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MONTHLY REVIEW
o f C r e d it a n d
S e c o n d

B u s in e s s

F e d e r a l

C o n d itio n s

R e s e r v e

D is t r ic t
A

Federal Reserve Agent

Federal Reserve Bank, New York

M o n e y M a r k e t in J u l y
M idyear currency demands and movements o f funds
between districts, which ordinarily are the dominant
influences on the money market during July, were over­
shadowed this year by large Government transactions.
One of the largest operations was the retirement of
approximately $600,000,000 of United States Consols,
which were called fo r redemption on July 1. The re­
demption of these bonds, which had been the principal
collateral for National bank notes, was an important
step in the retirement of National bank currency, which
had been contemplated for a number o f years. The
Consols were issued in 1900 and have been callable
since 1930. Follow ing the announcement early in March
that these bonds were to be redeemed on July 1, many
National banks obtained the release of Consols deposited
as security fo r their outstanding notes by depositing
funds with the Treasury fo r the redemption of their
notes. Consequently, during recent months the Consols
have been largely held by banks as unpledged invest­
ments, and a substantial part o f the National bank notes
outstanding have become, in effect, obligations o f the
Treasury. On June 30 the statement showing the amount
o f various kinds of money outstanding indicated $769,000,000 of National bank notes outstanding, but funds
had been deposited by National banks with the Treasury
fo r the redemption o f all but a little over $ 2 0 0 ,000,000
o f that amount.
Such deposits by National banks between the first of
March and the first of July amounted to more than
$400,000,000, and the receipt o f these funds by the
Treasury temporarily reduced the amount of funds to
be obtained through additional security flotations by
the Treasury, or through withdrawals o f funds from
Government depositaries, to meet Government expendi­
tures. On July 1, however, the redemption of the Con­
sols, together with other Government expenditures, re­
quired preparations fo r disbursements of more than
$600,000,000.
A pproxim ately $200,000,000 o f that
amount was to be provided by further deposits of funds
by National banks to retire their outstanding notes;
$ 1 0 0 ,000,000 was obtained through the sale of an addi­
tional issue of Treasury bonds; and a call was issued
for the withdrawal o f $353,000,000 from Government
depositaries.
Follow ing an earlier announcement by the Treasury
that a part o f the gold revaluation profit would be used
in connection with the redemption of Consols and




»

August 1, 1935

Panama Canal bonds and the respiting retirement of
National bank notes, it was stafea in June that the
Treasury would use the gold profit gradually to redeem
National bank notes upon presentation at the Treasury,
which will probably continue over an extended period.
This procedure avoided a sudden large increase and
subsequent gradual shrinkage in bank reserves which
would have occurred if the Consols had been redeemed
out o f the proceeds o f gold revaluation in July, and
funds subsequently obtained fo r the redemption of
National bank notes through withdrawals o f funds from
Government depositaries or through sales of Govern­
ment securities. Presumably in preparation for redemp­
tions o f National bank notes, the daily statement of the
Treasury indicated a substantial transfer in July from
the item “ Balance o f increment resulting from reduc­
tion in weight o f the gold d olla r’ ’ to the item 4‘ W orking
balance.”
The redemption o f Consols proceeded rather slowly,
only $218,000,000 out o f approxim ately $600,000,000
outstanding being presented on July 1 , but continued
receipts o f these bonds fo r redemption occurred through­
out the month, and by the end o f July approxim ately
$580,000,000 had been redeemed. Meanwhile, however,
the accumulation o f funds by the Treasury in anticipa­
tion o f their redemption caused a temporary reduction
in member bank reserves, especially in New York, where
withdrawals from Government depositaries on July 1
M IL L IO N S
OF DO LLAR S

12 0 0I

\J

1000

/
/

193 5 J

/

/
193-4
/

20 0

/
/i
fl

A /J /
J ) 'v

M

-w/

;

i

/

•S/

v‘‘*

*o
3
■ 1y 33

M

N

Net Loss o f Funds by Second Federal Reserve District Through
Treasury Transactions (Accum ulated from beginning
of each year)

5
8

MONTHLY REVIEW, AUGUST 1, 1935

amounted to $187,000,000, and where most o f the
$100,000,000 issue of Treasury bonds was sold on that
date. These transactions, together with currency re­
quirements fo r the June monthend and the July 4
holiday, and also some midyear transfer o f funds to
other districts, although partly offset by the redemption
o f Consols and other Government transactions, resulted
in a decline in excess member bank reserves in New Y ork
to a little over $700,000,000, as compared with a high
point of approxim ately $975,000,000 near the end of
June.
A substantial inflow of funds from other districts
fo r deposit and investment occurred in the second week
of July, however, and was supplemented by a return
flow of currency to the Reserve Bank after the holiday,
so that excess reserves in New Y ork rose again above
$900,000,000 before the middle of July. On July 15,
however, a substantial part of a new issue o f more than
$500,000,000 of Treasury notes was purchased in New
York, and cash payments fo r these securities, amounting
to nearly $150,000,000 in New Y ork alone, again caused
a substantial shrinkage in reserves of the New Y ork
banks. On July 22, payments in New Y ork fo r $86,000,000 out of an issue of somewhat over $ 1 0 0 ,000,000 of
new Treasury bonds, again caused some shrinkage in
the reserves o f New Y ork banks. In the last week of
July, however, there was a renewed inflow o f funds
from other districts, w^hich, together with the redemption
of a substantial block of Consols that had remained out­
standing up to that time, caused an increase in excess
reserves of New Y ork City member banks to a new high
level at above $ 1 ,000 ,000 ,000 .
The preceding diagram shows the extent of with­
drawals of funds by the Treasury from this district
during the past three years. A s this diagram indicates,
the accumulated net loss of funds by banks in this dis­
trict thus fa r in 1935 through cash sales of new Gov­
ernment securities, withdrawals of funds from deposi­
taries, and tax collections, in excess of Government
disbursements in this district, has been even greater
than in the past two years, amounting in seven months
to more than $1,200,000,000. The supply of funds in the
New Y ork money market, however, has been replenished,
partly by an inflow of bank, commercial, and private
funds from other districts, and partly by the heavy
inflow of gold from abroad that has occurred thus far
this year.
M ember B a n k Credit and D eposits

Net demand deposits in reporting New Y ork City
banks, after showing some reduction in the first week of
July, subsequently increased again and rose to a new
high level on July 24. Compared with a year ago, the
increase has amounted to $1,460,000,000, or more than
23 per cent. Time deposits, however, have shown a net
reduction during the year of a little over $ 1 0 0 ,000 ,000 .
F or the country as a whole, the net demand deposits of
weekly reporting member banks also rose to a new high
level on July 17, and even after a moderate recession in
the follow ing week showed an increase of approximately
$2,800,000,000, or about 2 2 per cent, over a year ago.
The loans and investments of reporting New Y ork
City member banks showed no material change during
the past month, small reductions in loans being offset




by increases in investments. F or the country as a whole,
there was a net increase of approxim ately $50,000,000
in total loans and investments of the reporting banks
during the fou r weeks ended July 24, due to purchases
of new issues of Government securities during July.
Security loans declined moderately, and other loans
after reaching the low point fo r the year in the second
week o f July, in accordance with the usual seasonal
tendency, thereafter showed a small net increase.
M oney R ates

Money rates in the New Y ork market showed virtually
no change during July, except for a further slight decline
in the average rate charged by the large New Y ork banks
on commercial loans to customers.
Money Rates at New York
July 31, 19341
June 28, 1935 July 30, 1935
Stock Exchange call leans.......................
Stock Exchange 90 day loans.................
Prime commercial paper— 4 to 6 months
Bills— 90 day unindorsed.........................
Customers’ rates on commercial loans
(Average rate of leading banks at

1

X
*X
%
X

* % -l
H -l
X -X

X
* x
X
X

2 .1 0

Average yield on Treasury bonds
(mere than 5 years to earliest call date)
Average rate on latest Treasury bill sales
133 day issue..........................................
273 day issue..........................................
Federal Reserve Bank of New York re­
discount ra te ..........................................
Federal Reserve Bank of New York
buying rate for 90 day indorsed bills
* Nominal

1.79

1.71

No yield

No yield
0.09

No yield
0 .0 9

1.1 1

Treasury securities:
Maturing December (vie ld )...............
Maturing February 1937 (yield ). . . .
Average yield on Treasury notes

0.53

JO. 56

2.81

2.44

2.42

0.07
0 .1 2

0.07
0 .0 7

IX

IX

IX

X

X

X

J Average raised 0.05 by inclusion of issue due December 15, 1939

G overnment Securities

During July, the Treasury raised a substantial
amount of funds by selling new securities at a time when
there were no maturing obligations to be taken care of
by exchange. The offering on July 8 of $500,000,000 or
thereabouts o f 1 % per cent Treasury notes maturing in
December 1939 was quickly oversubscribed at the issue
price of 10 0 and the subscription books remained open
only one day. Despite the fact that qualified depositaries
were permitted to make payment fo r the notes by credit
on their books to the Treasury W ar Loan Deposit A c ­
count, not much more than half of the $526,000,000 of
notes allotted were so paid for, as many subscribing
banks preferred to make cash payment immediately in
view o f the large amounts of idle funds which they held.
The note issue was follow ed a week later by an an­
nouncement o f the Treasury inviting bids fo r an addi­
tional $100,000,000 of 2 % per cent Treasury bonds of
the issue of 1955-60. Tenders received amounted to
$511,000,000, o f which $101,967,000 were accepted. The
average price on the accepted bids was 1 01 19 /3 2, and
the average yield to the earliest call date was about 2.77
per cent, which compares with 2.62 per cent on the last
June sale o f bonds by competitive bid, but the bonds
then sold will be callable in 1946, or 9 years earlier.
Treasury bill financing during July resulted in a net
reduction o f $25,000,000 in the amount of bills outstand­
ing. The first two weekly maturities of $75,000,000 of
182 day bills were each replaced by $50,000,000 of 133

FEDERAL RESERVE AGENT AT NEW YORK

day and $50,000,000 of 273 day bills, but the next three
$75,000,000 182 day maturities were each replaced by
$50,000,000 of 273 day bills. The average rate of return
on 273 day bills during the course of the month touched
a new low of 0.052 per cent, as compared with 0.123 per
cent on the last June issue, and the rate on 133 day bills
also reached a new low for that maturity.
Yields on outstanding Treasury notes and bonds, how­
ever, showed little variation fo r the month of June,
reflecting the continuance of relatively stable price quo­
tations on Government securities which has persisted
for several months past. On the whole, prices were at
or near the highest ever reached by these types of
securities.
B

il l s a n d

Com

m e r c ia l

P

M U N IC IP A L ,
& F A R M LO AM
(N E W C A P I T A L )
CORPORATE
( N E W C A P IT A L )
STATE,
C R E F U N D IN G )
CO RPORATE
(r e f u n d in g ;

aper

The extremely quiet conditions which have existed in
the bill market for some time continued during July.
Dealers’ portfolios remained of meagre proportions, and
rates held at the low levels previously current. The
amount of bills outstanding at the end of June was
$343,000,000, or $32,000,000 less than in May, and
$191,000,000 less than a year ago, reflecting a steady
decline during the past six months. As compared with
a year ago, domestic warehouse credits show a net reduc­
tion of $84,000,000, bills based on goods stored in or
shipped between foreign countries a decline o f $59,000,000, and export bills a reduction of $51,000,000. Im port
bills outstanding at the end of June were slightly larger
than a year ago. A ccepting banks and bankers con­
tinued in June to hold a very large part of all bills
outstanding.
The commercial paper market also remained dull dur­
ing July, as the amount of new paper acquired by deal­
ers again was far below the quantity required to care
fo r the continued active bank investment demand. The
prevailing rate fo r prime names held at % per cent.
A t the end of June, commercial paper houses had
$159,000,000 of paper outstanding, compared with
$173,000,000 at the end of May. Outstandings, however,
remained 5 per cent above a year ago.
N e w F in a n c in g
The volume of corporate security financing which
reached the market in J uly aggregated about $440,000,000 , which is the largest monthly amount since the first
part of 1931. Recent issues, however, have been largely
for refunding purposes, whereas a substantial amount
o f the issues in 1931 represented the raising o f new
capital.
Public utility bonds with a total of about $250,000,000
in July constituted the largest group of new offerings,
followed by industrial issues totaling approximately
$160,000,000. In the public utility field, interest rates of
3 y2 and 3% per cent were offered on the principal new
issues, as compared with 4 y2 and 5 per cent on the out­
standing bonds refunded. The largest industrial new
issues, on which the interest rates are 4 and 41 per cent,
/4
are to refund outstanding obligations with 5 to 6 per
cent coupons. The reduction of 1 to 1 % per cent in
coupon rates on the large volume of long term bonds
refunded during July will result in a substantial inter­
est saving over the 15 to 30 year terms for which these
bonds were issued. A feature of one of the industrial




59

1933

1934

1935

Volume of Domestic Security Flotations, First Seven Months of 1935
Compared with Corresponding Period of Previous Five Years and
Average for 1925-29 (In millions of dollars; Commercial
and Financial Chronicle data, excluding investment
trust issues; July 1935 data preliminary)

issues floated during July is that the notes carry common
stock purchase warrants, the first issue of this type in
some time.
State, municipal, and farm loan financing totaled
about $100,000,000 in July. The largest offering in this
category was $38,000,000 City o f New Y ork corporate
stock and serial bonds, which provided funds to retire
outstanding obligations. The net interest cost to the
City on this financing, the average m aturity o f which
was 2 iy 2 years, was approxim ately 3.48 per cent, re­
ported to be the lowest rate for long term issues o f the
City since 1905. No large amount o f farm loan financing
was done during the month and consequently the total
of State, municipal, and farm loan issues was consider­
ably smaller in July than in several recent months.
F or the first seven months o f this year, security flota­
tions by domestic corporations to refund outstanding
obligations were in much larger volume than in the pre­
vious three years, and were larger than the average for
the 1925-29 period, as the accom panying diagram indi­
cates, although not as large as in the latter part o f that
period, when the refunding operations included heavy
stock issues. A s the diagram also indicates, State, m unic­
ipal, and farm loan refunding was in materially larger
amount than in any o f the past ten years. This group
includes Federal Land Bank issues, which have ac­
counted fo r a substantial part of the total, and also
Federal Intermediate Credit Bank issues, but excludes
Home Owners’ Loan Corporation bonds which are guar­
anteed by the Federal Government.
W ith respect to new capital issues, however, the
amount of corporate financing showed virtually no in­
crease in the first seven months of this year over the
previous two years, and the aggregate of State, munici­
pal, and farm loan issues to provide new capital was
below the corresponding figures for all recent years
except 1933. The grand total o f all security issues reach­
ing the market during the first seven months o f 1935,
including refunding as well as new capital issues, was
considerably larger than in the previous three years,
but remained roughly one-fourth smaller than in 1931
and less than half as large as in other recent years.

60

MONTHLY REVIEW, AUGUST 1, 1935

Movements o f Industrial Stock Prices (Standard Statistics index of
50 issues; monthly through 1932 and weekly in
subsequent years)

S e c u r it y M a r k e t s
Prices of industrial stocks advanced irregularly dur­
ing July, continuing the rise which began in March. On
the average industrial shares toward the end o f July
were about 8 per cent higher than at the close o f June
and some 30 per cent above the March low. The level
reached was approxim ately the same as the highest
attained in February 1934 and in July 1933, and with
those exceptions was the highest since September 1931.
The accom panying diagram indicates, however, that cur­
rent quotations on industrial stocks are still below the
lowest points reached in 1930.
Eailroad stocks tended to advance slightly further
throughout July, while public utility shares after some
advance in the first week of the month showed no fu r ­
ther rise. The principal New Y ork City bank stocks
advanced about 1 2 per cent in the first ten days o f the
month, and toward the end o f the month rose somewhat
further. On the whole, stock trading on the New Y ork
Exchange was in slightly larger volume than in June.
Bonds of domestic industrial corporations continued to
advance during July, accom panying the rise in stock
prices, and high grade issues reached the highest levels
for many years past. Public utility and high grade rail­
road bonds also rose in July, but medium and lower
grade railroad issues showed a sizable net recession for
the month. Italian bonds quoted in this market were
subject to considerable selling pressure at times during
July, and consequently representative foreign bond
averages showed some decline.
F o r e ig n E x c h a n g e s
D uring most of July rates for the principal foreign
currencies moved within a com paratively narrow range,
but in the latter part of the month, this stability was
disturbed by two special developments in E urope—
announcement o f the suspension o f the Bank of
Ita ly ’s legal reserve requirements, and the political
crisis in Holland. U nder the decree of December 21,
1927, by which de jure stabilization of the lira was
effected, the Bank of Italy had been required to hold in
gold and foreign exchange a reserve equal to at least




40 per cent of its sight liabilities. The actual ratio had
been below 43 per cent since September 1934, and the
requirement o f a minimum percentage was suspended by
decree on July 22, 1935, in order to free the Bank of
I ta ly ’s reserves fo r possible use in meeting payments
abroad. The rate fo r the lira, although ordinarily sub­
ject to official control, declined from a closing quotation
of $0.0825 on July 22 to a low o f $0.0795 during the
course o f trading on July 23. Through official support­
ing operations the rate was subsequently restored to
about $0.0819, which compares with $0.0830% at the
end o f June and a nominal gold parity o f $0.0891. The
present rate represents a discount of about 8 per cent
from parity.
Strong opposition in the Netherlands Parliament to
the economy measures proposed by the Government cul­
minated in the Cabinet’s resignation on July 26, and led
to a renewal o f severe pressure against the guilder and
a large outflow o f gold from Amsterdam. The rate for
the guilder, which had been quite stable during the first
half o f July, declined from $0.6826 on J uly 18 to a low
o f $0.6704, or considerably below the gold shipping
point, on July 27, and the discount on guilders for fo r­
ward delivery widened from the equivalent o f 1 % per
cent fo r three months to nearly 5 per cent. Weakness
also developed in most o f the other Continental E u ro­
pean exchanges. The French franc, after fluctuating
earlier in the month in the neighborhood o f $0.0663 to
$0.0664^4 with the exception o f a brief decline imme­
diately preceding the Bastille Day holiday on July 14,
receded from $ 0.0 66 4 ^ on July 18 to $0.0660% on
July 27. In the closing days o f the month, however,
the guilder recovered to above the gold shipping point
to New York, and the French franc also rose. The principal
exceptions to the general movement o f European cur­
rencies were the Scandinavian exchanges, which are
linked to sterling, and the belga, whose movements since
its devaluation at the beginning o f A p ril have consist­
ently been opposite to those o f the gold bloc currencies.
The pound sterling and its related currencies showed
a moderate advance in the first week o f July, but re­
mained quite stable thereafter despite the disturbance
in the Continental European exchanges in the latter
part o f the month. The Shanghai dollar receded further
from $0.3956 at the end o f June to $0.3738 on July 30
in keeping with the continued slight recession in the
price o f silver. This quotation is the lowest since A pril.
Closing Cable Rates at New York
Exchange on

July 31, 1934 June 29, 1935 July 30, 1935

Holland........................................................
Ita ly .............................................................
N orw ay........................................................
Spain.............................................................
Sweden.........................................................
Switzerland.................................................

$ .2346
.2251
5.0350
.06591
.3875
.6762
.0857
.2532
. 1367
.2598
.3260

Canada.........................................................
Argentina.....................................................
B razil............................................................
U ruguay.......................................................

1.0169
.3357
.0850
.8000

.9988
.3295
.0857
.8000

.9991
.3307
.0857
.8040

Japan............................................................
India.............................................................
Shanghai......................................................

.2991
.3790
.3388

.2909
.3737
.3956

.2927
.3750
.3738

B elgium .......................................................
D enm ark.....................................................
E ngland.......................................................
France......... ................................................

$ .1694
.2207
4.9413
.06639
.4048
.6837
.0831
.2483
.1376
.2546
.3285

$ .1693
.2215
4.9600
.06613
.4033
.6770
.0820
.2493
.1371
.2557
.3270

FEDERAL RESERVE AGENT AT NEW YORK

61

in which month silver rose suddenly from 61 cents to
a peak of 81 cents.
C en tra l B a n k R a t e C h a n g es
During July the discount rate of the Bank of France
was lowered to 3 % per cent, but the rate of the Nether­
lands Bank, after two further reductions during the
early part of the month, was raised abruptly from 3 to 6
per cent in two steps, follow ing the sudden weakening of
the Dutch exchange in the latter part of the month. The
follow ing table shows the sequence of rate changes at
these banks during the past four months.
Netherlands Bank

Bank of France
Date Effective
In effect April
M ay
M ay
M ay
June
July
July

1
24
27
29
21
5
19

Rate
2 M%

3

4
6

5
4
3H

Date Effective
In effect April 1
April 5
April 10
M ay 16
June 1
June 27
July 6
July 18
July 25
July 26

Rate
2 /4 %
3 /4

4^
4
5
4
3H
3
5
6

Other changes in central bank rates during July in­
cluded a reduction on July 10 by the Austrian National
Bank from 4 per cent to 3 % per cent, and on July 15 a
decrease by the Bank of Spain from 5 % per cent to
5 per cent.
G o ld M o v e m e n t
The receipt of $5,300,000 of gold from Canada and of
$500,000 from China accounted fo r the bulk o f the gold
imports during July.
In addition to these imports,
$1,400,000 of gold was released from earmark fo r foreign
account at this bank, and there were further deposits of
newly mined domestic gold and scrap gold at the mints
and assay offices. In all, the monetary gold stock o f this
country increased about $25,000,000 during the month.
In addition, $1,750,000 arrived from Colombia and was
immediately earmarked and therefore was without effect
on the monetary gold stock.
B u ild in g
Contracts awarded fo r residential building in the 37
States from which reports are collected by the F. W .
Dodge Corporation increased more than 10 per cent
further in June, contrary to the usual seasonal tendency,
and were nearly twice as large as a year ago. Although
the comparison with a year ago is magnified by the very
low level to which residential building had fallen then,
the June volume this year nevertheless was the largest
since 1931, as the accom panying diagram indicates. The
volume of residential construction in the territory
roughly contiguous with the Second Federal Eeserve
District is also shown in the diagram, which indicates
that some improvement in residential building has also
occurred in this district, although the recent volume has
not reached as high a point relative to earlier years here
as in the whole territory covered by the reports. The
largest increases in residential construction recently
reported have been in the Middle Atlantic States, Cen­
tral Northwest, and the Chicago, St. Louis, and Kansas
City territories.




Value of Residential Building Contracts Awarded in 37 States
and in New York and Northern New Jersey Territory
(F . W . Dodge Corporation data)

Total residential contracts during the first half of
1935 aggregated 58 per cent more than in the corre­
sponding period of last year, and constituted 30 per cent
o f the total volume o f contracts fo r construction o f all
types this year, as compared with 15 per cent last year.
In the Second Reserve D istrict the proportion o f resi­
dential contracts this year was 39 per cent, as compared
with 25 per cent in 1934.
Nonresidential building other than public works and
utilities also showed some increase over a year ago dur­
ing June. The aggregate increase amounted to about
37 per cent, reflecting principally larger amounts of
educational and other public building construction but
also some increase in commercial building contracts.
P ublic works and utility contracts continued below the
level o f a year ago, the reduction in June amounting
to 32 per cent, due in largest measure to a decrease in
highway construction.
D uring the first half o f July, residential contracts
showed approxim ately the usual seasonal recession, fo l­
lowing the unseasonal advances o f the previous two
months, but continued to be much larger than a year
previous. Public works and utility projects declined
considerably more than seasonally from June, and the
average daily volume o f other nonresidential contracts
was reduced, contrary to the usual seasonal tendency.
P r o d u c t io n
Steel output, after reaching a low point o f 32 per cent
of capacity around the Fourth o f July holiday, advanced
steadily throughout the rest o f J uly to 46 per cent, as
compared with an average o f 40 per cent o f capacity
during June. Electric power output expanded gradu­
ally, as in the preceding month, and automobile produc­
tion was well maintained, follow ing holiday shutdowns,
though at a lower level than in June. Bituminous coal
output, on the other hand, was reduced by approxim ately
one-half at the beginning of the month, with only moder­
ate subsequent recovery, and cotton mills continued to
operate on a restricted basis. On the whole, it appears
that production in July was maintained at about the
June level, after allowance fo r usual seasonal movements.

62

MONTHLY REVIEW, AUGUST 1, 1935

PER CENT

meat packing plants, in sugar refining, and in shoe pro­
duction.
(Adjusted for seasonal variations and usual year to year growth)

335
\

\

/
193

V '
/

y

✓

1934

i

/

/

/

1935

June

April

M ay

June

57
71 r
50
49

49
55r
47
64

47
54r
52
63

45
53
48
67

51
71

64
94

48
73

1 0 2p

71
78
73

64p
83

72 p
82

112 p

68

68

M etals

/
Automobiles

Passenger cars...............................................
M otor trucks.................................................

58p

Fuels

Volume o f Industrial Production, 1935 Compared with 1934 (Federal
Reserve Board’ s seasonally adjusted index; 1923-25
average = 100 per cent)

There was a slight upturn in the aggregate volume of
basic industrial production in June, and the Federal
Reserve B o a rd ’s index increased one point over the pre­
ceding month to 86 per cent of the 1923-25 average,
reversing the movement of the preceding months since
January. In general, factory output was little changed
after allowance fo r usual seasonal changes, while output
of minerals increased considerably. A s the accom panying
diagram shows, the recession in industrial production
from January to M ay this year was quite moderate in
comparison with the drop from May to September last
year, and the B oa rd ’s index fo r June this year equaled
the highest points reached in 1934.
June is ordinarily a month of seasonal recession in
many lines, and while such important series as steel out­
put and cotton consumption declined by 8 V2 and 7y2
per cent, respectively, these decreases were not greatly in
excess o f those which have occurred in the past from
May to June. Moreover, automobile assemblies exceeded
those of May by 5y2 per cent, and machine tool orders,
as the accom panying diagram shows, increased to the
highest point in five years. There were also gains in
electric power generated, bituminous and anthracite coal
output, and zinc smelting operations. Declining ten­
dencies, on the other hand, were evident in activity at
PER C E N T

Long Term G th (Trend of past years = 100 per cent)
row




Bituminous coal.............................................
Anthracite coal..............................................
Petroleum, crude..........................................
Petroleum products......................................
Electric p ow er...............................................

73

63
72

64r
77
65
76
lOOr

75r
105
59
73
106r

113
56
74

107

79
82
104
83

76
75
87
82

43

45
53
74
60

66

65
72 p

85p
69 p
73p

Textiles and Leather Products

Cotton consumption r ..................................
W ool mill a ctiv ity ........................................
Silk mill a ctiv ity ...........................................
R ayon deliveries*..........................................

73 r

10 2p

71r
117p
55 p
85 p
9 2p

Foods and Tobacco Products

M eat packing.................................................
Wheat flour....................................................
Refined sugar deliveries..............................
Tobacco products.........................................

86

87
83

70
83
68 p

83

M iscellaneous

Newsprint p ap er...........................................
Machine to o ls ................................................
p Preliminary

r Revised

45
55
74
30

66

67
52

44
73 p
76

* For quarter ended

C o m m o d i t y P r ic e s
Mixed price changes occurred in actively traded com ­
modities during July. A s a result o f changing reports
concerning crop prospects and potential supplies, wheat
prices showed wide and erratic changes during the
m onth; nevertheless by the end o f July the cash quota­
tion fo r Number 1 Northern wheat at Minneapolis had
advanced to $1.18% a bushel, com pared with $ 1 .00 % at
the end o f J u n e; and wheat futures at Chicago rose
about 6 cents net fo r the month. The J uly 1 crop report
issued by the Department o f A griculture indicated con­
siderable improvement in crop prospects, but reports
coming from the growing areas during the course of the
month indicated increasing damage to the spring wheat
crop from black rust infection. Prices of corn, for which
the July 1 crop report forecast a crop somewhat below
the average of 1928-32, showed a net decline o f about
21/0 cents during July.
The average price o f hogs touched $10.55 a hundred­
weight during the course o f the month, the highest since
September 1930, and although some recession occurred
subsequently, showed a net advance o f $1.17 fo r the
month. The average price o f steers, on the other hand,
declined 67 cents to $9.96 a hundredweight, the lowest
level since the beginning o f the year. The price of raw
silk advanced 23 cents during July to $1.61% a
pound, the highest since October 1933. Rubber receded
about y2 o f a cent to 1 2 cents a pound, and slight losses
for the month also occurred in the prices o f raw sugar
and cotton.
Silver dropped 2 cents an ounce to a spot quotation of
67% cents a fine ounce, while lead, zinc, tin, and the

63

FEDERAL RESERVE AGENT AT NEW YORK
future quotations for copper all moved slightly higher.
Scrap steel at Pittsburgh was advanced $1.00 a ton
toward the end of July, reaching the highest quotation
since early March.
Follow ing an advance that had been in progress since
the first part of 1933, retail food prices have shown a
downward tendency during the past two months. The
Bureau of Labor Statistics index o f retail food prices,
which had increased about 38 per cent between A p ril
1933 and A p ril 1935, has since shown a decline of about
3 per cent. A m ong the various classifications, the largest
decreases have occurred in the fru it and vegetable group
and in such dairy products as butter and cheese, while
further price advances have appeared in meats and eggs.
E m p l o y m e n t a n d P a y r o lls
Employm ent and payrolls in representative New Y ork
State factories declined about 1.5 per cent more than
usual from the middle of M ay to the middle o f June.
The usual early summer dulness in the clothing and
millinery trades and curtailed operations in the metals
and machinery industries accounted for a considerable
part of the reduced employment during the period. On
the other hand, the food products group showed a moder­
ate increase in employment, owing in part to seasonal ac­
tivity in canning and preserving.
F or the entire United States factory employment and
payrolls likewise showed reductions during June in ex­
cess of the usual seasonal changes. Decreased em ploy­
ment was somewhat more evident in the durable goods
industries than in the nondurable goods group. Reduced
employment at automobile plants and a strike in the
lumber industry in the Pacific Northwest accounted fo r
an important part of the reduction in the number of
workers employed in the durable goods industries, these
losses being offset only in part by employment gains in
the manufacture of such building construction materials
as cement, brick and tile, and glass. In the nondurable
goods group, pronounced reductions in employment were
evident in the clothing and shoe industries, and the gain
in the number employed in the food industries was of
less than the usual seasonal amount. In contrast to the
decline in employment at m anufacturing establishments,
the nonm anufacturing group of industries in general
showed an increase in the number o f workers from May
to June.
The gains were especially large in private
building construction and mining, and more than offset
small reductions reported in the retail and wholesale
trades.
The number of persons engaged on public projects
financed by Federal emergency outlays increased by ap­
proxim ately 135,000 from the middle o f May to the
middle o f June, owing to an addition of about 65,000
people on the Emergency W ork Program o f the Federal
Emergency R elief Adm inistration, an increase o f more
than 30,000 workers on Public W orks Adm inistration
projects, and the further enrollment o f more than 40,000
men in the Civilian Conservation Camps.
I n d e x e s o f B u s in e s s A c t i v i t y
D uring the first three weeks o f July, the daily rate o f
merchandise and miscellaneous freight car loadings was
maintained at approximately the level prevailing during




June, but the movement o f bulk freight over the rail­
roads contracted sharply, contrary to the usual seasonal
tendency, as the result of a substantial reduction in coal
shipments, which had been at a high level in June due to
accelerated operations in anticipation o f a possible strike.
Department store sales in the Metropolitan area o f New
Y ork during the first half o f the month, although higher
than in the corresponding period o f last year, appear to
have been more than seasonally below the June level,
especially in Northern New Jersey.
The distribution o f goods and general business activity
in June generally made a favorable comparison with the
previous month. Sales of general merchandise in small
towns and rural areas and sales o f chain stores in­
creased, and sales o f department stores in urban localities
were maintained at about the May level, although the
usual seasonal movement in most lines o f retail trade is
downward from M ay to June. Increases o f more than
seasonal proportions occurred in the volume o f check
transactions and sales o f life insurance, while registra­
tions o f new passenger automobiles, which usually show
a marked decline in June, were only moderately lower
than in May. Car loadings o f merchandise and miscel­
laneous freight were approxim ately unchanged from
May to June, but the volume o f advertising was con­
siderably reduced.
(Adjusted for seasonal variations, for usual year to year growth,
and where necessary for price changes)
1934

1935

June

April

60
61
54
63

60
58
47
68

88

77

72
69

68

M ay

June

58
59
47p
69p

58
63
53 p
76p

84
67
60
50
72

60
79
79
61
62
70

72
69
60
77
74
64
57
71

76p
70
61
85
82p
58
61p

Bank debits, outside New Y ork C it y .. ..
Bank debits, New York C ity .....................
Velocity of demand deposits, outside
New York C ity..........................................
Velocity of demand deposits, New York
C it y ..............................................................
New life insurance sales..............................
Factory employment, United S tates. . . .
Business failures...........................................
Building contracts r .....................................
New corporations formed in N. Y . State.

64
47

65
48

64
42

67 p
46

60

20r

20r

54

General price level * ....................................
Composite index of wages * .....................
Cost of living * .............................................

137
183
136

142
185
140r

P rim a ry Distribution

Car loadings, merchandise and misc........
Car loadings, oth er.......................................
Wholesale tra d e.............................................
Distribution to Consum er

Department store sales, U. S.....................
Department store sales, 2 nd D ist.............
Chain grocery sales......................................
Other chain store sales................................
Mail order house sales.................................
Advertising.....................................................
New passenger car registrations...............
Gasoline consum ption.................................

71

68

General B usin ess Activity

V

Preliminary

r Revised

73

68

65

66

53
61
83
47

48
53
83
45

41
54
82
43
55

45
55
81p
44
25p
59

143
186
140r

143p
188p
139

2 1r

* 1913 average=100

F o r e ig n T r a d e
D uring June merchandise exports amounting to $170,000,000 showed an increase over the M ay total while
imports o f $157,000,000 were lower than in the previous
month, resulting in a favorable trade balance fo r the
first time since March. Little change from a year ago
occurred in the value o f exports, while imports continued
to show a substantial increase. F or the first half o f 1935,
the United States Department o f Commerce estimates a

64

MONTHLY REVIEW, AUGUST 1, 1935

slight decrease in the volume of exports and an increase
of approxim ately 15 per cent in the volume o f imports,
as compared with the corresponding period of 1934.
Detailed data for the first five months of 1935 con­
cerning the quantities of leading individual commodities
entering into our foreign trade illustrate the general
tendency toward a narrowing excess of exports over im­
ports noted this year. The follow ing table, which lists
the chief products of our export and import trade ar­
ranged in order of their importance, shows that ship­
ments abroad were smaller in 1935 than last year in
the m ajority of cases, while the quantities of most of
the important foreign products received in this country
were larger than a year ago. O f the fourteen export
items, only five showed a gain over 1934, ranging from
9 per cent for lumber products to 37 per cent fo r electric
refrigerators, the latter being a com paratively small
item. The other nine export commodity classifications,
largely agricultural products, decreased in volume from
a year ago. Exports o f raw cotton were 30 per cent less
than in 1934 and wheat and wheat flour shipments, now
reduced to twelfth rank among the leading exports, were
69 per cent below a year ago. On the other hand, crude
rubber alone of the m ajor imports showed a decrease
from the volume of a year ago. Receipts of tin were
nearly 75 per cent larger than in 1934, and substantial
increases occurred in imports o f other industrial raw
materials, such as copper, raw silk, burlap, and wood
pulp. Likewise, imports of all the principal food prod­
ucts, except coffee, were larger than a year ago, in
contrast to the reduction in exports o f food products.

substantial gains in sales in 5 or 6 months. In the Capital District, average daily sales compared more favorably
with a year ago than in the previous two months, and in
t h e . Northern New Y ork State, Southern New York
State, the Hudson River V alley District, and in W est­
chester and Stam ford reporting department stores also
the year to year comparisons showed improvement over
May. Sales of the leading apparel stores in this district
were somewhat higher than last year, follow ing a de­
crease in May.
D uring the first half o f 1935, total sales o f the report­
ing department stores in this district were about 2 per
cent less than in the corresponding period o f 1934,
whereas during the first six months of 1934 sales were
9V2 per cent higher than in 1933.
Percentage change from
a year ago
Locality
Net sales

June
0

+ 4 .4
+ 2 .5
+ 5 .7
+ 7 .2
Northern New Jersey....................
— 1.9
— 4 .2
Northern New York State . . . . — 1 . 6
Southern New York State........ — 3 .6
Hudson River Valley D istrict.. — 10.4
Capital D istrict........................... — 3 .4
Westchester and S tam ford. . . . — 1.4

+
—
—
—
—
—
—

2 .5
1-2
0 .6
1 .2
0

1.4
3 .7

Stock
on hand
end of
month

1934

1935

— 3 .7
— 8 .2
— 2 .9
— 7 .4
— 9 .5
+ 4 .1
— 12 .6

Jan.
to June
—
+
+
+

Per cent of
accounts
outstanding
M ay 31
collected in
June

50.2
45.6
4 6.7
3 6.6
4 3.1
38.8
31.3

4 9.3
47.3
4 6.3
3 6.7
42.7
38.2
34.3

6 .6

2 .4
9 .1
1.1

4 .6

All department stores............

+

1 -2

— 1.8

— 5 .0

46 .5

46.2

Apparel stores.........................

+ 0 .3

— 0 .7

+ 5 .0

43.4

42.9

Percentage Change in Quantities Between First Five Months of 1935
and Corresponding Period of 1934

W h o le s a le T r a d e
Exports from the United States
Raw cotton................................. ,
Automobiles (pass. & trucks). .. .
Mineral oils, refined................ .
T o b a c c o , u n m a n u fa c tu r e d . . .
Petroleum, crude.........................
C opper.........................................,.
Lumber products....................... , .
Meat products...........................
Fruit, canned and dried..........
Cotton cloth...............................
L a rd .............................................
Wheat, including wheat flou r. .
Fertilizers....................................
Electric refrigerators................ .

— 30

Imports into the United States
C offee.....................................

0

+32
— 7

+ 11

— 17
— 29
+ 12
+ 10

+ 9
— 25
— 16
— 22

— 74
— 69
— 1
+37

Rubber, cru d e......................
Raw silk ................................
Newsprint..............................
T in ..........................................
W ood p u lp ............................
Fertilizers..............................
Hides and skins...................
C o co a .....................................
B urlap....................................
W hiskey and other spirits .
C op per...................................
B ananas................................

+20

+73
....
....
....
....
....
....

+ 10
+ 11
+ 10

+42
+16
+21

+19

In June, total sales of the reporting wholesale firms
in this district again averaged slightly higher than last
year. The diamond and jew elry firms reported sizable
gains over a year ago, which were the largest in a num­
ber o f months, and the m en ’s clothing and drug concerns
registered moderate advances in sales. The stationery
firms showed sales this year slightly higher than in 1934,
but the grocery, hardware, and paper concerns had small
declines from a year ago. Sales o f cotton goods showed
the smallest decrease in 6 months, but a considerable
reduction occurred in sales o f reporting shoe dealers.

D e p a r tm e n t S to re T r a d e
D uring the first half of July, total sales of the report­
ing department stores in the M etropolitan area o f New
Y ork were 3.6 per cent higher than in the corresponding
period of 1934, but trade appeared to be running some­
what more than seasonally below the June level. New
Y ork City showed a 6 per cent increase, but reporting
stores in Northern New Jersey had a 10 per cent decline
in sales compared with a year ago.
F or the month of June, total sales o f the reporting
department stores in this district were a little over 1 per
cent higher than in June 1934, and after allowing for
differences in the number of shopping days, June showed
the most favorable year to year comparison since last
December. On an average daily basis, sales of the Syra­
cuse and Northern New Jersey department stores showed
the largest advances since March 1934, and the New
York, Buffalo, and Rochester stores registered the most




Per cent of
charge accounts
outstanding
M ay 31
collected in
June

Percentage
change
June 1935
compared with
June 1934

Percentage
change
in
net sales

Commodity
Stock
end of
month

Net
sales
M en’s clothing............................
Cotton goods................................
Silk go o d s.....................................
Shoes.............................................

Paper.............................................

Weighted average...............

— 1.5
+ 5 .6
— 5 .7
— 18.2
+ 6 .7
— 3 .4
+ 0 .4
— 1.3
+ 4 0 .9
+ 1 6 .5
+ 0 .4

1934

+ 4 .7
*

*
— 9 .3
+ 9 .3
+ 1 9 .2
— 4 .4

1935

9 4.6
3 9.4
3 9.7
6 1.0
4 2.7
4 8.0
5 5.4
4 7.9

90.4
4 2.9
4 0.0
5 9.3
4 1.4
22.9
4 8.9
5 7.0
4 9.2

| 28.8

} 2 5.7

5 6.8

56.1

2 2 .2

First six
mos. 1935
from 1934
+ 1.8
— 0 .3
— 1 1 .6
— 3 .4
+ 2 .8
+ 2 .5
— 1.8
+ 4 .5
+ 1 3 .8
+ 2 .1
+ 0 .4

* Quantity figures reported by the National Federation of Textiles, Incorporated,
not yet available.

FEDERAL RESERVE BANK OF NEW YORK
MONTHLY REVIEW, AUGUST 1, 1935

B u s in e s s

C o n d it io n s

in

t h e

U

n i t e d

S t a t e s

(Summarized by the Federal Reserve Board)
ACTORY production declined seasonally in June, while output of mines
increased. Employment and payrolls at factories showed more than sea­
sonal declines. There was little change in the average level of wholesale
prices, and a decrease in retail food prices.

F

P

Index Number o f Production o f Manufactures and
Minerals Combined, Adjusted for Seasonal
Variation (1923-25 average == 100 per cent)

r o d u c t io n a n d

E

m ploym ent

Daily average output at factories, according to the Federal Reserve
Board’ s production index, declined by about the usual seasonal amount
during June. Output of mines increased, and the Board’s combined index
of industrial production, which is adjusted for usual seasonal changes,
advanced from 85 per cent of the 1923-1925 average in May to 86 per cent
in June. Daily average output of automobiles and lumber increased in
June, while activity at cotton mills, shoe factories, and meat packing estab­
lishments declined. Activity at steel mills declined seasonally during June,
but, according to trade reports, increased after the first week of July.
There were sharp increases in the production of anthracite and bituminous
coal during June and output of crude petroleum was also larger than in May.
Factory employment and payrolls decreased between the middle of May
and the middle of June. More than seasonal declines in employment were
reported by producers of automobiles, clothing, shoes, and cotton fabrics,
and employment at lumber mills also decreased, while the number of work­
ers at woolen mills increased. In most other manufacturing industries
changes in employment from May to June were largely seasonal in char­
acter. Employment and payrolls at mines increased considerably.

1929

1930

1931

1932

1933

1 934

1935

Value o f Construction Contracts Awarded (Three
month m oving averages o f F. W . Dodge Cor­
poration data for 37 Eastern States,
adjusted for seasonal variation)

P RC N
E ET

120 r

100 A A .
COtS

V

60

1929

Daily average loadings of freight on railroads increased during June,
reflecting larger shipments of coal. Daily average value of department
store sales showed little change from May to June, when a decline is usual,
and the Board’s seasonally adjusted index advanced from 76 per cent of
the 1923-1925 average to 80 per cent.

IE S ____

A ?

N />
e A

40

20

m

T

C o m m o d it y P

R M PR< 3DOCTS

1931

1930

t932

1933

1934

1935

Group Price Indexes o f the Bureau o f Labor
Statistics (1926 average = 100 per cent)
B ILLIO N S
OF DOLLARS

B a n k C r e d it
t
i

j

r
ALL

OTH
1 UA s.IER
Lf^lNc
nM

-r

LO A N S ON S E C U R IT IE S —

* ~ '~ w
.

r ic e s

Wholesale prices of farm products and foods declined during June,
while the prices of other commodities as a group showed little change.
Retail prices of food, which had increased sharply in the two years ended
last April, according to the index of the Bureau of Labor Statistics, de­
clined somewhat in May and June.

Member bank reserve balances with the Federal Reserve Banks and
excess reserves showed declines for the four weeks ended July 17, reflecting
in large measure an increase in the balance of the Treasury with the Fed­
eral Reserve Banks following a sale of Treasury notes.

U .S . SECUIRITIES
/V " »

v

The Department of Agriculture July 1 estimates forecast corn and wheat
crops larger than a year ago, but smaller than the five year average for
1928-1932. Acreage of cotton in cultivation on July 1 was reported as
about 5 per cent larger than at the same time last year.
D is t r ib u t io n

IO DS

^5

60

Daily average construction contracts awarded, according to reports of
the F. W. Dodge Corporation, were larger in value in June and the first half
of July than in May. Awards of residential building contracts were twice
as large as a year ago, while contracts for public projects continued smaller
than last year.

OTi -IER S E C U R IT IE S

i i i 1

l

I

1

1

l

I

I

1

W
ednesday Figures for R
eporting M ber
em
B
anks (Latest figures are for July 17)




Total loans and investments of reporting banks in leading cities in­
creased by $260,000,000 during the five week period ended July 17. Sub­
scriptions by reporting banks to new security offerings by the Treasury
exceeded retirement of bonds held by these banks, and consequently their
holdings of direct obligations of the United States increased by $200,000,000. Holdings of other securities increased by $125,000,000, while loans
declined by $60,000,000. Government deposits with these banks were re­
duced by over $200,000,000, while other deposits, exclusive of interbank
balances, showed an increase of a similar amount.
Yields on Government securities declined slightly during this period,
while other short term open market money rates remained at low levels.