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MONTHLY REVIEW o f C r e d i t a n S e c o n d Federal R eserve A g e n t d B u s i n e s s F e d e r a l D is tr ic t F ederal R eserve B a n k, N ew Y ork M o n e y M a r k e t in M a r c h The most important new development in the banking situation during the past month has been a considerable reduction in the indebtedness at the Reserve Banks of member banks outside of New York. Member banks in many communities were forced to borrow heavily from the Reserve Banks last autumn, due partly to withdraw als of currency by their depositors, and partly to a per sistent flow of deposits to New York which continued in the early part of this year, so that indebtedness of these banks rose further in January and February to above $800,000,000, the highest level since 1929. Such a volume of indebtedness at any time exercises a restrain ing influence on the banks, and, under present conditions when all banks are striving to attain a liquid position, it constitutes a heavy burden, and has a tendency to create considerable pressure toward the limitation of credit. The reduction during the past month, which has amounted to about $180,000,000, may be attributed in part to the indirect effects of purchases of United States Government securities by the Reserve Banks, and in part to the return flow of currency to the banks. Federal Eeserve purchases of Government securities necessarily were conducted largely in New York, but the funds paid out were widely distributed through Treasury transfers of funds to other parts of the country to cover payments of loans made by the Reconstruction Finance Corpora tion, as well as ordinary Government expenditures. Through this process many member banks obtained funds with which to reduce indebtedness. The result is in accordance with the usual effect of security purchases by the Reserve Banks; an increase in Government se curity holdings does not ordinarily increase the total volume of Federal Reserve credit, but rather helps to reduce the dependence of the member banks and of the acceptance market on money borrowed from the Reserve Banks, and so to promote easier banking conditions. The return flow of currency to the banks has proceeded at a fairly steady rate of at least $25,000,000 in most weeks, after allowance is made for seasonal variations in the demand for currency, and in the seven weeks ended March 26 the movement totaled around $165,000,000. This flow of currency into the banks, together with the operations of the Reconstruction Finance Corporation, undoubtedly has strengthened the position of many banks, and bank closings were reduced in March to the R e s e r v e C o n d i t i o n s A p r il 1 ,1 9 3 2 smallest number in many months. In the latter part of the month, closings were nearly equaled in number, and were considerably exceeded in the amount of deposits in volved, by reopenings of banks previously closed. These developments have retarded, although they have not yet stopped, the decline in bank deposits. During the four weeks ended March 23, the total loans and invest ments of weekly reporting member banks showed a further decline of about $200,000,000, notwithstanding large purchases of Government securities on March 15, and the net demand and time deposits of these banks showed an accompanying reduction of approximately $170,000,000. The return flow of currency, disbursements by the Treasury for Government expenditures, and Reserve Bank purchases of Government securities all have tended to increase bank deposits, but their influence has been more than counter-balanced by the reduction in deposits which accompanied the decline in loans and investments other than Government security holdings of the reporting banks. The March reduction in deposits, MILLIONS OF DOLLARS United States Government Security Holdings of Federal Reserve Banks and Borrowings of Member Banks Outside New York City MONTHLY REVIEW, APRIL 1, 1932 26 however, is considerably less than the reduction of nearly $540,000,000 in the previous month, and of $550,000,000 in January. M oney R ates The influence of the various factors which tended to ease the position of the banks during March was reflected also in a moderate decline in money rates, as the follow ing table indicates. Acceptance rates were reduced % per cent, yields on short term Government securities declined about % per cent, and nominal quotations for stock exchange time money were lowered by Y2 per cent. Commercial paper rates were unchanged, however, and the rate at which call loans were placed on the Exchange remained at the 2 % per cent level which has prevailed since early January, although loans were made outside the Exchange at 2 and 2 % per cent. Money Rates at New York M ar. 31, 1931 Feb. 29, 1932 M ar. 31, 1932 Stock Exchange call loans....................... Stock Exchange 90 day loans................. Prime commercial paper.......................... Bills— 90 day unindorsed......................... Customers’ rates on commercial loans.. Treasury securities M aturing June 15 (y ie ld ).................... M aturing September 15 (y ie ld )......... Federal Reserve Bank of New Y ork reFederal Reserve Bank of New York buying rate for 90 day indorsed bills * * Nom inal 1 ^ -2 **1 % -2 2 ^ - 2 3^ IK f3 .5 6 1.16 1.45 **3 M ~ 3 K 3 ^ -3 % 2X t4 .4 6 1.97 2.91 2M * *2 % -3 3 ^ - 3 3^ 2 y% t4 .4 8 1.21 2 .02 2 3 3 IVs 2U 2M t Average rate of leading banks at middle of month M arch T reasury F inancing O perations The March offering of $900,000,000 or thereabouts of Treasury certificates of indebtedness, in two series, was heavily oversubscribed by banks, investment houses, and the investing public. Subscriptions to the one year 3 % per cent certificates of indebtedness reached $2,451,000,000, of which $661,000,000 were allotted, and subscriptions to the seven month 3 % per cent certificates amounted to $953,000,000, of which $333,000,000 were allotted. On March 15, $624,000,000 of Treasury certificates of indebtedness became due and payable, but since nearly $500,000,000 were tendered to the Reserve Banks in exchange for the new certificate issues, the excess of Treasury disbursements over receipts on March 15 was unusually small for the first day of a Treasury tax period. As a result the Treasury found it necessary to issue to the Reserve Banks a special one day certificate of indebtedness for only $53,000,000 in order to balance its position for that day. Most of the excess of net cash redemptions of maturing certificates and interest pay ments over income tax collections on the 15th and cash payments for new certificate issues occurred in New York, and was added to the reserve accounts of the New York City banks. Consequently, participations totaling $33,500,000 in the special one day certificate issued to the Reserve Bank were sold to the New York banks to provide employment for part of the temporary excess of funds. The participation of the City banks was reduced on the succeeding day and was finally retired on the 17th, concurrent with reductions in the special certificate of indebtedness, which were effected through income tax collections and a withdrawal of funds from Government depositaries. During the month of March income tax returns representing the first quar terly payment on 1931 income totaled about $192,000,000, a reduction of approximately 42 per cent from the tax yield received last year. On March 2, and again on March 30, an issue of $100,000,000 of ninety one day Treasury bills was floated to replace similar amounts of maturing Treasury bills. Both of these issues were largely oversubscribed at an average cost to the Government of 2.50 per cent on the March 2 issue and of 2.08 per cent on the later issue. B ill M arket During the first part of March, the investment demand for bills diminished, with the result that dealers’ port folios increased somewhat, and offerings of bills to the Reserve Banks increased between March 2 and March 9. In the succeeding week, dealers’ sales were stimulated by local bank buying around March 15, as well as by foreign buying through the Reserve Bank, and the supply of bills was reduced as the banks retained newly created bills. Consequently dealers’ portfolios were re duced substantially, and open market rates for bills maturing within 90 days were reduced Ys per cent on March 11, following a decline of Ys per cent in bills of longer than 60 day maturity on March 1. For the balance of the month, the demand for bills was large relative to the amount of bills being released to the discount market by accepting and discounting banks, and dealers were unable to fill orders. A further reduc tion of Ys per cent in dealers’ rates for all maturities of bills was effected on March 22, bringing the offering rate for 90 day unindorsed bills to 2 % per cent, the lowest since the middle of last October, and on March 25 the buying rate of the New York Reserve Bank was lowered to 2 Yz per cent for indorsed bills not exceeding 4 months maturity. Following the increase in the first reporting week of March, Federal Reserve holdings of purchased bills declined steadily and on March 30 amounted to only $66,000,000, the smallest volume since last August, A t the end of February, there were outstanding $919,000,000 of dollar acceptances, a decline of $42,000,000 from January and of $600,000,000 from February 1931. Further declines were reported in the outstanding volume of import and export bills, and there were also decreases in dollar exchange bills and in bills based on goods stored in or shipped between foreign countries. C ommercial P aper M arket The dealers’ sales of commercial paper continued to be in limited volume during March, although distribution of paper became somewhat wider as the month progressed. The principal factor restricting the sales volume was the small amount of new paper being created by the type of concern which is able to finance through the open market. Investment demand continued to be concentrated on prime names of 3 to 4 month maturity, which were mostly offered and sold at 3 Y2 and 3 % per cent. Reports to this bank from dealers showed $103,000,000 of commercial paper outstanding on February 29. This compares with a revised total of $108,000,000 outstanding at the end of January, and with $315,000,000 in Febru ary 1931. FEDERAL RESERVE AGENT AT NEW YORK S e c u r ity M a r k e ts Stock prices were fairly firm during the first week of March, and representative price averages rose several points to levels that slightly exceeded the January and February highs. After the 8th of the month, price move ments in the stock market were predominantly down ward, and as a result of an almost continuous decline the general level of prices by the close of the month had dropped to a slightly lower point than was reached in the first part of February. The railroad stocks were relatively the weakest group during this period, declin ing about 26 per cent but industrial and public utility shares also declined about 18 per cent. Throughout the month the turnover of shares on the Exchange was of limited volume, reaching 2 million shares only one day and averaging about 1,400,000 shares daily. The comparative movements of stock prices and of dividend payments since 1929 are shown in the accom panying diagram. From the peak in September 1929, stock prices have declined approximately 75 per cent to the present level, whereas the decrease in the average dividend rate from the peak has amounted to 42 per cent. However, the high point of dividend payments was reached in March 1930, or well after the peak of stock prices and general business was passed, indicating a considerable lag in changes in dividend policies. In recent months, the reduction of dividend payments has been accelerated, while stock prices have fluctuated within a fairly constant range. PRICE INDEX 27 PRICE Movements of Bond Prices (Standard Statistics Company corpora tion bond indexes and Federal Reserve Bank of New York average of 11 United States Government bonds) below the levels prevailing at the opening of the month, but left them some 4 points above their December lows. United States Government bonds were uniformly strong in the first part of the month, so that from the low point of January the average price of Liberty Loan and Treas ury bond issues around March 10 had regained nearly half of the ground lost since last August. Subsequently, Liberty Loan issues showed some further net advance, reflecting principally investment demand for the taxexempt First Liberty Loan S1^ s, but the long term Treasury issues declined, so that the average price of Government bonds closed the month about % point be low the high level reached around March 10. Foreign bonds listed in this market showed movements similar to domestic corporation issues. An advance of about 2 points in a representative average of 40 foreign bonds between the last of February and the 10th of March was followed by a decline of about the same pro portions. N e w F in an cin g Decline in Stock Prices, Compared with Reduction in Dividend Rates (Standard Statistics Company weekly price index of 421 issues, and Moody’s Investors Service monthly weighted average dividend rate for 600 identical common stocks. Ratio scale used to show proportionate changes) Following some advance in the second half of Febru ary, bond prices continued to rise during the first ten days of March and reached the highest levels since early last December, but subsequently, as the accompanying diagram indicates, domestic corporate issues declined, while only United States Government bonds held part of the earlier gains. All classes of corporate bonds par ticipated in the advance during the early part of the month, which averaged over 2 points. The later down ward movement, which was most pronounced in rail road issues, reduced representative averages somewhat Aside from the United States Government financing, the flotation of new securities continued in small volume during March, though the total appears to have been somewhat above the February offerings. Security issues of public bodies again predominated and included in addition to a number of State and municipal flotations an issue of $25,000,000 of 4 % per cent Federal Inter mediate Credit Bank debentures which were put out in replacement of debentures maturing on March 15. The entire issue was sold without recourse to the Recon struction Finance Corporation, which had offered to take any of the debentures remaining unsold on March 15. The largest piece of financing in the State and municipal category was a $50,000,000 note issue of the State of New York. Virtually all of the rest of the month’s new offer ings represented public utility issues, the volume of which was somewhat larger than in other recent months. The following diagram indicates the decline that has occurred during the past two years in offerings of new securities by domestic corporations, States, and mu- 28 MONTHLY REVIEW, APRIL 1, 1932 MILLIONS OF DOLLARS September 28, 1931, effected a reduction to 6 per cent on March 21. Other European rate reductions in March were effected as follows: Bank of Lithuania, from 8 ^ to 7 % per cent on the 1st; National Bank of Rumania, from 8 to 7 per cent on the 4th; Austrian National Bank, from 8 to 7 per cent on the 18th. The discount rate of the Bank of Japan, which had been the equivalent of 6.57 per cent since November 5, 1931, was reduced to a rate equal to 5.84 per cent. It is reported that the Central Bank of Chile lowered its discount rate to member banks from 6 to 5 ^ per cent, effective March 1. G o ld M o v e m e n t New Security Offerings of Domestic Corporations, States, and Municipalities; and Excess of United States Government Security Issues over Retirements (Quarterly figures; data for March 1932 preliminary) nicipalities, due to the low level of investment demand for new securities which has increasingly restricted the types of borrowers that are able to obtain new capital through the security markets. The shrinkage in corporation financing through the security markets has been especially severe, and the total of security issues other than United States Government securities has included during the last nine months a somewhat larger amount of State and municipal financ ing than of domestic corporation issues. With the con centration of demand on the highest grade issues, United States Government obligations have been absorbed in increasing volume, as is shown by the other line in the diagram, which represents the excess of sales of United States Treasury issues over maturities from the interest bearing debt. A considerable part of the increase in Government issues has been necessitated by the shrink age in ordinary Government receipts, but in recent months a part of the proceeds of Government issues has represented the financing through the Reconstruction Finance Corporation of business which under more nor mal conditions would be financed through the market for corporation securities. C en tral B a n k R a t e C h an ges Nine European central banks reduced their official rates of discount in March, and like action was taken by the Bank of Japan. A reduction was reported to have been made also by the Central Bank of Chile. The Bank rate at London, which had been lowered from 6 to 5 per cent on February 18, was reduced to 4 per cent on March 10 and again to per cent on March 17. On the 3rd, the central banks of Sweden and Norway reduced their rates from 5 ^ to 5 per cent, this being in each case the fourth reduction from the high of 8 per cent made effective September 28, 1931. The Reichs bank rate was lowered from 7 to 6 per cent on the 9th, this being the fourth reduction since the high rate of 15 per cent was fixed on August 1 of last year. The Danish bank rate, which had been 6 per cent since last September 26, was lowered to 5 per cent on the 11th. The Bank of Italy, whose rate had been 7 per cent since During March there was a steady increase in this country’s gold stock, and by the close of the month the total was approximately $36,000,000 higher than at the end of February. Exports, which were composed almost entirely of gold which previously had been earmarked, ceased by the 15th of the month; these exports in the first half of the month totaled $43,900,000, of which $37,500,000 was shipped to France and $6,300,000 to Belgium, leaving less than $100,000 of gold shipped to other countries. Gold imports at New York amounted to $13,500,000, of which $7,000,000 came from Canada. $2,700,000 from Argentina, $2,500,000 from Mexico, and $1,000,000 from Brazil; and at San Francisco, $2,900,000 was received from China and $700,000 from Australia. In addition to these imports, there was a net decrease of $58,300,000 in the total of gold held under earmark for foreign account, including both the amount released for export and other net releases the proceeds of which were employed in this market. F oreign E x ch a n g e The principal development of the month in the foreign exchange market was a rise in the sterling quotation. On March 2, following closely upon an announcement by the British Treasury that it would shortly repay part of the credits granted by banking syndicates in this country and France, the pound, which had ruled in the vicinity of $3.45 during February, rose from $3.48^2 on March 1 to $3.53 on the 7th, and suddenly advanced to $3.70% the next day. This movement, which is illustrated in the accompanying diagram, was followed by a recession to around $3.62 a few days later, but, again showing a rising tendency, sterling advanced 18 cents in four days’ trading to $3.831/4 on March 28, reacting somewhat when the European markets reopened after the Easter holidays. All the other important European currencies moved irregularly during March; for the most part, they showed a tendency to weaken against the dollar at the time of sterling’s first sharp rise, but shared in the upward movement in the last week and were thereafter slightly easier at the close of the month. French francs moved erratically in a range of $0.0392 to $0.0394 during most of the month, the lower rate being quoted on March 24. French exchange then strengthened to $0.0394% on the 28th, but receded from this high as the month closed. Reichsmarks varied between $0.2376 and $0.2383 until the 28th, when they closed at $0.2385, later returning to about their previous level. Belgas, guilders, and Swiss francs 29 FEDERAL RESERVE AGENT AT NEW Y ORK DOLLARS at some time during the month declined to or below their parity; lire failed to improve materially; and the Scan dinavians tended to move with sterling. Most of the other European currencies fluctuated in a fairly wide range in the course of the month. No decided movement occurred in the South American list, the largely artificial rates being held at a constant level. Japanese yen went as low as $0.3113 early in the month, but sold between $0.32 and $0.33 most of the month. The silver currencies receded, chiefly in the last two weeks. Canadian dollars rose from $0.88% on March 1 to $0.90% on the 29th. Closing Cable Rates a t New York (In doUars) E xch an ge on A u s t r ia ...................................... B e lg iu m .................................... D e n m a r k .................................. E n g la n d .................................... F r a n c e ....................................... G e r m a n y .................................. H o lla n d .................................... I t a ly ............................................ N o r w a y .................................... S p a in .......................................... S w e d e n ...................................... Sw itzerla n d ............................. C a n a d a ..................................... A r g e n tin a ................................ B r a zil.......................................... U r u g u a y ................................... Jap an .......................................... I n d ia ........................................... S h a n g h a i.................................. P ar of E xch an ge $ .1 4 0 7 .1 3 9 0 .2 6 8 0 4 .8 6 6 6 .0 3 9 2 .2 3 8 2 .4 0 2 0 .0 5 2 6 .2 6 8 0 .1 9 3 0 .2 6 8 0 .1 9 3 0 1 .0 0 0 0 .9 6 4 8 .1 1 9 6 1 .0 3 4 2 .4 9 8 5 .3 6 5 0 .1 4 0 6 .1 3 9 1 .2 6 7 5 4 .8 5 8 8 .0 3 9 1 3 .2 3 8 3 .4 0 0 8 .0 5 2 4 .2 6 7 5 .1 0 9 3 .2 6 7 7 .1 9 2 4 .9 9 9 6 .7 9 0 5 .0 7 4 5 .7 1 8 0 .4 9 3 8 .3 6 1 5 .3 2 0 0 $ .1 3 9 6 .1 3 9 2 .1 9 2 2 3 .4 8 2 5 .0 3 9 3 5 .2 3 7 6 .4 0 2 3 .0 5 2 0 .1 8 9 4 .0 7 7 0 .1 9 2 6 .1 9 3 7 .8 8 3 8 .5 8 6 5 .0 6 2 5 .4 7 2 5 .3 3 2 5 .2 6 3 6 .3 4 3 8 $ .1 3 9 4 .1 3 9 7 .2 0 8 7 3 .8 0 5 0 .0 3 9 4 .2 3 8 0 .4 0 3 8 .0 5 1 8 .2 0 0 7 .0 7 5 4 .2 0 4 7 .1 9 4 1 .9 0 2 5 .5 8 6 5 .0 6 2 5 .4 7 5 0 .3 3 2 0 .2 8 8 8 .3 3 1 3 B u siness P rofits Annual earnings statements of 719 industrial and mercantile companies show aggregate net profits in 1931, after payment of fixed charges, that were 61 per cent smaller than in 1930, 78 per cent less than in 1929, and 74 per cent below 1928. It appears from quarterly re ports available for a smaller list of companies that the trend of industrial earnings was downward as the year 1931 progressed, the percentage decline in profits for the full year being larger than that reported for the first half year. Only one industrial group, the beverage concerns, re (N et profits in millions of dollars) C orporation group M a r . 31 , 1931 F e b . 2 9 , 1932 M a r . 31, 19 32 $ ported slightly larger net profits in 1931 than in the previous year, but the tobacco group showed very little reduction, and profits of confectionery concerns were down only 7 per cent from 1930. Comparatively moder ate reductions of 15 to 25 per cent in net profits were indicated for the leather and shoe, bakery, retail store, food products, and chemical and drug groups, and de clines of more than 40 to 60 per cent, or less than the average for all companies, occurred in such groups as office equipment and electrical equipment, and also in the automobile group, including the General Motors Corporation but not the Ford Company. Although the motion picture, automobile accessory, meat packing, rail road equipment, and realty groups suffered large reduc tions in profits they still were able to show some net return for 1931. Eleven of the 33 groups of companies listed in the accompanying table, however, reported de ficits of varying amounts from 1931 operations; promi nent among these were the oil, steel, rubber, copper, coal and coke, and heating and plumbing companies. Net operating income of 171 Class I railroads, that is, income before allowing for fixed charges, was reduced 40 per cent from 1930 to 1931 and was 58 per cent smaller than in 1929. In fact, in no year since 1920 has the net operating income of the railroads been as low. Net income of a list of 76 railroads, after allowing for fixed charges, was reduced 78 per cent between 1930 and 1931. Telephone companies’ net operating income, on the other hand, was slightly in excess of 1930 and only 2 per C o n fe c tio n e r y .......................................... L eath er and s h o e ................................... B a k ery p r o d u c ts..................................... M iscellaneous food p r o d u c ts........... C h em ical an d d ru g ............................... Printing and p u b lish in g..................... Office eq u ip m en t.................................... M in in g and sm elting (excl. coal, coke, an d c o p p e r )............................. E lectrical e q u ip m e n t........................... B uildin g su p p lie s................................... M o tio n p ic tu r e ........................................ A u to m o b ile p arts an d accessories (excl. t ir e s ) ........................................... M e a t p a c k in g ........................................... R a ilroad e q u io m e n t ............................. N o. of C os. 1928 1929 1930 1931 5 17 9 14 14 37 34 26 10 9 18 89 21 29 52 161 128 109 31 29 21 95 23 19 58 165 154 131 35 37 22 102 22 11 52 100 145 110 30 24 22 101 21 9 42 82 111 82 18 14 23 23 21 11 11 39 9 54 113 408 11 14 70 24 76 148 35 5 10 19 76 45 39 95 162 7 12 37 28 22 47 69 3 4 4 3 65 42 49 18 61 222 26 2 15 59 6 32 22 6 28 10 28 4 75 41 67 20 76 361 33 6 19 73 12 37 19 4 40 8 351 22 34 47 14 45 160 151 4 16 8 11 12 3 20 1 230 2 1 1 0 4 18 44 2 8 7 10 2 1 12 5 122 M isc e lla n e o u s........................................... 46 12 18 13 41 27 39 15 15 15 9 31 12 8 5 101 S t e e l............................................................... O i l.................................................................... H ou seh old e q u ip m e n t ........................ C o a l and c o k e .......................................... H ea tin g and p lu m b in g....................... M iscellaneous te x t ile s ......................... S ilk ................................................................. • — — — — — — — — — — — — — — — T o ta l 33 g r o u p s ............................ 719 2,5 4 2 3 ,0 0 6 1,7 04 66 7 Telephone (net op erating incom e) O ther public u tilities (net earn - 104 25 3 27 8 271 27 2 63 33 2 361 34 3 29 7 T o ta l public u tilities.................. 167 58 5 639 61 4 569 171 1 ,1 9 4 1 ,2 75 885 531 C lass I. R . R . (net op erating in - — D e fic it 30 MONTHLY REVIEW, APRIL 1, 1932 cent less than in 1929. Net earnings of other public utilities in 1931 showed the comparatively moderate drop of 13 per cent from 1930 and of 18 per cent from the 1929 level. E m p lo y m e n t and W a g e s Factory employment in the United States increased 1 y 2 per cent from the middle of January to the middle of February, or only slightly less than is usual at this season. The seasonally adjusted index of the Federal Reserve Board, however, reached a level 34 per cent below the peak of 1929, and was the lowest in the period of more than thirteen years for which the index has been computed. Reductions, after allowance for seasonal changes, were shown in February in most of the impor tant manufacturing lines, but increased employment was reported in the textile and shoe industries. Total wage payments increased by a somewhat larger amount than the number of workers employed, and the average remuneration per worker consequently advanced slightly. In New York State, however, the number of workers employed in manufacturing industries did not show any of the usual February increase. Wage payments de clined unseasonally, and average weekly earnings of those employed reached the lowest level since 1919. Average factory earnings have decreased from a high point of $30.47 a week in September 1929 to $24.02 in February, a reduction of 21 per cent. This decline reflects both a lower level of wage rates and a decrease in the number of working hours. B u ild in g The value of building and engineering contract awards in the 37 States covered by the F. W . Dodge Corporation report rose 5 per cent between January and February, which is about the usual seasonal increase. The increase reflected a more than seasonal rise in public utility pro jects from the low level of January and about the usual increase in other non-residential construction, partly off set by an unseasonal decline in residential contracts. Compared with February 1931, the contract value of February of this year showed a loss of 62 per cent; there were large reductions in all classes of contracts, with the greatest falling off in public works and residential build ing. The Metropolitan area of New York reported in Febru ary a total building contract value that was only 20 per cent as large as a year ago, and for the first two months of 1932 the total was 71 per cent below the 1931 figure. In the first three weeks of March a smaller than seasonal increase was reported in aggregate awards of building contracts. Although a considerable increase occurred in residential contracts, the total of building contracts was affected by an unseasonal decline in public works and utilities, and the expansion in other non residential work was less than usual. P rod u ction Steel mill activity declined somewhat further in March, instead of showing the usual substantial upturn at this time of year, and production of automobiles likewise failed to expand seasonally. Output of cotton goods was lower than in February. Production of crude petro leum, however, increased seasonally, and output of bitu minous coal rose contrary to the usual tendency. In February, manufacturing and mineral production increased slightly less than seasonally. The output of automobiles, lead, lumber, and crude petroleum declined instead of showing seasonal increases, and curtailment occurred also in mill consumption of raw silk and in pro duction of wheat flour and tobacco products. Output of pig iron increased somewhat less than usually, while steel ingot production for the month as a whole showed about the usual seasonal gain, although output at the close of the month was slightly below the level reached toward the end of January. Output of bitu minous coal had an unseasonal increase, however, slaught erings of live stock declined less than usually, mill con sumption of raw cotton rose moderately, wool mills were more active, and shoe production increased more than seasonally. (A d ju sted for seasonal variations and usual y e a r-to -y e a r grow th) 1931 1932 Feb. D ec. Jan. F eb. M etals Pig iron r .................................................................... Steel ingots r ............................................................ L e a d ............................................................................... Z i n c ................................................................................. T in d eliv e ries..................... ...................................... 57 r 63r 67 52 73 34r 36r 56 35 52 32r 35 r 50 34 49 31r 35r 45 35 38 Autom obiles Passenger e a r s .......................................................... M o to r t r u c k s ............................................................ r)5 87 36 56 35 51 2 0>p 47 p Fuels B itu m in ou s c o a l....................................................... A n th racite c o a l........................................................ C o k e ............................................................................... P etroleum , c r u d e .................................................... Petroleum p ro d u c ts............................................... 76 91 70 81 76 65 75 50 82 71 58 65 46 76 67 65 p 66 p 46 72 Textiles and Leather Products C o tto n c o n su m p tio n ............................................ W o o l m ill a c t iv it y ................................................. Silk c o n su m p tio n .................................................... Leath er, so le.............................................................. Leather, u p p e r ......................................................... B oots and sh o e s....................................................... 75 75 99 85 82 88 70 55 87 81 68 87 v Foods and Tobacco Products L ive stock sla u g h te r e d ........................................ W h e a t flo u r ................................................................ T ob a c co p r o d u c ts................................................... 96 91 98 98 81 80 93 84 85 100 80 81 76 64 50 86 86 83 77 55 45 29 75 84 68 69 p 59 56 30 48 Miscellaneous C e m e n t ......................................................................... T ir e s................................................................................ L u m b e r ......................................................................... Printing a c t iv it y ..................................................... Paper, n ew sp rin t.................................................... Paper, other than n ew sp rin t........................... p P relim inary 70 64 102 85 p 74 70 84 88 p 26 84 r R evised C o m m o d ity Prices The average price of commodities at wholesale showed little change in March from the level of the previous month, according to a new weekly index of the Bureau of Labor Statistics, which includes the prices of almost 800 commodities. Since the middle of February, this index has fluctuated between 66.2 and 66.5 per cent of the 1926 average. The prices of a number of important basic commodi ties, however, continued to show a downward tendency in March. Raw silk, rubber, and raw sugar declined to new low levels in the history of these commodities, and lead was reduced to the lowest price since the 1890’s. Cash wheat declined about 12 cents a bushel, reaching a level FEDERAL RESERVE AGENT AT NEW YORK 31 merchandise and miscellaneous freight and in sales of chain grocery stores, while less than the average in crease occurred in other chain store sales and in mer chandise imports. Moreover, bank debits outside New York City declined more than seasonally, and the ad justed indexes of wholesale trade, postal receipts, and life insurance sales also were lower than in January. On the other hand, car loadings of bulk freight and exports of merchandise increased moderately, department store trade in the country as a whole was little changed after seasonal adjustment, and business failures diminished somewhat. (A d ju sted for seasonal variations an d usual y e a r-to -y ea r grow th) 1931 19 32 Fe b . D ec. Jan. 78 75 73 76 66 90 65 61 56 76 47 91 65 55 51 67 45 87 62 58 56p 63p 43 80 97 95 92 93 80 87 65 85 77 80 68 67 80 52 82 77 88 74 66 82 44 p 80 73 84 82 75 73 68 73 67 66 62 83 71 126 103 80 78 71 114 36r 80 54 90 73 96 108 78 74 p 70 123 25r 83 81 70 82 92 73 E lectric p o w e r .......................................................... E m p lo y m e n t in the U n ited S t a t e s .............. B usiness fa ilu r e s..................................................... B uildin g contracts r ............................................. N e w corporations form ed in N . Y . S tate. R eal estate tra n sfe r s ............................................ 91 87 190 92 86 85 80 115 70r 85 61 69 114 26r 82 G eneral price le v e l* ............................................... C om p osite index of w a g e s * .............................. C o st of liv in g * . . . . , ............................................ 157 21 8 152 140 205 142 138 20 3 140 136 201 137 F eb. Primary Distribution (Ratio scale used to show proportionate changes) only 31/2 cents above the low of last July, and wool and hides dropped to the lowest levels in recent years. Declines occurred also in cotton, steers, and bituminous coal. Little net change was apparent in such commodi ties as corn, hogs, copper, zinc, tin, iron, steel, and petro leum, although in most of these instances prices remained close to the lowest levels reached during the current decline. The commodity price decline in the United States in its broad movements corresponds closely to the price movements in Great Britain, France, and Germany, as the accompanying diagram indicates. Except in Great Britain, where a slow downward tendency had been evi dent since just before the stabilization of the pound in 1925, the level of commodity prices in these countries was fairly steady from 1927 to 1929. From 1929 to the pres ent time, however, a virtually uninterrupted decline has been shown in wholesale prices in each of the four coun tries. The rather sudden rise in the British index last October is a reflection principally of higher sterling prices for certain imported goods, following the suspen sion of gold payments by Great Britain; and if adjust ment be made for the depreciation of the pound sterling in terms of the currencies of gold standard countries, British prices also would show a continued decrease. In d ex es o f B u siness A c tiv ity The limited data so far available for March indicate that the general level of business activity continued to show somewhat less than the usual spring expansion. Car loadings of merchandise and miscellaneous freight during the first three weeks increased less than usually, and department store sales in New York City and vicinity during the first half of the month were 22 per cent lower than in the corresponding period a year ago, a somewhat larger year-to-year decline than has been shown in pre vious months. Easter business, however, should favor ably affect the retail sales figures for the second half of the month. In February, the distribution of goods and general trade activity declined moderately after adjustment for seasonal changes, according to this bank’s indexes. None of the usual expansion took place in car loadings of C ar loadings, m erchandise and m isc .......... C ar loadings, o t h e r ................................................ W a te r w a y s tra ffic ................................................... W h olesale t r a d e ....................................................... Distribution to Consumer D e p a rtm e n t store sales, 2n d D is t ................ C h ain grocery s a le s ............................................... O ther chain store s a le s....................................... M a il order house s a le s ........................................ A d v e r tisin g ................................................................. G asoline c on su m p tion .......................................... Passenger au tom obile registrations............. 7Qp 66 General Business Activity B a n k debits, outside of N e w Y o r k C ity .. B a n k debits, N e w Y o r k C i t y .......................... V e locity of b ank deposits, outside of N ew Y o r k C i t y .............................................................. V elocity of bank deposits, N e w Y o r k C ity Shares sold on N . Y . S tock E x c h a n g e . . . L ife insurance paid f o r ....................................... p Prelim inary r R evised * 1 9 1 3 a v e ra g e ^ 100 F oreign T ra d e The total value of this country’s foreign merchandise trade remained substantially the same in February as in the previous month. Exports, amounting to $155,000,000, showed a slight increase over the January total, contrary to the general tendency for exports to decline between these two months. Imports, on the other hand, valued at $131,000,000, showed a small loss from the previous month, in contrast with a usual seasonal increase. Exports were 31 per cent less than a year ago and imports were 25 per cent less, but both of these declines were slightly less than have been shown in other recent months. The value of February exports of crude foodstuffs was 16 per cent larger than a year ago, due chiefly to the fact that the leading grain shipments were 70 per cent in excess of the small quantity exported in February 1931. Shipments abroad of crude materials, mainly raw cotton, showed a 10 per cent increase in value over a year ago, as a large increase in the quantity shipped more than offset the continued price decline. All other leading export groups, however, again showed decreases in value, with MONTHLY REVIEW, APRIL 1, 1932 32 the largest decline— 51 per cent— occurring in finished manufactures. Compared with a year ago, all of the major import groups again showed decreases in value, ranging from 15 per cent in imports of manufactured foodstuffs to 34 per cent in crude materials. Quantity receipts of raw silk increased 12 per cent over those of February 1931, but imports of crude rubber and coffee were in considerably smaller volume. D e p a r tm e n t Store T r a d e February sales of the reporting department stores in this district averaged 16 per cent below a year ago in dollar value, although there was one more selling day this year. As in January, unseasonably warm weather restricted the buying of winter merchandise. Sales of New York City, Rochester, Syracuse, Southern New York State, and Capital District stores showed declines somewhat larger than the average for the district as a whole, but nevertheless somewhat smaller than the declines reported for January. Department store sales in Newark also declined less from a year ago than in January, and sales in Buffalo, Bridgeport, and Northern New York State showed the smallest declines in several months. The leading apparel stores reported a 21 per cent decline from the previous year, a smaller decrease than in January, but larger than in other recent months. Reports from department stores in the Metropolitan area of New York covering business in the first 14 days in March showed a decrease of 22 per cent from the cor responding period of March a year ago. The effects of Easter buying, however, will appear in the figures for the latter half of the month. Department store stocks of merchandise on hand at the end of February, valued at retail prices, were 14 per cent below a year ago. Collections in February contin ued to be a little slower than a year ago. Percentage change from a year ago N e t sales Locality F eb. N e w Y o r k .................................................. B u ffa lo .......................................................... R o ch ester.................................................... S yracu se....................................................... N e w a r k ......................................................... B r id g e p o r t.................................................. E lsew h ere.................................................... N orthern N e w Y o r k S ta t e . . . . Southern N e w Y o r k S ta t e .......... H u dson R iver V a lle y D is t r ic t .. C ap ital D istr ic t................................. W estch ester D is t r ic t ...................... — — — — — — — — — — — — 1 6 .7 1 0 .1 1 8 .3 2 1 .5 1 1 .6 1 0 .2 1 6 .9 4 .3 1 8 .7 1 3 .0 1 9 .6 1 6 .3 Jan. and Feb. — — — — — — — 1 7 .9 1 3 .5 2 2 .2 2 2 .9 1 3 .5 2 1 .7 1 9 .1 Stock on hand end of m on th — — — — — — — Per cent of accounts ou tstand in g J anuary 30 collected in F ebru ary 1931 1932 1 4 .9 1 4 .3 1 2 .0 1 1 .8 9 .7 1 7 .0 1 2 .5 4 2 .6 4 3 .2 3 8 .6 2 7 .2 3 9 .7 3 4 .6 2 9 .8 4 0 .8 4 2 .0 4 1 .9 2 6 .6 3 7 .8 3 1 .9 2 7 .8 A ll d ep artm en t s t o r e s .............. — 1 5 .7 — 1 7 .4 — 1 3 .9 4 0 .3 3 8 .5 A pparel sto r e s................................ — 2 0 .9 — 2 7 .4 — 1 9 .3 4 0 .6 3 8 .5 all reported smaller declines than in the previous month. On the other hand, decreases in hardware, paper, and jewelry sales were about the same as in January, and the reduction in stationery and diamond sales was larger. Yardage sales of silk goods, reported by the Silk Association of America, were further below the level of a year previous than at any time since June 1930, and the volume of machine tool orders, as reported by the National Machine Tool Builders Association, was less than half as large as a year ago, following comparatively small declines in the three preceding months. Stocks of merchandise on hand at the end of February continued below the level of a year previous in all lines except drugs, which showed an increase for the fourth consecutive month. The February ratio of collections to accounts outstanding was practically the same this year as last. C o m m o d ity Percentage change F ebru ary 1932 com pared w ith January 1932 Net sales G roceries............................ M e n ’s c lo th in g .................. C o tto n g o o d s ...................... Silk g o o d s ............................ S h o e s ....................................... H a r d w a r e ............................. M ach in e t o o ls * * ............... S ta tio n e r y ............................. P a p er....................................... D ia m o n d s ............................. J e w e lr y .................................. W e ig h ted a v e r a g e . . . — 9 .4 + 9 3 .6 + 3 7 .9 — 1 3 .1 * + 2 4 .2 — 4 .2 — 7 .1 — 3 6 .4 — 2 0 .1 — 8 .1 — 1 7 .7 + 1 4 .8 — 1 .4 + 5 .4 + 3 .7 * — 4 .5 + 8 .1 + 1 2 .2 + + 2 .7 3 .8 N et sales — — — — — — — — — — — — 9 .6 2 2 .4 1 5 .3 1 9 .2 * 6 .8 2 0 .0 1 8 .2 5 5 .1 2 1 .5 2 7 .9 5 8 .5 3 5 .8 S tock end of m on th — 2 0 .2 — 1 4 .2 — 2 .6 * — 1 7 .3 + 1 9 .4 — 1 0 .6 — 3 3 .9 — 3 1 .4 — 1 9 .6 Per cent of accou nts ou tstand in g Janu ary 30 collected in F ebru ary 1931 1932 7 0 .8 3 8 .9 3 1 .1 4 1 .8 3 4 .0 2 5 .0 3 7 .5 7 2 .8 3 9 .6 2 8 .9 5 0 .7 3 0 .7 2 0 .5 3 5 .0 6 9 ’. 5 5 4 .8 6 6 .6 5 2 .3 | 1 7 .7 | 1 6 .4 4 6 .2 4.6. 5 * Q u a n tity not valu e. R ep orted b y Silk A ssociation of A m erica * * R ep orted b y the N a tio n a l M a c h in e T o o l B uilders A ssociation C h ain Sto re T ra d e Total February sales of the reporting chain store systems in this district were 3 per cent less than a year ago, the smallest decline since October. Variety chains increased their sales for the first time since May 1930, and candy systems continued the series of increases in sales which began last October. Furthermore, ten cent, grocery, and drug chains showed smaller declines than in January. Business of the shoe chains, however, again showed a large reduction. After allowing for the number of stores operated, all lines except variety systems continued to show declines from a year ago in sales per store. P ercen tage change F ebru ary .1932 com pared w ith F ebru ary 1931 W h o le sa le T ra d e S tock end of m on th + 1 5 .4 T y p e of store Wholesale firms in this district reported February sales 20 per cent below a year ago, or slightly less than the January decrease. Sales of groceries and shoes showed the smallest decreases from a year previous since 1930, and drug, cotton goods, and men’s clothing firms P ercen tage change F ebru ary 1932 com pared w ith F ebru ary 1931 G r o c e r y ..................................................... T e n c en t.................................................... D r u g ............................................................ S h o e ............................................................. C a n d v ......................................................... T o t a l................................................. N u m b er of stores T otal sales Sales per store + 1 .9 + 2 .0 + 0 .9 — 0 .6 + 3 .4 + 2 5 .0 — 6 .3 — 2 .7 — 0 .3 — 2 3 .2 + 3 .7 + 6 .2 — 8 .0 — 4 .6 — 1 .2 — 2 2 .8 + 0 .3 — 1 5 .1 + — — 2 .3 2 .7 4 .9 FED ERAL RESERVE BANK OF NEW YORK MONTHLY REVIEW, APRIL 1, 1932 B u s in e s s r \* C A W ROLLS \ 1928 1929 th e U n ite d S ta te s OLUME of industrial production and factory employment increased from January to February by an amount smaller than is usual at this season. Improvement in the basking situation during February and the first three weeks of March was reflected in a decline in bank suspensions and a return flow of currency from the public to the banks. V 1927 in V :m p l o y m e SIT AO C o n d itio n s (Summarized by the Federal Eeserve Board) 1931 \ Production and E mployment 1932 Index Numbers of Factory Employment and Payrolls. Without Adjustment for Seasonal Variation (1923-25 average —: 100 per cent) Wholesale Price Index of United States Bureau of Labor Statistics (1926 average 100 per cent) MILLIONSor DOLLARS Output of industrial products increased less than seasonally in February and the Board’s index, which makes allowance for the usual seasonal varia tions, declined from 71 per cent of the 1923-1925 average to 70 per cent. Activity in the steel industry during February and the first three weeks of March showed little change from the January rate, although ordinarily sub stantial increases are reported at this time of year. Automobile production continued in small volume, showing none of the usual seasonal expansion, and the number of cars produced in the three-month period ended in February was about 35 per cent less than in the corresponding period a year ago. In the lumber industry, output declined further, contrary to seasonal tendency. Activity at cotton mills and shoe factories increased by more than the seasonal amount and was at about the same level as in the corresponding month last year. Volume of employment at factories increased in February by somewhat less than the usual seasonal amount. In the iron and steel, automobile, and machinery industries the number employed showed an increase smaller than is usual in this month, and at lumber mills a continued decline in employment was reported. At establishments producing fabrics, wearing apparel, and shoes, volume of employment increased by more than the seasonal amount. Daily average value of total building contracts awarded, as reported by the 1’. W. Dodge Corporation, showed little change in February and the first half of March, and for the period between the first of January and the middle of March the value of contracts was 65 per cent less than a year ago, reflecting continued declines in residential building as well as in other types of con struction; part of the decrease in the value of awards reflects reductions in building costs. D is t r ib u t io n Carloadings of merchandise and of miscellaneous freight showed none of the usual seasonal increase in February, while sales at department stores remained unchanged, as is usual at this season. W h o l e s a l e P r ic e s Wholesale commodity prices, as measured by the index of the Bureau of Labor Statistics, declined further from 67 per cent of the 1926 average for January to 66 per cent for February. Between the first week of February and the third week of March, there were increases in the prices of cotton, live stock, and meats, while prices of grains, nonferrous metals, and imported raw mate rials including silk, sugar, and rubber declined considerably. Reserve Bank Credit (Monthly averages of daily figures for 12 Federal Reserve Banks; latest figures are averages of first 22 days of March) B ank Cr e d it In the banking situation the important developments in February and the first half of March, were a considerable reduction in the number of bank sus pensions and a return flow of currency from the public to the banks. The country’s stock of monetary gold declined in February but increased somewhat in the first half of March. Member bank reserve balances, after decreasing almost continuously since last summer, showed a slight increase for the first two weeks in March. Purchases of United States Government obligations by the Federal Eeserve Banks beginning in March were accompanied by a con siderable decline in member bank indebtedness to the Eeserve Banks. Loans and investments of member banks in leading cities continued to decline until the middle of March when there was a substantial increase, owing largely to the banks’ purchases of United States Government securities, issued on March 15. Demand and time deposits of these banks decreased further during February but showed little change in the first half of March. Money Rates in the New York Market (March rates are averages for the first 22 days) Open market rates on acceptances and commercial paper declined during February and the first half of March. During this period yields on Treasury and other high grade bonds decreased to the lowest point since early December, but after the middle of the month yields on high gTade corporate bonds increased somewhat.
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