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MONTHLY REVIEW o f C r e d it a n d S e c o n d Federal Reserve Agent B u s in e s s F e d e r a l R e s e r v e Federal Reserve Bank, New York Money Market inJuly Early in July there was a slight advance in money rates in New York due chiefly to the heavy demands on the banks for currency for the June month-end and for the 4th of July holiday, and to preparations for mid year statements. This slightly firmer condition in the money market persisted in some degree until the middle of the month. During the latter part of the month, how ever, a considerable surplus of funds accumulated in the New York money market, due principally to the decline of currency requirements to the mid-summer low point, reached in the last full week of July. The total amount of currency returned to the Reserve Banks between the first and fourth weeks of the month was about $120,000,000, a larger decline in circulation than occurred in the corresponding weeks of most re cent years, reflecting further curtailment of business activity and lower commodity prices. Part of the iuiids obtained by banks throughout the country from this de cline in currency circulation was used, as the diagram below indicates, for the retirement of Reserve Bank credit which had been called into use temporarily during the early part of July. On July 23 discounts of the Re serve Banks totaling $191,000,000 were the smallest for any weekly statement date since 1917. There were also transfers of funds to New York for employment, with C o n d itio n s D i s t r i c t August 1, 1930 the result that the amount of funds offered in the call loan market exceeded the rather small demand for loans during most of the latter part of the month, and New York City banks held reserves considerably in excess of legal requirements. Toward the end of July a considerable gold export movement to France developed, and also a moderate gold outflow to Canada. These gold losses absorbed some of the surplus funds in New York, but had no appreciable effect on money rates. Call money, which had advanced to 3 per cent at the beginning of July, declined to 2 per cent on the Stock Exchange in the latter half of the month, and a few loans were reported to have been placed outside the E x change as low as 1 per cent. Time money stiffened slightly about the middle of the month but declined again to as low levels as at the end of June. Commercial paper rates declined ^ per cent further, and the rates charged on commercial loans to customers by leading New York City banks continued to decline gradually. Due to the accumulation of surplus funds in the posses sion of large New York banks, “ Federal fu nds,” which are the surplus reserves of these banks offered for dayto-day use by banks or others who need immediate credit at the Reserve Bank, were quoted in New York as low as 34 to % per cent, the lowest quotations on record for these funds. MILLIONS OF DOLLARS 19 30 1931 Amount of Federal Reserve Credit Outstanding during June and July 1930, and Usual Seasonal Fluctuation in Federal Reserve Credit Required from August to January 58 MONTHLY REVIEW, AUGUST 1, 1930 M oney Rates at New York M IL L IO N S OF D O LL A R S July 31, 1929 June 30, 1930 July 30, 1930 Stock Exchange call loans....................... Stock Exchange 90 day loans................. Prime commercial paper.......................... Bills— 9t* day umnduraed........................ Customers’ rates <>n commercial loans. Treasury certificates and notes Maturing Dec. 15 (yield) ................. Maturing Mar 15 (yield )................... Federal Reserve Bank of New York re discount rate........................................... Federal Reserve Bank of New York buying rate for 90 day indorsed bills. f 5 .80 *1H ~3 2*4 S X -X lVs t4 .2 1 2* 1 2 X -M 3 -3 X 114 t 4 .11 4 .7 7 4 .5 2 1.86 2 .24 1.63 1.97 5 2K 5H 2 2 y2 %2 *8-10 8H 6 *For preceding week UNominal tAverage rate of leading banks at middle of month Jl-75 days— 1 % per cent A s the foregoing diagram indicates, the July monthend usually marks the beginning of the seasonal in crease in the demand for funds at the Eeserve Banks. This increased demand, which occurs regularly each year, is due chiefly to an enlarged use of currency, but partly to an increase in the amount of reserve against deposits which is required by member banks, accom panying the autumn expansion of bank credit. The de mand for reserve funds ordinarily proceeds gradually during August, but more rapidly in September and the early part of October, after which there is a lull in the demand until the latter part of November, followed in turn by a rapid increase until Christmas caused by cur rency requirements for the holiday trade. The precise amount of autumn requirements for Fed eral Reserve credit this year, as compared with the usual experience, will depend largely upon the movements of business and of commodity prices, particularly as they affect the demand for currency, as well as on the amount and nature of the gold movement. Ordinarily a consid erable part of the seasonal demand for Federal Reserve credit is provided as a result of offerings of bills to the Reserve Banks growing out of the usual seasonal draw ings of bills. M e m b er B a n k C redit During the past month the total amount of the loans and investments of weekly reporting banks has shown little change, although there have been considerable changes in the principal classes of their earning assets. The investments of these banks have shown a further increase of about $160,000,000 during the four weeks ended July 23, and on that date were slightly above the highest level of 1928. The recent increase in the invest ments of these banks has run somewhat parallel to their time deposits, which have been increasing rapidly during recent months and are now almost $500,000,000 above the highest point reached in June 1928. Security loans have been reduced by about $90,000,000 during the four weeks period, and other loans have declined nearly $120,000,000 following an increase in the previous month, so that on July 23 they were not far above the lowest level of the year. B il l M ar k e t A n increased volume of bills was offered to discount houses and to the Reserve Bank during the mid-year period, and, accompanying larger offerings of long bills for which there was little demand, rates for 5 and 6 months bills were advanced Ys per cent on July 9, while Volume of Bankers Acceptances Outstanding, 1930 Compared with 1929 and 1928 other maturities were unchanged at the levels established during June. During this period and in fact throughout the first three weeks of July, the investment demand for bills, except of short maturity, was small, with the banks generally sellers rather than buyers of bills, with the consequence that dealers’ portfolios were largely in creased. On July 21 the New York Reserve Bank ex tended its minimum buying rate of 1 % Per cent to in clude maturities of 46 to 75 days, and thereafter bank selling of bills practically ceased, and a good demand for bills developed, with the result that dealers’ portfolios of bills declined to a small amount from the moderately large total prevailing around the middle of the month. Federal Reserve holdings of bills increased $55,000,000 to $157,000,000 in the week ended July 2, and there was a moderate further increase in System bill holdings around the middle of the month, but thereafter bill holdings declined to a level somewhat lower than at the beginning of the month. A further decline of $77,000,000 occurred during June in the volume of bankers acceptances outstanding, mak ing a total decrease of $427,000,000 from the peak of last December. A s the accompanying diagram indicates, this compares with a net decrease of $172,000,000 during the same period of 1929, when the seasonal low point was reached in May, and with a decrease of only $54-,000,000 in 1928. W hile this year’s decline has been from a higher initial level, there have been other factors influencing the reduction, including lower prices for a number of important commodities and a decrease in this country’s foreign trade. Export acceptances have shown the largest reduction— $151,000,000— from the Decem ber volume, followed by a decrease of $140,000,000 in bills arising from domestic warehouse credits, which, however, remained considerably higher than a year ago. Import bills declined $107,000,000, and are the only class of acceptances to show any material decline com pared with a year ago. C o m m e r c ia l P aper M a r k e t Throughout the month of July the investment demand for commercial paper continued to exceed the supply of FEDERAL RESERVE AGENT AT NEW YORK paper that became available. The banks outside of New York City were actively in the market for investments of this nature, and the volume of dealers’ sales was lim ited only by the amount of paper that they were able to offer. A s a reflection of this situation, open market quo tations for prime names were lowered further during the first part of the month to a range of 3-31/4 per cent, a new low level since 1924, and toward the end of the month conditions became such that sales were being made more largely at 3 per cent than at the higher rate. Notwithstanding the increasingly attractive rates which dealers have been able to offer borrowers because of the excellent investment demand, the amount of com mercial paper outstanding showed a further seasonal de cline between the end of May and the end of June, but the decline appears to have been somewhat less than in the corresponding period of most recent years. Out standings of $527,000,000 on June 30 were about 2 % per cent smaller than a month earlier, but were only 5 per cent below this year’s high point of April 30. More over, the June 30 figure was 92 per cent larger than a year ago, and somewhat above the outstandings of June 1928. Condition of Security Loans inMember Banks Because of the wide fluctuations in security prices dur ing the past few years, the present condition of bank security loans with respect to the adequacy of the col lateral held against the loans, particularly as to banks outside the principal centers, has become a matter of general interest. In order to obtain definite information on this subject, the Federal Reserve Bank of New York during the past month has made a study of information that has become available recently on the condition of security loans in 118 country member banks in the Sec ond Federal Reserve District. The results are summar ized in the following table. Proportion of under-collateraled loans to total loans and discounts Number of banks None Negligible am ount..................................................... 1 per cen t.................................................................. 50 26 16 2 3 ” ” ” ” ...................................................................... ...................................................................... 5 6 7 ” ” ” ” ” ” ...................................................................... ...................................................................... ....................................................................... 9 10 11 ” ” ” ” ” ” ................................................................ ................................................................ ................................................................ 4 ” ” ........................................................ 7 7 3 2 1 3 1 1 1 118 This indicates that nearly two-thirds of these banks either had no security loans for which the current mar ket value was less than the amount of the loans, or had a negligible amount of such loans. In general, the num ber of banks diminished as the proportion of under-collateraled loans to total loans and discounts increased, and out of the total of 118 banks, only 9 had 5 per cent or more of under-collateraled loans. The ratio of the market value of the securities held as collateral to the amount of the under-collateraled loans varied considerably in the different banks, but averaged 59 a little over two-thirds for the whole group. In many cases, it is expected that the personal credit of the bor rower will assure eventual repayment of the loan in full. Foreign Exchange Following a general advance during July, all the ac tive European exchanges, with the exception of the Italian lira, stood at a premium over the dollar at the close of the month. The French, Belgian, and Austrian curren cies were above the estimated out-going gold points, and the Swiss exchange closely approached the export point. Sterling became progressively stronger during the month, gaining 1 cent between the end of June and July 29, and at $4.87 touched its highest level since last Jan uary. A quotation of $0.0393 1 1 /1 6 for French francs on the 16th induced an export of $4,000,000 of gold to Paris, following which francs declined gradually to $0.0393% , but without preventing further withdrawals of gold. Reichsmarks, guilders, and Swedish crowns made substantial gains. In the foreign exchange list as a whole, only the rupee, the yen, the Uruguayan peso, and the milreis were lower at the close of July than a month earlier. The Canadian dollar, unaffected by numerous shipments of gold to Montreal, gained steadily and was quoted at last report at a premium of 5 /3 2 of one cent. The Argentine peso recovered part of its June loss. The yen fell further below the theoretical gold import point, following an almost uninterrupted advance since last December, but the Chinese silver exchanges were stronger, Hongkong going from $ 0 .3 1 % to $ 0 .3 2 ^ and Shanghai from $0.37i/8 to $0 .3 8 % . Gold Movement After a six months’ interval, during which the mon etary gold stock of this country was increased $242,000,000, chiefly through imports, the United States began to lose gold in July. Towards the middle of the month there was a resumption of the movement of gold to France which ceased last January, and for the month of July withdrawals of gold for shipment to Paris to taled $30,000,000. Canada, after a lapse of a year and a half, began to take gold from New York on the 21st and withdrew a total of $12,500,000 in July. In addition to these exports $3,000,000 was earmarked for foreign account. Partially offsetting these losses of gold, there were receipts of $5,900,000 from Brazil, $3,000,000 from Uruguay, $3,000,000 from Venezuela, and $1,000,000 from Colombia; also, at San Francisco, $2,700,000 from China and $500,000 from Japan. A preliminary estimate indicates the net loss to the country’s gold stock in July to have been $29,000,000, which would reduce the net gain for the first seven months of this year to about $213,000,000. France resumed withdrawals from the Bank of Eng land during July, taking about £4,800,000, and in addi tion secured the bulk of the South African gold offered in the London market, which amounted to some £3,500,000. A considerable export of gold from Amsterdam to Paris was also reported. 60 MONTHLY REVIEW, AUGUST 1, 1930 C entral B an k R a te C hanges The Swiss National Bank and the National Bank of Belgium were the only European central banks to change their discount rates during July, both rates moving downward from 3 to 2 y2 per cent. The Swiss change was effective July 11, the Belgian change August 1. These banks now share with the Federal Reserve Bank of New York and the Bank of France the lowest bank rate in the world. On July 10 the Imperial Bank of India reduced its rate from 6 to 5 per cent, and on the 26th the Reserve Bank of Peru raised its rate from 7 to 8 per cent. SecurityMarkets Some recovery from the June low point of stock prices occurred during the closing days of that month and the general tendency was upward during July. Although there were several temporary interruptions to this up ward movement, composite averages of stock prices to ward the end of the month had regained about one-third of the loss sustained in the April-June decline. The per centage recovery was not quite as large in public utility shares as in the industrials and railroads, but the utility stocks in June did not reach as low levels relative to their November 1929 prices as did the other two prin cipal classes of stocks. Stock market activity was con siderably less than in June; for the month as a whole average daily trading was around 2,100,000 shares. Bond prices were firm during July, following a slight decline during the second half of June. Long-term United States Government bonds rose slightly further early in the month, and the average price of eight issues now outstanding reached a new high level for 1929 and 1930, and closed the month only slightly below that level. A n advance occurred also in domestic corpora tion bonds during the first part of the month, after which prices held steady at levels about the same as the high point of last March. Foreign bonds likewise moved higher, but an average of the prices of 40 representative issues remained somewhat below the March level. The PRICE AVERAGE A ; a 1 j X r v ~\\ jt* * U.S.GCWT • ' V - J FOREI DOMESTIC CORB 1 , 1 1929 1 ... , ! 1 1930 I .. Price Movements of U. S. Government, Foreign, and Domestic Corporation Bonds (Standard Statistics Co. index of domestic bonds and Baker, Kellogg & Co. average of foreign bonds) accompanying diagram indicates the substantial recov ery in bond prices that has occurred since the low points were reached last autumn. NewFinancing Final figures covering security offerings of all kinds during June showed a total of $787,000,000, or about $400,000,000 less than the large May aggregate, but only slightly less than the June 1929 total. For the first half of 1930, security offerings totaled $5,100,000,000, an amount $1,100,000,000 smaller than in the correspond ing period of 1929, but this decline is more than ac counted for by a reduction of over $500,000,000 in re funding issues and by a much larger reduction in the security offerings of investment trusts and other finan cial trading and holding companies. It is the decline in security flotations of the latter type which is respon sible for the somewhat smaller total volume of new cap ital issues in the first half of this year indicated by the accompanying diagram ; it appears in the reduced stock flotations in the first part of the diagram and in the smaller domestic corporation issues in the second part. New bond issues, as the diagram shows, totaled $1,300,000,000 more in the first half of 1930. Bond issues by railroad and public utility corporations showed especi ally large increases, and the total amount of new capital obtained by domestic producing and distributing con cerns of all kinds through new security issues was prob ably larger than last year. State and municipal issues of bonds and notes during the first half of the year exceeded the 1929 volume by over $100,000,000, reflecting the more favorable money conditions which have facilitated the financing of a large volume of road building and other public construction. New capital issues the proceeds of which were for use in foreign countries showed an increase of $250,000,000 for the half year; the offerings in the A p ril to June quarter alone were nearly as large as in the whole first half of 1929, and the total for the first six months of 1930 was practically the same as that for the entire year 1929. Despite this large increase from the 1929 level, however, foreign financing fell short of the volume in the first half of 1928 by about $90,000,000. In July the volume of security offerings has been smaller than in June, following the usual seasonal tend ency, but, excluding investment trust issues, the amount of capital raised for business and governmental organ izations appears to have been in excess of the amount ob tained in July 1929. In fact, domestic security issues were probably somewhat larger than in the preceding month, while the total of foreign issues was smaller than in June, when the German International Loan was floated. The largest foreign issue in July was the A u strian Government 7 per cent International Loan for $25,000,000, which was offered at 95, making the yield 7.40 per cent. In addition to the new financing publicly announced, it was reported that the City of New York had sold $130,000,000 of short-term securities to four large banks and investment banking firms at interest rates of 2% and 2 % per cent. FEDERAL RESERVE AGENT AT NEW YORK 61 under the average for the pre-war years 1911-1913. Fairchild’s composite fiber index, which includes cotton, wool, rayon, and silk, declined below the 1911-1913 average. The general wholesale commodity price index of the United States Bureau of Labor Statistics for June de clined 2.6 per cent from that of May, the largest loss that has occurred in any month since 1921. The index in June was 11 per cent under that of last July, and 13 per cent under the 1926 average. Employment andWages 1929 1930 1929 1930 New Security Offerings during First Half of 1929 and 1930, Classi fied as to Type of Security and Type of Issuer— Refunding Issues Excluded (In millions of dollars) CommodityPrices Commodity prices continued to follow a downward course in July, and a considerable number of important commodities reached new low levels for recent years. The average price of four basic metals, which usually responds quickly to any change in the industrial situa tion, continued to decline. Scrap steel dropped to $14.75, equaling the low price of the last week in May, and pig iron and finished steel declined further, pig iron reaching the lowest level since 1915. Domestic cop per declined to 11 cents, lead to a range of 5.20 to 5.25 cents, and zinc to 4.05 cents, the loiwest prices in recent years; zinc, however, had a substantial recovery in the latter part of the month. Among the fuels, there was a slight seasonal advance in anthracite coal, while petro leum and bituminous coal declined. The declines in agricultural commodities were not quite as general as in the metals, but prices of a number of important products fell rapidly, and reached new low levels for recent years. Cash wheat at its lowest daily closing was down to 8 2 % cents a bushel, as compared with $ 1 .5 0 % at last year’s high point. Corn, on the other hand, recovered somewhat from the low levels reached in June, and hogs advanced slightly from the June low. Refined sugar rose to 4.70 cents from the low of 4.50 cents reached in June. The price of hides declined to 1 3 % cents, the lowest since 1926, and prices of steers were down substantially. Crude rubber de clined to 1 0 % cents a pound, the lowest in the history of the industry. Among the textiles, raw cotton was quoted as low as 12.45 cents a pound, a price that has not been reached since the record crop year of 1926. Domestic wool recovered more than 1 cent a pound from the lowest levels of May, but raw silk continued to decline rapidly, and the Fairchild average silk price in the second week of July reached $2,613, the lowest price ever recorded. This compares with the 1929 high of $5,087, and is well Employment and wage data for June indicated fu r ther declines in employment and in opportunities for obtaining work. The number of workers employed in representative factories throughout the United States declined 2.4 per cent between the middle of May and the middle of June, according to the index of the Fed eral Reserve Board. The index for the country as a whole was the lowest since the 1921-1922 period, but remained about 9 per cent above the lowest point reached at that time. For New York State, the Department of Labor reported a decline of 1.9 per cent. A s there is generally only a slight decline between the two months, this bank’s employment index for New York State, which has been adjusted for the usual seasonal varia tions, declined to the lowest level in several years. Other indicators of employment conditions also gave evidence of a less satisfactory situation in June. A t New York State Employment Bureaus, orders for workers declined more than the number of applicants that came to the bureaus for work, and the ratio between orders and applications showed a more than seasonal decline in June that continued during the first three weeks of July. The rate of voluntary labor turnover also declined more than usual in June, and reached the lowest level for any June since these records were started in 1919. Factory payrolls in New York State declined more than 2 per cent between May and June, when usually there is a small increase, and average weekly earnings of New York State factory employees also declined fur ther, reaching the lowest level since April 1928. The decline of $1.51 in average weekly earnings since last September is the most substantial that has occurred in the past nine years. The decline in the cost of living since last September, however, has approximated the decrease in average weekly earnings, so that the purchasing power of the average worker who has retained employment during the past nine months has not decreased. This is not true of the total purchasing power of the general body of factory workers, which is considerably less than last autumn, due to unemployment of a considerable number of workers. The current industrial conditions have had a notable effect upon the farm labor situation. The Department of Agriculture reports that the supply of farm labor on July 1 was the largest on record, and that average farm wages declined 2 per cent between A pril 1 and July 1, MONTHLY REVIEW, AUGUST 1, 1930 62 Production when usually there is an increase of about 6 per cent. This decline brought farm wages to a level 13 per cent under that of a year previous, and the lowest for any July since 1923. The output of all of the more important groups of in dustries declined slightly further in June, after sea sonal allowance, and a substantial majority of this bank’s indexes continued under the long-time trend of growth. The indexes of metal production as a whole declined in June; output of pig iron and of steel ingots decreased somewhat more than seasonally, mine output of copper declined when usually there is a small sea sonal increase, and tin deliveries rose less than usual, while the only index to show a gain was that of zinc production. Average daily production of automobiles fell 18 per cent from May to June, as compared with an average decline of about 4 per cent in past years, and the index of activity in this industry reached the lowest level since December. Production of bituminous and anthracite coal and of coke showed unseasonal declines in June, and pro duction of petroleum did not show the slight increase that is usual at that season of the year. In the case of the cement industry, however, where production has been stimulated by large contracts for the construction of highways, output showed a slight seasonal increase. Mill consumption both of raw cotton and of raw silk declined markedly between May and June, and, although there was an increase in wool mill activity, a composite index of textile output reached the lowest level since 1921. There were declines also in live stock slaughtering, wheat flour production, and sugar meltings, while in creases after seasonal adjustment were shown only in tobacco products and boots and shoes. Further curtailment has been reported in a number of important industries in July, and it appears likely that production indexes will show more substantial declines for that month than for June. Probably the largest cur tailment was in the automobile industry, where several of the producers, including the two largest manufac turers, suspended operations for two or more weeks. Steel mill activity was reported to have declined from 60 per cent of capacity to 56 per cent in the first week of July, and to have shown no recovery in the remainder of the month. A further unseasonal decline occurred in fuel production. Output of cotton goods was at an even lower rate than in June, probably reflecting the failure of sales to keep pace with even the curtailed production of the past few months. B u ild in g Owing largely to an unusually heavy volume of con tracts for public works and utilities, together with some increase in other non-residential building, the June total of building contracts reported by the F . W . Dodge Cor poration for 37 States was materially larger than the May total and was the largest reported for any month since July 1929. The chief component of the large pub lic works and utilities total was over $100,000,000 of pipe line contracts, placed principally in the Chicago, St. Louis, and Kansas City districts. Highway construction contracts also were greater than a year ago, and the volume of contracts for railroad construction, railway buildings, and sewerage system work also increased. The total for other non-residential building was increased considerably by projected industrial power plant devel opments in the Middle Atlantic and St. Louis territories. The accompanying diagram indicates tendencies in the three major types of building and construction work this year in comparison with 1928 and 1929. Public works and utility contracts so far this year have generally been above the two previous years, and in June reached a larger total than for any month in the past. Other non residential building on the whole has shown a moderate decline from the corresponding months of 1928 and 1929, while in residential building there has been a continuous and rapid decline since the beginning of 1928. The com bination of these elements produced a total of all build ing and construction contracts for the first half of 1930 that was I 2 V2 per cent smaller than the figure for the corresponding period of 1929 and 23 per cent below the first half of 1928. In the territory which corresponds roughly with the Second Federal Reserve District, total building contracts for the first half of this year were 11 per cent below a year ago, and more than one-third smaller than in the first six months of 1928. Following the large total reported for June, building contracts declined materially during the first 25 days of July and the daily average was at least 40 per cent be low the unusually high average of July 1929. M ILLIO N S OF DOLLARS ■ \ \ f / M ILLIO NS OF DOLLARS MILLIONS OF DOLLARS [ " " /J W J _ vTr 19 2 8 \ V \ \. A A ^ 1930 \ v > ........ . / 1 1 v1 9 2 8 * ■ IS *' 1930 A \ l9 2 9 V I y \ \ 1929 A " 10 A - / \1 9 2 8 ) —..........~ V / j (O R E S I D E “N T I A L 1 ’ J F 1 1 1 M A M 1 J . J .......1 J *A ... S 1 .. _L O N D P U B L IC : W O R K S & U T Il J T I E S 1 1 ) 1 1 1I 1 1 11- ..L. I . _ J F M A M J J A S O N D N O N -F I E >_ 1 J . F . 1 .....J i M A TH E R S ID E N T IA L 1 1 LI ,1. M J J A S ..... 1, .... L. O N D Volume o f Building Contracts Awarded in 37 States, 1930 Compared with Previous Tw o Years (F . W . Dodge Corporation figures) FEDERAL RESERVE AGENT AT NEW YORK (Adjusted for seasonal variations and usual year-to-year growth) Metals Automobiles M otor trucks.................................................. Fuels Bituminous coa l............................................. Anthracite coa l.............................................. Coke .............................................................. Petroleum, crude........................................... Petroleum products...................................... June April M ay June 127 145 118 105 99 112 102 101 85 99 78 89 104 102 84 90 76 92 100 101 80p 90p 78 86 128 188 90 113 90 93 76p 87 p 83 72 123 113 101 85 77 108 99 96 77 85 110 98 95 101 97 p 86 67 85 116 95 77 75 87 113 88p 73 80p 64 112p 93p Textiles and Leather Products C otton consum ption.................................... W ool mill a ctiv ity ......................................... Silk consum ption........................................... Leather, sole................................................... Boots and shoes............................................. 106 101 111 103 108 Miscellaneous C em ent............................................................ Tires................................................................. Printing a ctiv ity........................................... Paper, newsprint........................................... W ood p u lp ...................................................... 72 p 75p The distribution of goods and general business ac tivity showed a further irregular decline in June, and this bank’s indexes continued at relatively low levels. Average daily car loadings, both of merchandise and miscellaneous freight and of heavy bulk materials, showed an unseasonal decline which continued into July, and remained well under the levels of recent years. The number of business failures continued numerous, but the number of new corporations formed in New York State and the amount of life insurance paid for declined by less than the usual seasonal amount. (Adjusted for seasonal variations and usual year-to-year growth) 91 104 94 110 96 106 80 103 94 106 92 102 120 124 106 86 103 108 97 101 80 103 118 100 100 87 102 92 99 p 74 107 118 88 81 p Preliminary ForeignTrade This country’s foreign merchandise trade during June showed a continuation of the tendencies of recent months. The value both of exports and of imports was again less than in the previous month and substantially less than a year ago. Exports, valued at $299,000,000, were 24 per cent below June 1929, and imports, valued at $250,000,000 showed a 29 per cent decline. Compared with a year ago, a decrease of $55,000,000 in the value of exports of finished manufactures ac counted for more than half of the total decline in ex ports. The group of exports composed of crude ma terials, however, continued to show the heaviest percent age loss; shipments abroad of raw cotton were less than twro-thirds in quantity and only one-half in value of the June 1929 shipments. On the other hand, the total value of exports of grains and grain products showed a slight increase in June, and was above the level of a year previous for the first time since last August. Imports of crude materials declined $44,000,000, or 36 per cent, from June 1929. The quantity of raw silk re ceipts was less than in any month in the past six years, and nearly 60 per cent less than in June of last year. Quantity imports of crude rubber, however, showed only a small percentage decrease from a year ago, and coffee imports showed an increase. For the fiscal year ended June 30, 1930, exports amounted to $4,698,000,000, and imports to $3,849,000,000, a decline of 13 per cent and 10 per cent, respec tively, from the previous fiscal year. The favorable bal ance of merchandise trade was reduced from $1,082,000,- Indexes of Business Activity 1929 1930 June April M ay 102 98 102 117 85 94 87 81 102 78 92 87 82 103 67 89 80 8 2p 94p 71 104 105 102 98 105 90 103 89 107 93 93 87 99 89 95 109 158 98 136 99 134 104 141 111 150 396 99 95 93 121 83 94 67 112 143 273 96 93p 92 121 83 95 66 114 146 269 94 Building contracts......................................... New corporations formed in N. Y . State. Real estate transfers.................................... 126 182 252 100 100 104 109 105 111 85 General price level*...................................... Composite index of wages*........................ Cost of living*............................................... 179 227 171 174 226 168 172 225 167 169 225 165 Primary Distribution Foods and Tobacco Products Live stock slaughtered................................ Wheat flour.................................................... Sugar meltings, U. S. p orts........................ T obacco products......................................... 000 in the year ended June 30, 1929 to $849,000,000 in the past year. 1930 1929 63 Car loadings, merchandise and m isc........ Car loadings, oth er....................................... Panama Canal traffic................................... Distribution to Consumer Department store sales, 2nd D ist............. Chain store sales, other than g ro ce ry ... . Life insurance paid f o r ................................ Advertising..................................................... General Business Activity Bank debits, outside of New Y ork C ity . Bank debits, New York C it y .................... Velocity of bank deposits, outside New York C ity ................................................... Velocity of bank deposits, New Y ork C ity Shares sokl on N. Y . Stock Exchange. . . Postal receipts............................................... Electric pow er................................................ Employment in the United States........... p Preliminary June 90 124 115 102 * 1913=100 ChainStoreTrade Total sales in June of the reporting chain store sys tems averaged about 5 per cent smaller than a year previous, following increases in each previous month this year, except March. Grocery organizations were the only type of chains that reported an increase in sales, and their increase was slightly smaller than in the three preceding months. Sales of ten cent and drug chains showed the largest decreases in several years, and the decline in the sales of reporting shoe firms was the largest since March. Following increases in sales in May, the variety and candy chain store systems reported moderate declines from last year in June. For the first six months of 1930, the total sales of the reporting chain stores averaged 3 per cent higher than the corresponding period a year ago. Last year the total sales of these chains in the first six months were 10 per cent larger than a year previous. Sales per store showed a decrease of 4 per cent from a year ago for the first six months of this year, as compared with an increase of 5 per cent for the first half of last year. 64 MONTHLY REVIEW, AUGUST 1, 1930 Percentage change first six months 1930 compared with 1929 Percentage change June 1930 compared with June 1929 T ype of store Number of stores T otal sales Sales per store T otal sales Sales per store G rocery......................... Ten cent....................... Drug.............................. S hoe.............................. V ariety.......................... C an dy........................... + 5 .9 + 7 .6 — 0 .9 + 7 .8 + 1 9 .6 — 1 .9 + 1 0 .7 — 9 .1 — 10.9 — 18.3 — 5 .4 — 3 .4 + 4 .5 — 15.5 — 10.1 — 2 4.2 — 20.9 — 1 .5 + 1 2 .7 — 1.3 — 1 .5 — 9 .5 + 5 .8 + 2 .2 + 8 .5 — 8 .7 — 7 .3 — 17.0 — 12.8 + 6 .3 T o ta l..................... + 7 .7 — 4 .6 — 11.4 + 3 .3 — 3 .9 Department StoreTrade The total June sales of the reporting department stores in this district were 5 per cent smaller than a year ago, the largest decline in any month this year, except March when sales were affected by the late Easter. However, a part of the June decline may have been due to the fact that there were four Saturdays in June this year compared with five Saturdays in June 1929, and sales are usually larger on Saturdays than on other days of the week. A ll localities reported de creases in sales— New York City stores showed a decline in sales of almost 4 per cent, and substantial decreases were reported in most of the other sections of the district. The leading apparel stores continued to report a considerable decrease in sales as compared with a year previous. Total sales of reporting department stores for the first six months of 1930 were 1 per cent larger than the corresponding period in 1929, which, although smaller than the usual year-to-year increase, compares favorably with other lines of business activity, most of which have shown substantial declines in the first half of 1930. Stocks of merchandise on hand at the end of June remained slightly smaller than a year ago. The rate of collections on charge accounts during June was slightly below 1929, following a small increase in May. Locality Percentage change June 1930 compared with June 1929 Net sales New Y o r k ....................... R ochester........................ Syracuse.......................... N ewark............................ Bridgeport...................... Elsewhere........................ Northern N .Y . State. Central N. Y . State.. Southern N. Y . State. Hudson River Valley D istrict................... Capital District. Westchester District. — 3 .8 — 10.9 — 7 .5 — 9 .1 — 5 .5 — 15.2 — 8 .8 — 14.9 — 22.6 — 9 .5 Stock on hand end of month + 0 .4 + 6 .4 — 5 .7 — 13.0 — 4 .8 — 13.2 — 4 .7 — 2 .3 — 5 .9 — 3 .1 Percentage change first six months 1930 compared with 1929 Net sales + — — — + — — — — — 2 .6 6 .7 0 .4 6 .5 0 .2 6 .8 1.3 8 .8 4 .4 4 .4 Per cent of charge accounts outstanding M a y 31 collected in June Average stock on hand 1929 1930 0 1 .0 7 .5 0 .1 9 .4 4 .5 4 .9 45.1 52.1 4 2 .2 33.7 4 6.4 39.5 37.0 4 5 .0 4 9.8 39.0 30.8 4 3.6 4 0.7 36.6 — — + — — — + 2 .0 + 1.3 + 0 .7 All department stores. . — 5 .2 — 1 .0 + 1 .0 — 1.9 4 4.6 4 3 .6 — 13.8 — 5 .2 — 7 .7 — 3 .0 4 7.2 4 3.7 Apparel stores................ Stock on hand percentage change June 30, 1930 compared with June 30, 1929 + 2 4 .6 + 7 .2 + 6 .8 + 4 .6 + 2 .9 — 0 .3 — 1 .0 — 2 .6 — 3 .0 — 4 .2 — 4 .6 — 5 .2 — 5 .9 — 6 .8 — 9 .3 — 11.9 — 18.2 — 3 3.0 + 4 .0 — 20.5 + 2 1 .8 + 5 .4 + 1 3 .2 + 2 .5 + 9 .3 + 5 .9 + 1 4 .9 — 2 .5 + 3 .0 — 1 .0 — 4 .5 + 1 7 .4 — 15.1 — 13.5 + 1 8 .4 — 5 .5 — 30.1 — 2 .7 Musical instruments and ra d io . . . . Silverware and jew elry...................... Toilet articles and drugs................... Shoes...................................................... Toys and sporting goods................... W om en’s ready-to-wear accessories. Cotton goods................................. .. M en’s and B oys’ wear....................... M en’s furnishings............................... Home furnishings................................ Luggage and other leather good s... Books and stationery......................... Silks and velvets................................. H osiery.................................................. Linens and handkerchiefs................. W om en’s and Misses’ ready-to-wear W oolen good s....................................... Miscellaneous....................................... WholesaleTrade Sales of the reporting wholesale dealers in this dis trict averaged 21 per cent smaller in June than a year previous. In several lines the June decreases were the largest reported so far this year, and in the cases of m en’s clothing and shoes, sales showed the largest de creases from a year previous in several years. Sales of cotton goods and hardware were smaller than a year ago for the eighth consecutive month, and the June decreases were the largest which have been reported in that period; wholesale stationery and paper dealers also reported substantial decreases in sales. Following in creases during A pril and May, the Silk Association of America reported a decrease in yardage sales of silk goods of nearly 29 per cent in June. Orders for machine tools reported by the Machine Tool Builders Association continued in less than half the volume of a year ago. Contrary to the general tendency, the sales of grocery and drug dealers showed only small declines from a year ago. In the jewelry and diamond trade sales con tinued well below a year ago, but the decreases were the smallest that have been reported since last October. Total sales of reporting wholesale dealers for the first six months of 1930 averaged 13 per cent smaller than in the corresponding period of 1929. The decreases in the various lines are shown in the following table. Percentage change June 1930 com pared with June 1929 Per cent of charge accounts outstanding M ay 31 collected in June Percentage change in net sales Comm odity Net sales Stock end of m onth Groceries................. — 0 .8 — 0 .9 M en’s cloth in g .. . . — 31.0 Cotton g ood s......... — 2 5.7 — V .5 — 28.7* + 0 .6 * — 33.0 + 2 0 .8 — 1.4 + 1 1 .3 — 26.6 — 20.4 Machine tools**.. . — 56.9 S tationery.............. — 15.2 — 14.5 — 35.4 — 39 ‘.8 I — 17.2 — 17.5 W eighted a v . . — 2 0.7 Sales and stocks in major groups of departments are compared with those of June 1929 in the following table. Net sales percentage change June 1930 compared with June 1929 1929 1930 7 0.0 4 6.1 3 5.7 5 1.6 4 2 .2 4 1 .0 5 1.9 71.3 4 0.6 3 4.0 4 6.9 4 1 .5 2 6.3 47.3 72*8 6 8.4 91 O 5 2.6 7 6‘.3 6 1.3 I> OO. I1 4 9.6 June 1930 First six from months 1930 M ay 1930 from 1929 0 — 33.1 — 4 .4 — 39.3* + 1 3 .0 — 8 .9 — 15.3 — 6 .9 + 1 0 .4 — 13.3 + 2 1 .4 + 4 3 .8 — 1.2 — 15.6 — 15.5 — 3 .1 * — 18.7 — 3 .2 — 16.1 — 4 9 .0 — 8 .2 — 7 .1 — 50.9 — 30.4 — 9 .7 — 12.8 * Quantity not value. f Reported by the Silk Association of America ** Reported by the National Machine Tool Builders Association FEDERAL RESERVE BANK OF NEW YORK MONTHLY REVIEW, AUGUST 1, 1930 Business Conditions in the United States (Summarized by the Federal Reserve Board) N D U S T R IA L production decreased in June by more than the usual seasonal amount and factory employment and payrolls declined to new low levels. The volume of building contracts awarded was large. Prices declined sharply and money rates continued downward. I I n d u s t r ia l P r o d u c t io n 1926 1927 1928 1929 1930 1929 1930 Index iNumber of Industrial Production of Man ufactures and Minerals Combined, Adjusted for Seasonal Variations (1 9 2 3 -2 5 aver age = 100 per dint) PER CENT 120“ ,9 2 6 1927 1928 Wholesale Price Indexes of the United States Bureau of Labor Statistics (1926 average = 100 per cent) and E m ploym ent In June industrial production showed a further substantial decrease and the Board’s index, which is adjusted fo r ordinary seasonal variations, declined to the lowest level since last December. Output of steel ingots declined in June and early July more than is usual at this season, while automobile pro duction was sharply curtailed to a level considerably below that of the same period of the past two years. Cotton consumption, already at a low level, declined further in June. Output of bituminous coal and copper continued in small volume. Wool consumption and shoe production increased slightly and cement output, as in the preceding month, was at a high level. Factory employment and payrolls decreased further in June. The number employed at steel plants and in the automobile, agricultural implement, and cotton goods industries, declined more than is usual at this season, and employ ment in the woolen goods and lumber industries continued at unusually low levels. The value of building contracts awarded in June, $600,000,000, according to the F. W. Dodge Corporation, was about 30 per cent more than in May and the largest since last July. The increase reflected chiefly unusually large awards for natural gas pipe lines and power plants; the volume of contracts fo r residential building was somewhat smaller than in May. In early July the total volume of contracts was small. Department of Agriculture estimates, based on July 1 conditions, indicate a decrease from last year of about 20,000,000 bushels in the winter wheat crop and a corresponding increase in spring wheat. The corn crop is expected to be about 2,800,000,000 bushels, 7 per cent larger than last year and 4 per cent above the five-year average. Area planted to cotton is estimated at 45,815,000 acres, 2.7 per cent less than last year. D is t r ib u t io n BILLIO NS OF D O LLARS The volume be substantially lim inary reports year ago was of year. o f freight car loadings in June and early July continued to below the corresponding periods of 1928 and 1929. Pre indicate that the decline in department store sales from a larger proportions in June than in any previous month this W holesale P r ic e s Commodity prices declined more rapidly in June than in any other recent month, and the index of the Bureau of Labor Statistics, at 86.8 per cent of the 1926 average, was about 10 per cent below the level of a year ago. Prices of many important agricultural commodities and their manufactures declined further, and those of certain leading imported raw products— silk, rubber, and coffee— reached new low levels. There were also further declines in iron, steel, and copper. Prices of raw wool, hides, and raw sugar increased slightly during June. Early in July, prices of meats were stronger, but there were further declines in many other commodities. Monthly Averages of W eekly Figures^ for Reporting Member Banks in Leading Cities (Latest figures are averages of first 3 weeks of July) MILLIONS OF DOLLARS ---------------- total/ *DISC<DUNTS^ / V V # I U.S. SECURITIE . -=— 1 7 M ----- w y v / 1 \ t f K ACCEPTANCES .............. 1 1926 1927 1928 1929 . 1930 Reserve Bank Credit (Monthly averages of daily figures for 12 Federal Reserve Banks; latest figures are averages of first 19 days of July) B a n k Cr e d it Loans of reporting member banks in leading cities declined somewhat between the middle of June and the middle of July, and on July 16 were $60,000,000 smaller than five weeks earlier. Loans on securities decreased by $140,000,000, while “ all other” loans increased by $80,000,000. The banks 1 investments increased further by about $280,000,000 during this period and were in larger volume than at any other time in the past two years. Member bank balances at the Reserve Banks increased, and in the week ended July 19, averaged $60,000,000 more than five weeks earlier, and at the same time their borrowings from the Reserve Banks declined by nearly $20,000,000—reflecting an increase in the Reserve Banks’ holdings of accept ances and Government securities, a further slight growth in gold stock, and a continued decline in the volume of money in circulation. Money rates in the open market continued to ease and in the middle of July rates on 90-day bankers acceptances at 1% per cent were at a new low level, while rates on commercial paper at 3-3*4 per cent were at the low point of 1924. During July the Reserve Bank discount rate was reduced at Boston from 3 ^ to 3 per cent, and at Philadelphia, Atlanta, and Richmond, from 4 to 3 ^ per cent.
@FedFRASER