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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.