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M ONTHLY R E V IE W of Credit and Business Conditions S e c o n d Federal Reserve A gen t F e d e r a l R e s e r v e D is tr ic t Federal R eserve Bank, New York A u gu st 1, 1934 4% per cent, and $35,000,000 of Edison Electric IlluminatingCompanyof Boston3yearnotes, yielding Theflotationof newsecurityissuesotherthandirect 3per cent. Oneof thepurposes of theBaltimore and obligations of the United States Government has been OhioissueistoretireindebtednesstotheReconstruction increasingduringthepast fewmonths, andinJulythe Finance Corporation. Therailroadissues, as has been volumereachedthelargest monthlytotal sincethefirst thecaseformanyyears, w T eresubjecttoapproval bythe part of 1931. Theaccompanyingdiagrammeasuresthe Interstate Commerce Commission, but not the Federal extent of theresumptionof borrowingthroughthecap TradeCommission. Thepublicutilityissuewasfloated ital market whichhas occurredthus far. Despite this afteritsregistrationwiththeFederal TradeCommission considerable increase, thevolume of securityissues re hadbecome effectiveandwas thefirst issue subject to mainslimitedincomparisonwiththeflotations during such registration which has been offered since the theperiodof 1925-1930. Securities Act of 1933 was amended. For the first half of this year, the volume of new IntheStateandmunicipal financing'field, thesaleof securityissuestotaled$1,007,000,000, exclusiveof direct $72,000,000ofsecuritiesbytheCityofNe^Yorkwasan obligations of the United States Government. This importantstepinreducinginterestchargesonoutstand amount is morethantwice the flotations inthe corre ingdebt. TheaveragecosttotheCityon$60,000,000of spondingperiodof 1933 but is considerably less than 1-15yearserial bondswasaround3.80percent andon halfthetotal forthefirstsixmonthsof 1931. Refunding $12,000,000of short termcorporatestocknotes V/gper issuesof all kindsaggregatedover$400,000,000whichis cent. The proceeds of this salewill beusedtoretire a larger volume than in any of the past four years securities bearing higher coupons. Inadditionto the except1931. Issuesfortheraisingofnewcapitaltotaled interestsaving, thisrefundingwillallowtheCitytoissue nearly $600,000,000,; of which State, municipal, and 600!------------------------------------------------------------------- -—— farmloanissues accountedfor about $500,000,000. A considerable resumption of private capital issues has characterizedprevious recoveries of business from 500 depressions. Inthe1920-1922period, forexample, new security issues increasedconsiderablyinadvance of a B riseincommercial loansof thebanks. Afterdepression, 400 theprimaryneeds for funds appear tobefor meeting maturingobligations, andfor improvement andexpan sionof plantandequipment. Thesearelongtermneeds normallyfinancedbysecurityissuesratherthanbyshort 300 termcommercialaccommodation. Increasesthatoccurin commercial loans duringtheearlystages of arecovery tendtobeoffsetintheaggregatebycontinuingliquida 200 tionof oldloans. As indicatedabove, most of thecor porateissues sofar offeredhavebeeninthenature of refundingoperationstocoverrequirementswhichupto this time have beenprovidedfor by the banks or the Reconstruction Finance Corporation or by extensions grantedbysecurityholders. O! __________ ^AmongtheJulycorporatesecurityofferings, theprin cipal issues were $50,000,000 Pennsylvania Railroad long^termbonds, yielding 4.37 per cent, $50,000,000 Baltimore and Ohio Railroad 5 year notes, yielding M o n e y M a r k e t in July MILLIONS OF DOLLARS rrrri CORPORATE ISSUES L -iJ _ _ ■ new c a p it a l STATE, MUNICIPAL, & FARM LOAN ISSUES — N EW C A P IT A L - ALL REFUNDING ISSUES 1925J 1930’31 ’32 AV. AV. AV. F M AM 1934 O ffe r in g s o f N e w D o m e s tic S e c u r it y Is s u e s , E x c lu s iv e o f D ir e c t O b lig a t io n s o f th e U n it e d S t a t e s G o v e r n m e n t ( C o m m e r c ia l a n d F in a n c ia l C h r o n ic le f ig u r e s w ith o u t in v e stm e n t tru st is s u e s ; J u l y e s t im a t e d fr o m w e e k ly d a t a ) MONTHLY REVIEW, AUGUST 1, 1934 58 new corporate stock in payment of contract and land purchase liabilities. On July 23 the Secretary of the Treasury, on behalf of the Federal Farm Mortgage Corporation, offered $100,000,000 of 3 per cent Federal Farm Mortgage Cor poration bonds maturing in 1944-49. These bonds were sold to the highest bidders at an average price of 100.559 and an average yield of 2.92 per cent to the earliest call date. The Corporation on receipt of the funds on August 1 is to use the greater part of the proceeds to repay advances by the Reconstruction Finance Corpora tion to the Federal Land Banks and to return deposits of public moneys made in these banks by the Treasury. Toward the end of the month, the offering and distri bution of new security issues were retarded by declines in the prices of outstanding securities. E x c e s s R e se r v e s Currency requirements for the June month end and Independence Day holiday amounting to about $100,000,000 and some increase in Treasury cash and deposits at the Reserve Banks resulted in a reduction in the ex cess reserves of all member banks to about $1,600,000,000 in the opening days of July. In the succeeding weeks, a decline in currency circulation to its seasonal low point and a large excess of Treasury disbursements over receipts caused excess reserves to rise to a new high figure of around $1,900,000,000. In New York City, surplus bank reserves dropped from around $575,000,000 at the end of June to $425,000,000 in the first week of July; one of the principal losses of funds resulted from the repurchase by several New York City institutions of the capital notes which they had previously sold to the Reconstruction Finance Corporation, and other losses occurred through holiday currency requirements and Treasury transactions. A substantial inflow of funds to New York from other parts of the country soon developed, however, which together with continued gold imports had the effect of raising excess reserves of the City banks to the neighborhood of $600,000,000 toward the end of July. With the exception of yields on short term Government securities which declined slightly further, there was no change during July in short term money rates in the New York market, MoneyfRates atJNew^York July 31, 1933 June 29, 1934 July 31, 1934 Stock Exchange call loans............ Stock Exchange 90 day loans. . . . Prime commercial paper— 4 to 6 months Bills—90 day unindorsed..................... Customers’ rates on commercial loans. Treasury securities Maturing December (yield)............ Maturing March (yield).................. Maturing December 1935 (yield). . . Average rate on latest Treasury bill sales 91 day issue....................................... 182 day issue....................................... Federal Reserve Bank of New York re discount rate....................................... Federal Reserve Bank of New York buying rate for 90 day indorsed bills * Nominal 1 *1%-1 X ix X *M-1 H-i Vs-H *K -l H-i H-H f3.24 f2.13 f2.10 0.08 0.40 No yield No yield 0.28 No yield No yield 0.22 0*.07 6 ’. 09 IX IX X X 0.37 2X 1 t Average rate of leading banks at middle of month which continued at unusually low levels as the accom panying table indicates. M e m b e r B a n k C r e d it The total loans and investments of weekly reporting member banks in principal cities showed a moderate net increase during the five week period ended July 25, following a large rise during the preceding month. United States Government security holdings advanced $89,000,000 further, and there was a rise of $93,000,000 in other security holdings, but the effect of these increases was offset to a considerable extent by declines in security loans and in other loans. In New York City, total mem ber bank credit outstanding showed no material net change, as a reduction in loans, especially in security loans in the last two weeks of the period, was nearly as large as the increases which occurred in Government and miscellaneous security holdings. Net demand deposits both in all reporting banks and in New York City recovered the loss sustained around the middle of June through Treasury transactions. Time deposits tended lower in New York, but were slightly higher for the country as a whole, while Government deposits were reduced by recent withdrawals of part of the proceeds of Government security issues. B djL M a r k e t The amount of business transacted in the discount market during July continued in much the same small volume as for a number of months past. In the closing days of June offerings of bills to the market had in creased slightly, due to sales by banks in connection with the mid-year statements, but immediately after the turn of the month bank investment demand quickly absorbed these bills. Throughout the remainder of July the small amounts of bills that came into the market moved out into investors ’ portfolios and the amount of bills in deal ers 7 lists remained at a minimum. Rates continued to be quoted by the dealers only upon application, but it was indicated that most of the trading again was done at a buying rate of 3/16 per cent and a selling rate of Ys per cent. The volume of bankers acceptances outstanding at the end of June reached $534,000,000 as a result of a drop of 6 per cent during that month, the fifth consecu tive monthly decline. The amount outstanding was $237,000,000 smaller than at the end of January and $153,000,000 smaller than in June 1933. The decline in outstandings has been the largest in domestic warehouse credits and, secondly, in bills based on export transac tions. Aside from the small demand for commercial accommodation of any kind, the decline in the use of bankers acceptances has been attributed to some extent to the offering of rates on direct commercial loans which are lower than the costs of acceptance credits, including commissions and discount charges. A t the end of June 90 per cent of the bills then outstanding were held by the accepting banks and bankers, leaving only about $50,000,000 of bills available for other investors. 59 FEDERAL RESERVE AGENT AT NEW YORK C o m m e r c ia l P a p e r M a r k e t Drawings of new eommereial paper showed a con siderable increase during the first part of July and moderate additions continued to occur until late in the month when there was some slowing down in the rate at which paper was being created. For the month as a whole, the amount of new paper drawn represented a continuation of the increase which occurred in June when the volume of paper outstanding rose 7 per cent to $151,000,000, the largest amount since November 1931. The July drawings included a diversified list of com mercial and industrial borrowers located in various parts of the country. This paper moved quickly from the dealers into investors’ portfolios, as the active bank investment demand that has prevailed in recent months continued throughout most of July. Somewhat greater importance in the rate structure was attained by the % per cent quotation for prime four to six month paper around the middle of the month, but the movement was not sufficiently marked to cause a general lowering of the prevailing rates. Toward the close of the month, the range of dealers’ offering rates was % - l per cent with the lower rate pertaining prin cipally to four month maturities and the higher rate to five and six month maturities. L o an s to In d u stry Early in July, announcement was made of the mem bership of the industrial advisory committee for the Second Federal Reserve District, which is to consider applications for loans by the Reserve Bank for the pur pose of providing established industrial and commercial businesses with working capital, under the terms of the amendment to the Federal Reserve Act enacted on June 19. The committee consists of Mr. John B. Clark, presi dent of the Clark Thread Company, Newark; Mr. John A. Hartford, president of the Great Atlantic and Pacific Tea Company, New York; Mr. Albert A. Hopeman of the A. W . Hopeman & Sons Company, Rochester; Mr. Charles R. Palmer, president of Cluett, Peabody & Com pany, Troy; and Mr. William H. Pouch, president of the Concrete Steel Company, New York. Mr. Pouch subse quently was elected chairman of the committee and Mr. Hartford, vice-chairman. A moderate number of formal applications for this type of loan were filed with the Federal Reserve Bank of New York during July, but in addition there were a large number of inquiries concerning the possibilities of obtaining loans under this section of the Federal Reserve Act. Security M a rk e ts Stock prices tended to advance in a continued small volume of trading during the early part of July, reach ing a point some 7 per cent above the lowest quotations touched in May and June. After the middle of July, however, stock prices declined, at first moderately, but toward the end of the month the decline was very sharp, accompanying reports of widespread crop damage in flicted by the drought and reports of the disturbances in Austria. This recession, which was accompanied by a PRICE INDEX J F M A PR IC E INDEX M J J A S O N D J F M A M J J A 5 0 N D M ovem e n ts o f Stock and B ond Prices (Standard S ta tistic s C om pany indexes o f 4 2 1 stock s and 6 0 bon ds) considerable increase in turnover for a few days, resulted in a drop of 16 per cent in the general level of stock prices to the lowest level since May 1933. The public utility price averages, as a result of the decline, reached a new low since July 1932. In the closing days of July, the market steadied, and trading volume diminished, but only one-fifth of the decline in prices was recovered. Movements in the bond market were similar to those in the stock market with the lower grade corporation issues, especially, tending to fluctuate with share prices. For the month as a whole, the bond averages composed largely of less high grade issues showed net declines of around 2 points with individual issues dropping much more, and the high grade bond averages registered reces sions of about 1 point. United States Treasury bonds advanced % of a point further in the first part of the month, but subsequent declines left prices showing a net decrease of Ys point from the end of June. Foreign dol lar bonds quoted in this market showed no material change until the latter part of the month when a repre sentative price average dropped 1 % points to the lowest level since January, reflecting general weakness in the foreign list. In connection with the recurrent declines that have occurred in stock prices during the past three months, the accompanying diagram indicates that the current level of share prices is about 29 per cent below the high est point reached on the advance which terminated in July 1933. In contrast to the materially lower level of share prices now than a year ago, corporation bond prices are higher than in July 1933. The bond average shown in the diagram is typical of high grade issues, which have been advancing steadily since the beginning of this year and which are now nearly 10 per cent higher than a year ago, but even those bond averages that are com posed of a large proportion of medium and lower grade issues show some advance over July 1933. G o ld M o v e m e n t During July gold imports at New York amounted to about $46,000,000, representing a moderate decline from the June total. The principal amounts received were $23,700,000 from England, $8,200,000 from Canada, 60 M O N T H L Y R E V I E W , A U G U S T 1, 1934 $8,400,000 from India, $3,300,00 from France, and $2,000,000 from Mexico. Imports of gold on the Pacific Coast amounted to $2,200,000, representing shipments from China. In addition, $2,100,000 of gold previously earmarked at this bank for foreign account was released, and receipts of scrap gold by the mints and assay offices and purchases of newly mined domestic gold each aver aged at least $2,000,000 a week. As a result of these ac quisitions of gold, the monetary gold stock of the United States rose about $75,000,000 further during July to a new high figure of about $7,930,000,000. C entral B a n k R a te C hanges On July 1 the Bank of Java lowered its discount rate from 4 % to 4 per cent, the higher rate having been in effect since August 16, 1933. The National Bank of Yugoslavia on July 16 reduced its discount rate to 6Vo per cent from the 7 per cent rate which had been estab lished on February 9, 1934; the rate on advances also was lowered to 7 % per cent from 8 per cent. Foreign E xch an g e Trading in the principal foreign exchanges was com paratively quiet during the first two weeks of July with some currencies gaining in value and others declining. During the second half of the month greater activity was evident in certain sections of the list, and three of the gold currencies were quoted for at least part of the time below their estimated gold import points to the United States, The only shipments of gold, however, came from France. After reaching its high closing rate for the month at $5.06% on July 3, sterling declined to $5.03% on the 9th and remained in the vicinity of $5.04 until late in the month when the rate was as low as $5.03^2. French francs, which fluctuated around $0.0659% through July 14, rose to $0.0660% on the 16th, but this was followed by an abrupt decline to the month’s low of $0.0658% on July 20, a rate below the estimated gold import point. Subsequent quotations were higher but the franc re mained below the gold point. Belgas were weaker than in June and sold consistently below the estimated incoming gold point and guilders, which moved irregularly down ward from a peak of $0.6790 on July 3, were the third currency to drop below the gold import point when they closed at $0.6760 on the 21st. Swiss francs were stronger than in June and regis tered a small net gain for the month of July after touch ing their parity of $0.3267 on the 16th. Reichsmarks fluctuated with considerable irregularity between a low of $0.3833 on July 6 and a peak of $0.3925 on the 19th, most of this gain being lost before the end of the month. Lire moved more narrowly than for several months past at a level slightly below their June average of $0.0860%. Japanese yen, the Scandinavian currencies, and the Argentine peso moved in close conjunction with sterling and showed in the main a similar measure of steadiness. The Brazilian milreis did not deviate at all from a closing rate of $0.0850 and the Canadian dollar pursued an al most unwavering upward course. The Chinese currencies showed a small net loss during July in common with the price of silver. Closing Cable Rates at New York Exchange on Belgium ................................ England................................ France................................... H olland................................. Italy....................................... Spain...................................... Switzerland.......................... Canada.................................. Argentina............................. B razil..................................... Ind ia...................................... Shanghai.............................. Par of Exchange $ .2354 .4537 8 .2 3 9 7 .0663 .4033 .6806 .0891 .4537 .3267 .4537 .3267 July 31, 1933 June 30, 1934 July 30, 193$ .1885 .2010 4 .4 8 0 0 .05280 .3222 .5440 .0709 .2252 .1128 .2315 .2610 $ .2335 .2256 5 .0 4 5 0 .06595 .3861 .6778 .0856 .2536 .1366 .2603 .3250 $ .2345 .2251 5 .0 3 7 5 .06591 .3865 .6760 .0857 .2533 .1366 .2599 .3261 1.6931 .7187 .2026 1.7511 .9300 .3413 .0829 .6000 1.0100 .3363 .0850 .8000 1.0169 .3358 .0850 .8000 .8440 .6180 .2770 .3380 .2850 .2990 .3800 .3431 .2991 .3796 .3381 F oreign T ra d e Total merchandise exports from the United States during June amounted to $171,000,000, and general im ports totaled $136,000,000. Exports were considerably larger than in May, contrary to seasonal tendency, while imports showed about the average decline for this time of year. The value of exports was 42 per cent larger than in June 1933, while imports gained only 11 per cent, the smallest increase in a year. Compared with a year ago, shipments of raw cotton from the United States to all of the major importing countries except Canada and the Far Eastern countries showed declines both in volume and value; the total quantity exported was reduced 25 per cent and the value was slightly less. Imports of raw silk were about onethird smaller in quantity and 40 per cent less in value than in June 1933. In contrast to the reduced foreign trade in textiles, the value of automobiles and accessories shipped abroad was nearly three times the small value of a year ago, and the value of imports of rubber in creased almost six times. The quantity of rubber im ports was more than twice the June 1933 volume. For the fiscal year ended June 30, exports totaled somewhat over $2,000,000,000 and imports $1,700,000,000. These totals represent increases over the small figures for the preceding twelve month period of 42 per cent in exports and 47 per cent in imports. Available statis tics covering the quantity of commodities in foreign trade during the past fiscal year show a gain of 59 per cent in imports of crude rubber and a decrease of 13 per cent in receipts of raw silk. Exports of raw cotton were also slightly less than in the year ended June 30, 1933, with the largest reductions occurring in shipments to European countries, notably Germany and Belgium. Japan imported 20 per cent more of American cotton than in the previous fiscal year. C o m m o d ity Prices Prices of important farm commodities rose substan tially during July, owing chiefly to reports of serious crop damage caused by insufficient rainfall and intense heat. Sharp advances in cotton and in wheat, corn, and other grains followed the release of the July 1 Govern ment crop reports and were stimulated by indications of further crop damage in July. FED ER AL RESERVE AG EN T A T N E W Y O R K 61 The price of cotton rose 1 % cents to 13.35 cents a at 75.1 per cent of the 1926 average in the third week pound for spot delivery, and despite the subsequent of July as compared with 74.8 per cent in the last week loss of a small part of this advance, cotton prices in of June. July were generally at the highest level in four years, as the accompanying diagram indicates. The rise in E m p lo y m e n t and P ayrolls cotton prices was due in part to an indicated decrease Employment at factories in the United States declined of over 30 per cent in cultivated acreage under the reduc somewhat more than seasonally from the middle of May tion program of the Agricultural Adjustment Adminis to the middle of June, the Federal Reserve Board ad tration, and in part to reports of subnormal rainfall in justed index showing a decrease of 1.3 per cent. Reduc tions in employment appeared in manufacturing indus the western part of the cotton belt. Wheat advanced 16% cents to $1.12 a bushel for tries producing both durable and non-durable goods, the cash price of Number 1 Northern grade. The level but were slightly more pronounced in the non-durable group owing largely to a marked recession in the tex of wheat quotations established in July was somewhat tile industry. Systematic curtailment at cotton mills below the temporary peak of the summer of 1933, but as a measure to avoid overproduction was responsible in with that exception was the highest since 1930. A total considerable part for the decreased employment in the domestic wheat crop of 484,000,000 bushels was forecast textile group. Substantial declines were also reported in the July 1 Government report, as compared with a in the number of factory workers in the shoe and lumber short harvest of 528,000,000 bushels last year and average industries. production of 886,000,000 bushels in 1927-31. A short In spite of a decline in farm employment in drought wheat crop for the world as a whole is also indicated by stricken areas there was a small seasonal increase during available estimates, with a marked decline in the indi June in the number of farm workers employed for the cated European harvest and some reduction in the country as a whole. Little change was shown in employ Australian and Argentine production. The prices of corn ment in wholesale and retail trade, in private building and other grains also rose considerably, accompanying operations, or on the railroads. reports of serious crop damage. Following a sharp ad According to Government reports, the number of vance in the previous month hog quotations fluctuated workers directly employed on projects financed by the irregularly but showed little net change during July, Public Works Administration was increased by about while cattle and hide prices moved somewhat lower. 100.000 from May to June, and approximately 50,000 Price reductions were announced by the principal steel were added to other Federal emergency payrolls. About manufacturers early in July. As the diagram shows, 1.800.000 workers in all had employment in June on these reductions tended to offset in part the sharp ad the various projects financed by extraordinary Federal vances made in April, but the present level of steel expenditures. The estimate of the American Federation prices is considerably higher than in 1932 or in 1933. of Labor places the total number of persons without Silk declined 9 cents further to the lowest price on employment of any sort in June at about 8,500,000. record at $1.07% a pound. In general, however, the As measured by the index of the Bureau of Labor prices of basic commodities other than domestic farm Statistics, factory payrolls declined 3.1 per cent from products showed comparatively little change during July, May to June which is estimated to represent a reduction and despite the large advances in the prices of principal of $4,000,000 in the weekly wages of factory workers. agricultural commodities the widely inclusive index of The income of factory workers as a group is much higher, wholesale commodity prices computed by the Bureau however, than* in the early months of 1933 even when of Labor Statistics advanced only 0.3 of a point, standing allowance is made for the increase in living costs during CENTS CENTS DOLLARS CENTS PER POUND PER CWT. PERPOUND PERBUSHEL Movements of Prices of Important Commodities (Monthly averages) MONTHLY REVIEW, AUGUST 1, 1934 62 the intervening period, and the real earnings of em ployed factory workers have recovered virtually to pre depression levels. In d exes of B u siness^A ctivity For the first half of July, there was some indication that general business activity showed a slight recession. Owing in part to a marked falling off in steel shipments, a decline occurred in the volume of merchandise and miscellaneous railroad freight, which had previously re mained quite stable apart from seasonal fluctuations for a number of months. As a result, this bank’s adjusted index of these two classifications of freight traffic re ceded to the lowest level since last December. The move ment of bulk commodities by rail showed no advance from the June level although the beginning of harvesting operations is usually reflected in some increase in this type of freight traffic in July. No definite reports on the volume of retail trade for the country as a whole are as yet available. In the New York Metropolitan area, sales of department stores showed a smaller than seasonal decline for the first half of the month, but labor dis turbances on the Pacific coast and intense heat in much of the farming region undoubtedly tended to restrict business in these sections. Retail sales of automobiles, however, were reported to have held up in comparatively large volume for this time of year. Divergent movements were shown during June by the various business indexes computed by this bank, but the level of business activity appears to have remained about the same as; in the previous month. Among the principal measures of activity, the largest increase occurred in retail sales of passenger automobiles. Although automo bile buying usually reaches a seasonal peak in May, and falls off rather sharply thereafter, June sales this year were fully maintained at the previous month’s level owing chiefly to price reductions announced early in the month by most of the principal manufacturers. As the accompanying diagram shows, the volume of sales in June, after seasonal adjustment, was the highest in three years and was more than double the extremely low vol ume of March 1933. Increases occurred also in the Daily Average Retail Sales of New Passenger Automobiles (Adjusted for seasonal variation) volume of check payments and in sales of chain stores other than grocery chains. Railroad freight traffic con tinued at the level of the previous two months. Declines were reported, however, in sales of department stores and mail order houses., and business failures were more numerous than in the previous month. (Adjusted for seasonal -variations, for usual year to year growth, and where necessary for price changes) 1934 1933 June April 58 55 47 64 55 100 May June 60 60 59 58 70 86 60 60 51p 62p 67 94 60 61 56p 63p 70 79 79r 75 71r 54r 81 45 72 73 66r 73r 71r 61r 68 51p 75 74 68r 75r 72r 63r 74 48p 72 69 68r 78r 67r 60r 62 58 66 56 62 47r 64 47 78 77 72 73 Shares sold on N. Y. Stock Exchange. . . Life insurance paid for............................. Employment in the United States r........ Business failures........................................ Building contracts.................................... New corporations formed in N. Y. State Real estate transfers................................. 62 310 67 68r 77 19 85 47 63 64 74r 83r 46 22 60 47 51 54 72r 84r 42 23 57 53 41 69 82r 47 20 General price level*................. ................. Composite index of wages*...................... Cost of living*......................... ................. 128 173 128 137 184 136r 136 183 136r 137p 183p 136 Primary Distribution Car loadings, merchandise and misc....... Car loadings, other................................... Waterways traffic...................................... Wholesale trade......................................... Distribution to Consumer Department store sales,U. S..................... Department store sales, 2nd Dist............ Chain grocery sales r ................................ Other chain store sales............................. Mail order house sales r ........................... Advertising r ............................................. Gasoline consumption............................... Passenger automobile registrations......... General Business Activity Bank debits, outside New York City.. . . Bank debits, New York City.................. Velocity of demand deposits, outside New York City..................................... Velocity of demand deposits, New York p Preliminary r Revised 88 56p * 1913 average=100 P r o d u c tio n Apart from a sharp decline in the output of steel, no considerable change in the level of basic industrial activity, other than seasonal, is indicated by the avail able weekly data for July. Operations in the steel in dustry, which usually reach a spring peak not later than May, were maintained this year until the final week of June but subsequently declined sharply. The average rate of operations in July was less than 30 per cent of capacity as compared with a June rate of 53 per cent. The exceptional magnitude of the decline was due in part to the drawing down of inventories accumulated by industrial consumers during the second quarter. In addition there was some evidence of a recession in the demand for steel in connection with publicly financed construction and railroad equipment projects. AutomoT bile production, however, was reported to have shown a smaller than seasonal recession, and although enforced curtailment of cotton mill operations was continued the seasonal low point in this industry is usually reached in July. The production of electric power showed little change either before or after seasonal adjustment. During June the average level of basic industrial out put showed some recession, and the Federal Reserve Board seasonally adjusted index of production of min- FEDERAL RESERVE AGENT AT NEW YORK erals and manufactures declined 2 points to 84 per cent of the 1923-25 average. The principal decline occurred in the textile industry, owing largely to en forced curtailment of operations at cotton mills to permit a reduction of accumulated inventories. Declines were reported also in the output of shoes, coal, lumber, and non-ferrous metals. These losses were not fully offset by recessions of considerably less than seasonal propor tions in the steel and automobile industries. 63 M IL L IO N S OF D O L L A R S 7.5 p u b l ic /" 5.0 (Adjusted for seasonal variations and usual year to year growth) June April May June 49 61r 47 56 53 55 64 38 46 85 59 73 50 48 44 67 53 93 47 79 56p 69 71 52 81 71 69 76 85 63 71 75 85 69 71 72p 68 67 67p 66p 82 85 62 76p 112p 64 76p 56 103p 104 87 72 81 110 107 81 87 83 45 48 70 37 46 77 39 75 30 Metals Pig iron............ Steel ingots Lead................. Zinc.................. Tin deliveries. . Automobiles Passenger cars. Motor trucks. . Fuels Bituminous coal. . . . Anthracite coal....... Coke........................ Petroleum, crude. . . Petroleum products. Electric power........ Textiles and Leather Products Cotton consumption.......... Wool mill activity.............. Silk consumption............... Rayon deliveries................ Shoes................................... Foods and Tobacco Products Livestock slaughtered. . . . Wheat flour....................... Sugar deliveries................ Tobacco products............ 66 120 133 150 123 110 98 77 65 76 113 68 56 56 66 \ .........- 1 1 1932 1 - PRVVATE W i I 1 933 I ] I 1934 I A v e ra g e D aily V a lu e o f B uildin g and E n gineerin g C ontracts Pu blicly and P riva tely Financed ( F . W . D odge Corporation data for 3 7 S ta te s ; J u ly data are for first ha lf o f th e m on th ) 72p 78p 73p thirds of all contracts, as compared with 37 per cent in 1933 and 50 per cent in 1932. Privately financed con tracts this year were slightly larger than in 1933 but remained smaller than in 1932. During the first half of July, awards of construction contracts increased considerably, whereas a seasonal de cline usually occurs at this time. The rise reflected an increase in privately financed non-residential construc tion, while publicly financed construction declined to the lowest level since last August. The average daily amounts of contracts awarded in the first half of July are also shown in the diagram. D e p a rtm e n t Store T ra d e Miscellaneous 43 79 42 59 72 19 Cement................ Tires.................... Lumber........ Printing activity. Newsprint paper. Machine tools . . . p Preliminary 2.5 1934 1933 86 37 64 74 40 66 34 r Revised B u ilding The total of building and engineering contracts awarded declined about 5 per cent from May to June, despite an unseasonal rise in residential contracts, and this bank’s index which is adjusted for seasonal varia tion, long time growth, and estimated price changes receded from 23 to 20 per cent of the trend of past years as compared with a recent high of 54 per cent reached last December. The principal element in the June decline was a recession in privately financed com mercial building, following the temporary advance in May. Contracts for publicly financed construction which include chiefly Public Works Administration projects increased slightly, as the accompanying diagram indi cates, while privately financed construction in the aggre gate declined. For the first half of 1934, the total of building and engineering contracts awarded in 37 States, as reported by the F. W . Dodge Corporation, was nearly twice as large as the total for the corresponding period of 1933 and 28 per cent larger than for the first half of 1932. Publicly financed construction was between three and four times as large as a year ago, and constituted two- During the first half of July, total sales of the report ing department stores in the Metropolitan area of New York were 4 per cent higher than in the corresponding period a year ago, and excluding sales of liquor from this year’s figures, the increase amounted to 2 per cent. Somewhat less than the usual seasonal recession appears to have occurred between June and the first half of July, following a counter-seasonal decline between May and June. For the month of June, total sales of the reporting department stores in this district were approximately 3 y 2 per cent higher than last year, a smaller percentage increase than in the previous month. A rise of 2 per cent was indicated after exclusion of sales of liquor from this year ’s figures. The largest percentage increases in sales were shown by the Bridgeport, Southern New York State, and Hudson River Valley District stores. The other districts also showed increases which were larger than that indicated for the Metropolitan area of New York, with the exception of the Capital district wThere sales were smaller than a year ago. For the first half of 1933, total department store sales in this district were 9y 2 per cent ahead of the corresponding period last year. Apparel store sales in June were 7 per cent larger than a year ago and the total for the first six months of this year was 15 per cent larger. Stocks of merchandise on hand at the end of June, while remaining 11 per cent higher than the year pre vious, showed a smaller year to year increase than in 64 M O N T H L Y R E V I E W , A U G U S T 1, 1934 the preceding10 months. Bothdepartment stores and diamondandjewelryfirmscontinuedlowerthanayear apparel stores continuedtoreport ahigherrateof col ago. Collectionscontinuedtoaveragehigherthanlastyear. lectionsthanayear ago. Percentage change from a year ago Locality Net sales Jan. to June June New Y o r k .......................................... Buffalo................................................. Rochester............................................ Syracuse.............................................. Northern New Jersey................... Bridgeport.......................................... Elsewhere............................................ Northern New York State. . . Southern New York State. . . Hudson River Valiev District Capital D istrict.......................... Westchester D istrict................. + 2 .9 + 7 .6 + 5 .2 + 4 .7 + 3 .0 + 1 6 .4 + 5 .8 + 5 .0 + 9 .6 + 1 2 .9 + 1 2 .7 + 9 .3 + 6.1 + 1 8 .8 +11.2 + 10.8 +11.1 — 6 .4 + 7 .0 Stock on hand end of month + 1 1 .7 + 5 .7 + 6.8 — 0.2 + 1 6 .9 + 3 .5 + 2.8 Per cent of accounts outstanding M ay 31 collected in June 1933 1934 4 5 .7 4 1 .0 4 2 .7 2 5 .6 3 8 .6 3 5 .3 3 0 .0 5 0 .3 4 5 .6 4 6 .7 3 6 .4 4 3 .1 3 9 .6 3 1 .5 + 2 .7 + 1 4 .2 + 9 .4 + 1 1 .5 All department stores.......... + 3 .6 + 9 .5 + 1 0 .9 Apparel stores......................... + 7 .2 + 1 5 .2 + 3 2 .2 Commodity N et sales Groceries...................................... M en’s clothing.......................... Cotton goods.............................. Silk goods.................................... Shoes............................................. D rugs............................................ Hardware..................................... Stationery................................... Paper............................................ D iam onds.................................... Jewelry......................................... Weighted average........... 4 3 .1 Percentage change June 1934 compared with June 1933 + 1 2 .1 — 1 7 .0 Per cent of charge accounts outstanding M ay 31 collected in June Stock end of month 1933 1934 8 3 .6 4 0 .7 3 6 .0 7 3 .9 4 4 .8 2 3 .4 4 4 .3 5 2 .7 4 0 .2 9 5 .1 3 9 .9 3 9 .7 6 1 .0 4 2 .7 2 2 .2 4 8 .0 5 5 .4 4 8 .1 { 2 4 .6 { 2 8 .8 5 4 .5 5 7 .0 + 2 2 .1 — 12.7 — 5 0 .6 * — 3 0 .0 — 4 .7 + 2 .4 + 11 .6 + 0 .4 — 1 7.1 + 3 .5 + 9 .7 * + 2 5 .0 + 2 2 .9 — 1 4 .9 — 1 0.1 — 4 .4 Percentage change in net sales First six mos. 1934 from 1933 + 2 7 .9 + 3 3 .9 + 2 0 .9 — 2 3 .4 * + 5 .8 + 1 2 .2 + 1 4 .2 + 2 4 .8 + 2 6 .3 + 2 0 .1 + 8 5 .4 + 2 5 .4 4 3 .7 * Quantity figures reported by the National Federation of Textiles, Incorpo rated, successor to the Silk Association of America, Incorporated; not included in weighted average for total wholesale trade. Men’s furnishings................................ Hosiery................................................. Men’s and Boys’ wear........................ Shoes..................................................... Woolen goods....................................... Women’s r^ndy-t.-i-w^ar accessories.. . Silks and vrlve1s ........................................ Tov*. ,m'! sooiiine; go'»ds.................... Pr.oka ?'<’ siaii 'neiy.......................... Cotton v i s ..................................................... Li'ivrrv*' and oilier leather goods. . . . T'ul't at tides and drugs.................... Wo»non^ and Misses’ ready-to-wear.. lion.c fin ni.-l'iti^s................................ Silvers an' and jewelry....................... Linens ••.)(! handkerchiefs................... Music0! in>iru!"enfs and radio.......... J'\itni(\-T° ........................................... Miscellaneous. ............................. Net sales percentage change June 1934 compared with June 1933 Stock on hand percentage change June 30, 1934 compared with June 30, 1933 + 1 0 .9 + 8 .9 + 8 .7 + 1 5 .0 + 8.1 + 6.6 + 5 .6 + 3 .2 + 3 .1 + 3 .0 2.1 — — — — — — 2 .9 3 .7 3 .9 5 .3 6 .3 7 .5 —12.0 — 1 4.3 + 5 .3 +10.6 + 1 7 .5 + 1 7.6 — 7 .2 + 6 .7 — 0 .5 + 1 1 .9 + 3 .7 + 4 .6 + 1 .9 + 1 4 .0 + 1 3 .1 + 7 .3 + 8 .7 + 12.6 + 5 .1 + 3 2 .7 + 1 .9 W h olesale T ra d e During June total sales of the reporting wholesale firms inthis district averaged4per cent belowayear ago, thefirst decrease since April 1933, owing largely tothefact thatyeartoyearcomparisonsarenowbeing made withaperiod inwhichwholesale trade showed substantialrecovery. Theshoe, cottongoods, men’scloth ing, and diamond firms reported sizable decreases in salesfromayearago, andsalesof silkgoods, reported onayardagebasis bytheNational Federationof Tex tiles, wereonlyhalfof the1933volume. Thehardware, paper, drug, and jewelry concerns showed moderate changesinsalesfromayearago, andinnocasewasthe comparisonas favorable as inpreceding months. The stationery andgroceryfirms, however, reportedrather substantial gainsinsalesoverlastyear, althoughinthe case of grocery concerns, the exclusionof liquor sales fromthe 1934 figure reduces theincrease to about % per cent. For thefirst 6months of 1934, sales of the reportingwholesale firms averaged25 per cent higher thaninthecorrespondingperiodof 1933. Substantial gains over ayear agoinstocks of mer chandise onhandwereagainreportedbythe grocery, drug, andhardwareconcerns, whilestocks heldbythe C hain Store T ra d e Total Junesalesof thereportingchainstoresystems were approximately 9V2per cent higher than ayear ago, asomewhat smaller increase thanoccurredinthe previousmonth. Salesof thecandychainsagainshowed asubstantial gainoverayearago, whichaftermaking allowance for one more Saturday this year than last was about thesameaslast month’sincrease. Tencent andvarietychainstoresales alsocontinuedwell above ayearago, butineachcasethepercentageincreasew T as not quiteaslargeasinMay. Salesof chaindrugstores were only1per cent higherthanayear ago, theleast favorablecomparisoninfourmonths, andsalesofgrocery andshoechainsweresmallerthanayearagofollowing increasesinMay. Forthefirsthalf of 1934, total chain store sales were 13 per cent higher thaninthe corre spondingperiodof 1933. BetweenJuneayearagoandthisyearthedrugand shoechains reducedconsiderablythe number of stores operated; salesperstoreof thesetypesof chainsshowed averyfavorablecomparisonwithsales inJune of last year, whichwas not indicatedby thefigures for total sales. Candy chains reported amoderate gain inthe number of units operatedinJune1934 comparedwith ayearago, andsalesperstoreincreasedlessthantotal sales. For all reportinglines, theincreaseover ayear ago in sales per store was slightly larger than the increaseintotal sales. Percentage change June 1934 compared with June 1933 Type of store Percentage Jan.-June compared Jan.-June change 1934 with 1933 Number of stores Total sales Sales per store Total sales Sales per store D rug........................................................ Shoe........................................................ Variety................................................... C andy..................................................... — 1 0 .8 — 2 2 .3 — 0 .4 + 6 .0 — 2 .7 + 1 4 .4 + 1 .1 — 2 .5 + 1 4 .4 + 2 5 .4 — 1 .3 + 1 4 .6 + 1 3 .3 + 2 5 .5 + 1 4 .9 + 1 8 .3 + 3 .1 + 1 6 .3 — 0 .4 + 8 .5 + 2 1 .6 + 1 5 .0 + 4 .6 + 1 6 .7 + 2 2 .6 + 3 7 .3 + 2 1 .9 + 4 .8 T o ta l.............................................. — 2 .2 + + 1 1 .9 + 1 3 .2 + 1 6 .1 ! 9 .4 FEDERAL RESERVE BANK OF NEW YORK MONTHLY REVIEW, AUGUST 1, 1934 Business Conditions in the United States (Summarized by the Federal Reserve Board) I N DUSTRIAL production, which had increased during each o f the six months from December to May, declined in June by somewhat more than the usual seasonal amount. Factory employment and payrolls also showed decreases which were partly o f a seasonal nature. The general level o f wholesale com modity prices advanced during June and showed little change during the first three weeks o f July. P r o d u c t io n and M inerals Com bined, A d ju s te d for Sea sonal Variation ( 1 9 2 3 - 2 5 a v e r a g e s 1 0 0 per cen t) and E m ployment Volume o f industrial output, as measured by the B oard’s seasonally ad justed index, decreased from 86 per cent o f the 1923-25 average in May to 84 per cent in June, reflecting chiefly a sharp reduction in activity at cotton textile mills. Production at lumber mills and at coal mines also showed a decline. In the steel and automobile industries activity decreased in June by an amount somewhat smaller than is usual at this season. Maintenance of activity at steel mills in June reflected in part the accumulation o f stocks by consumers, according to trade reports, and at the beginning of July output of steel showed a sharp decline. Employment at factories decreased somewhat between the middle o f May and the middle o f June, reflecting reductions in working forces in industries producing textile fabrics, wearing apparel, leather products, automobiles, and lumber, offset in part by increases in employment at steel mills and at meat packing establishments. Value o f construction contracts awarded, which had shown little change during May and June, showed an increase in the first half o f July, according to the F. W. Dodge Corporation. for Seasonal V ariation ( 1 9 2 3 - 2 5 a v e r a g e s 1 0 0 per cen t) PER CENT > Department o f Agriculture estimates, based on July 1 conditions, indi cated a wheat crop o f 484,000,000 bushels, compared with an average of 886,000,000 bushels for the five years 1927-1931, and a corn crop o f 2,113,000,000 bushels, compared with the five year average o f 2,516,000,000 bushels. Crops o f other grains, hay, and tobacco were also estimated to be considerably smaller than usual. The acreage o f cotton under cultivation was estimated at 28,000,000 acres, about 2,000,000 less than the acreage harvested last season. In the first three weeks of July drought conditions prevailed over wide areas, particularly in the southwest. D is t r ib u t io n rv ^ t The number of freight cars loaded per working day showed a further slight increase in June followed by a decline in the first half o f July. Sales by department stores decreased in June by more than the estimated seasonal amount. 30D5 on ioH£ W V r& * > FARM PIRODUCTS1 v ' 1929 t930 1931 1932 1933 1934 Group Price Indexes o f the B ureau o f Labor S tatistics ( 1 9 2 6 ave ra g e= 1 0 0 per cen t) W h o l e s a l e C o m m o d it y P r ic e s Wholesale prices o f farm products and foods generally advanced during June while other commodities as a group showed a slight decline. H og prices increased considerably in the middle o f the month while wheat declined throughout the month. In the middle o f July wheat prices advanced rapidly to levels above those reached at the end o f May, and there was a considerable advance in cotton, while lumber prices declined and finished steel prices were reduced somewhat from the advanced quotations previously announced. Bank Cr e d it Between June 13 and July 18 member bank reserves increased to a new high level o f nearly $4,000,000,000, about $1,850,000,000 in excess o f legal requirements. The growth reflected chiefly a further increase in the monetary gold stock. A seasonal increase in demand for currency over the July 4th holiday period was followed by an approximately equal seasonal return flow during the succeeding two weeks. The volume o f Reserve Bank credit out standing showed little change. At reporting member banks there was a growth o f U. S. Government deposits during the five week period, reflecting chiefly the purchase in June of new issues o f Government securities by the banks. Bankers7 balances also increased but deposits o f individuals, firms, and corporations have shown little change. Loans declined somewhat, reflecting a decrease in loans to customers, while loans to brokers showed an increase. Wednesday Figures for Reporting Member Banks (Latest figures are for July 18) Money rates remained practically unchanged at the low levels prevailing in June.