The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
( The article on the last page describes gold imports in their relation to the Federal Reserve system.)
MONTHLY REVIEW
Of Credit
and
Business
Conditions
In the Second Federal Reserve District
By
t he
Federal
Reserve
Agent,
Federal
Reserve
Bank,
Ne w
York
New York, August 1,1921
Credit'Conditions
T
The loans of all Reserve Banks except New York de
clined $775,000,000 from the high point of September
24, 1920, or......................................................................... 34 per cent.
The loans of the New York Reserve Bank declined $749,000,000 from the high point of February 27, 1920, or.. 62 per cent.
HE reserve percentages of the Federal Reserve
system and of the New York Reserve Bank have
been higher in the last thirty days than at any
This decline in loans taken in connection with the
time in the past three years, an indication of the liquida
importation of gold and partly as a result of it, is reflected
tion of credit which has been going forward since the in the reserve ratios of the Federal Reserve system and of
autumn of 1920.
the New York Reserve Bank. These ratios for the last
This liquidation of credit has been attended by a eighteen months are shown in the diagrams printed on
liquidation of goods and of stocks, but by no means has it this page. In all cases the percentages shown for the New
been confined to domestic business. The heavy importa York Reserve Bank are figured irrespective of borrowings
tion of gold from Europe, which has continued for about from other Reserve Banks or of loans to them. At this
a year, some of it to finance current transactions, has also time such loans to other Reserve Banks in districts which
paid a large amount of foreign indebtedness to the United are largely agricultural amount to $38,000,000.
States, and has contributed toward the building up of
A L L DISTRICTS
NEW YORK
considerable foreign balances in New York. Up to July 10,
0 - - ..
100
the net movement of gold to this country since July 1,
1920, amounted to $531,500,000. As appears in a more
A .............
80
extended discussion of gold imports, which is printed on
u
the last page of this issue of the R e v i e w , almost all of this
gold has entered into the reserves of the Reserve Banks.
........ r*-f*
60
0
It has worked doubly to increase the reserve position of
\9 Z\ j
the system, by enabling member banks to reduce or
\9Z0
yvx / w f
extinguish indebtedness to the Reserve Banks, and by
f\»
*4 i
40
i<
enlarging its gold reserve. According to a calculation
*o>V
given in the July issue of the Federal Reserve Bulletin,
......
20
,u
the average reserve ratio of the system during June would
have been 48 as against 59 per cent., had there been no
additions to gold reserves in the preceding year.
n .........
JANThe liquidation in this Federal Reserve district has
been more extensive than in the country as a whole, and Reserve Percentage of the Federal Reserve Bank of New York Each
within this district the greatest reduction of bank credit Week in 1920 and 1921 before Interbank Borrowings and Reserve
has taken place in New York City banks. Similarly, the
Percentage of the Federal Reserve System
decline in the loans of the New York Reserve Bank has
The reduction of bank credit thus far effected, accom
been greater than in the Federal Reserve system as a whole,
and accounts for about half the entire reduction. In sum panying a decline in the prices of practically all commodi
ties and products, has not been marked by any series of
mary the liquidation of bank credit is as follows:
severe business failures such as has characterized other
The loans of 816 principal banks in all districts, which
comparable periods. Figures based on the reports of credit
report to the Federal Reserve Board, declined $2,233,000,000 from the high point of October 15, 1920, o r.. . . 13 per cent.
agencies indicate on the contrary that the number of such
The loans of 70 banks in New York City declined $1,252,reverses in recent months has been but little above and
000,000 from the high point of October 10, 1919, or___ 21 per cent.
frequently somewhat below the average through a series
The deposits of 816 banks in all districts declined $1,349,of years. Bankers ordinarily have avoided the precipitate
000,000 from the high point of January 16, 1920, or___
9 per cent.
calling of loans and have aided in the work of readjusting
The deposits of 70 banks in New York City declined
to new conditions. In this they have been guided by the
$974,000,000 from the high point of September 19,
1919, or............................................................................... 18 per cent.
knowledge that the resources of the Federal Reserve
system have always been available to meet all necessary
The loans of all twelve Reserve Banks declined $1,458,credit demands.
000,000 from the high point of October 15, 1920, o r.. . . 43 per cent.
/
V/
2
MONTHLY REVIEW
The reduction in the volume of bank loans, and particu
larly the decline in loans of the Reserve Banks, reflects the
passing of the period of credit stringency. There con
tinues, however, as necessarily must continue at all times,
a scrutiny of new loans and the exercise of sound banking
judgment in granting them, especially when they are
desired for the purpose of holding goods at values unrelated
to present conditions or for embarking on enterprises
which depend for their profits upon the former level of
prices. The discretion of the individual banker, keeping
in mind the serious consequences of too strict a program
with regard to loans already made and still required, will
no doubt lead him to follow a liberal policy wherever
present conditions or sound expectations warrant.
On July 21 the New York Reserve Bank reduced its rate
on all rediscounts and advances from 6 to
per cent.
The Boston, Philadelphia and San Francisco Reserve
Banks announced similar new rates simultaneously.
Savings Bank Deposits
An increase in deposits reported on July 10 by represent
ative savings banks in this district coincided with the
semi-annual crediting of interest. Deposits in New York
City have increased steadily since February but the July
increase for banks outside New York was the first since
January. In industrial centers in which unemployment
has been most marked, banks reported an unusually large
turn-over of deposits. In several cases the crediting of
interest on July 1 was insufficient to offset heavy with
drawals, and deposits on July 10 were lower than on
June 10. The aggregate changes are shown in the fol
lowing diagram.
PER CENT.
Bill Market
The dealers’ offering rates for prime unindorsed 60- and
90-day bills in the New York market declined to 5 and 534
per cent, late in July, from the 534 per cent, rate which
prevailed earlier in the month. Shorter maturities were
sold at 5 and 5}z$ per cent., while four and six months’
bills were offered at 5 ^ and 5 ^ per cent.
Bills covering the importation of raw silk and raw sugar
were numerous. The portfolios of several important
dealers were composed largely of bills drawn under recent
sugar import credits and these dealers had difficulty at
times in filling orders for bills on other commodities.
There appeared to be some increase in the volume of grain
and cotton export bills during the month. There has been
a continuing lack of acceptances drawn overseas in financ
ing foreign trade transactions.
The bill market, as a whole, has broadened materially
in the past two months and offerings of bills to the Federal
Reserve Bank both by dealers and by member banks have
steadily declined. At the end of July the bill holdings of
the Federal Reserve Bank were the smallest in several
years, aggregating $5,747,000 on July 20, as against a
maximum of $231,257,000 in February a year ago. Pur
chases by this bank for the account of its foreign cor
respondents were an important factor in maintaining
market activity.
Commercial Paper
In the third week of July, simultaneously with the
reduction of rediscount rates at the Reserve Bank, open
market rates for commercial paper were reduced 34 °f one
per cent, to a range of 6 to 634 Per cent, for prime paper.
Slower moving paper generally ruled at 6}/z per cent.
The lowering in rates accompanied an increased de
mand for paper and larger sales than in some months.
MILLIONS
OF DOLLARS
Deposits of 11 Savings Banks in New York City and 10 Savings Banks
in the Second District Outside New York City. (Average Deposits
in 1918 = 100 Per Cent.)
FEDERAL RESERVE AGENT AT NEW YORK
Up to that time, however, the market was dull, and dealers
reported that while there was a good demand for paper of
unquestioned grade, the unwillingness of purchasers to
accept paper of less high grade tended to restrict the volume
of sales. This bank’s tabulation of the outstanding paper
of eleven principal dealers on June 30 indicates a further
decline. Dealers continue to report that their best out
side market is in the eastern States, and that in New York
City the chief buyers continue to be the up-town banks.
A few of the larger down-town institutions, which were
out of the market for a long period while in debt to the
Reserve Bank, have now paid off their loans and are
again buying paper for their own accounts; the majority
of down-town banks, however, are not investing in com
mercial paper.
The supply of paper, particularly of choice names, has
been rather limited, but both dealers and bankers report
that textile concerns which have been light borrowers for
some time are now beginning to borrow larger amounts in
connection with a more active movement of goods in those
lines.
Stock Market Money Rates
In the latter part of June the accumulation of large
supplies of funds in preparation for July 1 settlements
resulted in a reduction in the call loan renewal rate to
5 per cent., the lowest since October, 1919. After July 1
the rate rose again to 6 per cent., which remained the
typical rate during the first three weeks of the month.
The somewhat higher range during July accompanied a
moderately large movement of funds from this center to
the interior in payment of corporate maturities and in
response to early crop demands. While the withdrawal
from the banks of Government deposits was larger than
in recent months, the effect upon money rates was slight,
inasmuch as those funds returned to the banks almost
immediately upon the redemption of Treasury certificates
or when the Government made other disbursements.
Time money became somewhat more active for a brief
period early in July, but otherwise the market remained
quiet. Rates declined slightly, and at the close of the
period were prevailingly 6 per cent, for all maturities as
compared with 6 to 6 ^ per cent, a month ago.
3
which they fell in June. This rise was partly due to the
usual July reinvestment buying, but the consistent
character of the advance appeared to reflect a change in
money conditions more favorable to fixed income secur
ities. Railroad bonds were leaders in the advance.
Foreign government bonds were steady. Belgian issues
were especially strong, and the 7)^s reached 101, a new
high price for the year. Japanese 4 per cent, bonds also
reached a new high level for the year. Mexican bonds
weakened following the failure of the Mexican Govern
ment to resume interest payments on July 1.
Total bond sales on the New York Stock Exchange,
excluding United States Government bonds, were $99,202,000 during June, a slightly smaller amount than was
sold in May, but more than half as much again as the
total in June, 1920. During the first three weeks of July
trading became slightly more active.
United States Securities
Heavy trading in Government war issues, particularly
Victory notes, brought total sales during June to $214,
500,000, the largest amount for one month since December
and not far below the total for June last year. In July,
however, trading slackened again, and by the third week
of the month sales fell to about two-thirds of the June
average.
Prices between June 20 and July 20 showed marked
steadiness. The tax exempt Liberty 33^s continued an
exception to the general trend, declining sharply to near
the lowest price recorded.
The usual Treasury offering of certificates of indebted
ness on the fifteenth of the month was omitted in July, but
certificates to the amount of $132,886,500 were redeemed.
Two issues dated August 1, aggregating $300,000,000 or
thereabouts, were announced late in July at rates of 5 ^
for seven and one-half months and 5 ^ per cent, for one
year. Early subscriptions were exceedingly heavy. Out
standing issues continue to find an active market and
all are quoted at slightly above par.
Stock Market
New Financing
Following the prolonged decline during May and June,
the stock market in July became decidedly inactive.
Industrial stocks recovered slightly, but failed to hold
their gains. Railroad stocks made a sharper rise and
despite some later profit taking, retained the greater part
of their advance. Readjustment of railroad wage scales,
quarterly reports showing larger net earnings and the
expectation of government relief were factors in the ad
vance. June stock sales were 18,300,000 shares, slightly
larger than the May total, and nearly double the amount
sold in June, 1920. In July the volume of sales was much
smaller.
During July the market for new securities recovered in
moderate degree from the dulness that prevailed during
June. Dealers reported a fairly active investment inquiry,
but the volume of new offerings was not large. State and
municipal bonds formed an unusually large percentage of
total issues, and were in excellent demand. Chief among
the corporate offerings were $25,000,000 twenty-five-year
bonds of the Canadian Northern Railway guaranteed by
the Canadian Government, sold to yield 6.80 per cent.
Bond Market
During the four weeks ended July 20 average bond
prices advanced 2 points or more above the low levels to
Terms of new offerings varied little from those estab
lished in recent months. Highest grade bonds are mar
keted to yield between 6J/^ and 7 per cent., compared with
7 and 7 ^ per cent, last year. Hesitation of rates in some
groups to decline was emphasized recently when City of
Philadelphia bonds were offered above 5 per cent, for the
first time in the history of the city.
4
MONTHLY REVIEW
June corporate issues totaled $179,000,000, a slightly
larger sum than was offered in May, but less than the
offerings in the active months of this year or in June of
last year. As in past months, industrial issues prepon
derated, and new bonds and notes largely outnumbered
stocks. Total issues for the half year aggregated $1,442,000,000, compared with $1,800,000,000 in the first half
of 1920. It is estimated that about 30 per cent, of this
year’s issues were to pay off maturing obligations.
Gold Movement
June imports of gold totaled $43,844,000, which is
smaller than the totals for March, April or May but larger
than the figures for January or February. Exports con
tinued small.
Below are shown for the first quarter and for April,
May and June the amounts of gold received from various
countries.
(In thousands)
Country
England..................................
France.....................................
Sweden...................................
Canada...................................
China and Hong Kong..........
British India..........................
Netherlands...........................
All Other................................
First
Quarter April
May
June
Total
Jan. 1June 30
$51,163 $13,771 $18,807 $18,509 $102,250
45,235 10,895 9,726 7,482 73,338
4,679 23,798 7,846 6,569 42,892
140 4,237 25,088
158
20,553
454 19,312
12,508 3,980 2,370
8,081 3,214 4,305 1,546 17,146
450 15,716
1,557 11,052 2,657
19,859 13,792 12,370 4,597 50,618
Total Imports.................... $163,635 $80,660 $58,221 $43,844 $346,360
Total Exports....................
4,471
384
1,062
773
6,690
Excess of Imports.............. $159,164 $80,276 $57,159 $43,071 $339,670
On July 1, the stock of gold in the United States, as
estimated by the Treasurer, amounted to $3,223,000,000,
the largest in the country’s history.
During the first ten days of July gold imports amounted
to $13,131,000, of which $5,912,000 came from England
and $4,279,000 from France. Exports during the period
were $1,244,000, of which about $1,124,000 went to
Sweden, the first export to any European country since
December, 1920.
Foreign Exchange
Sterling exchange declined further during July although
the fall was much less precipitate than during either May
or June. Contributory factors in this weakness were the
accumulation of foreign-owned balances here which are
understood to include provision for retiring certain foreign
Government obligations maturing shortly in this market,
and the payment for the continued large imports from
this country made necessary by the British coal strike
which was not settled until late in June, as well as for
seasonal shipments of cotton and grain.
Rates on continental Europe followed the fluctuations
of sterling in a general way. There was at times consider
able selling of exchange on some of the former neutral
countries, notably Holland, Switzerland, and the Scan
dinavian countries. This selling was reported by dealers
to have originated from German sources, Rates on all
these countries declined somewhat during the month.
No change was apparent in the general trend of rates
on South America. Continued unfavorable trade con
ditions in Argentina caused several sharp declines in
exchange on that country. Unsettlement in the rates on
Brazil, Chile, and Peru continued although declines were
less severe than in rates on Argentina. Improvement in
bar silver prices was reflected in higher quotations for
Far Eastern exchange.
The following table shows the closing quotations for
principal exchanges on July 23, the change from last
month, and the per cent, depreciation from par.
Country
July 23
Last
Change
from
June 18
Per Cent.
Depreciation
from Par
England.......................................
France..........................................
Italy.............................................
Spain............................................
Germany......................................
Switzerland..................................
Sweden (Stockholm)..................
Holland........................................
Belgium.......................................
Argentina.....................................
China (Hong Kong)...................
China (Shanghai).......................
Japan (Yokohama).....................
Canada.........................................
Bar Silver in N. Y ......................
$3.5775
.0773
.0433
.1275
.0129
.1647
.2055
.3132
.0773
.2867
.5013
.6788
.4813
.8888
.6025
-.2 1 7 5
— .0048
-.0 0 7 5
— .0055
— .0017
-.0 0 5 6
— .0185
— .0198
-.0 0 3 0
- .0182
+.0175
+ .0200
+ .0025
-.0 0 0 6
+ .0125
26.5
59.9
77.6
33.9
94.6
14.7
23.3
22.1
59.9
32.5
*
*
3.5
11.1
*Silver Exchange Basis.
Exchange Rates and Currency Depreciation
In the May issue of the R e v i e w there was presented
a discussion of the theory of foreign exchanges propounded
by Viscount Goschen to the effect that fluctuations in the
foreign exchanges away from their gold parity are due
primarily to the relative depreciation of currencies in dif
ferent countries, as shown by the relative price levels in
different countries. The accompanying diagram brings
up to date the comparison between the depreciation of
the exchanges of leading European countries and the de
preciation in the purchasing power of their currencies as
shown in index numbers for wholesale prices.
In recent months exchange levels have tended to ap
proach the purchasing power of the different currencies.
This movement has been particularly evident in the
English rates which have held fairly closely together
since early in 1921 and are now practically identical.
Some slightly greater divergence in the figures for France
and Italy in the past month has resulted from the declines
in exchange rates. The rate of exchange has tended to
approach the relative domestic purchasing power in
Germany for the entire past year, although there is still
a wider divergence between the curves in the case of
5
FEDERAL RESERVE AGENT AT NEW YORK
buyers were in the market but their buying was limited
by the fact that they requested 90 day credit. Plans were
reported under way for the formation of several banking
groups which would supply credits for grain shipments to
Germany.
Exporters doing business in Australia reported slightly
increased orders and improved collections. This appar
ently reflects the movement of wheat from Australia
which has permitted Australian banks to strengthen their
balances in London.
Reports from South America indicate that business
depression there continues serious. Stocks of unsold
goods are said to be still large, and new buying is slow.
A number of exporters have taken increased orders for
textiles, particularly colored goods and print cloths, but
reports of larger buying have been too scattered to
indicate a general improvement.
Summary figures for exports and imports follow.
Depreciation of Foreign Exchange from Par and Depreciation of the
Purchasing Power of Foreign Currencies from the Purchasing Power of
the Dollar. The Par Line Represents the Value of the Dollar and the
Figures for Exchange and Purchasing Power are Plotted as Percentages
Below Full Dollar Value
Germany than in that of any other nation. The German
mark is much more depreciated in foreign exchange than
in domestic purchases.
Exports................
Imports................
June, 1921
May, 1921
June, 1920
$337,000,000
186,000,000
$329,700,000
205,000,000
$629,000,000
$53,000,000
World Commodity Prices
As indicated in the accompanying diagram and table,
wholesale prices in terms of the various currencies con
tinued downward in most of the principal countries for
PER CENT#
Foreign Trade
There has been no marked change in export trade con
ditions in recent weeks; orders for most commodities are
coming in slowly, though in some lines, especially raw
cotton and cotton goods, the increases of the past two or
three months have been generally maintained or extended.
In certain other important lines, including wheat and
copper, buying has become somewhat duller, while trade
in steel remains at practically its lowest point.
Japanese buying has contributed largely to increased
activity in raw cotton, and China also has taken round
amounts. Germany has been buying steadily from
American stocks on consignment, but demand elsewhere
has not noticeably increased. The War Finance Corpora
tion has recently announced the completion of financial
arrangements for the export of 37,000 bales of American
cotton, and tentative arrangements for further financing.
Total cotton shipments for June were 495,590 bales,
slightly larger than May shipments and more than double
those of June last year. Twenty-two per cent, of June ex
ports of cotton went to Germany. Orders of some im
portance for cotton goods were received from the Levant
and China.
Despite reports of crop damage abroad, European
buying of wheat showed a falling off during July, which
exporters attributed to active purchasing a month ago
and the recent unsettlement of exchange rates. German
Wholesale Commodity Prices in Four Countries.
in 1913 = 100 Per Cent.)
(Average Prices
6
MONTHLY REVIEW
which figures are available, but on the whole at a greatly
reduced rate of decline. Germany stood out as an excep
tion to this movement. Following additional issues of
paper money, which brought note circulation to the highest
point yet reached, wholesale prices turned sharply upward.
The Italian index declined more rapidly in June than for
some months past, accounted for primarily by lower prices
of foods and chemicals. The index number for French
prices, on the other hand, declined less during June than
for several months previous. The movement of British
prices was closely similar to that of prices in this country.
Indices of the prices of basic commodities in England
and the United States compiled by this bank have shown
a tendency towards an upward movement in the early
weeks of July, although the tendency is more marked in
the United States than in England.
Commodity
Group
Maximum
Level
June
Level
Per Cent.
Decline
from
Maximum
Per Cent.
Change
from
May
Farm products...............
246
195
287
222
356
284
341
371
247
272
113
132
132
166
180
187
202
250
150
148
54.1
32.3
54.0
25.2
49.4
34.2
40.8
32.6
39.3
45.6
-3 .4
-4 .3
-0 .8
0.0
-0 .6
-3 .6
0.0
-4 .6
-0 .7
-2 .0
Chemicals, etc................
Cloths and clothing.......
Fuel and lighting............
Building materials..........
House furnishings..........
Miscellaneous.................
All....................................
materials group shows no change. In the computation of
the figures for this group, however, structural steel and
other metals used in building are not included. If prices
of these metals are taken into consideration the cost of
building materials shows a continued decline. An index
of the cost of building maintained by this bank, including
both wages and materials, declined from 187 to 185 during
June, based upon the 1913 average.
Early in July the United States Steel Corporation
announced a further price reduction, which brings iron
and steel prices to a level about 50 per cent, higher than
in 1913, or in close correspondence with the general level
of wholesale prices. During the past year steel prices
have followed the general price average downward with
a lag of two or three months. Prices of the non-ferrous
metals have tended downward in the past few weeks.
Prices of cotton, wool, rubber, certain textiles, and
certain foodstuffs have advanced somewhat in the early
weeks of July.
Domestic Commodity Prices
The monthly index number of wholesale prices, com
piled by the United States Department of Labor from the
average wholesale prices of 327 commodities, declined
during June from 151 to 148, or 2 per cent., as compared
with a decline from 154 to 151, or 1.9 per cent., during
May. Decreases were recorded for 136 commodities and
increases for 79. In the case of 112 commodities prices
remained constant.
The movement of prices of different groups of com
modities making up the Department of Labor index
number is shown in the table at the top of this page.
Two of the largest declines are in house furnishings
and fuel and lighting, groups in which prices have been
considerably above the general average. The building
Indices of Wholesale Prices
Base of 1913 = 100 Unless Otherwise Noted
Per Cent. Change During
Country
United States:
12 basic commodities*..................
Department of Labor...................
Dun’s ..............................................
Bradstreet’s ....................................
Great Britain:
Economist......................................
Statist.............................................
20 basic commodities*..................
France.................................................
Italy....................................................
Japan..................................................
Canada...............................................
Swedenf ..............................................
Australia|...........................................
Norway...............................................
Germany § ..........................................
Denmark |j..........................................
^Computed by this bank,
= 100. r. Revised.
April
May
June
Per Cent.
Decline
from High
Latest Quotation
Date of High
105
148
132
116
(July
(June
(July
(July
16)
av.)
1)
1)
-3 .1
-4 .9
-4 .4
-4 .9
+ 2 .4
-1 .9
-0 .4
-1 .9
-7 .6
-2 .0
-3 .7
+ 1.0
57
46
39
49
May 17, 1920
May,
1920
May 1, 1920
Feb. 1, 1920
179
183
156
324
509
192
179
218
166
274
1,488
254
(July
(July
(July
(July
(July
(June
(June
(June
(May
(July
(July
(June
1)
1)
16)
1)
1)
av.)
15)
15)
av.)
1)
1)
1)
-3 .3
-4 .2
-3 .2
-3 .5
-3 .2
-0 .5
-3 .6
-3 .4
-5 .5
-2 .1
+ 1.3r
-4 .8
-0 .3
-4 .5
-0 .9
—5. lr
-6 .3
+ 0 .5
-2 .5
-4 .8
-2 .9
+ 1.0
—3.6r
-1 .2
-2 .1
-3 .9
-1 .7
-1 .8
-6 .9
+ 0 .6
-1 .9
0.0
42
41
55
45
24
40
32
41
30
37
13
37
Apr. 1, 1920
May 1, 1920
May 21, 1920
May 1, 1920
Dec. 1, 1920
March, 1920
May 15, 1920
Dec. 15, 1918
August, 1920
Oct. 1, 1920
May 1, 1920
Nov. 1, 1920
f July 1, 1913, to June 30,1914 = 100.
{July, 1914 = 100.
-0 .6
+ 6 .6
§Middle of 1914 = 100.
[]July, 1912, to June, 1914
FEDERAL RESERVE AGENT AT NEW YORK
Cost of Living
The index number of the National Industrial Conference
Board shows practically no change during June in the cost
of living for a wage earner’s family in the United States.
A slight decline in food costs is about counterbalanced by
a slight increase in the cost of clothing. For four months
the index has shown only a slight downward movement.
The index numbers for past months together with the per
cent, declines from previous months have been as follows.
7
In England cost of living figures for June were 4 per
cent, below the May figures. The change was largely due
to a decline in food costs of about 6 per cent. As in the
United States the greatest decline in food items was in
dairy products and sugar. In Paris food prices declined
about 2 per cent, during June. The index for the food
budget of an average family is 219 in England and 312 in
Paris, both indices being computed from a base of July,
1914, in terms of the respective currencies.
Production of Basic Commodities
(Base—July, 1914 = 100)
Per Cent. Per Cent.
Change from Decline
from
Preceding
High
Month
Date
1920
Index
July 1 ...........................................
August 1......................................
September 1................................
October 1.....................................
November 1.................................
December 1 .................................
1921
January 1 ....................................
February 1 ..................................
March 1 .......................................
April 1..........................................
May 1 ..........................................
June 1..........................................
July 1 ...........................................
204.5*
203.2
199.4
197.3
193.1
190.0
+ 0 .7
-0 .6
-1 .9
-1 .1
-2 .1
-1 .6
0.0
0.6
2.5
3.5
5.6
7.1
181.2
176.3
168.7
167.6
165.7
161.9
161.6
-4 .6
-2 .7
-4 .3
-0 .7
-1 .1
-2 .3
-0 .2
11.4
13.8
17.5
18.0
19.0
20.8
21.0
The accompanying table presents in a new form the
available figures for the monthly output in the United
States of important basic commodities. For each com
modity current monthly production is expressed as a
percentage of an estimated normal figure for that month.
To arrive at a fair estimate of normal production a sta
tistical analysis has been made of all available figures for
previous years. The normal growth in production from
year to year has been estimated by fitting curves to the
annual figures, and the normal variation from month to
month has been determined by a study of the
deviation of monthly figures from a 12 place moving
average.
(Normal Production = 100)
*Peak.
The latest reported figures for different elements of the
index are shown in the following table.
Items
Food...................................
Shelter................................
Clothing.............................
Fuel and Light..................
Sundries.............................
All items.....................
Per Cent.
Decline
from High
Per Cent.
Change
During June
144
171
163
178
185
84.2
0.0
43.4
11.0
3.6
-0 .7
0.0
+ 0 .6
0.0
0.0
161.6
21.0
-0 .2
July 1
Level
The figures quoted for food are those compiled by the
United States Bureau of Labor Statistics. Of the 43 food
articles included in the index, 26 declined duriiig June and
10 advanced. There were marked decreases in sugar,
butter, cheese and poultry and marked advances in
vegetables and fruit.
Inasmuch as food is a larger item in the family budget
than clothing, food is given a heavier weight in computing
the index number and its decline has more than offset the
increase in clothing costs.
Jan.
Anthracite coal mined 101 .3
73 .6
Bituminous “
“
Pig iron production..
70 .0
Steel ingot production 58 .3
Tin deliveries............
30 .1
Cement production. . 77..8
Cotton consumption.
54 .8
Wool consumption...
55 .4
Sugar meltings..........
53 .6
Wheat flour milled.. . 79 6
Meat slaughtered___
88..2
Feb.
Mar.
April
May
June
110 .8
64 .0
59 .1
48..8
30..7
70. 3
66..7
67. 1
77.,9
80,,0
92..2
93 .4
57 .4
44 .4
40 .0
32 .6
88,.2
66 .1
87,.8
120 .0
107 .9
91 .9
98 .2
64 .0
33 .2
30 .9
30,.8
87..7
63 .6
98 .4
93 .9
113 .7
101 .1
88 .9
67 .3
33 .7
31 9
23 .7
82,.8
67 1
105 .2
80,.3
104..6
96, 9
94 .1
65, 9
30 .8
26,.5
30,.8
83. 6
72, 5
106,.6
79,.2
116..1
102. 0
Of the 11 indices given in the table, 7 show some increase
in June production over that for May. The textile
industries have shown the most continuous recent improve
ment and recent reports point to continued active opera
tions. Cotton and woolen goods producers are showing
goods for next spring at prices about on a par with those
prevailing for the fall season and report an excellent
volume of orders. No figures on silk production for the
country as a whole are available but reports from concerns
in this district indicate that July production was at about
47 per cent, of capacity as compared with 52 per cent, in
June. Buying of silk goods in July was not so active as
in previous months.
8
MONTHLY REVIEW
Stocks on Hand
Index figures for stocks of important commodities in the
United States have been computed by methods similar
to those used to determine the rate of production. The
table below shows stocks each month in 1921 expressed as
percentages of normal stocks taking into consideration
normal increases from year to year and seasonal fluctua
tions. For grain the figures on visible supply from which
the following percentages are calculated do not include all
the stocks in the United States. The low visible supply of
wheat may be caused in part by the retention of wheat on
the farms. A report as of March 1 showed wheat stocks
on farms considerably above normal. Very recently it
has been reported that this wheat is moving to market.
(Normal Stocks = 100)
Jan. 1 Mar. 1 May 1 June 1 July 1
Cotton....................................
Sugar....................................
Corn.......................................
Wheat...................................
Rye.............................
. .
Barley.....................................
Tin (world’s supply).............
Zinc.........................................
Gasoline.................................
Chile Nitrate (at Chile ports)
97.2
70.0
57.9
70.2
180.1
97.4
127.4
254.2
96.3
143.7
110.7
65.6
116.0
54.3
127.1
85.7
107.6
125.4
73.9
182.5
29.7
124.4
113.5
117.4
133.7
76.3
224.1
37.0
141.6
150.6
122.4
105.9
151.4
105! 5
143.0
118^9
130.1
129^8
304.2
118.1
116.5
Volume of Building
Building contract awards in this district in June as com
piled by the F. W. Dodge Company amounted to $63,000,000, a figure $5,000,000 larger than the May total and
only $6,000,000 less than the figure for June, 1920, when
building costs were about 40 per cent, higher than at
present. This bank’s index of the actual volume of
building, which allows for the changes in prices, is now
9 per cent, higher than in May, 1921, and 27 per cent,
higher than in June, 1920. The heavy volume of building
is due almost entirely to residential construction, which is
four times as great in money value as in June, 1920. This
is illustrated in the following diagram which compares
contract awards for different types of buildings in June,
1921, and June, 1920.
juNg
MILLIONS of DOLLARS
For the country as a whole June building activity was
slightly less than in May. Contract awards in the twentyseven northeastern states were 6 per cent, below the May
total, largely as the result of labor troubles in several of
the larger cities. In several cases wage adjustments had
been effected by the middle of June and contract awards
were much greater thereafter.
Employment
The New York State Industrial Commission reports a
decrease of 2 per cent, between May 15 and June 15 in
the number of persons employed in industrial establish
ments. The principal declines were in the iron and steel
and miscellaneous metal industries, while there were
increases in textiles and clothing a)nd certain establish
ments for the manufacture of food products. It is probable
that the decrease in numbers of employed has continued
in recent weeks. Employment bureaus and charity organ
izations report an increase in the numbers applying for
work or for relief.
There is now a considerable demand for farm labor in
carrying on harvest work. In the neighborhood of
Buffalo the number of workers placed on farms in the
past few months is reported as twice as large as in the
corresponding period last year.
In the country as a whole recent changes have appar
ently been similar to those in this district. There has been
a reduction in the workers in metals and miscellaneous
manufactures, but an increase in employment in industries
making goods for more immediate consumption. The
following table shows the changes between June, 1920,
and June, 1921, and between May, 1921, and June, 1921,
in the payrolls of representative establishments in fourteen
industries which report to the Department of Labor.
Per Cent. Change in Number
Employed
Industry
RESIDENCES
OFFICES STORES 1921
^FACTORIES J9201
12 8
SCHOOLS &
1921 ■ ■ ■ 7
HOSPITALS
IQ2Q|
|5
PUBLIC BUILDINGS 1921W H IN 6
y WORKS
19201
Rm eious e
1921H
SOCIALBU11D1N55
~ l25
s
Building Contracts Awarded for Different Kinds of Buildings in New
York and Northern New^Jersey During June, 1920, and June, 1921
Woolen...................................................
Cotton manufacturing..........................
Cotton finishing.....................................
Cigar manufacturing.............................
Coal (bituminous)................................
Silk..........................................................
Men’s clothing.......................................
Boots and shoes.....................................
Hosiery and underwear........................
Leather...................................................
Paper making........................................
Automobiles...........................................
Iron and steel........................................
Car building and repairing...................
June, 1920,
to
June, 1921
May, 1921,
to
June, 1921
+ 3.9
- 0.4
- 0.6
- 0.6
- 4.8
- 6.5
-1 2 .8
-1 3 .1
- 2 0 .8
-2 8 .2
-3 4 .6
-3 7 .5
- 3 9 .6
- 4 1 .6
+ 1 .8
0.0
+ 1 .8
+ 1.3
+ 5 .0
0.0
+ 8 .9
+ 4 .7
+ 2 .7
+ 7 .2
-0 .4
+ 0 .1
-5 .7
-2 .4
FEDERAL RESERVE AGENT AT NEW YORK
Wages
During July the independent steel companies announced
a second reduction in wages of 15 per cent. The United
States Steel Corporation also effected a further reduction
by doing away with time and a half pay for overtime work.
These changes bring average wages of common labor in
plants of the steel corporation to about 37 cents an hour,
while most of the independent mills are paying about
30 cents. The 1915 level for both the steel corporation
and the independents was 20 cents an hour. The reduc
tion in steel workers’ wages is one of the few instances of
a second wage cut.
On July 1 the railroads without disturbance put into
effect previously announced wage revisions. In New York
City, employees of both rapid transit companies accepted
a 10 to 12 per cent, reduction in wages although the
existing wage agreements did not expire for several
months. Last year wages had been increased in proportion
to the rise in the cost of living.
Members of the building trades unions in New York City
thus far have refused to accept any reduction from the
current rate of $9 per day. The working agreement does
not expire until December 31. In Westchester County
arbitration following labor disputes resulted in an award
granting the petition of employers for a reduction from
$9 to $8 a day, and in several upstate centers workers have
accepted reductions and strikes have been terminated.
In the major industries of the district, with few excep
tions, some wage reductions have now been put into
effect and rates of pay are now from 10 to 30 per cent,
below those prevailing a year ago. Average weekly earn
ings of factory workers in June in New York State were
$25.71, about the same as in May, and 11 per cent, less
9
than in last October. For thirteen industries in the
country as a whole, average earnings showed a reduction
of 15 per cent. Reports from the rural districts of New
York State indicate that farm labor is being employed
this summer at 25 to 30 per cent, lower wages than last
year.
Wholesale Trade
This bank has begun the collection of figures showing the
sales of large wholesale houses in this district. Thus far
firms doing a business of about $100,000,000 in 1920, have
reported their monthly sales for the past two years and a
half. For five lines of business the data cover a sufficient
number of firms to be indicative of the general trend of
sales and are presented in the following table. The figures
are subject to revision as further reports are received.
Per Cent. Change in Sales in June, 1921,
Compared with Sales in
May,
1921
June,
1920
June,
1919
0
+ 5
- 5
+26
-1 3
- 2
-4 8
-4 6
-6 6
- 9
+17
-3 8
-3 4
-7 2
-1 0
Clothing.................................
Groceries................................
Hardware...............................
Machine Tools......................
Sales of clothing have been improving recently and for
June compare favorably with sales of previous years.
Shoe sales are in good volume when price changes are
taken into consideration. On the other hand, sales of
groceries, hardware, and machine tools are clearly behind
those of previous years, even when allowance is made
Sales and Stocks of Department and Apparel Stores
Month of June, 1921
(56 Stores Reporting)
Per cent, change in net sales in June, 1921, com
pared with net sales in June, 1920.......................
Per cent, change in number of transactions in June,
1921, compared with number of transactions in
June, 1920...............................................................
Per cent, change in net sales from January 1, 1921,
to June 30, 1921, compared with net sales dur
ing, corresponding period last year........................
Per cent, change in stocks at close of June, 1921,
compared with stocks at close of June, 1920.......
Per cent, change in stocks at close of June, 1921,
compared with stocks at close of May, 1921.......
Percentage of average stocks during first six months
of 1921 to total net sales during the same period..
Percentage of outstanding orders at close of June,
1921, to total purchases during calendar year
1920..........................................................................
New York
and
Brooklyn
-
8.7
Buffalo
-
3.4
Newark
-
4.4
Rochester
+ 2.4
Syracuse
-
+1 4.2
+ 13.7
+ 5.0
-
8.8
+ 3.5
-
2.8
+ 7.9
-
-1 7 .6
-1 2 .2
-2 6 .2
-
-
-
5.9
8.4
8.9
9.2
Elsewhere
in Second
District
-
7.7
Apparel
Stores
-
5.2
Entire
Second
District
-
7.1
+ 9.1
+ 3.8
+11.4
3.3
-
5.3
+ 4.1
-
-3 1 .0
- 2 1 .5
-
5.0
-2 0 .5
-1 1 .5
-
-
0.8
+ 3.3
-1 1 .1
-
2.7
5.1
5.6
329.6
396.4
330.3
387.0
411.7
472.5
196.1
333.9
5.4
8.S
5.5
4.2
3.7
7.3
11.0
6.2
10
MONTHLY REVIEW
for lower prices. The increase in machine tool sales is
noteworthy, as such sales bear a close relation to activity
in manufacturing establishments.
Retail Trade
Net sales by representative department stores in this
district during June were 7 per cent, below sales of June,
1920, and less than one per cent, below those of May of
this year. As prices on the average are probably 20 to 30
per cent, below those which prevailed last year, and as
the number of individual transactions in June, 1921, was
about 11 per cent, greater than in June, 1920, it is evident
that the amount of merchandise sold continues to be
greater than last year. Sales in June, 1921, show an
increase of about 20 per cent, over sales in June, 1919,
when prices were more nearly equivalent to those prevail
ing to-day.
Sales for the first half of this year were about 5 per cent,
less than in the first 6 months of 1920, but about 25 per
cent, greater than during the same period in 1919.
Stocks held by department stores declined about 6 per
cent, between June 1 and July 1, a seasonal movement
due to the liquidation of spring and summer merchandise.
Practically no fall goods have been received as yet,
although there is a disposition among retailers to place
fairly large orders for fall requirements. The majority
of such orders is usually placed in August. Stocks held
by retailers on July 1 were about 12 per cent, below those
held on the same date last year, whereas sales decreased
only about 7 per cent. Stock turn-over during the first
six months of 1921 was at the rate of 3.6 times a year com-
pared with 3.1 times a year during the first six months of
1920, and 3.6 times a year in the first six months of 1919.
In June sales by strictly apparel stores and by the
apparel sections of department stores showed some
falling off and sales by house furnishing departments some
gain. This is in direct contrast to conditions that prevailed
in May and is due to a seasonal slackening in the demand
for clothing as well as to a larger demand for house fur
nishing goods, following price revisions by many of the
department stores. Sales of cotton, silk, and woolen
piece goods were also above those of last year.
Sales of mail order houses and chain stores have not
been maintained in recent months as well as sales of
department stores. The accompanying diagram brings
the sales of three large mail order houses into comparison
with department store sales. The figures for chain store
sales are not exactly comparable with those for other
groups of stores, because there has in recent years been
a rapid increase in the number of stores. In spite of this
increase total sales of 6 important chain store systems
in June were somewhat lower in comparison with figures
for June, 1920, than were sales of department stores.
A summary statement of the facts follows. The chain
store and mail order house figures are on a nation-wide
basis.
Percentage Comparison of Sales
Chain
Stores
Mail
Order
Houses
Depart
ment Stores
2nd Dist.
June, 1921, and June, 1920............
June, 1921, and June, 1919............
Jan.-June, 1921, & Jan.-June, 1920.
-1 4 %
+26%
- 9%
-2 7 %
-1 5 %
-3 4 %
- 7%
+19%
- 5%
PER CENT.
Business Failures
DEPAI tTMEN r
STC RES
.N | l
/ \ I1
1 N
l / \
19t< i
AVERA GE
\
/
f'\
\1
I
//
i/ 7
\ \ /
\
/ A 1
i\ 1
1
— 1
•s.. I
\
/
1/
7
-
/
\ r
\ i
V
*/'
\
Ms\
M AIL ORC
HOUSE
1919
1920
1921
Sales of 57 Department Stores in the Second District and 3 Leading
Mail Order Houses Doing a Country Wide Business. (Average Monthly
Sales in 1919 = 100 Per Cent.)
The normal seasonal decline in the number of commer
cial failures continued throughout June and preliminary
reports for July indicate a similar decline in that month.
The liabilities involved in recent failures have shown a
greater falling off than the number of individual reverses.
The amount of liabilities in June was 42 per cent, less
than in May, while the number of failures declined but
3 per cent. Failures in the Second Federal Reserve
District in June numbered 232, a slight increase over May,
while liabilities aggregated only $4,736,684, a reduction
of 57 per cent.
The following diagram shows an index of failures
throughout the country computed by this bank from
Dun’s reports. The index gives for each month the
annual rate of failures in terms of the percentage of
failures to the number of firms in business and makes
allowance for normal seasonal fluctuations. Since 1866
FEDERAL RESERVE AGENT AT NEW YORK
when failure figures began to be compiled, an average of
about one per cent, of the firms in business has failed
each year. The one per cent, line in the diagram may
well be considered the normal line. In 1915 failures were
above normal but in the following years with rising prices
and increased consumption of goods failures were at a
lower annual rate than in any previous period for which
the figures are available. This year the number of
failures has risen in some months a little above the normal
line, but latterly the number has been somewhat below it.
11
estimates a decline of 8 per cent, in crop prospects in New
York State during June and a prospective yield of 18 per
cent, below the average crops for the past ten years. Hay
and oats crops are those most seriously affected.
In the United States as a whole the Department of
Agriculture reports a 3 per cent, improvement in crop
prospects during June due almost entirely to the rapid
growth of corn in the middle western states. The expected
production of corn, wheat, oats, barley, and rye combined
is now 4 per cent, less than last year but 4 ^ per cent,
above the average for the years from 1915 to 1919.
PERCENT.
Farm Values and Mortgages
The Bureau of the Census recently gave out figures
showing the 1920 values of farms and the amounts of mort
gage debts. In New York State the value of farm land
and buildings has increased 36 per cent, since 1910, while
the amount of mortgage debt has increased nearly 50 per
cent. In New Jersey the increase in value has been 21
per cent, and mortgage debt has increased 29 per cent.
In the United States as a whole the value of farm property
increased 118 per cent, and mortgage debt 133 per cent.
In every grand division, mortgage debt has increased
more rapidly than the value of property.
The ratio of mortgage debt to value of property at three
periods is shown in the following table. Figures for 1900
are not available.
Percentage of Firms Failing to the Number in Business, in Terms of
Annual Rate, Seasonal Variation Allowed For
United States........................
New York State....................
New Jersey............................
1890
1910
1920
35.5
43.6
49.6
27.3
34.2
35.1
29.1
37.5
37.4
Crop Conditions
Scant and irregular rainfall in the Second Federal
Reserve District during June led to reduced estimates of
the probable volume of 1921 crops. Taking all crops
together the United States Department of Agriculture
Inasmuch as the 1920 figures were collected before the
recent decline in the price of farm products, the increase
in the ratio of debt is not attributable to that cause but
to more fundamental tendencies.
Gold Imports and the Federal Reserve System
HEN Congress passed the Federal Reserve
Aet one of its major purposes was to provide
elasticity of currency and credit. Gold was to
form the sole reserve behind Federal Reserve notes, which
were the new elastic currency, and was to be the principal
reserve behind Federal Reserve Bank deposits, which
increase as bank loans and bank deposits expand. Con
gress did not specify in dollars or percentages what these
reserves should amount to, except as to minimum require
ments, and even these were not absolutely rigid.
In practice the reserve ratios of the system pass through
a wide range, but thus far they have never fallen to the
minimum percentages below which they cannot go without
the payment of a penalty. These minimum percentages
are 40 per cent, of gold behind Federal Reserve notes and
35 per cent, of gold and lawful money behind deposits.
In the middle of July, 1920, the gold behind all Federal
Reserve notes in circulation, after allowing for the required
reserve against deposits, amounted to 49 per cent., and in
July, 1921, to 80 per cent. The corresponding ratio of the
New York Reserve Bank rose in the same time from 46
per cent, to more than 100 per cent.
It is from the holdings of the Reserve Banks that gold is
mainly withdrawn at times when it is flowing away from
the country, and it is into the Reserve Banks that gold
mainly goes when the flow is toward the United States.
Consequently, if the outflow coincides with a heavy
credit demand, as in the period between July, 1919, and
July, 1920, the reserve ratios rapidly decline; and if the
inflow coincides with a lessened credit demand, as at
present, the reserve ratios rise rapidly. In either case,
the flexibility of the Federal Reserve system permits
adjustment to the demands for credit from industry,
commerce and agriculture, and the former adverse conse
quences of heavy gold movements, such as a sharp curtail
ment of credit when gold flows out, are minimized.
The supply of gold in the United States is now at its
highest point, though not much higher than before the
restrictions on the export of gold were removed in June,
1919. During the last twelve months, because of con
ditions which are without precedent in any like degree,
there has been a great flow of gold to this country from
W
1913 1914 1915 1916 1917 1918 1919 19£0 1921
Stock of Gold in the United States, Deposits of all Banks, and Paper
Money in Circulation July 1 of Each Year. (Figures for 1913 = 100
Per-Cent.)
Europe. The total stock of gold in the United States on
July 1 of this year was $3,223,000,000, estimated to be
about 40 per cent, of the world’s stock.
The gold recently received came largely from private
sources, and served mainly to reduce foreign indebtedness
to this country. The gold holdings of most of the Euro
pean central banks are larger than before the war. The
Bank of England has more than three times as much gold
as it had in 1913, the Bank of France more than half as
much again, and even the German Reichsbank has nearly
as much gold as before the war. That does not mean neces
sarily that the entire stocks of gold in those countries are
greater than before the war, because the tendency has
been for gold to be assembled in the central banks, where
it should serve as the basis for credit and issues of currency.
In the United States also this tendency has prevailed,
and the stock of gold is now largely in the possession of the
Federal Reserve Banks. On July 1, out of the total
amount of monetary gold in the country, $2,462,000,000
was in the reserves of the Reserve Banks. In the war
years gold circulated less generally and gravitated toward
the Reserve Banks, though at all times Federal Reserve
notes were redeemable dollar for dollar in gold. In the
last twelve months, which marks the recent period of
heavy gold importation, the bulk of gold received has been
deposited with the Reserve Banks, and in the year ended
July 1 their gold reserves increased $490,000,000, as
against an increase of $535,000,000 in the country’s stock.
The primary reason why so much of the imported gold
went immediately into the reserves of the Reserve Banks
is that it is of greatest utility there. In the possession of
a member bank it cannot serve as the basis for credit any
more than any other form of money received on deposit,
and as long as it remains in the vaults of a member bank
it is useless even as reserve, because member banks must
keep all of their reserves with the Reserve Bank. In
the possession of the Reserve Banks, however, the gold
not only serves to strengthen their position, and to
increase their availability for the country’s credit needs,
but it serves better the uses of the member bank de
positing it. It loses immediately the disability of weight
and bulk; it can be drawn against by check and be
transferred by telegraph. It becomes merged with
the deposits in the Federal Reserve Banks, and like
them can be drawn out again in gold if desired; or when
those deposits are in excess of the reserves which member
banks are required by law to maintain, can be used to
reduce indebtedness at the Reserve Banks. Indeed a
large proportion, possibly 40 per cent., of the decrease in
Reserve Bank loans is attributable to gold imports.
In spite of the large imports of gold, the percentage of
gold to money in circulation is smaller than before the war,
as is also the percentage of gold to bank deposits. Whereas
in 1915 total gold holdings were almost exactly equal to
the volume of paper money in circulation, they are now
about 75 per cent, as large as the volume of paper money
in circulation; and whereas in 1915 total gold holdings
were 10.4 per cent, as large as bank deposits, they are now
about 10.2 per cent. The changes in the volume of gold
holdings in the country, currency in circulation and bank
deposits are shown in the accompanying diagram.
The changes shown in the diagram may be taken as an
illustration of how the Federal Reserve system, through
its flexibility, met the country’s demands for credit in 1920
at a time when the gold supply was diminishing^ and how
also at this time the gold supply is increasing simultane
ously with a decline in the volume of currency and credit.
@FedFRASER