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The article on the last page describes Credit Expansion Outside the Federal Reserve Banks. MONTHLY REVIEW o f C r e d it a n d B u s in e s s C o n d it io n s Second Federal Reserve District Federal Reserve Agent Federal Reserve Bank, New York April 1, 1923 Business Conditions in the United States O N TIN U E D active business is indicated by the maintenance of a high rate of industrial produc tion, increases in freight traffic and employment, and a large volume o f retail and wholesale trade. C P r o d u c t io n The Federal Eeserve B oa rd ’s index o f production in basic industries fo r February was at the same high level as in January. The index number fo r these industries is now approxim ately equal to the highest point reached in the past. Since the low point in J uly 1921 there has b ?en an increase of 61 per cent. The volume of new building projected in February was exceptionally large for the season, particularly in western districts. Rail road freight shipments have been increasing and the car shortage, which was somewhat relieved in December and January, became more marked in recent weeks. A continued increase in industrial employment has been accompanied by further advances in wage rates in a number o f industries. Many New England woolen mills announced a wage increase o f 12y2 per cent, effec tive A p ril 30. A shortage of women workers has been reported in the textile, rubber, and garment industries, and there is a shortage o f unskilled labor in many in dustrial centers. T r ad e Wholesale and retail distribution o f goods continued at a high level during February. Sales o f both wholesale and retail concerns reporting to the Federal Reserve Banks were well above those o f a year ago, but the in crease was relatively more pronounced in wholesale trade. Mail order and chain store business was almost as large in February as in January despite the shorter month, and sales o f five and ten cent stores were actually larger than in January. W ho lesale P r ic e s The Bureau o f Labor Statistics index o f wholesale prices advanced slightly during February. Prices of metals, building materials, and clothing increased, while prices o f fuels and farm products declined. Building materials and metals during the past year have advanced more than any other groups o f commodities and are now about 25 per cent, higher than in March 1922. B a n k C r e d it Recent increases in industrial and commercial activity have been reflected in a larger volume o f loans by mem ber banks fo r commercial purposes, espeeialty in the New York, Chicago, and San Francisco districts. Loans of this character by reporting member banks are now approxim ately 500 million dollars larger than at the end o f December. This increase has been accompanied by a P RC N . E ET PERCENT. Index of Production in Basic Industries— Combination of 22 Individual Series Corrected for Seasonal Variation (1919 average = 100 per cent.) Index of Wholesale Prices, U. S. Bureau of Labor Statistics (1913 average = 100 per cent.) MONTHLY REVIEW, APRIL 1, 1923 2 BILLIONS pF DOLLARS E IL LIO N 3 OF DOLLARS 1 LOAfMS & •COUNTS DEMAND DEP05ITS INVESTMENTS ----------------^ ---- T IM E DEPOSIT5 19)9 19Z0 192.1 1922. 19^3 Bank Credit—800 Member Banks in Leading Cities reduction in holdings of investm ents; so that there has been only a moderate net increase in total loans and investments. The larg er dem and fo r fund s has not led to a n y in crease d u rin g the past month in the total volum e of credit extended b y the Reserve B anks. Total earning assets and loans to member banks on M arch 2 1 were ap proxim ately the same as fou r weeks earlier. B orrow ings b y member banks in the interior increased, p a rticu la rly in the Chicago district, but borrowings b y member banks in the N ew Y o rk district decreased. Sin ce the end of F e b ru a ry , there has been a sm all decline in the volume of F ed eral Reserve note circulation w hich is now a t ap proxim ately the same level as six months ago. Other form s of curren cy in circulation, however, have recently increased. The market rates on commercial paper advanced fu r ther to a range of 5 to 5% per cent., and the rate on bankers acceptances rem ained steady at about 4 per cent. There has been a slight increase in the yield of short-term T re a su ry certificates as well as of Government and other high grade bonds. Bank Credit—All Federal Reserve Banks for income ta x paym ents due M arch 1 5 resulted, as has frequen tly been the case, in increased borrowing at the Reserve B an k and firm er money conditions. These tendencies w ere more m arked than usual because o f the fact that income ta x receipts w ere considerably in excess of Governm ent disbursements, which had the effect for the time being at least of absorbing fun d s from the market. Between M arch 2 1 and M arch 26, rediscounts and advances of the Reserve B an k showed an increase of $53,000,000. A somewhat more general discussion o f present bank ing and credit conditions is given in the article on the last page of the Review. r S WVR C V J E OK IT / ^ J / .-* 1 '-V s ----- Banking Conditions The same rising tendency as was observed in the com m ercial loans of reporting member banks fo r the country as a whole, w as apparent in an increase o f $ 117 ,0 0 0 ,0 0 0 between F e b ru a ry 1 4 and M arch 1 4 in commercial bor rowings at the member banks in this district. In the district, however, this increase w as more than offset by declines in loans on stocks and bonds and in security investm ents; so that total loans and investments showed a slight decrease fo r the period. B etw een F e b ru a ry 1 4 and M arch 2 1 , member bank borrowings from the F e d eral Reserve B an k o f N ew Y o rk declined $124,0 00,00 0, or 4 2 per cent., accom panying a movement o f fun d s into this district and Government disbursements fo r L ib e rty bond interest and certificate redemptions on M arch 1 5 . Rediscounts and advances of this bank were the lowest since Ja n u a r y , while total earnings assets fell to $217,0 0 0 ,0 0 0 , approxim ately equal to the lowest figure touched last summer. Follow ing the q u arterly ta x date, collection o f checks C IC G H AO --^B ST N O O r T-'x,.......... ~~ ... ....... __ _ / v- / ^ B F AO UF L / ‘' W 1919 j 19£0 1921 192a 1 9E 3 Rate of turnover of bank deposits. Allowance has been made for usual seasonal changes Rate of Turnover of Bank Deposits Increases in the volume of trade, in prices of basic commodities, and in wages have been accompanied in the past two months b y a more ra p id rate of turnover of bank deposits. Th e computations made b y this bank, w ith the cooperation o f the R eserve B an ks of Boston, Chicago, and S a n Fran cisco, show fo r p ractically all of the cities reported a ra p id increase in rate of turnover, which is p a rticu la rly m arked when allowance is made fo r the usual trend at this tim e o f the year. The flue- FEDERAL RESERVE tuations in rate o f turnover in four cities during the past few years are shown in the foregoing diagram. The figures have been adjusted to eliminate the influence of usual seasonal fluctuations. Money Market Money continued to grow firmer in March, reflecting the increasing credit requirements o f trade and industry. A larger demand upon the banks from their own custo mers tended to curtail the volume o f their funds availble fo r outside investment, and open market rates for commercial paper, Government short term issues, and 8tock market time money reached the highest points in approximately a year. Commercial paper rates rose one-quarter o f one per cent, to 5 and 5J4 per cent., and the volume o f paper outstanding continued to increase, as shown by the accom panying diagram which includes dealers’ reports through February. Banks’ charges to their own cus tomers also rose to 5 per cent, fo r the better grade o f loans, compared with 4% to 4 % per cent, at the low point last summer. Open market bill rates, however, remained unchanged at 4^$ per cent, bid and 4 per cent, offered, due to heavy demand, chiefly for foreign account. There are indications that firmer discount rates in this market as compared with London are tending to divert from New Y ork to London credits for overseas transit o f goods. A ccording to an estimate o f the London Times the volume o f credits open in London for the financing o f trade from the F ar East to the United States is 50 per cent, larger than six months ago. A n advance in open market rates fo r Treasury cer tificates and notes, centering chiefly around the nearer maturities, was illustrative o f a general tendency dur ing the month fo r loans o f short maturity to advance more rapidly than those o f longer maturity. D uring the past year or more short loans, such as are required for ordinary commercial purposes, have been relatively low compared with rates fo r longer time securities. The recent advances, however, which have come with rising business activity, have tended to eliminate this difference and to bring the two types o f money into closer corre spondence. The follow ing table o f Government issues in dicates the more marked upward tendency o f near maturities. Maturity Group YicId’ Feb. 21 Yield Mar. 23 Increase 3-12 months........................................... 1-2 years................................................ 2-3 years................................................. 3-5 years................................................. 3.78 4.44 4.48 4.49 4.25 4.61 4.69 4.67 .47 .17 .21 .18 The new offering of $400,000,000 or thereabouts of Treasury certificates dated March 15 and running six months at 4*4 per cent, and one year at 4y2 per cent, reflected recent advances in the rates o f outstanding issues. The offering was largely oversubscribed, with demand favorin g the longer maturity. Stock market call money continued generally at 5 per cent, except for tem porary fluctuations around the middle AGENT AT NEW a YORK of the month and later advances to b l 2 and 6 per cent., / follow ing collection o f income tax checks. Time loans on stock market collateral rose to 5J4 and § l 2 per cent., / the highest since November 16, 1921, and approximately one-half o f one per cent, higher than rates prevailing in the middle o f February. ML N IL IO S O DLA S F OL R Commercial Paper Outstanding— -Twenty-six Dealers Security Markets The opposing tendencies o f stock and bond prices in recent months became clearer in March as industrial stocks rose to new high prices since early 1920 and bonds declined to the lowest prices in approxim ately a year. These movements were in accordance with the usual ex perience in periods o f rising com modity prices, business expansion, and firmer money rates, when funds tend to be diverted from fixed income investments into more active commercial and industrial employment. Extensive public participation in the stock market was indicated b y a further succession o f million share trading days and heavy odd lot business. A ctivity, how ever, was confined largely to industrial stocks; trading in railway issues averaged less than one-tenth o f the total shares sold and prices o f such issues remained consider ably below the high levels o f last fall. The follow ing table compares changes during the past year in averages o f both industrial and railway stocks with those o f 40 corporation bonds and 3 Liberty issues. Average March 20 20 Industrial Stocks.......................... 20 Railway Stocks............................. 40 Bonds............................................. 3 Liberty Bond Issues..................... Change from 1922 high Change from Year Ago 105.38 89.60 86.48 97.96 4-1.95 —4.39 — 5.64 —3.24 4-17.27 4- 9 .53 — 0.55 — 0.29 New domestic financing continued in only moderate volume. Offering o f $10,000,000 first mortgage and re funding bonds o f a trunk line railroad at 4.70 per cent, yield, approximately the lowest for a corporation offer ing in recent years, was in contrast with generally firmer money tendencies, and indicated a good demand for prime bonds o f legal investment status. E xcept for an issue o f $31,500,000 equipment trust certificates and a $15,000,000 public utility preferred stock, other offer ings were com paratively small. MONTHLY REVIEW, APRIL 1, 1928 4 Foreign Trade Foreign Exchange The value o f February exports was $310,000,000, about $25,000,000 less than in January, but $60,000,000 more than in February 1922, an increase which may be partly explained by the rise in prices. A sharp recovery in Belgian and French exchanges about the middle o f the month was the leading feature o f the exchange market during March. Belgian francs rose approxim ately three-quarters o f a cent to 6 cents, while French francs advanced from 6 to over 6 % cents. These were the highest levels since January, when the troop movement into the R uhr began. Marks were steady at prices not far from the highest reached in the sudden rise o f February. Sterling late in February reacted somewhat from the high point o f $4.72 reached on the 21st, but thereafter held steady around $4.69 to $4.70. O f interest in connection with the strength o f sterling during the past year is an estimate in the annual num ber o f the London Economist indicating a favorable B rit ish trade balance amounting to £62,000,000 when in visible as well as visible items are included. A negative balance o f £63,000,000 was estimated fo r 1921, and a favorable balance o f nearly £200,000,000 fo r 1913. As com pared with 1913, the net income from investments abroad is estimated as about cut in half. Visible exports and imports are each about £200,000,000 larger than be fore the war. The complete tabulation, as given in the Economist, follows. December imports, according to recently announced figures, totaled $297,000,000, about 25 per cent, larger than those o f December 1921, and 67 per cent, larger than those o f July 1921, when imports dropped to the lowest level of recent years. Total imports during 1922 were $3,116,000,000 as compared with $2,509 000,000 in 1921. Our favorable balance of trade has been steadily re duced in the past three years in a manner corresponding closely with the reduction in the trade balance o f Great Britain, with the distinction that there has been an ex cess o f exports in this country and an excess o f imports in Great Britain. The follow ing table, in which the pound sterling has been converted into dollars at the average rates o f exchange prevailing during each year, shows the annual exports, imports, and trade balances o f the United States and Great Britain. The changes are further illustrated in the accompanying diagram. (In Million £'s) 1913 (In millions of dollars) UNITED STATES Year 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 Exports Imports $2,484 2,114 3,555 5,483 6,234 6,149 7,920 8,228 4,485 3,832 $1,793 1,789 1,779 2,392 2,952 3,031 3,904 5,278 2,509 3,116 Excess Exports $ 691 325 1,776 3,091 3,282 3,118 4,016 2,950 1,976 716 US. EXCESS EXPORTS BOB 19 1 3 H H M i Exports $3,088 2,592 2,294 2,873 2,841 2,531 4,266 5,692 3,114 3,647 Imports $3,739 3,431 4,038 4,513 5,066 6,258 7,201 7,064 4,172 4,442 Excess Imports $ 651 839 1,744 1,640 2,225 3,727 2,935 1,372 1,058 795 G EXCESS IM .B. PORTS EEO J 1914 GREAT BRITAIN I 1915 1921 1922 Exports (including gold and silver), as returned....... Add invisible exports— Net income from investments................................. Shipping earnings...................................................... Financial and insurance charges. . . . Miscellaneous............................................................. 697 882 882 200 94 30 20 100 80 50 20 100 94 40 20 Total visible and invisible exports....................... 1,041 1,132 1,136 843 5 1,145 50 1,049 25 Total visible and invisible imports...................... 848 1,195 1,074 Final balance................................................................. + 193 — 63 +62 Imports (including gold and silver), as returned....... Add invisible imports.................................................... Gold Movement February imports o f gold amounted to $8,383,000, as compared with $32,820,000 in January. This is the smallest amount received in any month since F ebruary 1920, although only slightly less than in M ay last year. Gold exports were also small, amounting to less than $1,400,000. The gold imports during both January and February came largely from Canada, England, and France. 1917 Commodity Prices 1918 Recent price changes have been chiefly in those groups of commodities which have most nearly related to indus trial expansion. There continues to be a strong upward tendency in the prices o f many basic commodities, par ticularly metals, building materials, rubber, cotton, wool, and silk. B ut at the same time the prices o f most farm products have remained stable, and the general level o f prices, including prices o f both finished and semi-finished products, as shown by the Department o f Labor index, has remained practically unchanged fo r the past fou r 1919 1QZ0 19£1 j 1 9 Z Z @ flB B J 1 BILLION tW LUO NS Balance of Trade in the United St&tes Each Year 3 BILLIONS 4 BILLIONS Great Britain 5 FED ERAL RESERVE AGENT AT NEW YORK months. The index number for February was only one point higher than that for January. In these price changes is reflected the exceptional de mand fo r certain products resulting from a heavy volume o f building construction, and high rates o f output in the automobile industry, and in the railroad equipment in dustries. In all three o f these lines production was restricted during the war and post-war years and short ages apparently created. In certain other basic com modities, not particularly related to industrial produc tion, shortages in the supply have been influential in causing price increases. In the case o f farm products there was stimulation of output during the war or post-war period, and there is in general no shortage o f supply. The export demand fo r food products remains considerably larger than before the war, although somewhat less active now than in the year 1921. The diverse movements o f prices o f different types o f commodities are shown in the follow ing table o f commod ity groups making up the Department o f Labor index. which were first released when the depression started. The Brooklyn N avy Y ard has recently been able to ob tain a sufficient number o f skilled workers at 72 to 84 cents an hour, but has had difficulty in hiring 300 com mon laborers at 41 cents an hour. Production of Basic Commodities ^ The high rate o f production in basic industries, estab lished in January, was maintained in February, and the production index com puted by the Federal Reserve Board, which placed January output 21 per cent, above the average fo r 1919, remained unchanged in February. The follow ing table shows recent changes in the in dividual production indices maintained by this bank. The figures are shown as percentages o f computed normal production, taking into consideration the usual year to year growth and seasonal fluctuations. Estimated normal production = 100 1922 Low Cornmodi(y G roups Latest price quotation Per cent. Per cent. change from change from Jan. 1923 Aug. 1922 Metals...................................................... Building Materials.................................. Miscellaneous........................................... Cloths and Clothing................................ Chemicals and Drugs.............................. Foods........................................................ House Furnishings.................................. Farm Products........................................ Fuel and Lighting................................... 139 192 126 199 132 141 184 142 212 + 4 .5 + 2 .1 + 1 .6 + 1 .5 + 0 .8 0 0 - 0 .7 - 2 .8 + 10.3 + 11.6 + 9.6 + 9.9 + 8.2 + 2.2 + 6.4 + 8.4 -2 1 .8 All Groups.......................................... 157 + 0 .6 + 1.3 The cost o f living index compiled by the National In dustrial Conference Board declined slightly during February. A n advance in the price o f clothing was off set by a slight decline in the price of food. 1923 1921-22 Anthracite coal....................... Bituminous coal...................... Tin deliveries...................... Copper, U. S. mine................. Sugar meltings, U. S. Ports. .. Meat slaughtered........ ........... Wood pulp............................... Paper, total*........................... Cotton consumption............... Wool consumption*e.............. Tobacco consumption.......... Leather, sole............................ Oct. Nov. Dec. Jan. Feb. 74f 56f 30 29 25 15 75 55 77 67 64 64 55 77 86 73 95 75 85r 75 103 84r 112 108 97 92 109 95 131 88 127 94 99 81 92r 75 110 \S6r 111 147 98 91 108 106 140 94 137 1U) 103 85 102r 80 95 85r 93 136 94 93 103 95 129 87 136 91 108 83 102r 81 128 94r 93 115 104 100 109 103 138 96 157 101p 112/i 81 p 103r 74 109 89 p 109 121 108 159 * Seasonal variation not allowed for. f Strike period not included. e Estimated data. V Preliminary r Revised. Wages and Employment A compilation b y the National Industrial Conference Board o f wage changes in a variety o f industries through out the United States shows 37 instances o f increases in wages between February 15 and March 15, and only 1 wage decrease. Later in March, New England woolen manufacturer* generally announced a wage increase o f 1 2 per cent, effective A pril 30, and cotton operatives were negotiating for increases. The New Y ork State Department o f Labor reports that the number of workers employed in the m anufacturing industries o f New Y ork increased over 1 per cent, in F ebruary due mainly to seasonal increases in most o f the metal working and clothing trades, and in some o f the food products industries. Current reports from New Y ork C ity employment agencies indicate an increased demand fo r skilled and unskilled workers in factories and mercantile establishments. One large agency re ported a decrease o f 25 per cent, in the number o f regis trations as compared with last year, and a 10 per cent, increase in the number of jobs open. Increased orders have been placed fo r clerks and bookkeepers o f the type Automobile Production Production o f automobiles in the United States dur ing February set a new high figure o f over 11,000 cars per working day, and in spite of the shortness o f the month the total number o f cars produced was the largest in the history o f the industry, with the single exception o f June 1922. The production o f passenger cars and trucks is shown on page 6 for each month since January 1920. The figures used for 1920 and the first half o f 1921 are partly estimated. A feature o f the past 12 months’ production is the divergence between the output of passenger cars and trucks. Over 2,600,000 passenger cars were produced in the year ended February 1923 — an average of 217,000 per month or about 40 per cent, above the 1920 monthly average. On the other hand, the output o f trucks was only 21,000 per month or 20 per cent, below the 1920 monthly average. 6 M ONTHLY R E V IE W , thousand* OC R P A3 A P R IL 1, 192a freight movement since the conclusion of the coal strike last fall to a high point in February about 12 per cent, above estimated normal. The February figure is higher in relation to estimated normal than any o f the monthly figures for 1920, and was exceeded only during 1918, when the movement o f war supplies was at its height. Even the heavy freight movement o f recent weeks has not kept pace fu lly with the demand fo r facilities, and the total shortage o f cars has increased from about 76,000 cars in the latter part o f January to about 85,000 cars early in March. This increased shortage may be attributed to the spring movement o f goods. There has continued to be some gain in the tons per loaded car and some continued reduction in the number o f cars and locomotives awaiting repair. Production of Passenger Automobiles and Trucks in the United States Each Month Wholesale Trade Car Loadings Compared with Estimated Normal F or the purpose o f discovering the relationship of the present high rate o f freight car loadings on American railways to the amount o f traffic which may reasonably be expected in view o f the growth o f popula tion and industry, this bank has made an analysis o f the railroad traffic statistics o f previous years to determine the normal rate o f growth from year to year and the usual seasonal fluctuations. On the basis o f this analysis an estimate has been made o f the volume o f freight traffic which may be thought o f as normal or equal to the requirements of an average volume o f business each month. The results o f this analysis are presented in the two diagrams at the foot o f this page. The diagram at the left shows average weekly loadings o f cars with revenue freight during each month since the beginning o f 1918. The diagram at the right shows these same figures expressed as percentages o f an estimated normal when allowance has been made for year to year growth and the usual seasonal fluctuations. The second diagram indicates a rapid increase in THOUSANDS OF CARS Dollar sales in February by representative wholesale dealers in this district in ten com m odity lines were 23 per cent, above those o f February a year ago. W ith the single exception o f stationery, sales in all lines were well above the sales o f February 1921, and in clothing and drugs sales were above those o f any previous February. Detailed figures are shown in the follow ing table. FEBRUARY SALES (In Percentages) Commodity 1919 1920 1921 1922 1923 Machine Tools............... Diamonds........................ Jewelry.......................... Clothing........................... (a) Men’s .................... (b) Women’s............... Hardware........................ Dry Goods...................... Groceries......................... Shoes................................ Drugd............................... Stationery....................... 636 381 195 103 126 89 152 71 118 132 92 104 720 309 264 124 294 104 103 96 80 106 125 99 106 100 100 100 100 100 100 100 100 100 100 100 100 435 247 150 135 173 110 134 118 117 114 114 108 Total (weighted)........ 105 136 121 125 170 131 132 243 105 120 112 83 110 102 The diagram at the top o f the next page shows the trend o f sales since 1919. The heavy line shows the PERCENT 150r 1 50 0r .. 100 0 ^ J /\ ■ A 100 A / ** ET * E 3 INT D MR A OWt > V v A 50 500 _ 1918 1919 1920 1921, 1922 Average weekly loadings of freight cars 1923 1916 1919 1920 1921 i __ __ _ 1922 1923 Car loadings as percentages of estimated normal loadings, when allowance is made for usual seasonal fluctuation and year to year growth FEDERAL RESERVE AGENT AT NEW YORK ; -------- --------- _ _ _ r ~ ... .. E5TIMATED VOLUME of SALES ^ DOLLAR SALES 100 ♦.— x PRICES 50 i^iy iy*u iy^.1 19££ _______________1 1923 Sales of Representative Wholesale Dealers in the Second District, Wholesale Price changes, and the Estimated Physical Volume of Sales when allowance is made for price changes. All lines are adjusted for usual seasonal influences (1919 average = 100 per cent.) Sales by Representative Department Stores in the Second District, Retail Price Changes, and the Estimated Physical Volume of Sales, when allowance is made for price changes. All lines are adjusted for usual seasonal influences (1919 average = 100 per cent.) dollar sales in ten lines combined into a single index. Sales in each line of business have been weighted in accordance with their relative importance. The trend of prices in these lines computed from group price indices o f the Department o f Labor is also shown and the physical volume o f goods sold has been estimated by dividing the dollar sales by the price index. Figures both fo r dollar sales and estimated volume o f sales have been adjusted to eliminate the effect o f usual seasonal influences. fluctuations due to seasonal causes. In addition to the dollar sales there is shown the retail price (or cost of living) index computed by the National Industrial Con ference Board. This index includes rent as well as other retail prices, but experiment has indicated that it corresponds more closely with the movement o f average prices o f articles sold by department stores than any other available index o f prices. The physical volume o f sales has been estimated by dividing the dollar sales by the prices fo r each month. The increase in the estimated volume o f department store business corresponds closely with the increase in the estimated volume o f wholesale business, though the fluctuations are smaller. In both wholesale and retail trade there is a consistent and rapid growth in sales from year to year. In the case o f retail sales the growth since 1919 has averaged about 7 per cent, a year. This growth is more rapid than the rate o f growth o f the population in the cities represented and appears to indicate an absorption by department stores o f trade form erly handled by smaller concerns or else an increase in per capita purchasing power. Department Store Business Inclement weather during the past two months re tarded the growth of department store business in this district. February sales were 2.8 per cent, above those o f February a year ago as compared with a gain o f nearly 10 per cent, in January. Sales during the first three weeks o f March were also slow. Even with sales somewhat retarded, stocks held by department stores, computed at the selling price, were in about the same ratio to sales as in February a year ago. Mail order sales continue to show as large advances as occurred in recent months, and February sales were 40 per cent, above those o f February 1922. Detailed figures are shown in the follow ing table. STOCK ON HAND MAR. 1 (In Percentages) FEBRUARY SALES (In Percentages) 1919 1920 1921 1922 1923 1919 1920 1921 1922 1923 All Dept. Stores. . 80 New York........ 80 Buffalo.............. 90 Newark............ 78 64 Rochester......... 80 Syracuse........... Bridgeport........ 85 Elsewhere in 2nd 77 District............. Apparel Stores. . . 78 Mail Order Houses 120 102 104 107 102 87 110 110 104 103 121 107 101 112 111 100 100 100 100 100 100 100 103 103 110 110 87 105 97 77 78 84 77 87 95 73 118 118 125 126 140 135 116 98 99 106 95 128 114 93 100 100 100 100 100 100 100 103 102 100 109 99 96 98 89 94 206 98 102 108 100 100 100 89 105 140 76 61 ** 98 104 ** 85 89 ** 100 100 ** 99 109 ** A diagram at the top o f this page shows the trend of department store sales in this district during the past fou r years, with figures adjusted to eliminate Chain Store Sales Influences retarding department stores sales in Febru ary were not reflected in sales o f chain apparel stores, which were 25 per cent, larger than a year ago. W ith the exception o f cigar and shoe stores, February sales o f all reporting chain store systems were larger than those o f any previous February. Detailed figures are shown in the follow ing table. NUMBER OF STORES TYPE OF STORE FEBRUARY NET SALES f c (In Percentages) Per cent, change in sales per store, 1919 1920 1921 1922 1923 Feb. 1922 to Feb. 1923 Feb. 1922 Apparel............... Grocery.............. Drug................... Cigar................... Total............... Feb. 1923 390 7,281 1,728 282 2,253 199 454 9,717 1,783 300 2,737 234 55 69 71 78 71 72 69 99 84 98 97 95 108 89 93 98 107 104 100 100 100 100 100 100 125 122 116 104 100 84 + 7.3 — 8.9 + 12.8 — 1.9 — 17.4 — 28.6 12,133 15,225 70 92 94 100 116 — 7.6 C r e d it E x p a n s io n O u ts id e H E loans and investments of all member banks throughout the country, which measure the cur rent public demand fo r credit, are not much below what they were at the height o f credit expansion in 1920. The recent statement o f the Comptroller of the Currency covering all member banks, both city and country, permits the follow ing comparisons. T 1 otal loans and investments: November 15, 1920.................................$26,108,000,000 December 31, 1921................................. 23,630,000,000 December 29, 1922................................. 25,749,000,000 Demand and time deppsits: November 15, 1920................................. 20,924,000,000 December 31, 1921................................. 19,627,000,000 December 29, 1922 ................................. 22,460,000,000 I n 1920 R eserve B a n k C redit W as L argely U sed In 1920 the lending power o f the Reserve Banks was used almost to the legal limit, and on November 12 of that year the reserve ratio o f all twelve Federal Reserve Banks stood at 44 per cent. On December 29, 1922, when the volume o f member bank credit was practically the same as in the autumn o f 1920, the reserve ratio was 72 per cent. Indeed, during the whole o f 1922 the reserve ratio was very high and varied little from week: to week. I n 1923 R eserve B a n k Credit is L ittle U sed I t will be seen from the foregoing that the reserve ratio is not under present conditions an accurate measure of the amount of bank credit in use. Its steadiness at a high level during 1922 was mainly the result o f large im ports o f gold. In 1920 the gold in the country was about a billion dollars less than it is at present, and in order to supply the demands fo r credit and currency prevailing in that period the member banks drew heavily upon the Federal Reserve Banks. The immense volume o f gold which has since come here from foreign countries has enabled the banks during the past year to satisfy the increased credit demands without increasing the amount o f Reserve Bank credit in use. P resent C redit I ncrease B ased on I ncreased G old A lmost all o f the gold which comes in finds its way in natural course into the reserves o f the Federal Reserve Banks, and thereupon becomes the basis fo r potential increase of bank deposits. This is because the banks are obliged by law to hold in reserve only a portion o f their deposits. Member banks keep all of their reserves with the Federal Reserve Banks, on the average about one dollar o f reserve to every ten dollars o f deposits. W hen additional gold is lodged with a Reserve Bank and is not used to pay debt owing to the Reserve Bank, it becomes the potential reserve fo r bank deposits o f several times its face amount. The banks create these additional de posits when they make loans to customers or buy securi ties, the proceeds o f which are deposited with them or with other banks. In 1922 gold imports amounted to $238,000,000; while the loans and investments o f all member banks throughout the country increased $2,100,000,000, and their deposits increased $2,800,000,000, or roughly, ten times the amount o f the additional gold. th e F ederal R eserve T he Extent of B a r iK S P r e se n t I n c r e a se of C redit The volume of bank deposits is now larger than ever before and the volume of bank loans and investments not much if any below the form er maximum. The p ro ductive and distributing activity o f the country is very near its cap acity; it has already overtaxed our ordinary transportation facilities and in many departments o f industry has caused a shortage o f labor. Also, the gen eral level o f commodity prices has risen about 11 per cent, in a year. That this activity could have developed to such an ex tent without placing a strain upon the credit facilities o f the whole banking system is in itself an indication o f the ample supply o f credit available fo r use. A bsenc e of t h e N a t u r a l C o r r e c t iv e : F ree G old M ovem ents One o f the natural regulators or correctives to a too rapid increase o f bank credit is not now in operation. The United States is the only great nation o f the world which is on a free gold basis, in ordinary times there is a delicate adjustment in international economic relations which causes the tide o f gold to ebb and flow and so pre vents an excessive accumulation in any one country. A t such times a rapid increase o f credit in any country, coupled with a rise in com modity prices, results in a fa ll ing off in its exports, an increase in its imports and ulti mately in an outward flow o f gold. Such an outward flow tends to reduce the amount o f credit available for use, and is ordinarily followed by a decline in prices and ultimately by a stimulation o f export trade. A t this time and for many months past this corrective has been ab sent because o f financial disorganization abroad, and on monthly balance the gold flow has been only one way, namely, to the United States, to purchase goods and pay debts, and fo r other purposes. In the absence o f this automatic international correc tive, moderation o f the volume o f bank credit called into use in this country is effected largely as a result of domestic influences o f which the economical use o f bank credit by borrowers may be one o f the most important in preventing a too rapid increase in the credit volume. In 1919-1920 the use o f bank credit was not only un economical but excessive and was accom panied by a speculative bidding up o f prices without corresponding increases in the production and consumption o f goods; as well as by an increase in the cost o f living without a corresponding increase in the general standard o f living. T h e A cco m m o datio n of C redit B u s in e s s to C om m erce and It is clear that commerce and business are best accom modated as the Federal Reserve A ct contemplates, by a volume o f credit responsive to the changes in the physical volume o f production and trade. It is also clear that nothing accommodates commerce and business less than a volume o f credit fluctuating without reference to the needs o f industry and agriculture. The more nearly the volume o f credit, by economical use, remains commen surate with the legitimate needs o f business, the better are accommodated not only commerce and business, but the welfare of every citizen.