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Business Conditions Report of the Federal Reserve Bank of Philadelphia November 1, 1919 T h e demand for commodities of all kinds continues unabated. Prices display great firmness and there appears to be no imme diate expectation of any large decreases in the near future. Increased production and economy in retail purchasing are now recognized as the only means by which prices may be lowered, and business men everywhere are stressing these points. Labor troubles have not proved very disturbing in this dis trict during the past month, though some isolated instances of strikes have been reported. There has been a very natural interest in the labor situation and it is felt that some solution must he attained without further delay. The conference at Washing ton between the representatives of capital and labor commanded the attention of many of our manufacturers, and they feel that a continuation of its sessions would be distinctly helpful in se curing a degree of harmony. They appear willing to make reasonable concessions in order that the spirit of unrest may be eradicated as soon as possible, but resent the intrusion of agi tators who cloud the issues with radical preachings and attempt to bring into this country the doctrines of less advanced nations. Retail trade has continued to show great activity in quantity goods sold and in sales returns. There has been an increase ln the quantity of goods as compared to the previous month and last year, but one large department store reports that this is not the case as compared to 1914. House-furnishings and clothing l of the higher qualities are in heavy demand. The people are not yet manifesting a tendency to buy goods of medium qualities but want only the best, even though the prices for such materials may be far beyond that which they can reasonably afford to pay. The outlook for the coming spring is regarded as uncertain, as merchandise is scarce and the mounting of prices might be fol lowed by economy on the part of the buying public. Collections are normal and satisfactory in every way. Coal The present condition of the anthracite market is very active in so far as the family or domestic sizes—egg, stove, chestnut and pea—are concerned, though some scarcity of stove and chestnut sizes is noted. The market in steam sizes, however, is very weak, which indicates that consumers are fairly well supplied. The arrival of cold weather is expected to enlarge the demand for this size. The renewal of the wage agreement with the anthracite workers which is to continue until April 1, 1920, has stabilized conditions in this branch of the coal industry and no trouble is expected for some time to come, at least until the end of the present coal year, March 31 next. Retail dealers, to a large extent, have educated consumers to prompt payment of coal bills by judicious cash discounts, and the wholesalers in turn have reaped the benefit by the prompt pay ment of their bills. Collections are uniformly reported to be good, and it is stated that a large number of buyers are anxious to pay in advance in order to insure their supplies of goods. The demand for bituminous coal has not been urgent, as large consumers have been forehanded in accumulating considerable supplies during the summer season. The average supply of coal in the hands of the largest consumers is expected to last about sixty to ninety days. Prices have sagged somewhat due to the large tonnage thrown on the market as a result of the steel strike. Many countries are seriously short of bituminous coal, but the limited shipping facilities and irregular movement of vessels have largely curtailed shipments to this trade. The production of bituminous coal has been showing a very steady increase since the early part of last May, when the out put was at a very low ebb. While the tonnage has shown remark able gains, it has not been up to the 1918 figures. Car shortages have been the most active factor in cutting down production 2 lately, but the latest figures show some improvement, especially in the northern and central Pennsylvania fields. The bituminous miners are making demands which are abso lutely unreasonable, in the view of the coal trade. Pennsylvania is the principal coal-consuming state of the country. A com petent authority places its annual consumption of bituminous coal, apart from that used by the railroads, at approximately 80,000,000 tons, and estimates that demands of the strikers would, if granted, cause an increase in the bituminous coal bill of about $161,000,000 annually. Cotton Owing to the poor prospects for the new crop of cotton, prices have advanced materially of late, and the Southern fac tors and growers are not eager sellers. Business is active and profitable in so far as domestic selling goes, and the improvement in the European situation is expected to create a large export demand, which will serve to further sustain the cotton market. Business in cotton is very brisk indeed, and this seems to be equally true of all those connected with the manufacture of this commodity, whether into yarns or the finished goods. They are unable to cope with the demand. No particular labor trouble is at present disturbing them, but it is recognized that a greater degree of harmony between employers and employees will have to be established before continued production can become a certainty. Little or no difficulty is had in making collections, as accounts are, in most cases, paid promptly on discount dates, and it some times happens that payments are made even before this date. Crops The Department of Agriculture estimates of the production corn and oats based on conditions on October 1 show consider a t e improvement as compared to their estimate on August 1. *n comparison with last year’s crops, corn shows an increase but oats have decreased. The figures given below show the acreage and estimated production in Delaware and such parts of Pennsylvania and New Jersey as are located in this district. Acreage 1919 Corn Oats Forecast o f production based on condition September 1, 1919 Acreage (Bushels) 1918 Production 1918 (Bushels) 1,533,000 67.748.000 1,544,500 59,804,500 748,000 23.165.000 763,700 29,772,800 3 Hardware There is a general demand for hardware of all kinds and the only drawback is the difficulty in securing enough goods from the different factories to fill orders. Sales have increased materially during the last few months. Barring some unforeseen happen ing, jobbers declare that present conditions forecast prosperous business for some time to come. Collections are normal in every way and outstanding accounts bear a smaller ratio to sales. One large jobber states that this change has been quite marked as compared to conditions a year ago. Hosiery Hosiery for immediate delivery and also for delivery up to next spring is in great request. It is reported that almost any price can be asked for merchandise that can be delivered promptly. The output of the mills is quite markedly below the demand for goods. This would very probably be the case at this time even if the mills were operating under normal conditions, but they are retarded by decreased hours of labor and the lower indi vidual efficiency of their forces. Production in one large estab lishment is at only 60 per cent of normal and they can see no price change in the immediate future except toward higher ones. Hosiery manufacturers are practically unanimous in taking the stand that only through steady and consistent working, with a resultant increase in production, can any decrease in prices be expected. Collections are satisfactory. Iron and steel There is a heavy demand for iron and steel products of every kind and orders now on the books of most of the concerns in this district are expected to carry production well into next year. Rails and railroad supplies are not called for in large quantities, but the reversion to private ownership is expected to be followed by large orders from the railroads, which are unwilling at pres ent, due to the uncertainty of their present status, to contract for more than absolute necessities. The volume of business in wire and allied lines is normal and shows no tendency to fall off. Collections hold up very well- 4 The pig iron trade is somewhat depressed by the prospect of a strike of bituminous coal miners, which would seriously inter fere with the supply of coke. The production of pig iron through out the country reflects this lessening in demand and the decrease in output due to strikes. The average daily production in Sep tember was 78,340 tons, as compared to 88,396 tons in August, and 113,942 tons in September, 1918. The steel strike has not been very widely felt in this dis trict and, with the exception of a few isolated places, producers of iron and steel products have been operating their plants steadily. Manufacturers recognize the restraining effect on operations which an uncertain labor situation exerts, and are desirous of making a basis for an amicable settlement, either through the medium of the conference held at Washington or through other means. They feel that wages have gone as high as they may without doing serious harm and state that an increase in efficiency has not accompanied the increases in wages that have been made thus far. Jewelry Jewelry has been in steady demand and the volume of busi ness has shown substantial growth commencing early in the year. As compared to like months a year ago, the increases have been as high as 15 to 20 per cent. Collections in this line are said to be a bit slow. Paints The neglected condition of buildings throughout the coun try, coupled with new construction and strong export demand, has caused a very considerable call for white lead and paints of all kinds. The majority of manufacturers are somewhat behind on the delivery of orders and expect continued activity for a long time to come. Shortage of efficient labor is very embarrassing |n many cases and such labor as can be procured is said to be inefficient, causing delays in output and increasing costs. Cus tomers are mainly discounting their bills. Paper The demand for paper is exceedingly active, both for domestlc consumption and for export. This encouraging condition is expected to continue at least over the year 1920, unless some 5 unforeseen calamity should occur. There is a scarcity of paper all over the world and our foreign competitors thus far have had great difficulty in making prices which could compete with our own. Collections continue to be good. Shoes Business has been very active, the demand being greater than the ability of the manufacturers to supply. Prices rule high, but the big retail dealers have not been restrained by this factor and show a general tendency to purchase heavily. This state of activity is expected to last at least until the spring buying is completed. The thought is expressed that there may be some cessation thereafter, due to increased economy on the part of con sumers, but the supply is so far behind the demand that even such a condition will probably exert but little effect on this line. The general feeling prevails that the labor problem must be solved. Actual strikes have not been numerous but there are incessant calls for higher wages. Manufacturers state that they wish to work in harmony with their organizations, but that they cannot continually raise wages and receive no return in the shape of more efficient services which would bring production back to what might be termed a normal output. Wool The wool market has ruled quiet for a long time past. Prices of merinos and fine cross breds have held steady at high prices, and there seems to be no probability that they will become lower in view of the record prices that are prevailing in the London market. Medium grade wools have shown a shade more activity, but this is not general, and the opinion is presented that there cannot be any general demand for these qualities until the public expresses a definite desire to buy fabrics at a less cost or some standard, lower-priced material is evolved which will attract popular favor. The mills have been doing a wonderful business and are somewhat behind on their orders. They could very easily book new business far into 1920, but some manufacturers have been paying heed to the demands for lower prices and are trying to avoid the acceptance of too many orders at the high prices now current. They are hoping that the situation at a later date will 6 be more clear and enable them to quote goods and yarns at a lower level; it is stated that some of them are using the unusu ally high prices now prevailing as a means of forcing buyers to hold off. Collections have been prompt. Financial The financial situation continues undisturbed and the offer ings of certificates of indebtedness have met with a liberal re sponse by the banks of the district. The average rate for commercial paper shows no change, holding firm at Sy2 to 53^ per cent. The operations of this Bank during September have increased, discounts amounting to $1,003,715,000, compared with $922,775,000 in August. The transit department handled an increased number and amount of checks during the month. Average money rates charged by the banks in Philadelphia during the thirty-day period ending October 15, 1919, follow: High Low Average 5 5 5^ 5^ 5 5% Customers’ prime commercial paper: 30 to 90 days.................................................................. 4 to 6 m onths................................................................. 6 6 Prime commercial paper purchased in open market: 30 to 90 days................................................................... 4 to 6 m onths................................................................. 6 5X 5X Loans to other banks—secured by bills payable............ 6 4% 5 Bankers’ acceptances o f 60 to 90 days: E ndorsed........................................................................ Unendorsed..................................................................... 4U 4X 4X 4] i 4A Loans secured by prime stock exchange collateral or other current collateral: 6 6 6 Commodity paper secured by warehouse receipts, etc. 6 5 6 Loans secured by Liberty bonds, Victory notes and certificates o f indebtedness............................................. 6 5 5 Cattle lo a n s .. . . ............................. 7 9 6 6 4'A 5 5 D em and........................................................................... 3 m on th s........................................................................ 3 to 6 m onths................................................................. 5 •• STATEM EN T Federal Reserve Bank o f Philadelphia RESOURCES Oct. 18, 1919 Gold reserve........................ Legal tender, silver, etc.. $130,824,692 190,488 $126,278,575 253,767 $186,435,321 771,081 Total reserve............. $131,015,180 $126,532,342 $187,206,402 183,884,304 23,477,992 618,291 30,567,400 170,482,556 22,754,057 826,786 28,636,000 $238,547,987 $222,699,399 $138,068,731 Federal reserve n otes........... 12,550,405 Federal reserve bank notes. 1,137,091 12,089,853 107,880 15,740,502 251,296 Uncollected ite m s............. All other resources........... 45,968,478 95,013,578 2,971,052 74,878,440 102,297,902 3,036,535 47,218,480 Total resources......... $527,203,771 $541,642,351 $390,724,340 LIABILITIES Oct. 18, 1919 Month ago Year ago Month ago Year ago Bills discounted,m e m b e r s : Secured by Governm ent war ob ligations.......................... All oth er................................... Bills bought in open market United States securities.. Total earning assets 106,387,503* 26,081,678 5,599,550 Mutilated and fit notes on hand: Due from d e p o s i t a r y banks—war loan deposit account.............................. Capital paid i n ................... Surplus.................................. Profit and lo s s ................... Government deposits . . . . Due to members—reserve account.............................. Collection item s................. Total gross deposits 2,238,929 $7,773,850 $7,757,250 $7,362,300 5,311,336 271,415 6,964,013 5,311,336 274,183 10,886,505 643,279 19,532,648 105,244,455 90,773,665 83,548,027 100,593,298 81,583,157 44,881,996 $202,982,133 $195,027,830 $145,997,801 Government deposits— special account.............. F ederal reserve notes outstanding............................ Federal reserve bank notes outstanding..................... All other liabilities............ 47,747,411 80,934,030 231,771,280 223,921,145 231,815,200 28,420,000 2,926,346 26,200,000 2,166,577 3,204,000 1,701,760 Total liabilities......... $527,203,771 $541,642,351 $390,724,340 •Total of bills discounted—items not segregated. 8 R E S O U R C E 8c L I A B I L I T Y IT E M S o f member banks in Philadelphia, Scranton, Camden and Wilmington At the close of business Oct. 10, 1919 Sept. 12, 1919 [ Oct. 11, 1918 In thousar ds o f dollars— "1 i.e, ooo’s omitted. J United States bonds to secure circulation $11,262 Other United States bonds and notes__ 48,268 54,176 ................... Certificates of indebtedness $11,597 49,188 43,895 $11,492 29,363 94,052 Total United States securities owned $113,706 $104,680 $134,907 Loans secured by United States securities 159,950 684,160 All other loans and investments ........... 171,600 667,858 50,360 615,665 Total loans and investments ........... $957,816 $944,138 $800,932 67,764 Reserve with Federal Reserve Bank...... 16,984 Cash in vault............................................ Net demand deposits on which reserve is computed ....................................... 677,051 22,221 Time deposits .......................................... 49,121 Government deposits ............................... 69,716 22,362 65,034 19,590 681,626 21,949 30,587 626,508 14,440 25,742 56 56 51 Number of banks reporting..................... C H A R G E S T O D E P O S IT O R S ’ A C C O U N T S other than banks’ and bankers’ , as reported by Clearing Houses Weeks ending A lt o o n a .......................................... C h e ste r .......................................... H a r r is b u r g .................................. J o h n sto w n ................................... L a n c a ste r ..................................... P h ila d e lp h ia R e a d in g S cra n to n T re n to n . .............................. ... . .. ... W ilk e s -B a r r e W illia m s p o r t W ilm in g to n Y ork T o t a l o f c le a r in g h o u s e s Oct. 15, 1919 Sept. 17, 1919 Oct. 16, 1918 $2,922,000 2,431,000 4,226,000 3,142,000 5,347,000 283,458,000 3,841,000 13,192,000 10,634,000 9,394,000 3,190,000 11,086,000 3,615,000 $3,322,000 4,782,000 4,600,000 3,522,000 5,181,000 376,013,000 3,819,000 12,112,000 13,704,000 8,634,000 3,643,000 21,931,000 3,684,000 $3,102,000 4,909,000 5,292,000 3,119,000 4,656,000 275,702,000 5,749,000 11,621,000 8,447,000 6,722,000 3,612,000 7,012,000 3,195,000 $356,478,000 $464,947,000 $343,138,000 9 B U S IN E S S IN D IC A T O R S Percentage increase or decrease compared with Oct. 18, 1919 Previous month Philadelphia banks: L o an s.......................................................... Deposits..................................................... Ratio of loans to deposits................... $809,223,000 $712,233,000 114 % Federal Reserve Bank: Discounts and collateral loans........... Cash reserve............................................. 90-day discount rate.............................. $207,362,296 40 % Commercial paper...................................... 5 — + + 2 3 119 7 40 Year ago % — 26 % + %* + 103 57 %* 6 fi* fc* <fc %* % 9 99 % % 4% % * 5 'A % * Percentage increase or decrease compared with Sept. 1919 Previous month Year ago Bank clearings: In Philadelphia........................................ Elsewhere in district.............................. $1,911,994,474 119,037,490 Total clearings.................................... $2,031,031,964 Building permits, Philadelphia............... Post office receipts, Philadelphia.......... Commercial failures in district (per Bradstreet’s ) .................................. $5,234,425 $1,096,888 6 5 % + + 6 % + 13 12 % _ + 28 Latest commodity index figures: Annalist (food prices only) ............... Dun’s ......................................................... Bradstreet’s ............................................... 277.028 $235,867 $19.5215 O- 19 14 + + % — — 1 1 0 + * 30 % % * 32 % — % + % — 2 1 3 This business report 'will be sent regularly to any address on request. 10 % 18 +392 13 % % % °fo % ON THE H O R I Z O N In the thirty months ending with September of this year, Treasury disbursements, with the exception of certain items such as the paying off of matured certificates of indebtedness refunded by bonds, totalled $34,850,000,000. This includes the $9,356,312,959 loaned to the Allies. Treasury expenditures are gradually de creasing, the total for September being $667,221,630, which is the lowest since July, 1917. An association which is termed the “ Army Ordnance Asso ciation” is being formed, the membership consisting of technical experts, reserve officers and prominent American manufacturers. This organization has not been formed for the purpose of manu facturing large supplies of ammunition and guns, but is being formed for the purpose of organizing into a permanent associa tion the ten thousand or more men in the country having expert knowledge of all those things which are essential in time of war, so that preparedness upon a moment’s call will be possible in case of any future emergency. *8 One of our nationally-known economists reaches the root of the present labor situation when he says: “ When we talk about the need of increased production we do not mean merely a gross increase. That would help. What we need most is an increase production per man. The longshoremen in New York harbor take practically twice as long to coal a vessel as they took in 1915. When you ask them if this falling off is because they were li crowded in 1915, they merely say that they are wiser now than they were then. This is typical. Till this spirit gives way to an individual zeal for doing a day’s work there is little hope of a genuine business boom or of a lower cost of living.” In discussing the subject of foreign credits in a recent letter, Secretary Redfield of the Department of Commerce states that “ there are but three ways that debts can be paid, namely: by cash, by goods, or by services. Credits are a deferred form of cash, but no European country is in a position to either ship gold or to give us credits. They certainly are not in a position at present to ship goods on any large scale, nor are we in a posi tion where they can render us adequate service. We must help those other nations who are our debtors by aiding them to help themselves. This means we must extend them the credits to get on their feet.” The chart given below shows the percentage of firms failing to the total number of firms in business from 1906 to date. The falling off in failures does not indicate a favorable condition as some might expect, but is really a sign for caution. Failures have reached a minimum, and it would appear that high standards are not now so necessary in order that a business may keep its head above water. Normal business conditions are usually marked by a greater percentage of failures than the United States has been having for some time past. 12 A prominent merchant of Philadelphia thinks that “much of the present labor agitation is caused by the cunning altruistic propaganda that is going on, originating largely with the foreign element, naturalized and unnaturalized, who are jealous of America’s great prosperity.” *8 Dow, Jones & Co.’s combined index prices of 40 bonds for September was 67.40, compared to 68.18 in August, and 67.79 in September, 1918. This is the lowest average on record. Stock prices during the first part of October reached the highest levels attained so far this year. *8 The chart on the foreign trade of the United States shows the tremendous increase of exports during the period of the war. Imports are gaining and the time may come when it will be necessary to reverse our foreign trade figures from an excess of exports to an excess of imports in order to permit European nations to pay in goods for their past purchases. S c a l e 1 9 1 0 1 9 1 1 1 9 1 2 1 9 1 3 1 9 1 4 j l 9 1 5 1 9 1 6|l 9 1 7 1 9 1 8 1 9 1 9 MILL'S OF DDLS. | lj —TOO— —6Q Q — — 1 IS . F O R E GN iU TRAC \fCr i 7 •#ts • i^ V ; ij EXPORTS s' •• l / 'S»* \ - ^ ---- 1-- • H t \ j iQn n * \ /j S ib. /| ! * ^IMPORIrs h v*1 TL .» w 100 13 1 The second chart analyzes our export trade. Manufactured articles are gradually losing their pre-eminence and foodstuffs are coming to the fore. This is in line with the primary needs of the former belligerent powers. The attitude of America toward foreign trade has been very widely changed during the period of the war. Through necessity she has been forced to take a place which formerly was held by European competitors in supplying commodities to all sections of the earth. Congress has not been slow to respond to the changing times and the Webb law was passed permitting com binations in export trade, thus giving the exporters of this coun try the opportunity which was formerly held only by the coun tries of Europe and Japan. The value of this legislation will be more clearly apparent when the warring nations have regained their old-time strength in commerce and finance. Meanwhile we have been facing the problem of exporting necessities to countries which have suffered through the fearful ravages of war. They cannot pay us in goods or in money and we must extend credit. It would not seem expedient to continue 14 to do so further through the United States Government, but a very legitimate field is opened for the investing public. The McLean bill, which amends section 25 of the Federal Reserve Act, has just become a law. This bill permits national banks to invest 5 per cent of their capital and surplus in corporations engaged in foreign financial operations. The Edge bill, which has passed the Senate and is now pending in the House, provides for the federal incorporation of concerns with a minimum capital ization of $2,000,000 to handle the financing of foreign business. When the Edge bill or another bill with similar provisions becomes law we will be armed with some of the best facilities that could be desired for maintaining and extending our foreign trade. Legislation which will have as its object the perpetuating of our merchant marine is all that is needed to intrench this country in its position as a great trading nation. Since 1914 there have been many changes in the rank of nations as shipbuilders. The following table reprinted from the Journal of Commerce shows the gross tonnage under construc tion: U n ite d S ta te s U n ite d K in g d o m Canada D o m ....................... A u s tr ia ......................... B e lg iu m C h in a ........................... .......... D en m ark F ra n ce ......................... .................... G erm an y G reece .... ............ H o lla n d .................... ... Japan .......... N orw ay . P o r tu g a l R u s s ia ........................ . S p a in Sw eden ... .............................. O th er Ita ly ............... . W o r l d ............... June 30 1914 June 30 1919 148,515 1,722,124 14,184 22,390 92,767 5,792 0 25,671 226,779 547,050 0 116,137 69,098 91,510 38,776 0 20,667 4,429 17,001 3,874,143 2,524,050 261,643 84,810 0 7,063 33,300 57,771 109,615 3,162,800 15 • Gain or loss + + + + — + + + — ? p 1,500 219,332 271,620 282,060 62,441 12,320 3,725,628 801,926 247,459 62,420 117,164 1,271 33,300 32,100 92,767 + + + + + + 1,500 103,195 202,522 190,550 23,665 12,320 p ? 118,854 97,245 + 114,425 80,244 8,017,767 + 4,854,877 + A. C. Bedford, in welcoming the delegates to the Inter national Trade Conference at Atlantic City, assured the delegates that “ American business men had a full consciousness of the new solidity and interdependence of the world, that they realized the peril of Bolshevism and that its remedy was the restoration of the world to business and labor.” He furthermore stated that we cannot have real and lasting prosperity unless we have co-operation between our business men and by a return “by our people to a realization of the dignity of labor. No nation that puts a minimum of its strength into labor can hope to compete with another that works at full blast; to live the world must produce more and talk less.” *8 Dr. Nicholas Murray Butler, president of Columbia Uni versity, analyzed the labor situation very clearly in a recent address before the Institute of Arts and Sciences. Reprints of the complete text may be obtained on request to Box 213, Post Office Sub-Station 84, New York City. Dr. Butler reached the following conclusion: “ To solve the real labor problem, then, we must think straight and clear regard ing facts of industry, and think straight and clear regarding principles of political organization. Continued industrial reforms are easily possible, and in my view are only possible, if the principles and ideals on which and for which the American people have been building for a century and a half are maintained and strengthened. Moreover, we must shun and take active steps to limit the influence of those who foment unrest and organize industrial war and who thrive upon this process. These are pub lic enemies and the handworkers’ meanest friends. “ From the very active company of those who would not hesi tate to tear down or to overthrow the Government of the United States in order to attain their immediate personal or group ends there has not come a single suggestion which does not spell destruction. Not one of those who claim to represent these move ments and tendencies has proposed to build up anything. They are all bent upon destruction, in the wild hope that after their joy in tearing down has had full satisfaction somewhere and somehow personal advantage may accrue. In the process they would not hesitate to destroy America.” 16
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