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MONTHLY REVIEW o f C r e d it a n d S e c o n d Federal Reserve Agent B u s in e s s F e d e r a l R e s e r v e Federal Reserve Bank, New York Money Market inMarch During March money rates declined rapidly to the lowest levels since early in 1925, and accompanying this ease in money the bond market made a vigorous recov ery both as to prices of outstanding issues and the capacity of the market for absorbing new issues. The recovery in the bond market was of special importance because various programs of public works and other new undertakings have been dependent on the possibility of the sale of bonds in considerable quantities. Lower money rates during the month resulted in part from the continuation of causes which have been oper ative in recent months, but were in part the result of a temporary surplus of funds in the market due to Treas ury tax day operations. The general tendency toward lower rates in recent months has reflected primarily gold imports, a reduction of more than seasonal proportions in the country’s cur rency requirements, and a rather slack commercial de mand for bank credit. Imports of gold and releases from earmark during March totaling about $60,000,000 brought the net gain of gold for the first three months of the year to about $125,000,000. The amount of cur rency in circulation, apparently reflecting reduced in dustrial payrolls, declined in March to an even lower level than in the latter part of January, whereas the beginning of spring industrial and commercial activity C o n d itio n s D i s t r i c t April 1 , 1930 is ordinarily accompanied during this period by in creased demands on the banks for currency. Similarly the unclassified loans, largely commercial, of reporting member banks, which usually show an increase at this time of year in response to seasonal business require ments, declined during March. But the operation of these more basic causes became confused in the second and third weeks of the month by Treasury tax period operations. When the Treasury redeems its maturing obligations on the 15th of March, June, September, and December, this operation usually throws into the money market a considerable amount of free funds, for these Treasury disbursements precede the collection of income taxes and for an interval of a few days the Treasury borrows from the Federal Reserve Banks sums ranging from $100,000,000 to over $200,000,000 on special one day certificates of indebtedness. Dur ing the period when Treasury disbursements exceed tax receipts and the gap is bridged by this temporary bor rowing, the money market receives from $100,000,000 to over $200,000,000 of free funds. Under ordinary cir cumstances the member banks in principal centers are sufficiently in debt at the Reserve Banks so that they employ the free funds made available by the Treasury in the reduction of their indebtedness for a few days. Thus ordinarily the Treasury operation has no consider able effect on money rates. 1928 1927 1926 1919 iy ^ u iy ^i iy d 3 iy^41925 iy ^ o iy^o w c l i i^ o 1924 1921 1920 1922 1923 Monthly Rates for 4 to 6 Months Commercial ay iiailA Bankers 60 90-D ay Stock Exchange Time M oney; and UUllcrUJLal Paper,, JLa p cr9: 90-D t7lf"l/dy Cio Acceptances, v v to wv w Discount Rate of the Federal Reserve Bank of New York Discoimt MONTHLY REVIEW, APRIL 1, 1930 26 On this recent occasion, however, member banks in New York, Chicago, and other principal centers were practically out of debt at the Reserve Banks when the Treasury put about $200,000,000 into the money market. A small part of this sum was absorbed by dealers in acceptances to rebuy bills they had sold to the New York Reserve Bank under repurchase agreement. But there was no means of absorbing the rest of the funds, and as a consequence many banks found themselves in possession of excess funds which they had no means of employing except by buying acceptances and placing the funds in the call market or some other short-time use. The result was so vigorous a demand for bills as to depress the rates rapidly from 3 Ys per cent on March 14 to 2 Y2 per cent on March 20, and corresponding declines in rates took place in other money markets. The extreme ease in money rates continued for only a few days, for as the Treasury collected income taxes, the excess funds were withdrawn from the money market, and on Friday, March 21, the member banks in New York City found it necessary to borrow more than $100,000,000 to adjust their reserve position for the three day period from Wednesday to Friday. In the few days succeeding, the market readjusted itself to a more nor mal position, reflecting the more basic tendencies of money conditions. Bill rates rose to 2 % per cent for 90 day maturities, and call money returned to an average of 3 Y2 to 4 per cent. The New York banks in a few days again paid off most of their loans at the Reserve Bank, as Reserve Bank bill holdings increased. The following table shows the level of short time money rates at the end of March, as compared with the prevailing rates at the end of February. On March 13 the Federal Reserve Bank of New York reduced its dis count rate from 4 to 3^2 per cent, and the Reserve Banks of Philadelphia, Cleveland, and San Francisco reduced their rates during the course of March from 4 Y2 to 4 per cent. Money Rates at New York Mar. 28, 1929 Feb. 28, 1930 Mar. 31,1930 Stock Exchange call loans..................... Stock Exchange 90 day loans................ Prime commercial paper........................ Bills—90 day unindorsed....................... Customers’ rates on commercial loans.. Treasury certificates Maturing June 15 (yield).................. Maturing September 15 (yield)........ Federal Reserve Bank of New York rediscount rate.................................... Federal Reserve Bank of New York buying rate for 90 day bills............... *8-20 * 4 -4 H *3H-4 8H 4^ f5.60 t5.09 t4.93 4.89 4.88 2.98 3.24 2.58 2.77 4 3H 3^ 3 5H-6 5 m 3 ^ -4 2H •Range for preceding week tAverage rate of leading banks at middle of month The strength of the bond market which is described more fully in a later paragraph represented a response in part to the more basic tendencies in money, but was also affected in no small degree by the temporarily easy conditions in the middle of the month. M em ber B an k C r e d it A fter declining steadily during January and Febru ary, the total loans and investments of reporting mem ber banks increased substantially in March, as the ac companying diagram shows. A n unusually small com mercial demand for bank credit was reflected in the B ILLIO N S OF D O LLA R S Total Loans and Investments of W eekly Reporting Member Banks, 1930 Compared with 1929 and 1928 further decline in unsecured loans previously noted, and there were evidences also of the gradual liquidation of loans on securities made directly to customers. Reduc tions in these types of bank credit were more than offset, however, by a large increase in bank loans to brokers. There was also a substantial increase in bank investments in the third week of March, part of which doubtless represented subscriptions to the new issue of Treasury securities on March 15. C o m m e r c ia l P aper M arket A series of reductions occurred during March in open market rates for commercial paper. Beginning the month at 4 % - 4 % per cent, prime commercial paper had declined by the end of the month to a prevailing range of 3 % -4 per cent, the lowest offering quotations since January 1928. Investment demand on the part of the banks continued in excellent volume throughout the month, and the size of dealers ’ aggregate sales was lim ited principally by the lack of supplies of paper. A l though dealers obtained some additional paper, partly in response to the inducement offered by lower rates, it was reported during the latter part of the month that dealers' lists in general were very short. A s a result of a further increase of 13 per cent during February, the amount of commercial paper outstanding at the end of the month through the 21 principal dealers that report to this bank reached a figure of $457,000,000, or 11 per cent more than the outstandings a year ago. This is the first time since January 1928 that dealers have reported a larger volume outstanding than a year previous. A s the accompanying diagram indicates, com mercial borrowings through the open market have been increasing during the past five months, while in the last three months of this period the 4‘ all other” loans (largely commercial) of the reporting member banks have shown a large reduction, even though these loans include such open market commercial paper as is held by the reporting banks. W hile part of the decrease in commercial bank loans is a seasonal development, and part doubtless a reflection of the slowing up in produc tion and business activity, at least some small part may reflect the obtaining of loans by well known commercial FEDERAL RESERVE AGENT AT NEW YORK BILLIONS OF DOLLARS 27 was largely in export and domestic warehouse credits, and the amount of acceptances based on foreign shipped or stored goods showed relatively little decrease. SecurityMarkets Volume of Open Market Commercial Paper Outstanding, Compared with All Other Loans (largely commercial) of Reporting Member Banks and industrial concerns through the note brokers, rather than from the banks, because of somewhat lower rates. Open market rates are more flexible than are banks’ rates on loans to their commercial customers, and have been reduced much more from the high levels of early autumn; open market commercial paper rates have fal len nearly 2 % per cent, while the average customers rate on commercial loans charged by the leading New York City banks has thus far declined only about half as much. B il l M a r k e t During the first three weeks of March, there were suc cessive reductions in open market bill rates, which car ried offering quotations for unendorsed bills of 1 to 4 months maturity from 3 % per cent down to 2 y 2 per cent, and rates for 5 and 6 months bills from 3 % to 2 % per cent, the lowest levels for bills since November 1924. In vestment demand throughout this period was generally larger than the volume of new bills that came into the market, and as a consequence dealers’ portfolios were reduced by about one-half. W ith the passing of the influence of Treasury tax period operations, however, investment demand de creased and was materially exceeded by offerings of bills to the dealers. This resulted in a considerable increase in dealers’ portfolios of bills and large offerings of bills to the Reserve Bank under repurchase agreements, and caused the dealers to make an upward revision of *4 per cent in their rates for 2, 3, and 6 months bills, and of % per cent in 1 and 4 months bills. Consequently, toward the close of the month, 90 day unendorsed bills were being offered at 2 % per cent, a net decline of 1 per cent for the month. The increase in repurchase agreement holdings at the New York Bank was more than offset by an excess of maturities of bills over new acquisitions of bills by the Reserve Banks, so that total holdings of bills by the Reserve System showed a net decline of about $40,000,000 for the month. A further seasonal decline of $69,000,000 occurred during February in the volume of bankers acceptances outstanding, but the total at $1,624,000,000 remained nearly $400,000,000 larger than a year ago. The decline Bond trading increased greatly in volume during March, and prices advanced substantially. In previous months bond prices had shown a slight upward tendency which raised quotations somewhat above the 1929 lows, but in March the bond market showed greater strength than in many months, and, despite the flotation of fairly large amounts of new bond issues, average prices rose to the highest levels since 1928. Domestic corporate bonds, the course of which during recent years is shown in the accompanying diagram, rose between 1 y2 and 2 points on the average in March. After practically two years of falling prices, these bonds within a few months have recovered nearly two-thirds of their declines. United States Government bonds also had a substan tial upward movement. A n average of the prices of eight issues now oustanding advanced about l 1/^ points further, and toward the end of March Government securities were selling at higher prices than at any time since 1928. In the foreign bond list, an advance of over 2 points occurred, carrying average prices to the highest levels in more than a year. PRICE INDEX 104 102 100 98 96 94 Price Movements of Domestic Corporation Bonds by W eeks 1927 to 1930 (Standard Statistics daily average of 3 0 issues) Although attended by considerable irregularity, the trend of stock prices continued generally upward during March. In fact, stocks have been advancing almost con tinuously during the past three months, and toward the close of March had regained over 50 per cent of the loss sustained in the 1929 break. Public utility shares at March closing prices showed by far the largest net recovery from the November low points— about 69 per cent; industrials were up 38 per cent; and rails 20 per cent. NewFinancing Accompanying a stronger bond market, domestic bond financing was considerably accelerated during March. The total value of such bond flotations was substan tially larger than in February and appears to have 28 MONTHLY REVIEW, APRIL 1, 1930 been well in excess of the offerings of March 1929. Railroad financing continued to be the largest ele ment in the domestic offerings; a $60,000,000 new capital issue of the Pennsylvania Railroad was in cluded and numerous issues of from $15,000,000 to $25,000,000. Industrial bond offerings likewise increased between February and March. State and municipal bond and note issues were somewhat larger than in the previous month and were materially larger than a year ago. There appears, according to a preliminary calcula tion, to have been an increase in the amount of security issues, the proceeds of which finance operations abroad. The largest of these flotations was by an American con cern— that of nearly $50,000,000 American and Foreign Power Company debentures of a refunding nature— but there were also a $40,000,000 issue of Royal Dutch Com pany bonds, the principal part of which was offered in this market; the major part of a Rhine-Westphalia Elec tric Power Corporation $20,000,000 issue; and a number of smaller offerings. Complete February figures on domestic corporate financing indicate that the volume, exclusive of refund ing issues, was smaller than in the previous month or a year ago. New bond issues at $238,000,000 were only about one-half the January volume, but were some $60,000,000 more than the amount offered during Febru ary 1929. Issues of stock for new capital purposes in creased slightly between January and February but were less than one-fourth of the stock flotations of Febru ary a year ago. Railroad financing increased substan tially, and offerings of securities by industrial and manufacturing concerns were much larger, but there was a considerable contraction in public utility company flotations from the extremely large volume of January. Municipal and State financing showed a drop of about 25 per cent from January, but was somewhat heavier than in the corresponding period of last year. The nom inal amount of new capital raised in this country for use in foreign countries was about the same as in January, and was somewhat larger than the new flotations of February 1929; the amount issued for refunding pur poses was considerably larger than in the previous month or a year ago. GoldMovement Of principal interest during March was the continued importation of gold from Japan at San Francisco, amounting to $38,500,000, and the receipt of about $2,000,000 from China. Since the removal of the em bargo on gold exports in January, Japan has shipped abroad about $79,000,000, with consequent strengthening of yen exchange. Imports at the Port of New York amounted to about $7,000,000, made up largely by the arrival of $5,500,000 from Brazil and $1,000,000 from Colombia. There was also a gain of $13,000,000 to this country’s gold stock through the release of gold previ ously earmarked for foreign account. Exports were negligible, and a preliminary calculation indicates a net gain to the country in excess of $60,000,000. The ac companying chart shows the monthly net gain or loss to the country’s gold stock during the past five years. The Bank of England’s gold holdings showed an in crease of £5,000,000 during March, accounted for mainly MILLIONS OF DOLLARS Monthly Net Gain or Loss to the Gold Stock of the United States (March 1930 preliminary) by the arrival of £4,000,000 in sovereigns from Australia. Further shipments totaling £5,000,000 are reported en route from Australia. The Bank of France lost about 70.000.000 francs of gold to Germany during March, and 165.000.000 francs to Belgium. ForeignExchange The strengthening tendency of the principal ex changes, which became evident in the last week of Febru ary, continued during March. Excepting the Spanish peseta, the Argentine and Brazilian currencies, and the Shanghai silver unit, all the exchanges quoted below are at higher levels than those of one year ago. Outstanding are the Canadian dollar, which touched parity on March 24 and 25 for the first time since November 1928, and the Japanese yen, which has approached the point at which gold shipments to San Francisco cease to be profitable. Cable Rates Country B elgium ............................... E ngland.............................. France................................. I ta ly ..................................... Netherlands........................ Spain.................................... Sweden................................ Switzerland. ...................... Canada................................ Argentina............................ B razil................................... Japan................................... Shanghai, ta e l.................... M arch 30, 1929 February 28, 1930 March 28, 1930 $ .1389 4.8525 .0391 2372 .0523 .4008 .1510 .2670 .1924 .9950 .9560 .1178 .4455 .6238 $ .1394 4.8603 .0391 .2386 .0524 .4008 .1215 .2684 .1930 .9945 .8562 .1120 .4925 *.4700 $ .1396 4.8659 .0392 .2389 .0524 .4014 .1241 .2689 .1937 .9997 .8673 .1168 .4947 .4713 * February 27 Central BankRate Changes The almost world-wide movement toward lower money rates continued during March. The course of this move ment, as illustrated by the open market and central bank discount rates in the four leading European money cen ters, is shown in the accompanying diagram. Following is a table of official discount rates at those European central banks where changes have been made since January 1, 1930, which shows the current rates in comparison with the highest rates established in 1929. FEDERAL RESERVE AGENT AT NEW YORK BANK RATE I' \ | I i i I i i .1 i i PARIS LONDON 1928 RATE 1928 RATE 9i----BANK RATE / % BILL RATE\ a AMSTERDAM BERLIN Ll 1928 Central Bank Rate and Open Market Rate for 3 Months Bills in Leading European Money Markets O f the 13 banks in this list, 11 reduced their rates at least once during March. The Bank of England has lowered its rate in six suc cessive steps of one-half per cent each since the 1929 high of 6^/2 per cent on September 26. Austria, Ger many, and the Netherlands have had five reductions from the 1929 high levels; Hungary has had four reduc tions; Danzig, Norway, Poland, and Sweden have low ered their rates three times, Denmark twice, and France and Italy once. Among the non-European central banks, the Bank of Java reduced its discount rate from 5 to 4 ^ per cent On March 11. European Central Bank Rates (per cent) Country A ustria............................................. B elgium ........................................... D anzig.............................................. D enm ark......................................... E ngland........................................... F rance.............................................. G erm any.......................................... H ungary........................................... I t a ly .................................................. Netherlands.................................... N orw ay............................................ P ola n d .............................................. Sweden............................................. High 1929 8H 5 7 5H 6H 3H 7 ya 8 7 5M 6 9 5H Current rate 6 3H 534 4X sy2 3 5 6 6K 3 4X 7 4 Date of last reduction Mar. 22 Jan. 1 Mar. 8 Mar. 7 Mar. 20 Jan. 31 Mar. 25 Mar. 29 Mar. 3 Mar. 25 Mar. 21 Mar. 14 Mar. 7 Commodity Prices Further declines in wholesale commodity prices in February brought the index of the Bureau of Labor Statistics to 92.1, which with the single exception of January 1922 is the lowest since 1916. Every one of the ten groups composing the Bureau of Labor Statistics index showed a decline in February from the level of the month preceding, a rare occurrence. W eekly commodity indexes have shown a further de cline in March. A substantial majority of important commodities moved lower in the first half of the month, and many commodities established new low levels over rather extensive periods. W heat was the lowest since the break of last May and June, and corn was the lowest since the first half of 1927. Cotton, at 14.00 cents, also 29 reached a new low since the early part of 1927, and was 3 % cents under the level of January. New lows for re cent years were established by domestic wool, refined sugar, and the nonferrous metals except copper. Pig iron was the lowest since the 1927-1928 business recession. Recoveries were made in the latter half of March in a few commodities, especially cotton, but these advances were from unusually low levels, and other important commodities at the close of the month were still hovering around their lowest levels. It appears that the average prices for the month of March as a whole were somewhat lower than in February, and that general indexes of wholesale prices for March will be close to the January 1922 levels, the lowest reached in the post-war decline. Building Building contracts awarded in the 37 States east of the Rockies, included in the F . W . Dodge Corporation report, showed in February a decline of 2 per cent from the January volume, and were 12 per cent smaller than in February 1929. Residential contracts were up only slightly from the very low level of January, and public works and utilities projects declined 23 per cent, but other non-residential building increased somewhat. For the first two months of this year total contracts awarded have been 17 per cent smaller than in the corresponding period of 1929, when a tendency toward curtailment of building activity was already apparent. Residential contracts were 47 per cent smaller than in the first two months of last year, and the volume of non-residential work other than public works and utilities decreased 20 per cent, while public construction projects showed a 59 per cent increase. In Metropolitan New York and vicinity, February contracts were 10 per cent larger than in January, and were 20 per cent ahead of the amount in February 1929. In up-State New York also, there were increases over the previous month and a year ago, amounting to 42 per cent and 8 per cent respectively. These increases re flected chiefly larger amounts of commercial building and of public works projects. In the first three weeks of March contracts let showed a substantial increase over the February level, and a much smaller decrease from the level of the previous year. ForeignTrade The foreign merchandise trade of this country showed a considerable decline during February. Exports, val ued at $351,000,000, had at least the usual decrease from January, and imports, valued at $281,000,000, had a much larger decrease from the previous month than the normal seasonal movement. The value of exports was less than in February of any year since 1923, and the value of imports was less than in the corresponding month of any year since 1922. A ll principal groups of both imports and exports con tinued to contribute to the downward movement in total foreign trade. Undoubtedly lower commodity prices accounted partly for the decrease in value. Compared with a year ago, the exports of manufactured products were down $35,000,000, or 16 per cent, and exports of crude materials and crude foodstuffs decreased 26 and MONTHLY REVIEW, APRIL 1, 1930 30 45 per cent, respectively. Imports of crude materials, the chief items of which are crude rubber and raw silk, showed a loss of $39,000,000, or 28 per cent. Business Profits in 1929 Reports of 629 companies now available, comprising 33 main industrial and mercantile groups, showed net profits for the fu ll year 1929 that were 19 per cent larger than in 1928 and 46 per cent larger than in 1927. This very favorable showing for the full year 1929 oc curred in spite of a sharp drop in industrial profits dur ing the final quarter which accompanied the business recession then in progress. In the fourth quarter, in dustrial profits declined to the lowest level since the first quarter of 1928, following an unusually high level in the preceding part of 1929, as is shown in the accom panying diagram. This diagram also shows that railroad profits declined considerably in the final quarter of 1929. MILLIO NS OF DOLLARS Quarterly N et Profits of 105 Industrial Corporations and N et Operating Income of Class I Railroads A large proportion of all the industrial groups had a materially higher margin of net profit for the full year 1929 than for 1928. The outstanding example was the steel group, which expanded net earnings 66 per cent further, or about twice as much as the percentage rise (Net profits in thousands of dollars) N um ber Corporation Groups Steel com panies..................................... R . R . equipm ent................................... O ils........................................................... M o to rs..................................................... M otor parts and accessories (excl. tires) R u b ber......................................................... B akery prod ucts........................................ B everages.................................................... C onfectionery............................................. M eat packing............................................. Other miscellaneous food p r o d u c ts .. . . T o b a cco ....................................................... Leather and shoes..................................... P aper............................................................ Printing and publishing.......................... Am usem ent................................................ C lothing...................................................... S ilk ............................................................... Other miscellaneous textiles................... Metals and mining (excl. coal, coke, and cop p er)................................................ Coal and co k e ......................................... C op per..................................................... M achinery.............................................. Chemicals and drugs............................ Electrical equipment............................ Heating and plum bing........................ Household equipm ent.......................... Office equipm ent................................... R e a lty ...................................................... Shipping.................................................. Building supplies.................................. Stores....................................................... Miscellaneous industries..................... 1927 1928 1929 $154,009 33,236 138,742 302,985 42,416 58,754 46,156 15,719 16,573 18,851 110,086 96,008 29,820 7,752 27,130 29,662 8,098 7,788 27,273 $205,310 23,587 291,170 370,842 78,116 18,921 50,153 18,128 18,395 34,462 127,186 99,435 26,854 8,470 31,767 36,515 10,498 8,551 18,111 $339,754 37,169 356,849 331,216 89,197 31,284 58,001 21,816 20,903 33,978 144,856 109,675 24,868 8,944 36,274 55,031 7,955 7,116 17,671 9 4 5 33 36 81 40,682 12,760 25,310 31,915 101,733 46,962 29,581 7,722 23,868 1,749 4,415 64,667 152,145 213,009 51,272 6,662 49,849 37,541 122,451 54,577 31,621 9.568 29,333 4.569 68,993 162,272 273,059 68,724 12,863 63,259 44,801 144,836 73,381 35,434 14,949 38,063 4,034 6,611 73,116 172,206 338,586 24 13 45 14 41 13 11 6 8 11 37 17 13 9 12 12 6 13 28 20 13 12 31 27 10 7 8 2,686 T otal 33 groups............................ 629 1,927,576 2,380,924 2,823,420 Telephone (net operating income) . . Other public utilities............................ 97 95 227,566 775,177 253,437 868,703 276,139 1,006,500 T otal public utilities.................... 192 1,002,743 1,122,140 1,282,639 Class I R .R . (net operating income) 180 1,085,142 1,194,488 1,274,774 from 1927 to 1928. Amusement, household equipment, realty, and shipping companies reported large increases in profits; also the railroad equipment, rubber, and coal and coke companies, but in the case of the three latter groups the advances represented recoveries from the low figures for 1928. Increases in net earnings of the oil, machinery, electrical equipment, office equipment, metals and mining companies, and miscellaneous were also above the average for all industrial companies. The only groups to show smaller profits in 1929 than in the preceding year were the automobile companies, which, exclusive of the Ford Motor Company, reported an 11 per cent reduction; and clothing, meat packing, leather and shoe, and silk and other textile concerns. COAL & COKE RUBBER STEEL MOTORS OILS 1927 '2 8 LEATHER & SHOE 1927 '2 8 1927 *28 1927 '2 8 '2 9 CHEMICAL & DRUG 1927 '2 8 '2 9 '29 BUILDING SUPPLIES 1927 '2 8 '2 9 1927 '2 8 *29 STORES 1927 '2 8 '2 9 FOOD & FOOD PRODUCTS 1927 *28 *29 ALL INDUSTRIALS 1927 '28 *29 TOBACCO 1927 '2 8 '29 TELEPHONE 1927 '2 8 *29 METALS & MINING INCL COPPER 1927 '2 8 '29 OTHER UTILITIES 1927 'ZQ *29 1927 *28 CLASSI R.R. 1927 '2 8 Annual Net Profits of Industrial, Mercantile, and Public Utility Corporations, and Net Operating Income of Class I Railroads in 1929, Compared with 1928 and 1927 (1 9 28 = 100 per cent) *29 *29 31 FEDERAL RESERVE AGENT AT NEW YORK E m p lo y m e n t and W a ges The number of factory workers employed in the coun try as a whole showed practically no change from Janu ary to February, whereas usually there is a seasonal in crease of around 1 % per cent; consequently the general level of employment, after seasonal adjustment, declined further to a new low point since 1924. In New York State, factory employment declined about ^ per cent, in contrast to a usual gain of more than 1 per cent, and this bank’s adjusted index fell slightly below the lowest level reached in 1924. Two other indicators of the em ployment situation— voluntary labor turnover, and the ratio between orders for workers and applications for employment at New York State employment bureaus— also remained at low levels in February. Factory payrolls in New York State declined in February, whereas there is usually a seasonal increase in that month, and were substantially under the level of a year previous. Average weekly earnings of the factory workers who retained their employment also declined from January to February, and were lower than in any month last year. In March the ratio of help wanted to applications for work increased somewhat. There were indications that factory employment showed little change, when usually there is a seasonal increase, but an expansion in out-ofdoor activities provided employment for more workers. The number of workers who were unemployed remained relatively large. Production A number of important industries made further re coveries in February from the low levels to which pro ductive activity fell in December, but operations in nearly all cases remained well below a year ago, and pre liminary indications are that seasonally adjusted figures for March may show a decline. The largest February increase in production, relative to the usual seasonal movement, occurred in the steel industry, but there was also a substantial increase in pig iron output, and a 30 per cent increase in the average daily automobile pro duction was slightly more than usual for the season. Other more than seasonal increases occurred in February in silk manufacture and the production of cement; slaughterings of live stock in the aggregate showed less than the usual decline; and petroleum production was somewhat higher. On the other hand, output of copper was further curtailed, and this bank’s index, which is adjusted for the usual seasonal variations and year-toyear growth, reached a new low level since 1923. Con sumption of raw cotton showed an unseasonal decline, and curtailment of activity was also reflected in this bank’s indexes of zinc output and of tin deliveries. Production of coal dropped steadily throughout Febru ary, and figures for the month as a whole showed a de crease of more than seasonal proportions. Operations in the steel industry, after reaching 82 per cent of capacity in the third week of February, decreased to slightly below 75 per cent in the third week of March, but there was a small recovery in the final week. Con sequently, the average daily output for the month of March will probably show a decline, when usually there is a considerable seasonal expansion. The rate at which pig iron was being produced at the beginning of March was less than 1 per cent above the average for the month of February as a whole, so that a decided increase would have been necessary in the remainder of the month in order to show the usual March expansion. A decline in automobile production was reported in the second half of February, and it appears doubtful whether the March output will show the usual seasonal increase over the February average. Petroleum produc tion averaged less than in February, and coal production was decidedly lower. (Adjusted for seasonal variations and usual year-to-year growth) 1930 1929 MetaU Steel ingots..................................................... Copper, TJ. S. m ines..................................... T in deliveries.................................................. Automobiles Passenger cars........................ .............. .. M otor trucks.................................................. Fuels Bituminous coal............................................. Anthracite coal............................................... Textiles and Leather Products C otton consum ption..................................... W ool mill a ctiv ity ......................................... Silk consum ption........................................... Leather, sole................................................... B oots and shoes............................................. Foods and Tobacco Products Livestock slaughtered.............................. .... W heat flour..................................................... Sugar meltings, U. S. p o rts........................ T obacco products.......................................... Feb. Dec. Jan. Feb. 115 117 126 86 111 104 '95 86 107 94 83 94 94 91 92 79 83 84 101 109 88p 89p 81 73 138 143 39 74 87 99 88p 109p 99 107 no 119 102 88 114 104 106 100 87 103 104 104 93 82p 99p 103p 107p 105 97 99 102 97 80 76 103 109 86 89 75 104 113 92p 86 75p 108 118p 87p 100 103 90 103 95 88 92 103 90 94 93 99 94 95p 75 102 119 130 86 111 65 86 108 87r 91 110 85 92 Miscellaneous Paper, newsprint........................................... p Preliminary r Revised Indexes of Business Activity General business activity showed no consistent change in February, and at present it appears that March fig ures will show no material change. Average daily car loadings of merchandise and miscellaneous freight in creased slightly more than usual in February, and showed a further increase of about seasonal proportions in the first half of March, while loadings of bulk freight have shown a little more than the usual decline. The total foreign trade of this country dropped to a level substantially under that of a year previous, and the index of imports, adjusted for seasonal variations and year-to-year growth, was the lowest since 1924. Depart ment store sales in this district were little changed in February, while advertising and chain store sales showed small increases, after seasonal allowance. Average daily life insurance sales increased in February, but the gain was somewhat less than seasonal, and the adjusted index showed a decline for the first time since last October. This bank’s index of bank debits in 140 centers outside of New York City remained in February at about the lowest level since 1924, and it now appears probable that the March index will show little change. 32 MONTHLY REVIEW, APRIL 1, 1930 (Adjusted for seasonal variations and usual year-to-year growth) 1929 Sales and stocks in major groups of departments are compared with those in February 1929 in the following table. 1930 Feb. Dec. Jan. Primary Distribution Car loadings, merchandise and m isc........ Car loadings, oth er....................................... E xports............................................................ Im ports............................................................ Panama Canal traffic................................... 99 104 105 117 91 87 88 80 104 75 92 90 85 104 85 Distribution to Consumer Department store sales, 2nd D ist............. Chain store sales, other than g rocery .. . . Life insurance paid f o r ................................. Advertising..................................................... 101 99 104 98 100 101 107 93 98 89 111 86 99 96 106 89 112 187 103 138 98 117 98 126 125 210 313 87 106 101 102 109r 119 85 115 139 289 85 102 96 100 81r 86 71 115 129 241 80 103p 96 111 88r 96 69 115 143 267 79 179 225 170 174 227 172 174 227r 170 173 226 170 General Business Activity Bank debits, outside of New Y ork C ity.. Bank debits, New Y ork C it y ..................... V elocity of bank deposits, outside of New York C it y ................................................... V elocity of bank deposits, New Y ork C ity Shares sold on N. Y . Stock E xchange. . . Postal receipts................................................ Electric p ow er................................................ Employment in the United S tates........... Building contracts......................................... New corporations formed in N. Y . State. Real estate transfers..................................... General price level*...................................... C ost of livin g *................................................ p Preliminary r Revised Feb. T oys and sporting g o o d s....................... Toilet articles and drugs....................... Shoes.......................................................... W om en’s and Misses’ ready-to-w ear.. W om en’s ready-to-wear accessories... Books and stationery............................. M en’s and B oys’ w ear........................... 94p 116 90r 101 69 * 1913 average= 100 Department StoreTrade The total sales of reporting department stores in this district during February were practically unchanged from a year ago. Sales of New York City stores were 1.5 per cent larger than last year, and the Hudson River Yalley district showed an increase of more than 5 per cent, but the sales of the Rochester, Northern New York State, and Capital district department stores showed little or no change from a year ago, and all other locali ties reported decreases. The sales of the reporting ap parel stores continued to be substantially smaller than last year. Stocks of merchandise on hand in department stores were slightly smaller than a year ago, and the average rate of stock turnover was a little higher. Collections on charge accounts outstanding continued to be slower than a year previous. Locality Net sales percentage change February 1930 compared with February 1929 94 89 85p 95p Percentage change February 1930 compared with February 1929 M en’s furnishings................................... Hom e furnishings.................................... Musical instruments and ra d io........... Linens and handkerchiefs..................... Silverware and jew elry.......................... W oolen good s........................................... Luggage and other leather goods........ Silks and velvets..................................... Miscellaneous........................................... Net sales 1930 4 5.3 4 2.2 + 9 .9 + 3 .1 — 7 .7 + 2 .0 — 3 .3 + 1 1 .6 + 1 4 .7 + 3 .7 — 2 .6 + 7 .7 + 2 .8 — 0 .9 — 13.6 + 8 .4 + 0 .7 — 17.0 + 1 0 .7 — 15.4 — 8 .8 Wholesale dealers in this district reported an average decrease of 8 per cent in February sales as compared with a year previous, or about the same decrease as in January. Sales of groceries showed a very small increase over February 1929, but sales in all other reporting lines showed decreases. Following increases in January, the sales of m en’s clothing and paper declined in February, and sales of stationery showed the first decrease in al most a year. Large decreases continued to be reported in the sales of jewelry and diamonds, and there were fairly substantial declines also in sales of cotton goods, shoes, and hardware. Machine tool orders, reported by the Machine Tool Builders Association, were only a little over half as large as in February 1929. Quantity sales of silk goods, reported by the Silk Association, showed a comparatively small decrease, and drug dealers reported sales only slightly smaller than a year ago. Stocks of silk goods, shoes, and drugs remained larger than a year ago, but stocks held by cotton goods and hardware dealers continued to be smaller than last year. Collections were slower than in 1929 in a majority of lines. Per cent of accounts outstanding January 31 collected in February 1929 + 1 5 .9 + 1 0 .5 + 8 .3 + 7 .3 + 6 .4 + 3 .4 + 1 .7 + 1 .4 + 0 .8 — 1 .2 — 1 .2 — 1 .2 — 2 .4 — 3 .1 — 3 .2 — 10.7 — 10.9 — 12.5 — 4 .4 WholesaleTrade C om m odity Stock on hand end of month Stock on hand percentage change February 28, 1930 compared with February 28, 1929 Percentage change February 1930 compared with January 1930 Net sales Stock end of month Percentage change February 1930 compared with February 1929 Net sales Stock end of month Per cent of accounts outstanding January 31 collected in February 1929 1930 6 6.3 4 2.9 2 8.9 4 3.2 3 5 .2 3 9.0 3 9.6 6 7 .7 3 4 .6 2 6 .0 4 3.8 3 2.4 3 1.4 4 2.2 76*4 6 4.9 64 ’.7 6 4.4 ? 26.1 j 2 2.4 4 8.0 4 5.4 1 .5 9 .2 0 .2 6 .9 1.5 4 .1 2 .0 0 .6 1.9 8 .5 5 .9 0 .3 7 .5 — 0 .2 + 5 .0 — 10.3 + 2 .7 — 4 .8 + 0 .6 — 5 .7 All department stores.............................. — 0 .1 — 0 .9 43 .3 4 0.7 W eighted Average. Apparel stores............................................ — 9 .4 + 71.6 67.1 * Quantity not value. Reported by Silk Association of America ** Reported by the National Machine Tool Builders Association New Y o r k ............................................................ B uffalo.................................................................. R ochester............................................................. Syracuse............................................................... N ew ark................................................................. B ridgeport........................................................... Elsewhere............................................................ Northern New Y ork S tate.......................... Central New York S ta te............................. Southern New York S ta te.......................... Hudson River Valley D istrict................... W estchester D istrict..................................... + — + — — — — + — — + + — 36! 8 25.4 35'.3 24.1 36.2 37.5 37^0 36.2 M en’s clothing............... Cotton good s.................. Machine tools**............ 1.1 — 12.0 + 5 0 .0 + 1 5 .2 — 9 .8 * + 2 4 .1 — 13.2 — 6 .9 — 6 .5 — 17.3 — 9 .5 — 7 .0 + 7 .4 + 6 .4 — 5 .2 + ‘ i'.8 — 0 .3 * + 6 .9 + 1 9 .7 — 0 .2 — -9*.4 + 2 .0 + 0 .4 — 1.7 — 11.5 — 2 .3 * — 12.7 — 0 .7 — 12.2 — 49.3 — 3 .2 — 5 .6 — 37.1 — 33.5 — 7 .9 — 0 .6 — T .3 + 9 .9 * + 2 .8 + 1 7 .0 — 12.7 — 3 0 ’.6 — 10.6 FEDERAL RESERVE BANK OF NEW YORK MONTHLY REVIEW, APRIL 1, 1930 Business Conditions in the United States (Summarized by the Federal Reserve Board) N D U STR IA L production increased in February, -while the number of workers employed in factories was about the same as in January. Wholesale com modity prices continued to decline. Credit extended by member banks was further reduced in February, but increased in the first two weeks of March. Money rates continued to decline. I P r o d u c t io n Index Number of Production of Manufactures and Minerals Combined, Adjusted for Seasonal Variations (19 23 -2 5 average = 100 per cent) PER CENT In February industrial production increased about 2 per cent according to the Board's index, which is adjusted to allow fo r seasonal variations. This increase reflected chiefly a substantial gain in the output of iron and steel. Automobile production was in larger volume than during January, but was 30 per cent smaller than the large output of a year ago. Cotton and wool con sumption by mills was substantially lower in February, and production of bituminous coal and copper also decreased. In the first two weeks of March the output of steel mills declined in com parison w ith February, contrary to the usual seasonal movement. Bituminous coal output also was smaller. The volume of building contracts awarded in February was about the same as in the preceding month. Residential building continued at an exceptionally low level while contracts fo r public works and utilities were large in comparison w ith the corresponding month in other recent years. Awards in the first two weeks of March were larger than in the first ha lf of February. E Wholesale Price Index of United States Bureau of Labor Statistics (1926 average = 100 per cent) BILLIO NS OF DO LLARS A\i V t1 A. V'' /Jrv ^ ^ ^ ^ N V E S T M E N T S ^ ^ ^ 1926 1927 1928 1929 1930 Monthly Averages of W eekly Figures for Report ing Member Banks in Leading Cities (Latest figures are averages of first 2 weeks of March) MILLIONS OF DOLLARS Reserve Bank Credit (Monthly averages of daily figures for 12 Federal Reserve Banks; latest figures are averages of first 18 days of March ) The volume of factory employment, which had reached a low point in Janu ary, showed little change in February, when an increase usually occurs. Factory payrolls increased during the month, but by a smaller amount than is usual at this season. In the steel, automobile, agricultural implement, and tobacco industries, employment increased during the four-week period, while further decreases occurred in the cotton and wool textile, lumber, ^automobile tire, electrical machinery, and machine tool industries. D is t r ib u t io n Freight car loadings on an average daily basis were slightly larger than in January, but smaller than in the corresponding month of any other recent year. Slight seasonal increase was reported during early March. Department store sales in February continued to be below the level of a year ago. A L L 01 'HER LO A Ni LC)A N S ON SE[CURITIES m ploym ent P r ic e s i Wholesale prices of commodities declined further during February, and the Bureau of Labor Statistics index at 92.1 per cent of the 1926 average was at the lowest point since January 1922. Marked declines occurred during the month in the prices of many agricultural products— grains, hides, raw wool, and cotton; in certain imported raw materials, notably sugar and silk; and also in textiles, petroleum, and pig iron. During the first part of March, a number of these commodities declined s till further in price. Wheat and cotton prices were considerably lower, and silver reached the lowest point on record. By the middle of the month, however, prices of cotton, hides, and silver had recovered somewhat. B a n k Cr e d it Liquidation of credit at member banks continued throughout February and on February 26 total loans and investments of member banks in leading cities were in about the same volume as in the early summer of last year. During the following two weeks, however, there was an increase of $230,000,000 in loans and investments, chiefly in loans on securities. A ll other loans, largely fo r commercial purposes, increased slightly. From the middle of February to the middle of March the volume of Reserve Bank credit outstanding decreased further by $90,000,000. This decline reflected chiefly an increase in gold stock of $75,000,000 and a further decline of money in circulation, offset in part by some increase in member bank reserve balances. Member bank indebtedness at the Reserve Banks declined to $267,000,000, the lowest level since early in 1925; Reserve Bank holdings of bills declined, while those of United States securities increased. Money rates in the open market eased further and bond yields declined rapidly to the lowest level since 1928. A t the middle o f March the discount rate at the Federal Reserve Bank of New York was reduced from 4 to per cent, and the rate at the Cleveland, Philadelphia, and San Francisco banks from 4% to 4 per cent.
@FedFRASER