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F E D E R A L R E S E R V E B A N K O F C H IC A G O REPORT OF BUSINESS C O N D IT IO N S IN T H E S E VE N TH FEDERAL RESERVE D IS T R IC T SEPTEM BER 25, 1919 Compiled September 20, 1919 There continues to be in evidence in the Middle West a rather marked disposition to “ capitalize” present prices and conditions, notwithstanding the fact that they are due primarily to the war. This is indicated by the land move ment where present owners of land, seeking to capitalize present prices of farm products, are exacting higher rentals and are holding for higher acreage prices. Another development along this line is the appeal of the Illinois Agricultural Association to the Indiana Federation of Farmers to hold their live stock and grain on the farm until “ a sane market has re-established itself,” which is generally understood to mean a higher price level. Such a movement, if it becomes widespread, would in a measure at least defeat efforts to readjust living prices to a lower level. Labor’s Attitude Tends to Curtail Production This tendency to profit from war conditions is also reflected in other directions, especially in labor circles, where the cost of living is being utilized as a leverage to exact high wages and shorter hours, thus curtailing production and tending to perpetuate the existing high living costs. This makes for continued unrest. Adjustment of wage scales on a temporary basis to meet the existing living problem apparently would be com paratively easy, but when attempt is made to make binding long-time agreements in face of declining exports and the popular and widespread demand for lower prices fomsssentials, the employer shows hesitancy and in some instances resistance. Manufacturers complaining of the labor situation say that their controversies are not entirely a matter of wages but due to the tendency of labor not to work full time. They report an attitude among wage earners not to work full time when they have plenty of money in their pockets, a development which curtails output. Business Generally is Active Business in the Seventh District, however, generally is reported as very good. Retailers are selling all the goods they can get, at high prices, making money enough to cover the increased cost of doing business, collecting their bills promptly and banking satisfactory profits. The demand for the best qualities of^merchandise is insistent and, regard less of newspaper headlines, the people appear to have money in pocket to pay for whatever they fancy. Nothing but the shortage of stocks in first hands, reduced production and delays in transportation prevents a much greater volume of merchandising. Business mortality is next to nil, credits are well in hand everywhere and the physical conditions which restrict buying ahead tend to make the outlook more secure than it would be ordinarily on so high a price level. Keeping in mind the possibility of a “ break” —if any unforseen event should disturb the chain of supply, demand and prices— merchants of all grades are proceeding with more than usual caution. Timid merchants, who cannot bring themselves into harmony with the state of things, are liquidating at a profit rather than place orders at ruling prices for future deliveries. Others, taking the middle course, are placing orders ahead, but protecting themselves against a possible “ slump” by restricting quantities to come and limiting their money liability to the ordinary total. Retail Demand is Very Large Speaking generally, the volume of retail trade measured in dollars is very large, about 40 per cent over 1918, and because of the “ holding off” policy of many people, the indications are that it will increase this fall and win ter. Returning soldiers are a large factor in the buying of staples and as they settle down to normal civil life they will afford a good prop for producers and distributors alike. Luxuries are Demanded Everywhere Textiles and shoes rule at high and higher prices, with ginghams 20 per cent advanced for 1920 delivery and shoes “ pegged” at the present level at least until January. Raw leather, however, is “ steadying,” indicating a gradual readjustment. The demand for silks is characterized as “ extravagant” and the high prices merely signify scarcity. Diminished output is attributed in part to labor and in part to short supplies of raw materials. Luxuries are gobbled up faster than they can be produced. The people will have jewelry and they want the costliest. The watch factories cannot keep up with orders, partly because it is impossible to obtain materials and efficient labor. Prices would go higher but for the policy of one dominant factor, stated thus: “ We do not want to see this vicious circle of advanced prices and costs go on any longer.” In the wool and woolens department matters are in an uncertain state. Merinos and the high grade apparel wools are higher. Off grades trend downward. Radical advances in prices for 1920 clothing are announced on the basis of higher costs due to shorter hours of mill labor and much reduced production. Stocks in retail hands are very low and deliveries are being made in some cases at contract prices representing actual loss to manufacturer and jobber. Present costs are figured about 30 per cent up, and this increased cost put against prices made to dealers a few months ago, means doing business for nothing. Hand to mouth deliveries are the rule, cutting against orders being the nec essary rule. Overcoats are scarce and likely to command a good price. Problem of Housing and Furnishing Perplexing In furniture there is an interesting situation. Suitable woods are scarce and competent labor even scarcer. Poor housing facilities, due to high building costs, account for some of the trouble. Sales are reported from 50 to 60 per cent over 1918, and some manufacturers have advanced prices about 10 per cent. Factories are booked to 75 per cent of the year’s capacity if no new orders are received. Buyers are already in the market for 1920 shipments, local stocks are low and sold out as soon as uncrated. The enormous mobility of the American people and the increase of migratory club and hotel existence have made necessary a great increase in transient housing capacity at all trade and industrial centers. How these new hotels are to be outfitted is the problem. Furniture makers are unable to furnish the needed equipment, and in some cases are refusing to book orders. The grocery trade is worrying along with small stocks and some irritation over executive attempts to interfere with the usual routine of warehousing future requirements when the supply is abundant. Sugar is scarce and fruit also, indicating a small winter ration of sweets and preserves. Stocks are hardly normal. Shipments are very slow and the shelves show gaps in important items. Volume of trade is far”ahead of last year. Few “ no pay” customers are left. Credits are at the peak, collections good, with few failures in the trade. Lumber and Building Lumber shipments are much below 1918 but the money volume of August business was large. Production is greatly restricted and the car shortage is a perplexing fa ctor... Government payments are reported slow. Railway buying is unsatisfactory but the state of the rolling stock points to a not long deferred demand. Matters have taken a turn for the better in Chicago by the settlement, on September 20 of the building trades strike and lockout in this city. The builders facing the absolute necessity of pushing through housing work granted the $1.00 an hour demand of the carpenters and operations were immediately resumed. It is estimated that from $110,000,000 to $125,000,000 of contracts have been affected by the controversy. The settlement is counted on to give a good impetus to building. Shortage of renting space and soaring rental prices have caused much discomfort and discontent. Stable building conditions should encourage a good volume of new contracts, but the building season is well advanced in Chicago. Labor Situation Source of Great Concern The labor situation is a source of great discomfort. On one side of the survey it would appear that things are a little better—workers a little less restless and perhaps a bit less disposed to fly in the face of public sentiment to gain extravagant concessions of time and pay. On the other side there stands the steel workers strike vote, attempting to tie up the Steel Corporation plants, and this in full defiance of the President’s conciliatory endeavors. Likewise in the Illinois coal fields the mine workers threaten to violate their agreement as to scale pending the official end of the war. If this is done there may be a cessation of coal production in this region on November 1. This would intensify a situation already bad because of small output and the car famine during recent months. Shrewd observers profess to see signs of “ backing down” on the part of labor agitators. In any case public opinion appears to be disposed to set against arbitrary measures to enforce wage increases at the present high level. Automobile prices are at the top and the demand is unabated. There are signs of accumulation, however, and next spring and summer may show surplus stocks and lower prices. But labor in this industry is restless, although wages are 100 per cent higher than in 1914 and working hours 20 per cent shorter. The great need of the hour, manu facturers say, is for more loyalty and efficiency among workers. In no other way can the situation be met and overcome, as they view conditions. Foreign Exchange Situation a Big Factor Steel makers and other manufacturers are complaining of the foreign exchange situation which curtails export. Wire mills are working below capacity on account of labor shortage and lack of cars for shipments. The demand is good and road sales forces have been called in. Stocks are fairly abundant in the structural department but resump tion of building would soon use up the surplus. Peace in the labor field and normal exchange rates seem to hold the key to the situation. The grain business, according to the reply of an important house, is rather unsatisfactory. The car shortage has produced congestion at country elevators and the Federal Wheat Corporation is blockading seaboard terminals, pre venting free movement of other grains. Add to these difficulties the slump in foreign exchange, causing a decline in foreign demand, and the story is complete to date. Investment Demand Reflects Hesitancy Investment houses report somewhat unsatisfactory conditions. New financing is prevented by the uncertainties of the labor situation and the prolonged haggling over the Peace Treaty. Foreign securities recently issued here have declined and investors are in a waiting attitude. An important possibility is the conversion of corporation short-term notes into preferred stocks on favorable terms. Capital is abundant, needing only stable conditions to bring it int active employment. Movement of Live Stock Live stock prices have experienced a sharp decline. Cattle, calves and sheep receipts at all Western markets for August showed an increase of 5, 15 and 85 per cent compared with the corresponding period a year ago. The receipts of hogs at the various points in the Middle West during August were considerably less than for the corresponding period of last year. The sharp decline in prices has resulted in the feeders frequently taking losses on shipments, while the drouth in the northwest has forced ranchers to ship out most of their cattle. The high prices of cottonseed cake and hay discourages the wintering of cattle. Receipts of live stock at Chicago for the four weeks ended September 13, compared with the corresponding period of 1918, are as follows: 1919..__ ______ _____ ______ _____ __ ___ _____ ___ 1918................................................................................. ....................... Increase ♦Decrease Cattle 225,585 300,264 Calves 43,587 35,734 Hogs 347,854 349,354 Sheep 511,714 514,957 *74,679 7,853 *1,500 *3,243 There is a feature affecting the cattle loan companies that should be noted. Cattle loans which showed a good margin when made, in many instances now are practically without margin, due to the drop in prices. The high prices for feed are not likely to make the autumn cattle loans attractive, excepting from the most responsible cattle men. The campaign against the high cost of living together with the delay in stabilizing the foreign exchange situation is regarded as a big factor in the sharp decline in hogs and sheep. Crop Situation Not Materially Changed There has not been a great deal of change in the crop situation, the government figures showing a further depre ciation in spring wheat, of which there is very little in this district. The export demand for both flour and wheat is light. The agitation against high prices and Mr. Hoover’s statement that Europe has large food stocks on hand have been factors in depressing the price level. Government estimates on the principal crops in the States of Illinois, Indiana, Iowa, Michigan and Wisconsin, excluding those counties which are not in the Seventh Federal Reserve District, compare as follows: Crop Acreage 1919 Corn............. Oats.............. Beans______ Acres .24,178,000 .14,118,000 . 353,000 Hay (all)..... 12,618,000 Forecast of Production Based on Condition September 1, 1919 Bushels 897,618,000 438,683,000 3,530,000 Tons 18,010,000 Acreage 1918 Production 1918 Acres' 35,346,000 14,923,000 543,000 Bushels 895,138,000 640,005,000 4,887,000 Tons 16,344,000 12,735,000 Trend in the Western Money Market Indications point toward an easier money situation in the agricultural section, with a fair demand in manufac turing districts. With the marketing of the crop there is in prospect the release of a considerable amount of funds which it is believed will enable the reduction of loans generally. In manufacturing centers the accumulation of stocks of manufactured products for the coming season, together with strikes and other factors at work, is likely to increase the use of credit, so that the demand from these sources in the shape of loans is showing a tendency to increase. Partial payment subscribers to Liberty Loan Bonds are meeting their obligations in a very satisfactory way. At the same time savings deposits continue to increase. There is, however, a considerable letting down in the practice of thrift and economy compared with war times, despite the efforts of the banks to stimulate thrift. Chicago bank clearings for the first eighteen days of September, comprising fourteen business days, aggregate $1,606,920,294, an increase of $399,525,626 compared with the corresponding period of 1918, in which period there were only thirteen business days. Bank exchanges at twenty leading clearing house centers in the Seventh Reserve District aggregated $234,533,400 for the first fifteen days of September, an increase of $50,933,800 compared with the first fifteen days of September, 1918. SELECTED M E M B E R BAN K STATISTICS— SEVEN TH DISTRICT (OOO’s omitted) Chicago ----- -44 Member Banks-----Jan. 3 Aug. 8 L oa n s— S e c u r e d b y U . S . w a r o b lig a t io n s ..$ 6 1 ,1 6 0 A ll o t h e r lo a n s a n d in v e s t m e n t s . .8 4 6 ,0 0 8 R e s e r v e B a la n c e w it h F e d e r a l R e s e r v e B a n k s ........ ............ ................. .1 0 8 ,8 2 5 C a s h in V a u l t ............ ........................... .. .. 4 4 ,5 5 5 D e p o s it s — N e t d e m a n d ....... ..................................... ..7 9 4 ,3 9 8 ........ . 1 4 9 ,8 5 9 T i m e ........................... ................ G o v e r n m e n t . ............ ........................ .. 1 3 ,9 6 2 B ills P a y a b l e a n d R e d is c o u n t s — C o lla t e r a l N o t e s ....... ............... .. 3 7 ,7 3 5 B ills R e d i s c o u n t e d .............................. .. 1 0 ,1 8 6 S e p t . 12 Detroit ------ 12 Member Banks-----Jan. 3 Other ------ 44 Member Banks------ S e p t . 12 A ug. 8 Jan. 3 Aug. 8 S e p t . 12 $ 7 2 ,8 2 2 9 1 6 ,4 2 2 $ 7 3 ,3 5 3 6 3 4 ,4 4 7 $ 8 ,7 2 0 2 1 4 ,0 8 5 $ 1 2 ,7 9 5 2 9 7 ,5 1 4 $ 1 1 ,6 6 1 2 6 4 ,4 5 5 $ 1 3 ,4 2 0 2 8 0 ,9 3 9 $ 1 4 ,5 6 4 3 0 7 ,1 1 9 $ 1 6 ,3 7 7 2 7 8 ,6 8 2 1 2 0 ,4 3 3 3 7 ,2 0 1 1 2 2 ,6 9 0 3 8 ,7 3 9 2 1 ,8 8 6 1 3 ,8 2 1 2 7 ,6 2 1 1 2 ,5 2 8 2 8 ,4 9 4 1 5 ,3 7 9 2 5 ,2 4 1 1 5 ,8 1 1 2 9 ,3 7 5 1 3 ,4 7 8 2 9 ,1 5 8 1 4 ,3 3 1 8 8 0 ,2 0 9 1 6 7 ,8 5 1 4 9 ,1 7 3 9 0 2 ,2 0 2 1 6 9 ,3 0 9 3 3 ,4 0 4 1 6 2 ,0 4 8 1 5 5 ,8 9 6 1 3 ,9 6 4 19 6 ,8 6 1 1 7 5 ,8 8 7 1 7 ,7 2 6 2 2 3 ,5 7 3 1 8 1 ,2 8 0 1 0 ,7 6 4 2 0 9 ,7 0 7 8 9 ,2 1 1 6 ,1 8 9 2 4 9 .1 6 3 9 9 ,5 6 7 1 1 ,3 5 1 2 4 8 ,4 2 6 1 0 1 ,0 2 7 1 0 ,0 9 8 5 0 ,7 6 1 6 ,4 9 4 4 0 ,0 6 7 1 2 ,1 5 5 1 2 ,1 5 4 412 4 8 ,5 9 0 1 ,0 7 4 2 3 ,7 8 3 3 ,4 8 6 1 8 ,3 8 0 1 6 ,1 9 1 9 ,1 0 2 3 ,3 3 5 1 6 ,7 8 7 4 ,1 1 1 RECEIPTS AND SH IP M E N T S OF IM P O R T A N T C O M M O D IT IE S AT CHICAGO (OOO’s omitted) ----------------Receipts---------------—July— —August— 1919 1918 1919 1918 397 873 686 606 6,596 21,413 27,250 9,375 4,887 10,007 3,296 5,254 11,012 13,521 12,318 22,765 17,790 20,270 19,463 30,256 116,330 101,634 93,466 105,686 24,505 12,776 11,339 8,909 19,997 18,680 22,328 14,365 34,554 34,424 27,037 41,523 563 412 622 459 563 454 732 702 18,263 12,683 17,604 9,951 200 243 170 208 Flour, barrels................. Wheat, bushels.......... Corn, bushels..... Oats, bushels......... Cured Meats, pounds.... Fresh Meats, pounds.... Lard, pounds—............... Cheese, pounds.............. Butter, pounds.............. Eggs, cases.......... .......... Potatoes, bushels.......... Hides, pounds................ Lumber, thousand feet. 1919 340 1,292 2,316 6,443 96,487 177,395 55,215 29,875 41,919 286 399 13,897 90 ------------- —Shipments-----------—July— —-August— 1918 1919 1918 663 259 384 1,405 14,827 17,429 1,910 3,051 2,728 8,099 8,321 9,360 94,646 82,987 73,214 142,084 152,057 121,638 22,883 49,199 15,708 6,295 31,079 6,026 21,311 33,884 18,834 295 162 213 214 258 169 16,279 22,183 12,399 98 87 78 BUILDING PER M ITS OF SEVEN TH FEDERAL RESERVE D ISTRICT CITIES —August No. of Buildings ................................. 50 ______ ______ 288 Decatur, Illinois.............. ................ ........... ............. .............. .. 87 145 Des Moines, Iowa............................. ........... ___ _______ ___ Detroit, Michigan___ _______________ . 1,923 Debuque, Iowa__________ __ _ _______ ........................ ........ 18 Fort Wayne, Indiana____ __________ _______ ___ ______ 60 ___ Grand Rapids, Michigan___ __ ........ 176 Indianapolis, Indiana....... .....1......................... 709 Jackson, Michigan....... . ......................... 79, Lansing, Michigan..... ............. ............ 166 Milwaukee, Wisconsin .................... ........... ................................. 397 Peoria, Illinois.................................. .......... ......... ..... ......... ....... 58 Saginaw, Michigan..... ........ ........... ...... ................................. 2 3 3 ... ............. 109 Sioux City, Iowa................ ..................... South Bend, Indiana........... __________ 174 61 Springfield, Illinois....................... Terre Haute, Indiana____ ___________ _______________ _ 75 City Cedar Rapids, Iowa................................... 1919— Estimated Cost $ 158,000 4,960,400 204,175 863,210 8,767,135 134,615 302,165 458,805 2,601,497 152,685 236,595 1,144,598 192,775 283,312 2,013,415 155,783 120,300 56,205 -—August, No. of Buildings 22 247 20 31 667 2 24 98 431 45 40 232 23 63 48 100 33 63 1918— Estimated Cost $ 72,000 4,635,900 42,725 874,529 743,515 1,220 23,725 192,535 931,394 51,687 18,235 348,300 90,785 108,553 119,250 45,055 28,350 41,995 Per Cent Per Cent Gain Loss 119 5 377 1 1079 10934 1173 137 179 195 1471 228 112 161 1588 245 324 33 COM PARATIVE STATISTICS OF BUILDING AND EN G IN EE RIN G OPERATION S Contracts awarded' in States north of the Ohio and eas t of the Missouri Rivers, from January 1, to September 1, 1919. 1919..-.................. 1918.................................. 1917-................. $1,565,489,000 1,211,065,000 1,156,176,155 1916............................................... $838,024,922 1915..................... v. .. _________ 598,619,600 1914........................................ ...... 531,915,200 1913____ 1912................... 1911............ $616,067,000 558,820,000 539,266,313 Contracts awarded in Seventh Federal Reserve District States— Illinois, Indiana, Iowa, Michigan and Wisconsin — also Northern Missouri and Eastern Kansas, 1919.. 1918.. 1917.. .. .. . $582,627,000 273.794.000 479.812.000 1916.................................................$286,887,422 1915.......... 188,796,600 1914........................ 151,865,200 1913 1912. 1911. NOTE—Building and Construction statistics compiled by the F. W. Dodge Company. $134,722,000 . 83,723,000 . 99,600,313
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