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Business

conditions

in

the Philadelphia Federal
Reserve District
FEDERAL
OF

RESERVE

BANK

PHILADELPHIA

January 2, 1918

HE industries of this district which are engaged in the produc­
tion of materials and supplies needed by the Government for
war purpose liave been tu n in g to, a.-* near capacity as pos­
sible. Other, industries, however, have felt to a considerable extent
the factors, of labor shortage and transportation. difficulties which
have been cutting ds wjv their output; in addition, they have been
unable to meet the wages which the munition factories offer, and
the demand for their products has decreased, so their position is far
from satisfactory.

T

Railroad situation

Referring to the railroad problem and the
solution of the country’s transportation diffi­
culties, we are in receipt of a most interesting letter from one of the
Vice-Presidents of the principal railroad system in this country,
who says in substance, that the present necessities of the railroads
are as follows:
1— Immediate increases in rates to meet increasing operating
expenses and to strengthen railroad credit are imperatively
necessary, because for years the railroads have been deprived
of remunerative rates sufficient to give them a proper credit
basis and to enlarge their plants to meet the growing traffic of
the country. There is no railroad problem, outside of the need
of rates to meet the tremendous increase in the cost of materials,
labor and other expenses. As a new development, there is the
further problem of securing capital to meet maturing obligations




and to provide additional equipment and facilities, because the
Government has absorbed the money market.
2— The present congestion of traffic has arisen from the causes
specified above in item 1 and because of the world wide war,
with the consequent tremendous expansion of our industrial,
agricultural and mining activities. This situation, however,
should soon correct itself to a large extent because most of the
troops have been moved; cantonments are nearly completed;
many of the shipyards are built; a regular service for camp
supplies has been inaugurated; and the northwest has been
relieved of its coal shortage.
3— Most of the railroads need more locomotives immediately and
enough new cars to replace those worn out. There are approx­
imately 3,800 locomotives and 33,000 cars on order for American
railroads, but they have not been delivered. Government priority
orders are essential for prompt delivery of such equipment.
A— Approximately 2,000 locomotives and 150,000 cars in addition
to those now on order will be necessary to meet the require­
ments of next year. Tnis r, more than the railroads usually
require each yeai and represents a cost of approximately
$500,000,000
5— Railroad men should be drafted and assigned to railroad service
until actually needed for military service; this applies especially
to firemen and skilled shop men, wlic become expert only after
considerable experience. The rates heretofore allowed the rail­
roads have ro« allowed a proper margin Vc keep the best work­
men in the service, so they have taker, positions in other indus­
tries at higher wages.
Any congestion which now exists cannot be remedied com­
pletely under any form of control or money expenditure. It results
from an unprecedented war in which we are trying to equip and
feed ourselves and several other nations as well.
No complaint can be made as to the lack of efficiency of the
railroads. For several months they have handled 50% more busi­
ness than in 1915 without material enlargement of plants. They do
not need a billion dollars or any other sum like it to meet their
financial necessities. Railroad maturities during 1918 will be in
the neighborhood of $250,000,000; this and other necessities must
be met.
The repeal of the Anti-Trust Act and the Anti-Pooling Laws
are not essential at present to produce maximum efficiency, but they
should never have been applied to railroads, because railroad rates
and activities are uniform and are regulated by Federal and State




commissions. It may, however, be desirable to have these subjects
considered, so that, directly or indirectly, there may be no obstacle,
legal or otherwise, to the railroads unifying their operations and
facilities and combining for that purpose to help win the war and
serve the American people.
No matter what kind of Government control or policies may be
instituted the eastern railroads will require increased rates.

Coal

The supply of coal is in no way equal to the demand and
many industries, including even some of those which pro­
duce war materials, have been forced to shut down, at least tempo­
rarily, due to their inability to secure fuel.

That the production of coal has not lessened but is greater than
ever before is shown by the fact that the Reading, Pennsylvania, and
Baltimore and Ohio Railroads transported a total of approximately
85,000,000 tons of bituminous coal during the first eleven months of
1917 as compared to 80,000,000 tons during the same period in 1916.
As a natural consequence, the supplies which are reaching each
locality are likewise larger, but the demand has so largely increased,
that the net result is, to all intents and purposes, a coal shortage.
The output of the central Pennsylvania fields of late has aver­
aged from 80 to 85 per cent of their possible capacity. The chief
cause of this loss, as shown by Government reports, was the in­
ability to secure a sufficient number of cars. Solid trainloads of
coal have been shipped and are being shipped, but they become
tied up at some congested point and only serve to emphasize the
lack of adequate transporation facilities. The extent of this short­
age of cars available for coal carrying can be judged from the fact
that many mines are getting less than 15 per cent of their car allot­
ment. It has been hard to secure sufficient labor, and, in addition,
the mines are having great difficulty in holding the men now in
their employment due to the alluring wages offered elsewhere.
An increase in the production of coal can only be secured by
giving coal priority in shipment over other articles of commerce and
furnishing an adequate supply of cars to the mines. Government
officials are doing all in their power to make these things possible,
and it is hoped that the situation will be improved in the near future.
Primarily the situation depends upon the right solution of the
transportation

Commodity




Tft<* index nurrH?er of commodity prices as
givferi'to# t t a * Statistical agencies in this

country are somewhat at variance, as may be seen by the following
comparison:
Dec. 1
1916
D u n s .................................... 168.090
Bradstreet’s ......................... $13.6628
Annalist ............................... 209.797

Nov. 1
1917

Dec. 1
1917

220.750
$17.0701
278.006

220.172
$17.8113
280.655

It would seem, however, that we have about reached the high level
in commodity prices. There may be some increase in the future,
but as the Government gets a stronger hold on the situation by
means of price regulation, it may be expected that prices will prob­
ably remain more nearly stationary in the future than has been the
case during the last two years.

Crops

The crops raised in this district during the year 1917 were
very large. According to the Pennsylvania State Depart­
ment of Agriculture, the five cereal crops show an excess of
8,560,417 bushels over the 1916 crops. All of the cereals show in­
creases, but oats present the largest gain. This showing is remark­
able in view of the scarcity of labor, which has been such an impor­
tant factor throughout the year. At the present time, the farmers
are prosperous and ask for little accommodation at the banks. The
labor situation is their chief concern, and owing to this it appears
that the acreage planted in winter wheat is not quite up to what
was hoped.
The Lancaster county tobacco crop is nearly all sold. The
small amount which remains in the hands of the growers is held in
the hope of getting 30 cents a pound. The season has been marked
throughout by prices beyond all precedent.

Food storage

In our last report, we indicated that the cold
storage holdings of various dairy products and
eggs were in excess of the holdings in the same month of 1916. As
compared to December 1, 1916, there was an increase of 92 per cent
in the holdings of American cheese on December 1, 1917; eggs—28
per cent increase; and creamery butter—9 per cent increase.

Christmas
Our inquiries last year as to the amount of
savings funds “ Christmas Savings Fund” payments by banking
institutions in this district resulted in such inter­
esting returns that we continued our inquiries this year. Replies
were received from only 74 per cent of the banking institutions.
Four hundred and thirty-four institutions reported payments to
depositors amounting to over $10,200,000, and depositors to the




number of 359,186, or an average of $28.30 each.
figures for 1917 and 1916 follow :
N um ber o f B an ks
P er
In
Reply”
d is t r ic t
in g
reP1y '

B an ks R e p o rtin g N um ber o f
No
F u n d ," D e p o s ito r s
fu n ds

Comparative
A m ou nt o f
D e p o sits

1917
National banks . .
State institutions..
Totals ..............

628
427

511
266

81%
236
61 • 107

275
159

155,940
203,246

1055

777

73%

434

359,186 $10,200,393.35

343

$4,642,774.59
5,557,619.16

1916
National banks . .
State institutions..

632
361

576
296

91
82

303
1 12

273
184

$3,948,319.00
5,447,525.00

Totals ..............

993

872

88

415

457

$9,395,844.00

Retail trade

Outside of Philadelphia reports indicate that
Christmas trade has not been up to normal, it be­
ing asserted that the people are economizing more and more. In
Philadelphia, however, it is stated that trade has been good. There
seems to be the strongest demand for materials and articles of a
medium quality. An official of one of the largest department stores
states that the rich have not been buying as costly articles as for­
merly, and that those who had previously favored cheaper articles
have been purchasing goods of better quality. The dry goods trade
is said to be abnormally good with a shortage in all kinds of colored
cotton goods and consequently higher prices.

General industrial
conditions

Following the suggestion of some of the
leading wool organizations, the W ar Trade
Board promulgated regulations which
placed restrictions on importations of wool. Under these regula­
tions the Government is to take an option on all imported wool at
a price 5 per cent below the basic price at Boston on July 30, 1917.
One of the effects to be expected from these rulings is the curbing
of speculation in wool, which is without a doubt to be desired. At
present the wool market rules quiet and prices remain firm. Stocks
are very light and offer a rather poor selection to the buyer.

The cotton yarn market during November was marked by a
distinct wave of buying which has somewhat receded of late.
Prices, however, have been more than maintained, though it is ex­
pected that they will recede somewhat after the first of the year.
The cotton goods market is adjusting itself to war conditions.
Trade in fancy cotton goods has fallen off considerably, but there
is a strong demand for the simpler products.




The Government has ordered so much of the output of the knitgoods manufactories for delivery during the first half cf 1918 that
very little of the product has appeared on the market, and then only
at large increases in price.
The manufacturers of silk goods report that the market is still
quiet, since buyers will not order ahead until they are more certain
of the trend of demand and prices. It is expected that after the first
of the year the demand will be stronger.
Reports from the leather market give emphasis to the funda­
mentally strong position of good leather, due to the tremendous
world demand and a lessened world supply of leather and leather
materials. Buyers of footwear for civilian use, however, have not
been so urgent in their demands of late, which is to be expected
until after the holiday season.
At this date the shipyards along the Delaware River have on
hand Government contracts for 272 vessels of an estimated tonnage
of 2,240,000. Eleven shipyards in this vicinity are now employing
44,000 men, and ultimately hope to increase their force to 84,000.
The nature of the stupendous amount of work which the yards are
facing can be judged from the fact that one of the plants now being
erected must construct 120 ships in 20 months, or an average of 6
a month.

Iron and steel

It is reported that operating conditions among
the eastern Pennsylvania steel mills and blast
furnaces are the worst that have been experienced since the begin­
ning of the European war. The plants of some of the largest steel
companies, which heretofore have been fairly free from serious
difficulties, are now troubled by shortage of coal and coke, and in
some cases production has been cut down to 50 per cent and less.
Among the smaller mills the situation is reported to be still more
serious. The steel makers have so far been unable to see any per­
manent relief in sight which will give them a better supply of coal
and coke. Unless the situation is much improved, the shortage in
steel products will seriously hinder our war program. Orders can
be had in great quantity, but the companies cannot guarantee de­
livery at particular dates. The market is rather quiet, and nothing
of importance has developed within the last month.

The port

Exports from the port of Philadelphia in November
amounted to $32,000,000, a decrease of 49 per cent as
compared to October and 22 per cent as compared to November of
1916. Imports amounted to $4,000,000, a decrease of 6 per cent




from the figures for October and 31 per cent below November, 1916.
Petroleum and lumber made up the bulk of the imports.
The reasons advanced for this decrease in our foreign trade are
the great scarcity of ships and the embargoes which have been
placed on trade with neutral countries.

Building operations

Building operations have fallen off
sharply throughout the district. A list of
twelve important cities in this district in Bradstreet’s shows build­
ing permits issued amounting to $2,322,662, as compared to
$5,864,127 in November of 1916. In Philadelphia, building permits
during November amounted to $1,712,520, which is a decrease of 15
per cent from October. For the first eleven months of 1917, there
was an average decrease of $1,000,000 per month in the amount of
building permits issued in Philadelphia, as compared to the first
eleven months of 1916. The building situation has been rendered
more difficult by the commandeering of sand and gravel supplies by
the Government.

M oney

The money market has been rather quiet with a slight
increase in rates. The Federal Reserve Bank has made
some increases in discount rates during the last month, amounting
in no case to more than y2 per cent. The market rate for call money
is 6 per cent, and the rates for commercial paper 5y2 to 6 per cent.
Bank clearings in the district fell off slightly during November.

The national banks in Philadelphia reported net profits of 27.2
per cent for the year ending November 20, 1917, which were close to
the best figures ever attained.




FINANCIAL INDICATORS
D ec.

17,

1 91 7

I Percentage increase or decrease compared with
-----------+ : ------------------- ---------------------------- —

Previous month

Last year

Philadelphia banks:
Loans ..............................
Deposits . . . ...................

$588,129,000
640,987,000

Federal Reserve Bank:
Discounts and collateral
loans ...........................
Cash reserve ..................
90-day discount rate. . .

34,819,052
49%
4!/2%

+ 116
- 26
4%

+463
9
4%

5V 4 %

5|/2%

41/ 2 %

Commercial paper..............

November, 1917

-

+
+

4
5

8
2

Percentage increase or decrease compared with
Previous month

Last year

Bank clearings:
In Philadelphia..............
Elsewhere in district. . .

$1,532,681,531
99,531,560

- . 2
9

+

+

20
17

Total ...........................

$1,632,213,091

-

3

+

20

32,309,000
4,106,000

-

49
8

-

22
31

1,712,520

-

15

-

62

1,077,1 15

+

11

+

30

Port of Philadelphia:
Exports................
Imports..............
Building permits in Philadelphia ................
Post-Office receipts in Philadelphia ..............
Commercial failures in district (per Bradstreet's) .

(Actual) 60

F ederal

R eserve

(Actual) 65

Bank

of

R ichard L. A u s t in ,

(Actual) 86

P h il a d e l p h ia

Chairman

Compiled Dec. 2 8 , 1 9 1 7

The purpose of this report is to provide member banks and the
business community in general with a brief monthly review of prevailing
business conditions in this particular Federal reserve district.