to be 18 per cent above the level of a year ago. It is obvious that the physical volume of department store sales this May was con siderably less than last year. What is less obvious is the cause of the decline. The fact that May this year had one less trading day and that Memorial Day came on a Saturday accounted for some of the shrinkage, but not all. Various other factors were at work. Instalment sales declined 37 per cent and open book or charge accounts receded 10 per cent. Un doubtedly part of this shrinkage in credit sales has been caused by the regulation of consumer credit. The purpose of the credit controls was to dampen the purchase of consumers’ durable goods and act as a curb on inflation and they, no doubt, have had an influence in that direction. Cash sales have gained 12 per cent thus cush ioning the drop in total sales. Customers have more cash to spend and are less inclined to mortgage future income thus boosting cash sales and reduc ing credit volume. The fact that their total pur chases are off must rest on other reasons, as credit normally expands as payrolls increase. The pur chasing power is available but apparently is being withheld. In fact there was a contra-seasonal decline in May from April sales, both in dollar and physical volume. Sales during May fell off 10 per cent from April. Only three times in the last ten years have sales during May been less than they were in April. The ten-year average shows an increase of 3 per cent. This decline has been general throughout the District as all reporting cities, except Detroit, showed substantial decreases, ranging from 2 per cent to 2Q per cent in dollar volume. Scarcity of merchandise is not of sufficient mag nitude to be the principal factor as the largest de clines were in men’s apparel and women’s ready-towear, but there was a drop of 1 per cent in the housefurnishings classification which includes lines such as electrical appliances affected by restrictions. In the men’s and boys’ apparel classification there was a drop of 19 per cent in total dollar sales this May from those recorded in May of 1941. It is particularly significant that every item in this classification showed declines from year ago figures. Men’s clothing showed the largest drop with dollar sales off 33 per cent. While this is a sizeable decline, part of it can be accounted for by the fact that there was very heavy forward buying in January when it was quite generally believed that there would be a shortage of woolens and even possible rationing. Although these fears were not justified, DEPARTMENT AND APPAREL STORE TRADE SEVENTH FEDERAL RESERVE DISTRICT Total Net Sales Per Cent Change Per Cent Change May 1942 from Locality April 1942 May 1941 - 9 —12 -12 -10 -10 - 2 - 1 - 8 Chicago............................ Fort Wayne....................... Sioux City........................... Flint........................ Grand Rapids............................ - 9 - 9 May 1941 +12 + 9 +25 +19 +10 +21 Milwaukee........................... Other Cities............................... -13 -10 -23 -13 -14 - 2 -14 District total....................... -10 - 7 -21 - 7 +21 uraers Outstanding Per Cent Change May 1942 Per Cent Change May 1942 Open Book Sales Instal ment Sales -12 -34 —7 — 6 4-14 Apparel Stores........................... —20 (End of Month) from May 1941 Per Cent Change January through May 1942 from -39 Cash & C. O. D. Sales April 1942 May 1941 April 1942 May 1941 + 0 + 9 +73 -16 +84 +i9 + 9 + 9 +70 4-82 -49 ** +60 - 2 +84 +57 4-45 -4i - 7 +125 +81 (Insufficient data) -30 +20 * + 9 4- 6 -54 -16 +i2 4-11 + 9 + 3 4-12 +10 4- 7 +65 -15 +83 +4 + 3 +57 -23 +99 ♦Increase of less than one per cent. ♦♦Decrease of less than one per cent. Page 5 large sales of men’s clothing during the early part of the year undoubtedly have played a large part in the decline during May. Women’s and misses ready-to-wear group showed the second largest decline although the drop-off was only 3 per cent. Fur sales, while normally not of large proportions in May, declined much more than seasonally and showed a recession of 28 per cent from the sales of such merchandise in May, 1941. There was, of course, heavy buying of furs in late summer last year to avoid the 10 per cent excise tax which went into effect October 1. Women’s and misses coats and suits, and girls’ wear were the only two items to show increases in this classifi cation. Hosiery sales continued in large volume, increas ing 45 per cent over year ago figures. This was the largest gain in the ready-to-wear accessories classi fication and offset declines in other items, resulting in raising the entire group sales to a point where they showed a 5 per cent increase over a year ago. Sales of yard goods were unusually high, register ing an increase of 31 per cent, and this gain is in sharp contrast to the decline in women’s and misses dresses. Notwithstanding the fact that major household appliances fell off 53 per cent, the drop in house furnishings was but 1 per cent below the sales of a year ago. The sales of electrical appliances, of course, were restricted by shortages of such items. Retailers are now feeling the after-effects of the great wave of forward buying during the last year. During August of last year the Seventh Federal Reserve District adjusted index of department store sales reached the all-time high of 153.9 on the basis of the 1935-39 daily average. This forward buying was carried over into September and subsequent months. The January index reached a secondary peak of 153.7 per cent in January of this year. This index has shown a gain each month over the cor responding month of the previous year from March 1940 until it was halted at 123 per cent this May, when it was somewhat lower than it was in May 1941. With the rationing of sugar and the establish ment of price ceilings on most commodities, there has evidently been a lessening of piling-up of pur chases by the buying public for future consumption. Digitized for Page 6 FRASER Prices as well as sales have been adversely af fected. Fairchild’s retail price index shows a de cline for the first time since July 1, 1938. While the reaction was only 0.2 per cent during May, it followed a gain of 0.8 per cent in April, of 0.5 per cent in March, of 1.5 per cent in February, and 1.8 per cent in January. Each of the major groups showed a decline during May, with the greatest re action in piece goods and men’s apparel. In fact no one item in the Fairchild’s index showed a gain during the month, although a number of them re mained unchanged. Under the circumstances stocks on hand have increased more than seasonally and were 65 per cent higher in May than they were a year ago. The ratio of stocks to sales at the end of April (the latest date for which figures are available) was 3.35. At the end of April 1941 the ratio was only 2.45. Regardless of what has caused the slump in de partment store sales in this District, it will be in teresting to watch whether sales have passed their peak or have merely entered a plateau. DEPARTMENT STOEE SALES BY DEPARTMENTS Selected Departments Per Cent Change May 1942 May 1941 PTFOE GOODS—TOTAL ...................................................................... Domestics—Muslins, Sheetings, etc...................................................... READY-TO-WEAR ACCESSORIES—TOTAL.................................... +11 +31 - 3 - 5 + 6 + 5 + 9 +10 -12 - 2 -10 +45 + 3 +11 + 5 - 1 +1 WOMEN’S AND MTPSER’ READY-TO-WEAR—TOTAL................ - 3 +13 - 7 - 4 - 6 + 3 - 7 -28 -19 -33 - 8 -30 - 4 -10 HOTTREFTTRNTSHTNOS—TOTAL......................................................... - 1 + 4 +10 +26 + 7 - 3 - 3 -53 + 6 + 8 +10 SALES OF INDEPENDENT RETAIL STORES SEVENTH FEDERAL RESERVE DISTRICT RECEIPTS AND SHIPMENTS OF GRAIN At Interior Primary Markets in the United States (In thousands of bushels) Per Cent Change April 1941 to April 1942 May 1942 May 1941 Per Cent Change May 1942 from May 1941 Ten-Year Average 1932-1941 Per Cent Change May 1942 from Ten-Year Average Wheat: Receipts.............. Shipments........... 17,600 12,977 31,396 17,464 -43.9 -25.7 17,879 15,070 - 1.6 -13.9 Receipts.............. Shipments........... 25,497 16,308 25,852 22,599 - 14 —27 8 16,900 16,051 +50.9 5,772 4,704 3,850 3,163 +49.9 +48/ 5,527 7,435 + 4.4 -36.7 Corn: Oats: Receipts.............. Shipments........... + 1.6 Illinois Indiana Iowa Michigan Wisconsin + 5 +11 +13 +16 +17 +16 +17 +15 +23 + 3 +10 +19 + 8 +15 +12 +16 +21 +21 + 7 +11 +19 +19 +21 + 3 +26 +17 +29 -81 Total All Groups*..................... Apparel Group........................... Drug Stores............................... Eating and Drinking Places__ Food Group............................... Furniture-Household-Radio Group..................................... Hardware Stores....................... Jewelry Stores........................... Lumber and Building Materials Motor Vehicle Dealers............. - 6 +42 +30 +18 -78 - 7 +20 +29 +16 -74 + 8 +35 +27 + 7 -69 + 7 +24 +16 +27 -76 ♦Includes classifications other than those listed. Source: Daily Trade Bulletin. WHOLESALE TRADE SEVENTH FEDERAL RESERVE DISTRICT Per Cent Change April 1941 to April 1942 Commodity Net Sales May 1942 April 1942 May 1941 May 1940 Illinois............................................. Indiana............................................ Iowa................................................ Michigan......................................... Wisconsin........................................ 17.2 16.6 18.2 15.7 16.0 18.0 17.0 19.0 15.9 16.6 12.7 12.3 14.4 12.2 13.1 9.2 9.3 9.5 8.9 8.5 16.3 16.9 12.6 8.5 Accounts Outstanding Collections +22 - 3 +63 + 1 +12 +17 +12 +20 +23 + 5 + 9 +52 +35 +35 +13 +18 +14 +10 +19 -12 +54 +14 +10 +14 +29 +34 +13 +38 +40 +78 +13 +13 +24 +17 +15 +13 +26 Drugs and Drug Sundries.............. Electrical Goods............................. Groceries......................................... Hardware........................................ Jewelry............................................ Meats and Meat Products............. Paper and Its Products.................. Tobacco and Its Products.............. Miscellaneous.................................. United States.................................. Stocks +19 +17 HOG-CORN RATIOS Total................................................ Source: Bureau of Agricultural Economics, United StatcB Department of Agriculture. Source: Bureau of the Census, United States Department of Commerce. UNITED STATES FEDERALLY INSPECTED LIVESTOCK SLAUGHTER (In thousands) April 1942 Lambs and Sheep............ April 1941 Average of 5-year April 1937-41 Per Cent Change April 1941 to April 1942 Per Cent Change April 1942 from 5-year Average 4,196 956 502 1,570 3,807 792 507 1,436 3,124 759 507 1,355 +10 +21 - 1 + 9 +34 +26 May 1941 Five-Year Average May 1937-41 Per Cent Change May 1941 to May 1942 Per Cent Change May 1942 from Five-year Average 4,320 885 471 1,475 +16 May 1942 4,023 908 501 1,551 3,202 807 514 1,457 +7 -2 -6 -5 +35 +10 - 8 + 1 Source: Agricultural Marketing Administration, United States Department of Agriculture. DEPARTMENT AND APPAREL STORE TRADE SEVENTH FEDERAL RESERVE DISTRICT Total Net Sales Per Cent Change April 1942 from Locality March 1942 Chicago..................................... April 1941 Per Cent Change Per Cent Change January through April 1942 from January through April 1941 (End of Month) Orders Outstanding from April 1941 Per Cent Change April 1942 Per Cent Change April 1942 Open Book Sales Instal ment Sales Cash & C. 0. D. Sales March 1942 April 1941 March 1942 April 1941 - 8 +151 Des Moines............................... Sioux City................................. Flint........................................... Grand Rapids............................ Lansing...................................... Milwaukee................................. - 4 — 2 - 2 — 4 - 3 - 0 * - 6 + 3 +12 + 8 - 3 + 6 + 6 + 2 +13 + 9 + 3 - 2 +20 - 5 + 4 + 2 +14 + 2 +18 +16 +34 +25 +15 +10 +28 - 2 +16 +14 +28 +20 + 2 -17 +13 +15 +57 + 7 -i9 +2i +10 +69 +32 + 6 +58 + 5 +i35 +10 + 8 +20 -30 +18 +13 +ii + 6 +55 +40 +14 +16 +138 + 83 -0 * Fort Wayne............................... + 9 +21 + 6 -10 +19 +11 +55 + 3 +136 + 9 +29 + 7 -16 +15 +13 +50 - 2 +119 -14 +13 +121 ♦Decrease of less thon one percent Page 7 EMPLOYMENT AND PAYROLLS SEVENTH FEDERAL RESERVE DISTRICT Per Cent Change from March 15,1942 Week of April 15,1942 Industrial Group +0.9 +0.8 +3.2 -2.2 +0.8 Textiles and Products........... Food and Products............... Chemical Products................ Leather Products.................. Rubber Products................... Paper and Printing............... Total...................................... 419 1,005 314 176 37 694 2,645 74,626 122,721 41,971 34,462 17,685 85,554 377,019 1,803 3,840 1,545 961 598 2,843 11,590 +0.8 +17 -0.1 -0.2 -3.9 -1.6 +0.1 +0.5 +1.9 +0.6 * 0.0 -6.9 -2.3 -0.2 Total Mfg., 10 Groups............. 5,624 1,380,537 55,413 +0.4 4,877 1,118 46 703 145,710 109,799 7,497 13,000 3,668 3,985 258 573 -1.2 +14 -0.4 +14.7 +0.3 +19.1 +23.2 + 3.7 +15.3 +16.7 + 9.0 +10.0 +18.1 + 8.3 +0.6 Merchandising.......................... Public Utilities.......................... Coal Mining.............................. Construction............................. + 4.9 + 8.6 -6.7 +18.7 Non-Durable Goods: m> -0.2 +2.2 +3.8 -2.6 +0.5 Rent +22.5 +23.0 *• * $24,788 16,600 759 1,676 43,823 Food +19.4 +21.4 Fuel, House Elec tricity, Furnish Miscel and Ice ings laneous to 593,667 326,413 24,003 59,435 1,003,518 Chicago........................ +12.8 Detroit.......................... +14.8 Average: Large Cities.............. +12.7 Cloth ing cooo 1,871 393 263 452 2,979 All Items Ci ^ Durable Goods: City ++ + Wage Wage Number Number Payments Number of of (In of Payments Reporting Employees thousands Employees of dollars) Firms Metals and Products1........... Transportation Equipment... Stone, Clay, and Glass......... Wood Products...................... Total...................................... PERCENTAGE INCREASES FROM MAY 15, 1941 TO MAY 15, 1942 IN THE COST OF GOODS PURCHASED BY WAGE EARNERS AND LOWER-SALARIED WORKERS BY GROUPS OF ITEMS INDEXES OF THE COST OF GOODS PURCHASED BY WAGE EARNERS AND LOWER-SALARIED WORKERS, BY GROUPS OF ITEMS MAY 15, 1942 Chicago........................ Detroit......................... Average: Large Cities.............. 116.8 118.7 121.7 122.2 123.6 126.3 116.2 119.5 103.1 106.6 121.2 120.8 110.4 113.4 116.0 121.6 126.5 109.7 104.7 121.5 111.0 Source: Bureau of Labor Statistics. +0.1 Total Non-Mfg., 4 Groups....... 6,744 276,006 8,484 +0.5 +1.1 BANK DEBITS Total, 14 Groups...................... 12,368 1,656,543 63,897 +0.4 +0.6 Debits to deposit accounts, except interbank accounts 10thcr than transportation equipment. ♦Decrease of less than one percent Data furnished by State agencies of Illinois, Indiana, Michigan, and Wisconsin. (In thousands of dollars) Per Cent Change May 1942 from May 1942 April 1942 May 1941 April 1942 May 1941 BUILDING CONTRACTS AWARDED SEVENTH FEDERAL RESERVE DISTRICT Illinois: Total Contracts April 1942....................................................................... Change from March 1942.............................................. First four months of 1942.............................................. Change from same period of 1941................................. Residential Contracts 358,180,000 -59% —19% $329,684,000 +10% $26,298,000 -48% -23% $132,198,000 +31% Source: F. W. Dodge Corporation. + 9 +13 - 1 +20 + 6 +10 -16 +11 - 8 - 1 - 1 + 9 -10 +15 + 2 + + + 1 1 4 4 +16 - 3 - 2 +24 54,427 29,545 - 1 - 3 + 8 + 3 36,036 9,201 28,662 122,958 13,543 14,030 4,951 32,677 7,672 26,847 107,669 12,245 12,626 4,575 - 1 - 9 - 3 +1 - 9 * - 2 +10 +10 + 3 +16 + 1 +11 + 6 59,422 30,496 48,313 23,176 + 4 -15 +28 +12 5,679 19,744 17,128 1,511,432 33,780 70,528 23,037 30,350 38,315 5,560 17,238 14,598 1,373,683 35,880 70,228 20,567 30,576 31,050 + 2 + 2 - 6 +1 + 7 + 4 +17 +10 +11 - 1 + 1 +1 - 1 +13 - 4 +25 28,687 29,540 +1 - 2 22,212 19,208 - 9 + 5 10,247 380,122 11,694 9,375 319,762 11,392 + 2 - 1 - 5 +12 + 18 - 2 28,283 7,358,782 21,306 6,470,140 + 3 + 2 +36 +16 274 Centers............................ 48,324,000 46,620,000 43,661,000 + 4 +11 Indiana: Fort Wayne........................... Gary....................................... Hammond.............................. Indianapolis........................... MONTHLY BUSINESS INDEXES Data refer to Seventh District and are not adjusted for seasonal variation unless otherwise indicated. 1935-39 average=100 7 1 1 4 5 6 9 Aurora................................... $ 16,639 Bloomington.......................... 16,662 Champaign-Urbana............... 17,398 Chicago.................................. 4,194,048 Danville................................. 13,430 Decatur.................................. 26,084 Elgin...................................... 9,185 31,177 Moline.................................... 13,071 Peoria..................................... 73,433 Rockford................................ 43,954 Springfield............................. 31,564 April 1942 Mar. 1942 Feb. 1942 April 1941 Mar. 1941 Feb. 1941 South Bend............................ Terre Haute........................... Iowa: Manufacturing Industries: Durable Goods: Employment.............................................. Payrolls...................................................... Non-Durable Goods: Employment.............................................. Payrolls...................................................... Total: Employment.............................................. Payrolls...................................................... 144 202 144 201 143 195 140 167 135 163 132 159 112 137 112 137 114 139 106 118 103 115 102 113 133 182 133 181 133 178 129 152 124 149 122 145 1/ 209 207 188 196 193 516 249 222 182 524 261 211 170 449 223 202 164 228 184 202 182 213 168 176 159 195 160 162 148 245 190 162 187 141 170 171 166 158 161 161 143 142 143 147 129 120 120 159 140 160 147 165 149 145 134 140 135 147 135 136 132 152 22 152 137 Residential.................................................... Total.............................................................. 228 148 435 357 312 185 294 181 254 333 178 110 Chicago.......................................................... Detroit........................................................... Indianapolis................................................... Milwaukee..................................................... Other Cities................................................... Seventh District—Unadjusted..................... Adjusted.......................... 121 149 152 145 136 133 134 126 148 160 150 136 136 141 106 126 124 116 115 114 135 112 126 140 127 128 120 118 103 118 123 114 111 109 116 92 101 98 89 97 95 113 Pig Iron Production:* Illinois and Indiana....................................... 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: Department Store Net Sales:* ♦Daily average basis. JNo longer available. Page 8 Cedar Rapids........................ Clinton................................... Davenport............................. Des Moines............................ Dubuque................................ Mason City............................ Muscatine.............................. Sioux City.............................. Waterloo................................ Michigan: 51,508 24,422 12,562 337,192 13 481 20 257 58*821 30,438 13 199 35,829 8,416 27,779 124,615 12,383 13,983 4,841 15 655 61,672 25,911 Adrian.................................... 6,798 Battle Creek.......................... 20,157 Bay City................................ 16,097 Detroit................................... 1,529,379 36,010 Flint....................................... Grand Rapids........................ 69,679 Jackson.................................. 23,343 Kalamazoo............................. 29,403 Lansing.................................. 38,771 26,792 12^646 Saginaw................................. 29J376 $ 15,510 16,490 17,198 4,038,185 12,749 27,700 10,148 $ 15,329 14,752 17,586 3,489,191 12,656 23,794 10,911 11,745 79,995 44,495 31,801 11,983 81,624 38,089 30,882 50,788 24,619 12,104 323,715 44,445 25,198 12,832 271,133 59,474 31,529 Wisconsin: Green Bay............................. 20,167 42,994 10|499 Manitowoc............................. Milwaukee............................. 376,437 Oshkosh................................. 11,157 24,417 29|027 Sheboygan............................. TOTAL 41 CENTERS............ 7,530,840 TOTAL 50 CENTERS........... 7,731,458 + + + + + - - 3 ** United States: #New reporting centers for which figures were not collected before May 1942. ♦Decrease of less than one per cent. **Increase of less than one per cent. INDUSTRIAL PRODUCTION NATIONAL SUMMARY OF BUSINESS CONDITIONS (By the Board of Governors of the Federal Reserve System) Federal Reserve monthly index of physical volume of production, adjusted for seasonal variation, 1935-39 av erage — 100. Latest figures shown are for April 1942. FREIGHT-CAR LOADINGS POINTS IN TOTAL index 160 120 TOTAL MISCELLANEOUS 0 1936 1937 1938 1939 1940 1941 1942 Federal Reserve monthly index of total loadings of rev enue freight, adjusted for seasonal variation, 1935-39 av erage 100. Subgroups shown are expressed in terms of points in the total index. Latest figures shown are for April 1942. MONEY RATES IN NEW YORK CITY TREASURY BONDS TREASURY NOTES TREASURY BILLC 1936 1937 1938 1939 1940 1941 1942 Weekly averages of daily yields on Treasury notes and bonds and average discount on new issues of Treasury bills offered within week. Latest figures shown are for week ending May 16, 1942. MEMBER BANK RESERVES AND RELATED ITEMS 1940 1941 Wednesday figures. 1942 1940 1941 1942 Latest figures shown are for May 13, 1942. Industrial activity increased in April and the first half of May, reflecting continued advances in armament production. Following an increase in buying during the first quarter, retail trade declined somewhat. Wholesale commodity prices advanced further. Production—Expansion of industrial production in April was reflected in an advance in the Board’s seasonally adjusted index from 172 to 174 per cent of the 1935-39 average. This increase followed upon a period of relative stability during the first quarter of the year, when growing war production was offset by de creased civilian output. Since the beginning of the year total volume of industrial output has shown little change but there have been marked differences among individual industries. In general output of machinery, chemicals, and armament of all kinds has con tinued to expand at a rapid rate. There have also been substantial increases in output of electric steel, nonferrous metals, glass containers, wood pulp, and coal. On the other hand, output of many products for civilian use such as automobiles, tires and tubes, wool textiles, electrical appliances, alcoholic beverages, petrol eum, and petroleum products has been sharply reduced either by direct order or by shortages of material or transportation facilities. In the month of April crude petroleum and petroleum products were the principal commodities showing a decline in output. Output of furniture, cotton and rayon textiles, manufactured foods, paper products, and tobacco products has been maintained in large volume. Value of construction contracts awarded in April, as reported by the F. W. Dodge Corporation, was almost one-fifth below the high March total, reflecting a decline in publicly-financed construction. Residential contracts decreased by one-fourth and for the month were at about the same level as last year. Awards for non-residential building increased slightly, mainly because of a 40 per cent increase in awards for factory construction, practically all publicly financed. In the first four months of 1942, total awards were about one-fourth greater than in the corresponding period last year; public awards more than doubled, while those for private projects were down by about two-fifths. Public awards in this period made up over 70 per cent of the total, compared with about 40 per cent last year. Distribution—Retail sales declined somewhat in April, following a considerable amount of anticipatory buying during the first quarter of this year. At depart ment stores, dollar sales in April were about 10 per cent below the first quarter average, making allowance for usual seasonal variations, but were 5 per cent above the level prevailing during the latter part of 1941. During the first half of May sales showed a further decrease and were around 6 per cent larger than a year ago in contrast with price increases amounting on the average to about 20 per cent over the year period. Total freight car loadings increased sharply in April owing chiefly to larger shipments of coal and forest products, and to a sharp rise in iron ore loadings as the Great Lakes shipping season got under way. Shipments of merchandise in less than carload lots, which had begun to decline in March, were reduced sharply further in April, reflecting Government action to increase the average load per car in order to effect fuller utilization of railroad equipment. Commodity Prices—Beginning on May 11, wholesale prices of most com modities were limited to the highest levels reached during March, according to the general maximum price regulation issued April 28. Effective May 18, retail prices of most commodities were likewise limited. Retail prices of related serv ices will be limited beginning July 1. About 30 new maximum price schedules for industrial products were issued from the middle of April to the middle of May. Most of these covered wholesale prices of items previously subject to informal or temporary controls. Upward adjustments in maximum prices were allowed for coal, ferromanganese, tires, petroleum products, and a few other items. Wholesale prices of most farm products and basic foods, which are exempt from direct control, showed little change in this period, following sharp in creases earlier in the year. Bank Credit—During the five weeks ending May 20, Federal Reserve Bank holdings of Government securities increased by about 200 million dollars while currency in circulation rose by 260 million. Member bank deposits increased during the period and required reserves showed a corresponding growth. The net. result was a decline of 300 million in excess reserves. Holdings of United States securities at banks in leading cities increased further, while commercial loans declined. Liquidation of loans was concentrated at banks in New York City and in the Kansas City district. United States Government Security Prices—Prices of U. S. Government bonds declined in the last half of April, but steadied in the first half of May. Rates on current Treasury bill issues rose from about 0.20 per cent in March to 0.36 per cent in May. The Federal Open Market Committee announced on April 30 that Federal Reserve Banks stood ready to purchase all Treasury bills offered at 0.375 per cent. SEVENTH FEDERAL IOWA T ILljlND RESERVE DISTRICT
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