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MONTHLY REVIEW O f Credit and Business Conditions F V ol. E D E R A L R E S E R V E 25 A P R IL B A N K 1, O F N E W Y O R K 1943 No. 4 MONEY MARKET IN MARCH The money market in March was largely a reflection of compared with $728,000,000 in March, 1942. Both in March the effects of the Revenue Act of 1942 upon Federal income of this year and last year, Tax notes were employed somewhat tax payments. more extensively in this District than in other sections of Because of its lowered personal exemptions and sharply advanced tax rates, as well as the higher level of the country in paying income taxes; in this District the pro incomes upon which the taxes were assessed, many millions portions of income tax payments made by the use of Tax more Federal income tax returns were filed this March notes were 36 per cent in March of this year, and 18 per than in any other year and income tax collections in excess of cent in March, 1942. Sales of Tax notes during the month, for $4,500,000,000) were about $1,500,000,000 above the pre the country as a whole, apparently approximated the January vious record of March, 1942. A t the same time there were and February totals of $450,000,000, and were substantially differences in the pattern of collections and of resultant less, therefore, than the amount used in payment of taxes. credits to Government working balances with the Federal In order to avoid the pressures on the money market that Reserve Banks. Relatively fewer returns were filed prior to would otherwise have occurred through the unprecedentedly the March 15 deadline, and many taxpayers who in other heavy quarterly income tax collections, the Treasury at first years would have met their year’s tax liabilities in full, on or reduced and then suspended calls on W ar Loan deposit ac before March 15, adopted the quarterly instalment method of counts early in the month, meeting its requirements, tem payment. In some cases, in light of the size of the tax lia porarily, by selling direct to the Federal Reserve Banks special bilities, the choice of the quarterly instalment method of pay one-day certificates of indebtedness in amounts changing from ment was no doubt dictated by considerations of avoiding day to day according to Treasury needs for funds. The last call borrowing or the undue dissipation of cash resources. In other prior to the period of heavy income tax collections was issued cases, the quarterly instalment method may have been chosen for March 8 and 9, and total withdrawals from W ar Loan because of the existing uncertainty as to the character of account deposits during the first nine days of March totaled future tax legislation. A t the same time, as a result of the only $730,000,000. As an effect of the lightening of the calls, unprecedented volume of tax returns and staff limitations at the Treasury had built up by March 9 borrowings from the the collectors’ offices, the time consumed in "processing” Reserve Banks on special one-day certificates of indebtedness returns was somewhat longer than usual and hence the flow to the extent of $648,000,000. In the absence of further calls, of credits to Treasury working balances with the Federal the borrowing on special one-day certificates of indebtedness Reserve Banks was relatively slower. rose to a maximum of $1,302,000,000 on March 15. On the About $1,200,000,000 of Tax Savings notes were pre 15 th, of course, a large volume of income tax returns had sented in payment of taxes during March, and tax collections already reached collectors’ offices, and many more were in in cash were correspondingly reduced. The proportionate use the mails, but the peak volume of collections of tax checks did of Tax Savings notes in meeting Federal income tax liabilities not occur until March 16-18. Moreover, in addition to the was less than in December, 1942 (2 6 per cent compared with continuing heavy volume of expenditures for war and other 32 per cent), but greater than in March a year ago when only purposes, 16 V2 per cent of the income tax payments were met with public debt as well as $66,000,000 of maturing Treasury notes Tax notes. fell due on the 15 th. Income tax collections in the Second Federal Reserve District during March exceeded $1,000,000,000, as D o T O U R P a r t in th e approximately $200,000,000 of interest on the The flow of credits to the Treasury accounts in Federal S e c o n d W a r L o a n D r i v e MONTHLY REVIEW, APRIL 1, 1943 26 OF DOLLARS DATES Volume of U. S. Government Obligations Held by Federal Reserve Banks Federal Income Tax Collections as Reported in the Treasury Daily Statement (Cumulated from the first day of the month) Reserve Banks through income tax collections fell off more December 31, 1942, at the close of the first W ar Loan Drive, slowly than usual during the second half of March, reflecting there remained approximately $2,700,000,000 at the end of the lag caused by the relatively small number of early returns and March. the time consumed in "processing” and clearing the remittances. In addition to the tax collections and repayments from W ar Through the heavy credits to the Treasury’s accounts as a Loan account balances, Government receipts included pro result of income tax collections, together with the weekly net ceeds from the sale of Savings bonds, Tax Savings notes, and receipts of $200,000,000 from Treasury bills and other rev Treasury bills. enues, the borrowing on special one-day certificates of indebt maintained at $200,000,000 weekly, as offerings were stepped edness had been reduced to $512,000,000 by Wednesday, up from $700,000,000 to $800,000,000 beginning March 17, March 24. accompanying a rise in weekly maturities from $500,000,000 During the final week of the month, the special borrowing was eliminated as calls on W a r Loan account de Net receipts from Treasury bill offerings were to $600,000,000. posits, totaling $920,000,000 over the period March 25-30, supplemented the other sources of Treasury cash receipts. Calls on W ar Loan account deposits totaled $1,647,000,000 in March, compared with $2,936,000,000 and Excess R eserves February, Banks during March were marked by ( 1 ) sales of Treasury Credits to these accounts bonds and notes, to meet the persistent demand, particularly during the first quarter of the year, through use of the book on the part of banks, for Government securities of intermedi credit method of payment in connection with sales of Savings ate and longer term; ( 2 ) the rise through March 15 and subse and $2,198,000,000 in January. in O p e n M a r k e t O pe r atio n s Transactions in Government securities by the Federal Reserve bonds and Tax Savings notes, aggregated $1,300,000,000. Thus, quent rapid decline in Treasury borrowing from the Federal out of the $8,166,000,000 W ar Loan account deposits on Reserve Banks on special one-day certificates of indebtedness; Money Rates in New York and (3 ) transactions in Treasury bills, with sales predominat ing up to the middle of the month, and purchases thereafter. Mar. 31, 1942 Feb. 27, 1943 Mar. 30, 1943 Stock Exchange call loans.................... Stock Exchange 90 day loans.............. Prime commercial paper-4 to 6 months Bills—90 day unindorsed..................... Average yield on tax exempt Treasury bonds (not callable within 12 years). Average yield on taxable Treasury bonds (not callable within 12 years).......... Average rate on latest Treasury bill sale 91 day issue................................ Reserve Bank discount rates: On advances to member banks se cured by Government obligations callable or maturing in one year or less............................................. On other advances to member banks secured by Government obliga tions, and on rediscounts.............. Reserve Bank buying rate for 90 day indorsed bills...................................... * Nominal t 83 day issue 1 *1% Vs V* 1 1 *1% Yzr% % Between February 24 and March 24, Federal Reserve Banks reduced their holdings of Treasury bonds by $354,000,000 Vs-U % and Treasury notes by $235,000,000, while Treasury bill hold 2.02 2.05 2.08 ings showed a net expansion of $67,000,000. 2.33 2.32 2.32 a moderate increase ($29,0 00,000) in holdings of certificates There was also 0.203f 0.374 0.374 of indebtedness, other than the special one-day issues. Taking account of the $512,000,000 special one-day certificates out standing March 24, there was a net increase of $19,000,000 in H Vi 1 .1 l the Reserve Banks’ Government security portfolios during the four weeks ended March 24. Yl From $1,790,000,000 on February 24, excess reserves of all member banks rose to $2,130,000,000 on March 17 and then FEDERAL RESERVE BAN K OF NEW YO R K dropped to $1,630,000,000 on March 24. 27 There was thus a during this period were more than compensated for by an net decline of $160,000,000 in excess reserves over the four exceptionally heavy volume of Government checks placed on W hile the Treasury, by substantially deposit here. In the latter half of the month the inward move exhausting its deposits with the Federal Reserve Banks, added weeks taken as a whole. ment of funds ceased, and at the same time renewed calls on approximately $250,000,000 to bank reserve funds (exclusive the W ar Loan accounts brought about losses of reserve balances of the disbursement of funds borrowed from the Reserve through Treasury transactions. Banks), other factors, principally increased currency circula March 17, the weekly reporting member banks of New York tion, limited the increase in member bank reserve balances City enlarged their holding of Treasury bills to the extent of Between February 24 and to about $165,000,000, and meanwhile reserve requirements $244,000,000. were enlarged to the extent of approximately $325,000,000. declined $87,000,000, to $1,877,000,000, principally through Currency circulation rose $250,000,000 between February 24 sales to the Reserve Bank to compensate for losses of reserve and March 10, but declined $140,000,000 during the two funds. During the following week these holdings following weeks, reflecting the use of currency holdings in the W A R F IN A N C IN G payment of income taxes. The pattern of excess reserves of all member banks during N et public borrowing of the Treasury in March amounted March corresponded in general with the rise and fall of the to only about $1,000,000,000, consisting of net sales of Treas Treasury’s borrowing on the special one-day certificates of ury bills and Savings bonds, partly offset by net redemptions of indebtedness. Both the rise and subsequent decline of member Tax notes presented in payment of taxes. Expenditures bank excess reserves, however, were less pronounced than the were tax met to largely a from smaller quarterly extent by income drawing down receipts rise and fall of the special one-day borrowing. During the and Treasury period in which the special borrowing was increasing, many balances with depositary banks and the Federal Reserve Banks. banks gaining reserve balances put their funds immediately Borrowing operations will be resumed on a large scale during to work by adding to their Government security holdings, April, with the launching of the Second W ar Loan Drive.* especially through reacquiring bills previously sold to the Sales of Savings bonds held up well in March in spite of Reserve Banks under repurchase option. Indeed, throughout the quarterly income tax collections. On the basis of the Daily month there appeared to be a tendency for banks* acquiring Statement of the Treasury for March 27, it is estimated that substantial excess reserves to make effective use of those funds total sales of all series of Savings bonds during the month through surpassed the $887,000,000 February total. enlarging their investment portfolios. Following In the Second March 15, the tax collections and calls on W a r Loan accounts, Federal Reserve District, sales by agencies other than post which enabled the Treasury to reduce its borrowing on the offices special certificates, drew reserve funds from the market, and $130,000,000 in February. banks (principally those whose excess reserves were exhausted amounted to $79,000,000 in the previous month, exceeded or near exhaustion) $90,000,000. sold Government securities, predomi nantly bills, to the Reserve Banks in partial compensation for these losses. Many banks with surplus funds, however, con tinued to add to their Government security portfolios. amounted to about $140,000,000 compared with Sales of Series E bonds, which Cashing of Savings bonds, enlarged by redemptions to obtain funds for tax $130,000,000 for payments, March, may be estimated compared with at about $76,000,000 in As was true also in February, fluctuations in member bank February and $63,000,000 in January. Apart from the income excess reserves during March reflected in the main changes in tax factor in stimulating redemptions during March, Savings excess reserves of reserve city and "country” member banks. bond redemptions have shown a tendency to increase month In both of the central reserve cities, New York and Chicago, by month. The steady enlargement in the amount outstanding excess reserves were maintained at more or less "nominal” is the principal factor in the growth of redemptions, but it levels, as banks in these cities bought Treasury securities freely would also appear that there has been a perceptible rise in to keep their funds fully employed, and made sales of Treasury redemptions in terms of the volume outstanding. Redemptions bills when necessary to maintain their reserves at the required during March of this year amounted to 0.76 per cent of the levels. Excess reserves of the central reserve N ew York City amount outstanding at the end of February, whereas in March, banks averaged about $100,000,000 both in February and 1942, 0.28 per cent of the amount outstanding February 28, March. These banks, as earlier in the year, tended to gain 1942 was turned in. The relatively heaviest rate of redemp reserve balances through an inflow of funds from other sections tions has been experienced in the Series E bonds, particularly of the country during the first half of March. those of the smaller denominations. Losses of funds through income tax checks drawn on N ew York City banks and calls for repayment of W a r Loan account deposits * The Second W a r Loan Drive is discussed in a separate section be ginning on the following page of this R ev iew . M ONTHLY REVIEW, APRIL 1, 1943 28 SECOND W A R LO A N D R IV E Secretary Morgenthau has announced a minimum goal of offering various securities designed for every type of investor, $13,000,000,000 for the Second W ar Loan Drive which will and is providing that allotments will be made in full on sub be launched under the general direction of the United States scriptions received from (or entered on behalf o f) nonbank Treasury W a r Finance Committee* on Monday, April 12. The full resources of the W ar Savings Staff and Victory Furid Com ing investors. The types of securities available during the drive are indicated in the table. mittees will be joined, under the W ar Finance Committee, in It is of vital importance that the largest possible amount be an effort not only to exceed the sales totals of the December raised from individuals in order to absorb current income and drive but also to gain a substantially wider public participation. Since commercial banks will be limited to allotments of savings which might otherwise be used to bid up prices of scarce goods and services. Income received by individuals in $2,000,000,000 or thereabouts on each of two new issues, in the form of wages and salaries, dividends, interest, rents and addition to purchases of the weekly Treasury bill issues, the royalties is expected to total at least $135,000,000,000 during success of the drive will largely hinge upon the amount raised the current year. from other investors. The national goal for sales to nonbank ing subscribers has been set at $8,000,000,000, and the goal for this District at $3,000,000,000. income will be absorbed by present Federal and State taxes on individuals, spending. In order to encourage the widest possible distribution to investors other than commercial banks, the Treasury is again * The W ar Finance Committee in the Second Federal Reserve District is composed as follows: Allan Sproul, Chairman President, Federal Reserve Bank of New York Perry E. Hall Executive Manager, Victory Fund Committee, Second Federal Reserve District Thomas Hewes State Administrator, Connecticut W a r Savings Staff John E. Manning State Administrator, New Jersey W ar Savings Staff Richard C. Patterson, Jr. Chairman, New York State W ar Savings Staff Approximately $15,000,000,000 of this during leaving about $120,000,000,000 available for Since the supply of consumer goods and services 1943 is estimated at only about $77,000,000,000 at present price levels (about $5,000,000,000 less than last year), some $43,000,000,000 would have to be absorbed in savings and additional taxes in order to eliminate the danger of inflationary pressure on prices. Although savings through normal channels may be counted upon to absorb a substantial portion of this purchasing power, there will exist a large vol ume of excess funds which could be used to bid for the limited supply of goods and services. To the extent that this excess income can be absorbed through sales of Government securi ties to its recipients, there is less likelihood of its being spent G O V E R N M E N T S E C U R IT IE S O F F E R E D I N S E C O N D W A R L O A N D R I V E Maturity Prior redemption Denomination Subscription books open Limitations on purchases Treasury bonds of 1964-69 June 15, 1969 Callable on and after June 15, 1964 2H % $500 to $1,000,000 April 12 through duration of drive Commercial banks may not purchase until April 15, 1953 Treasury bonds of 1950-52 Sept. 15, 1952 Callable on and after Sept. 15, 1950 2% $500 to $1,000,000 April 12 through duration of drive; commercial bank subscriptions on April 28, 29, 30 Total commercial bank allot ments limited to about $2,000,000,000 with subscrip tions of $100,000 or less allotted in full Certificates of indebtedness April 1, 1944 None A% 7 $1,000 to $1,000,000 April 12 through duration of drive; commercial bank subscriptions on April 12, 13, 14 Same as Treasury bonds of 1950-52 Treasury bills Usually 91 days May be resold to Federal Reserve at % % Discount bid $1,000 to $1,000,000 Each week Allotments on basis of bid price Series E War Savings bonds Ten years from date of issue At option of owner after sixty days from issue date Yield 2.9 % if held to maturity $25 to $1,000 Continuously Only $5,000 (maturity value) in any calendar year— issued only to individuals Series F & G United States Savings bonds Twelve years from date of issue At option of owner after six months from issue date on one month’s notice Series F yield 2.53% if held to maturity; Series G interest rate is 2 $100 to $10,000 ($25 for Series F only) Continuously Only $100,000 (issue price) in any calendar year of Series F and G combined— commercial banks not eligible to purchase Series A Tax notes Sept. 1, 1945 Redemption for taxes during and after second calendar month after month of purchase — cash redemption with out advance notice Yield 1.92% if used for tax payment — otherwise no interest paid $25 to $5,000 Continuously Only $5,000 principal amount may be presented in payment for each class of taxes in any taxable period Series C Tax notes Three years from date of issue Redemption for taxes same as Series A— cash redemption after six months from issue date on 30 days’ notice Yield 1.07% if held to maturity* $1,000 to $1,000,000 Continuously None Type of issue Interest rate * No interest paid on cash redemption of Tax notes issued to a commercial bank. 29 FED ERAL RESERVE B A N K OF N E W Y O R K M E M B E R B A N K C R E D IT T his District’s Share There was a continued strong demand for Government The $8,000,000,000 goal for nonbanking subscrip securities on the part of the weekly reporting member banks tions in the April W ar Loan Drive has been broken during the five weeks’ period February 17 to March 24. down into similar goals for each of the twelve Federal Re though the only new Government offerings in this period con serve Districts. Three-eighths of it— $3,000,000,000— A l sisted of the regular weekly Treasury bill issues, the reporting has been set as the objective for the Second Federal banks in 101 leading cities added $865,000,000 to their Gov Reserve District. ernment holdings. This proportion for the Second Dis The highlight of the first four weeks was trict is based upon this Districts share in the total de the large volume of Treasury bills purchased by these banks, posits of individuals, partnerships, and corporations in $538,000,000. the country as a whole, with additional allowances for $240,000,000, or nearly half of these bills, were sold as some During the week ended March 24, however, the large resources of insurance companies and mutual of the member banks, particularly in New York and Chicago, savings banks located within the District. For the disposed of bills in the adjustment of their reserve positions. double reason that the District goals are based primarily The weekly reporting member banks in these two cities sold upon the location of deposits, and that disturbances to $172,000,000 in Treasury bills during that week. bank reserve positions might otherwise occur through For the five weeks as a whole the N ew York City reporting shifts of deposit balances from one part of the country banks made net purchases of $400,000,000 Government obli to another, it is desirable that subscribers enter their gations, more than replacing the $316,000,000 sold during the subscriptions as far as possible in the localities, and preceding five weeks’ period. through the banks, where their funds are. $242,000,000— consisted of Treasury bonds. More than half the increase— The other large item was net purchases of Treasury bills, $141,000,000. Certi ficates of indebtedness were sold in the amount of $58,000,000. than there would be if it were in the form of currency or bank deposits. two ways. Savings thus accumulated have a beneficial effect in N ot only do they hold down inflation during the war, but they may stimulate production after the 'war if used tc buy goods and services at a time when the available supply can be expanded. For these reasons, the primary goal of Treasury financing is to raise a maximum amount direct from individuals. selling Government securities to nonbanking investors, the proportion absorbed by commercial banks has not declined During the first four months of the fiscal year which began July 1, 1942, commercial banks (including the Federal Reserve) absorbed about 56 per cent of the net bor rowing from the public. Although the December drive was successful in that commercial banks were allotted only 40 per cent of the total amount raised during the month, the amount actually absorbed by banks was considerably greater after taking into account a shift of already outstanding Government securities from other investors to commercial banks during November and December. to show a steady increase. Over the two months of Novem ber and December, increases in holdings of Government securi ties by the commercial banks and the Federal Reserve Banks were equal to nearly 54 per cent of the net borrowing from Between February 17 and March 24 these banks purchased an additional $465,000,000, Treasury bonds accounting for $260,000,000 and Treasury bills for $157,000,000. Total loans declined both in New York City and in the 100 other cities. Although substantial achievements have been made so far in materially. Outside New York City, the Government securities port folios of the reporting member banks in 100 cities continued In N ew York the decrease amounted to $95,000,000; commercial, industrial, and agricultural loans fell off $58,000,000 and loans to brokers and dealers in securi ties $29,000,000. In the 100 cities outside N ew York total loans dropped $93,000,000, mainly as a result of a further decline of $44,000,000 in commercial, industrial, and agricul tural loans and $32,000,000 in the "all other loans” classification. In view of the offsetting effect of Government expenditures, income tax payments did not materially depress the level of adjusted demand deposits. In fact, in N ew York City adjusted demand deposits rose steadily over the five weeks’ period under review, the aggregate increase amounting to $964,000,000. Outside New York there was a decline of $394,000,000 dur ing the week ended March 24, but a net increase of $544,000,000 for the five weeks as a whole. The Govern ment drew down its deposits with the reporting member banks in the 101 cities an additional $1,123,000,000. the public. If the sale of securities to nonbank investors is to be success S E C U R IT Y M A R K E T S ful in attaining the objective of drawing off large amounts The forthcoming April financing was a dominating influ of current incomes of the public, considerable emphasis must ence in the Government security market during March, as be placed upon continued holding by subscribers of securities investors readjusted their portfolios in the light of individual purchased. requirements. Sales or redemptions of securities, in the absence of compelling need, tend to defeat that objective. There was a considerable volume of offerings of partially tax exempt bonds by insurance companies, in 30 M ONTHLY REVIEW , APRIL 1, 1943 preparation for purchases of the new issues during April, but these securities were quickly absorbed by banks and other investors. A t the same time, a buying interest was evident N E W S E C U R IT Y ISSU E S N ew offerings of corporate and municipal securities in March amounted to about $128,000,000, the largest monthly in the fully taxable bonds over the greater part of the month, total since June, 1942. Corporate issues, which had been at and in the longer maturities of outstanding Treasury notes and exceedingly low levels in the previous two months, increased certificates of indebtedness. Generally speaking, the principal tc $79,000,000 in March, including $49,000,000 for new outright demand came from commercial banks, while opera capital purposes. As in the previous two months, municipal tions of other investors, aside from sales of partially tax- awards aggregated about $50,000,000. The Fed The principal corporate offering was that of $20,500,000 eral Reserve Banks sold substantial amounts of Treasury bonds Public Service Company of New Hampshire first mortgage exempt bonds, were largely confined to "switches”. and notes over the month, with the effect of restraining rising 3*4 per cent bonds due in 1973, offered to the public at a tendencies in the prices of outstanding obligations. price of 108 to yield 2.85 per cent. O f the total amount raised Prices of municipal bonds during March held generally from this issue, $19,686,000 will be used to retire outstanding A c bonds. Other large corporate offerings included $14,000,000 companying a considerable increase in market activity, prices Continental Can Company 3 per cent debentures due in steady around the high level reached late in February. Near the 1965, sold privately to a group of life insurance companies, close of the month the yield on Baa bonds as computed by and $10,000,000 Erie Railroad Company 3 Vs per cent collateral Moody’s Investors Service was at a record low of 3.98 per cent. trust notes due from 1944 to 1953, awarded at a net interest Stock prices continued to move up in March, prolonging cost of 3.10 per cent and reoffered to yield from 1.00 to 3.15 of domestic corporation bonds tended to advance. In this per cent. In the municipal total there were $23,545,000 of eleven months’ period, the level of stock prices rose 55 per local housing authority serial bonds and $9,000,000 City of cent, according to Standard and Poor’s index of 90 stocks. Seattle, Washington 3 Vi per cent municipal transportation A t the end of March the index was about 5 per cent higher refunding bonds maturing from 1944 to 1961. the general rise which commenced late last April. than a month earlier, and at the highest point since May, 1940. In spite of increased financing activity in March, the volume Trading on the N ew York Stock Exchange was the most active of corporate security issues during the first quarter of 1943 it has been since December, 1941. averaged only $34,000,000 monthly. Over a million shares changed hands during practically every full day, and turnover Issues for new capital purposes, averaging $21,000,000 monthly, were above the unusually low level of $6,000,000 in the preceding quarter, exceeded two million shares on five occasions. but were still well below monthly averages of recent years. F O R E IG N E X C H A N G E S Although foreign exchange trading in the N ew York market P R O D U C T IO N A N D T R A D E continued on an extremely limited scale during March, there Judging from preliminary data, industrial activity in March was somewhat more fluctuation in rates than had occurred in appears to have increased further from the high level of recent months. early in the February. Weekly estimates of steel production indicate that month, the Canadian dollar subsequently advanced in the March output was close to the record tonnage turned out by the After declining to $ 0 .8 9 6 8 % unofficial market here, to be quoted as high as $ 0 .9 0 4 3 % on steel mills in the peak month last October. The daily output March 30. This rate, which was slightly above the 1942 peak of bituminous coal, which in February had reached the highest and indicated a net gain of nearly 2 cents for the elapsed por point in a number of years, showed a further gain during the tion of 1943, was only about V2 cent below the official rate at first part of March, and crude petroleum production and which the Canadian Foreign Exchange Control Board currently electric power output appear to have run slightly ahead of the sells Canadian dollars. rates of the previous month. This official rate virtually constitutes a maximum level above which the Canadian dollar is not likely In February the seasonally adjusted index of production and Among the other Western trade computed at this bank rose to a record level of 128 per Hemisphere currency rates, the free rate for the Argentine cent of estimated long term trend, three points above the peso continued during March to show the strength that had figure for January and fourteen points above that for February, to sell in the unofficial market. first developed in the middle of January. By March 31 the 1942. Retail trade and primary distribution showed marked quotation had reached $0.2414, as compared with $0.2372 gains in February and productive activity held close to the at the end of February and $0.2357 on December 31, 1942. record level of last December. The February rise in retail The "free” Swiss franc fluctuated irregularly in the usually trade was to a large extent due to exceptionally active buying, thin market here, showing little net change for the month as particularly of clothing, in anticipation of rumored future a whole. rationing. Toward the end of March the quotation, at $0.2800, remained about 9 Va cents below the December peak but nevertheless about 3 Vi cents above the February 1 low. The index of output of producers’ durable goods moved up three points between January and February, evidencing a fur- 31 FEDERAL RESERVE BANK OF NEW YO R K section of the accompanying chart.* 1943 1942 Successful conversion of the metal-working industries of Syracuse to war uses, and Feb. Dec. Jan. Feb. construction of new plants in the area, have reversed the (100=estimated long term trend) Index of Production and Trade.............. 114 123 125p 128p city last year and in the past four months both employment Production............................................. 120 136 135p 136p and payroll gains in Syracuse have been more rapid than in Producers’ goods—total.................... Producers’ durable goods............. Producers’ nondurable goods. . . . 143 158 126 171 207 131 172p 206p 133p 174p 209p 135p the curves of manufacturing employment and payrolls flattened Consumers’ goods—total.............. Consumers’ durable goods............ Consumers’ nondurable goods---- 92 56 105 91 39 108 87p 40p 103p 87p 41p 103p gains of the preceding two and one-half years. Durable goods—total........................ Nondurable goods—total................. 128 113 157 117 157p 115p 160p 116p Primary distribution............................ Distribution to consumer..................... Miscellaneous services....................... . 118 96 115 142 82 147 144p 88p 147p 150p 96p 148p substantially since then, although payrolls have shown a further 113 120 121 121p recently reclassified by the W ar Manpower Commission as a 132 146 147p temporary recession in employment which occurred in that Indexes of Production and Trade* Cost of Living, Bureau of Labor Statistics (100— 1935-39 average)........................... In the "capital” district off in January and February of this year, following the rapid ployment in the Factory em Kingston-Newburgh-Poughkeepsie area, which increased considerably during 1941, has not changed irregular rise; Kingston, a textile and apparel center, was labor surplus area. Wage Rates (100— 1926 average)................................. The nation’s estimated civilian labor force declined between (100=1935-39 average) New York City......................................... Outside New York City........................... 69 82 62 90 67 78 69 75 January and February and reached a new wartime low of 52,300,000. Military inductions constituted the principal -------------------------------------------------------------------------------------------------------------------------- FI- Velocity of Demand Deposits* p Preliminary. any other industrial area in the State. reason for the withdrawal of 400,000 men from the civilian * Adjusted for seasonal variation. ------------------------------------------------------------------------------------------------------------- y o c labor force in the month, and only 300,000 women entered ther rise in the manufacture of war goods and an increase in the labor market as replacements. the daily rate of steel production. W ith the exception of to February, 1943, the labor force declined by over 1,000,000 October, 1942, the average daily rate of steel production in persons, and the proportion of women among all employed February was higher than in any month on record and ship workers rose from 25 per cent at the earlier date to 30 per ments of steel plate reached a new high daily rate. During cent. February merchant shipyards delivered the record number of contraction of the labor force as a result of military inductions Navy Department reported the delivery of 150 warships The Bureau of the Census has forecast a continuing unless considerably larger numbers of persons, particularly housewives and youths, enter the labor market. of 200,000 tons displacement. The Under Secretary of W ar announced that 5,500 airplanes were produced in February. The producers’ nondurable goods index advanced two points in February. Reflecting in part the adoption of a six-day week * In this R ev ie w for February 1, 1943 (page 1 4 ) , a similar chart was reproduced covering factory employment and payrolls in New York City, Buffalo, Rochester, and Binghamton-Endicott-Johnson City. by most of the industry, the daily rate of bituminous coal out put rose to the highest level in nearly sixteen years, and the PERCENT PERCENT 500 A L B A N Y -T R O Y SCHENECTADY daily consumption of cotton was higher in February than in the preceding month. Output of consumers’ goods during February was maintained at approximately the January level. 300 200 / 150 EM PLOYM ENT AND PAYROLLS per cent and factory payrolls advanced almost 4 per cent from January to February, according to the New York State Depart ment of Labor. Rising activity at war plants and seasonal expansion in the clothing industries were the major factors in these increases. Average weekly earnings were $42.97 in February as compared with $36.30 one year previous. In New York City the February seasonal movement in apparel out r1 PA 200 300 200 70 i i i 1940 ... t i i 1941 i l 1 1942 ..J I .1 1 94 3 i .......... K I N G > S T O N - N E W B U R G h -1P O U G H K E E P S IE i P AYROLL £ /- v “ 150 100 in increases in employment and payrolls about equivalent to the changes in the State as a whole. The levels of -manu facturing employment and payrolls in the City remain, how ever, considerably below Upstate N ew York, shown in one 5 0 _J—i l 193 9 50 I i i i i i . 1939 1940 em p LOYME NT l l I 1941 i i i .1...I i 1942 1 94 3 500 UPSTA TE NEW YORK 300 1 1 PA'!i'R O LLS 200 „ y 150 X 70 put, together with an expansion at local war plants, resulted / y MPLO YIM E N T 100 70 5 0 _,l l I 1939 500 . 150 : m p l o ' MENT 100 Factory employment in New York State increased SYRy 1 p 'AYROLL CO 130 ships, totaling over 1,200,000 deadweight tons, and the In the year February, 1942 l 100 MPL.OYMEN T 70 _i i I 1940 ..III 1941 I i I 1942- J, I I 1943 50 ..i i i 1 93 9 -.1 1 1 194 0 i i i 1941 _l...l. 1 .1 1 1 1942 1943 Factory Employment and Payrolls in Selected Industrial Areas in New York State, and in Upstate New York as a Whole, as Reported by New York State Department of Labor (1935-39 average = 100 per cent; data plotted on ratio scale to show proportionate changes) M O N T H L Y R E V I E W , A P R I L 1, 1943 32 R A T IO N IN G A N D R A T IO N COUPON PER CENT B A N K IN G Following the establishment on March 1 of a point system of rationing for virtually all types of processed fruits and vege tables, a similar system went into effect on March 29 for the rationing of meats, canned fish, most types of cheese, butter, and other edible fats and oils. The point values set by the Office of Price Administration allow each person approximately two pounds of meat, butter, and cheese per week, depending upon the cuts of meat purchased. Although consumers will not have to surrender points for food consumed in hotels and restaurants, such establishments will be rationed directly with their supplies of meat, cheese, and butter considerably reduced. On March 26, the President announced the creation of a Food Production and Distribution Administration in the Department of Agriculture, to be headed by Chester C. Davis, President of the Federal Reserve Bank of St. Louis. Mr. Davis, who will be responsible directly to the President, will have broad powers over the production and distribution of food and the recruitment of farm labor and is expected to control food prices in cooperation with the Office of Price Administration. The President also announced plans for the deferment of over 3,000,000 farm workers and the recruitment of a "Land Army” of students, women, and other workers. The system of ration banking is being extended as a result of the enlargement of the rationing program. Since January 27, banks have been handling and clearing coupons for sugar, coffee, and gasoline. Indexes of Sales and Stocks of Reporting Department Stores in the Second Federal Reserve District, Adjusted for Seasonal Variation (1923-25 average=lO0 per cent) Expressed in retail values, stocks of merchandise on hand in the reporting department stores in this District at the end of February were 10 per cent below February, 1942. Returns from a limited number of department stores in this District show that at the end of February outstanding orders for merchandise purchased by the stores, but not yet delivered to them, were 16 per cent below February, 1942, but 18 per cent higher than at the end of January, 1943. N ow they are being called upon to Percentage changes from a year earlier handle the huge volume of coupons arising out of the rationing of meats and processed foods; beginning April 12 ration coupon Department Stores accounts will also be opened by shoe dealers. During March it was announced that certain agencies, such as the Army and New York City..................................... Northern New Jersey........................... Navy, exempt from rationing restrictions, would be required Westchester and Fairfield Counties. . . to open special ration coupon accounts with unlimited over Lower Hudson River Valley................ Poughkeepsie..................................... Upper Hudson River Valley................ Albany................................................ Schenectady*..................................... Central New York State...................... Mohawk River Valley...................... draft privileges. The agencies will draw special ration checks against these accounts to reimburse distributors for the coupon value of commodities they purchase, thus enabling both civilian and military supplies to be brought under the same system of distributive control. Northern New York State................... Southern New York State................... Binghamton....................................... Western New York State..................... D E P A R T M E N T STORE TR A D E Niagara Falls..................................... On the basis of weekly reports received at this bank, department store sales in this District during March appar ently were maintained close to the level of March, 1942 but lower than in February, 1943. Normally there is a seasonal increase between February and March, but this year sales during February of department stores (as well as apparel Net Sales Stock on -------------------hand, Jan. and February 28, Feb., 1943 1943 February, 1943 +20 + 3 + 7 + 8 + 10 + 9 +13 + 1 -1 2 +17 +23 +24 +22 + 5 +27 +31 +17 +24 +30 +47 +16 + 3 - 7 - 3 - 5 - 7 - 3 - 1 - 9 -1 9 + 3 + 9 +16 + 7 - 4 + 14 +17 + 5 + 9 +13 +36 + 2 -1 0 -1 7 -1 7 + 1 + 7 - 4 — - 1 — - 6 -1 1 - 3 -1 3 — + 2 — - 8 - 4 - 6 -1 4 All department stores................... +17 + 2 -1 0 Apparel stores............................ +48 +17 - 2 *Separate figures for Schenectady available for the first time. Indexes of Department Store Sales and Stocks, Second Federal Reserve District (1923-25 average = 100) stores) were at an exceptionally high level as the result of a 1942 1943 buying wave, particularly in clothing, induced by rumors of impending rationing. Buying of this character subsided in Feb. Dec. Jan. Feb. 215 119 97 123 112 138 118 121 108 118 105 111 March. Sales in February were 17 per cent higher than in Sales (average daily), unadjusted............... Sales (average daily), seasonally adjusted. . 94 116 the corresponding month last year, and exceeded even the Stocks, unadjusted....................................... Stocks, seasonally adjusted.......................... 119 124r record levels considered. attained in August, 1941, seasonal factors rRevised. FEDERAL RESERVE B AN K OF N EW YORK M ONTHLY REVIEW, APRIL 1, 1943 G eneral Business and Financial Conditions in the U nited States (Summari2ed by the Board of Governors of the Federal Reserve System) NDUSTRIAL activity continued to advance in February and the early part of March. Retail sales of merchandise, particularly clothing, were exceptionally large in February but declined somewhat in March. Wholesale prices, particularly of farm products, advanced further. Pr o d u c t io n I Index of Physical Volume of Industrial Produc tion, Adjusted for Seasonal Variation (1935-39 average—100 per cent) Indexes of Value of Department Store Sales and Stocks, Adjusted for Seasonal Variation (1923-25 average:=100 per cent) Indexes of Wholesale Prices Compiled by United States Bureau of Labor Statistics (Latest figures are for March 20; 1926 average =100 per cent) Member Bank Reserves and Principal Related Items (Latest figures are for March 24) Total industrial output continued to increase in February and the Board’s adjusted index rose to 203 per cent of the 1935-1939 average as compared with 199 in January. Larger output at coal mines, steel mills, and armament plants was chiefly responsible for the rise in the index. February deliveries of finished munitions, including a record of 130 merchant ships, considerably exceeded the previous month. Activity at steel mills reached the peak set last October. Operations averaged 98 per cent of the mills’ capacity, which has been increased since that time to a figure above 90 million tons of ingots annually. Lumber production, which declined in January owing largely to unfavorable weather, increased in February somewhat more than is usual at this season. Output of textile products remained at the high level of other recent months. Cotton consumption was slightly lower than the corresponding month of the previous year, while rayon and wool consumption were somewhat higher than last year. Shoe production, unchanged from January, was close to the level set by the W ar Production Board order which limits output of shoes for civilians in the six months beginning March 1 to the number produced in the last half of 1942. Meatpacking declined less than seasonally after a reduction in January, while output of most other foods was lower. Coal output rose sharply in February with the general adoption of the six-day work week in the mines. Operations in the anthracite mines increased to the high level of last summer while output of bituminous coal was the highest in many years. The value of construction contracts awarded in February was about the same as in January according to reports of the F. W . Dodge Corporation. Total Federal awards for war construction remained at a level about one-third as large as during last summer. Federal awards for housing continued to decline in February. D is t r ib u t io n Department store sales increased considerably in February and the Board’s seasonally adjusted index rose to a new high level of 167 per cent of the 1923-25 average. Previous peaks had been 143 in January and 138 in January and November 1942. The increase in February reflected a new buying wave that began early in the month and centered chiefly in clothing items. In the first half of March the buying wave subsided somewhat and sales declined from the high level reached during February. Freight car loadings showed more than a seasonal rise in February and the first two weeks of March and the Board’s adjusted index averaged 4 per cent higher than in January. Large off-seasonal movements of grain continued to be the most unusual feature of car loadings. C o m m o d it y Prices Prices of a number of commodities advanced further in February and in the early part of March. Farm products have continued to show the largest increases and prices received by farmers in the middle of March are estimated to be about 30 per cent higher than a year ago. Fruit and vegetable prices are considerably higher now than during the same season last year. Prices of bread grains and grains used for livestock feeding have advanced sharply in recent months and livestock prices have also risen further. In retail markets the largest advances have continued to be in food prices. In the latter part of February maximum levels were established for leading fresh vegetables following sharp price increases resulting in part from the restrictions on retail sales of canned and dried vegetables and fruits. Ba n k Cr edit Excess reserves of member banks remained generally above 2 billion dollars during the first two weeks of March, compared with an average of about 1.8 billion during the latter part of February. During the four weeks ending March 17 total Reserve Bank holdings of Government securities showed an increase of 4 70 million dollars. Purchases of special Treasury one-day certificates moderated the effect of large scale shifts of funds over the tax payment period. These purchases began early in March and on March 17 the certificate outstanding was 9 80 million dollars. Holdings of other United States Government securities declined by 510 millions. Reflecting the payment of taxes in cash, money in circulation rose less rapidly early in March and declined slightly around the middle of the month. The gain in reserve funds occurred mainly at banks outside the central reserve cities; at N ew York City and Chicago banks reserves remained close to requirements. In the four week period ending March 17 member banks in 101 leading cities increased their holdings of Government securities by 920 million dollars. Prices of Government securities continued steady. Demand deposits at banks in leading cities increased sharply over the four week period. There were also increases in interbank deposits, indicating accumulation of funds by country banks.
@FedFRASER