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MONTHLY REVIEW ofCreditandBusinessConditions S e c o n d V ol. 25 F e d e r a l AU GU ST T H E IM P A C T O F T H E W A R O N D ating back to the early p art of 1941, w hen the inaugura tion of the national defense program (in June, 1940) was translating itself into substantially accelerated w ar production and expenditures, the N ew Y ork m oney m arket has been sub ject to persistent and heavy net transfers of funds to other sections of the country. A t the same tim e the influx of gold from abroad, w hich had been enlarging reserve balances of the N ew Y ork banks and sw elling their excess reserves to record totals, came to a stop. Reflecting principally these tw o develop m ents, the $3,450,000,000 excess reserves held by the central reserve N ew Y ork City banks at the end of 1940 w ere virtually exhausted a little m ore than tw o years later. O ver the past year the N ew Y ork banks have been enabled to m eet further outw ard transfers of reserve funds in considerable m easure through m odifications in their reserve requirem ents and through purchases of G overnm ent securities in N ew Y ork by the R eserve Banks. T he m ovem ent of funds from the Second Federal Reserve D istrict is apparent in the relatively greater increases in bank deposits w hich have occurred in the other districts, in the lessening proportion of total m em ber bank reserve balances held by Second D istrict banks, and in losses of reserves from the Federal Reserve Bank of N ew Y ork to the other Federal R eserve Banks. As suggested by the follow ing tables, the experience of the Second D istrict as a w hole is largely a reflection of transfers of funds from N ew Y ork City banks to banks in other sections of the country; the banks of N ew Y ork City occupy such a dom inant position in the banking structure of the Second Federal Reserve D istrict that their experience tends largely to determ ine that of the D istrict as a whole. As has been indicated from tim e to tim e in this R e v ie w , the single m ost im portant and m ost persistent factor in the trans fers of funds from this D istrict to other districts has been transactions of the G overnm ent. T he volum e of funds raised in this D istrict by the G overnm ent in financing the war has been running far ahead of the volum e of G overnm ent checks placed on deposit w ith m em ber banks in this area. P rivate com m ercial and financial transactions of various types led to heavy additional tranfers of bank reserves from the N ew R e s e r v e 1, TH E D is tr ic t No. 8 1943 N E W Y O R K M O N E Y M A R K E T Y ork m oney m arket to other sections of the country during 1941 and 1942, but this factor has reversed itself during the first seven m onths of the present year and gains of funds through com m ercial and financial transactions during this later period have counteracted a considerable part of the loss through Treasury transactions. T he losses of reserve funds from the N ew Y ork D istrict to other districts through Treasury transactions have been ac counted for in p art by the relatively large proportion of tax revenues derived from the D istrict (around 25 per cent in the case of incom e taxes), in p art by the unusually heavy purchases of G overnm ent securities by banks, insurance companies, and Growth in Total Deposits of Member Banks During 1941-42 D e c e m b e r 31, 19 4 0 D e c e m b e r 3 1, 194 2 In crease In In In P er cen t P er cen t P er of m illio n s m illio n s c e n t a g e m illio n s of of in of U . S. of U . S. total tota l d o lla r s cr e a s e d o lla r s d o lla r s S e c o n d F e d e r a l R e s e r v e D is - Central reserve N ew York City Other Second D is tr ic t ............. 2 1 ,1 8 6 3 7 .5 2 6 ,7 5 8 3 4 .2 5 ,5 7 2 2 6 .3 17,7 U 3,442 314 6.1 22,078 4,680 28.2 6.0 4,334 1,238 244 36.0 3 5 ,2 4 4 6 2 .5 5 1 ,5 1 9 6 5 .8 1 6 ,2 7 5 4 6 .2 5 6 ,4 3 0 1 0 0 .0 7 8 ,2 7 7 1 0 0 .0 2 1 ,8 4 7 3 8 .7 O t h e r F e d e r a l R e s e r v e D is u n i t e d S t a te s t o t a l . . . Changes in Reserves of Member Banks and Federal Reserve Banks Since December 31, 19401 D e c e m b e r 31, 1940 In m illio n s of d o lla r s R e s e r v e B a la n c e s o f M em ber Banks S e c o n d F e d e r a l R e s e r v e D is t r ic t P er cen t of U . S. tota l J u n e 3 0, 1 9 4 3 In m illio n s of d o lla r s P e r ce n t of U . S. tota l C hange In m illio n s of d o lla r s 7 ,5 4 7 5 3 .9 4 ,0 6 8 3 3 .7 7,057 490 60.4 3.5 3,475 593 28.8 4-9 O t h e r F e d e r a l R e s e r v e D is t r ic t s 6 ,4 4 5 4 6 .1 8 ,0 1 7 6 6 .3 + 103 + 1 ,5 7 2 U n it e d S t a te s t o t a l ............. Central reserve N ew Y ork City Other Second D is tr ic t ..................... -3 ,4 7 9 - 3 ,5 8 2 1 3 ,9 9 2 1 0 0 .0 1 2 ,0 8 5 1 0 0 .0 -1 ,9 0 7 R eserves o f F ed era l R eserve Banks F ederal R eserve B a n k o f N e w Y o r k O th er F e d e r a l R e s e rv e B a n k s . . . 9 ,8 1 0 1 0 ,2 2 6 4 9 .0 5 1 .0 5 ,2 6 7 1 5 ,3 1 5 2 5 .6 7 4 .4 -4 ,5 4 3 + 5 ,0 8 9 12 F e d e r a l R e s e r v e B a n k s c o m b i n e d ......................................... 2 0 ,0 3 6 1 0 0 .0 2 0 ,5 8 2 1 0 0 .0 + 546 MONTHLY REVIEW, AUGUST 1, 1943 58 Factors of Gains and Losses of Reserve Funds to Member Banks in the Second Federal Reserve District (In millions of dollars) T r e a s u r y t r a n s a c t i o n s ........................................ C o m m e r c ia l a n d fin a n c ia l t r a n s a c t io n s . . C u r r e n c y m o v e m e n t s ......................................... G o l d a n d fo r e ig n a c c o u n t t r a n s a c t io n s . . N o n m e m b e r a n d o t h e r d e p o s it a c c o u n t s . R e s e r v e B a n k t r a n s a c t i o n s ............................. M e m b e r b a n k re s e r v e b a l a n c e s ............. 1 94 2 194 1 1940 + 80 — 940 — 320 + 3 ,0 8 0 — 290 — 370 — 490 — 1 ,7 4 0 — 510 + 760 + 1 ,2 4 0 — 1 ,9 2 0 + 60 It is noteworthy, however, that such offsets have fallen short of matching the losses of funds through Treasury transactions. 1 94 3 (t h r o u g h J u ly 2 1 ) — 2 ,2 6 0 — 1 ,9 3 0 — 680 + 650 + 150 + 3 ,4 6 0 — 2 ,9 9 0 + 2 ,1 5 0 — 400 — 200 + 600 — — 840 610 C o m m e r c ia l and Fin a n c i a l T r a n sf e r s Analyses of the factors accounting for gains and losses of reserve funds by member banks in this District have been carried on at this Bank for many years. Separating out certain measurable factors, including Treasury, currency, gold, and foreign account transactions, and Federal Reserve credit extended through this Bank, there is left an important residual other large institutional investors located in this District, and item of commercial and financial transactions. in part by the decentralization of war plants and the consequent embraces a wide variety of types of transactions undertaken on shift in the distribution of Government expenditures toward other areas. private accounts, among them ’'financial” transactions (such The contribution of the District to war financing has been This item as the transactions cited in the preceding paragraph) and "commercial” or business transfers of funds. Taking account During the of the gains of reserves which would be expected to accrue December War Loan drive $5,700,000,000 or 44 per cent of the securities sold were purchased in the Second Federal Reserve District; during the April drive the corresponding from the flow of investment funds to New York, it would exceptionally large in relation to the over-all load. figures were $7,100,000,000 and 38 per cent.* In comparison, appear that heavy losses of funds on other accounts must have occurred during 1941 and 1942, for commercial and financial transactions taken as a whole resulted in large losses from the the proportions raised in the Second Federal Reserve District reserves of Second District member banks. during the five Liberty Loan campaigns of the World War explanation, the probabilities point to heavy transfers of busi As a principal period ranged between 27 and 31 per cent. ness balances to other sections of the country where existing To be sure, there should be, and are, offsets to the outward flow of funds arising from the heavy payments to the Treasury plants were being converted to war production and new plants were being constructed and put into operation. for new Government security issues. During the first seven months of 1943, losses of reserve funds by Second District member banks through Treasury For example: 1. Some part of the losses of funds through Treasury operations may be accounted for by New York’s role as distributor for Government security issues— by purchases of new issues of Government securities by dealers and the larger banks in New York for later distribution in other sections of the country. 2. Moreover, insurance companies and mutual savings banks in this District, in the case of both the first and second War Loan drives, increased their capacities to purchase the transactions amounted to about $3,000,000,000, or more than the loss from this source during the whole of 1942 ($2,260,000,000). Commercial and financial transactions, however, showed a counterbalancing gain of $2,150,000,000 during the first seven months of this year; during both 1941 and 1942 losses of funds through commercial and financial transactions occurred simultaneously with the outflow of funds through Treasury transactions. folios of already outstanding issues. Thus the losses of funds The abrupt reversal in commercial and financial transactions is explained in part by the heavy net purchases of Government to the Second District through Treasury operations were securities in the open market by banks in the other districts enlarged, but offsets were created to the extent that securi which have occurred since the close of the December War ties sold were purchased in other Federal Reserve Districts Loan drive. new issues offered during the drives by reducing their port Such purchases are estimated at approximately (leading to gains from commercial and financial transfers) $2,400,000,000 for the first five months of 1943. or by the Federal Reserve System open market account (lead bulk of these purchases represented securities supplied in the ing to gains from expansion in Federal Reserve credit). 3. There have been offsetting gains through the trans fers into New York of investment funds by large institu tional investors such as insurance companies. The great New York security market, by the Federal Reserve System Account, and by banks, dealers, and insurance companies in this District. As a second factor in the reversal of the flow of commercial and financial funds, it seems reasonable to conclude that the * During the entire year 1942 purchases (less maturities) of Govern ment securities by the Second Federal Reserve District accounted for 40 per cent of the corresponding national total; the proportion was 36 per cent for the first half of 1943. Sales of securities to Government agencies and trust funds are excluded in these com pilations. net drain of business balances from the New York District to other districts prevalent during 1941 and 1942 was substan tially checked during the first seven months of the present year. Accumulations of funds elsewhere in excess of working capital requirements apparently have led to inward transfers of cor 59 FEDERAL RESERVE BANK OF NEW YORK poration balances to New York to such an extent as substan tially to offset outward transfers of other business funds. The more general disposition of banks in other parts of the country to make full use of their available reserve funds has also operated to reduce the net flow of funds from the Second Federal Reserve District to the other districts. A con tinuance of this tendency over coming months may work in the same direction, inasmuch as virtually all of the $1,000,000,000 of Savings bonds by agencies other than post offices totaled about $130,000,000 in July as compared with $122,000,000 in the previous month. The increase occurred in Series E sales, which amounted to about $95,000,000 in July compared with $87,000,000 in June. An additional $600,000,000 of "new money” was raised from Treasury bills, as weekly offerings of $1,000,000,000 replaced maturities of $800,000,000 on July 7 and 14 and $900,000,000 on July 21 and 28. Prior to July 21, the net excess reserves now held by member banks throughout the country are in the possession of banks outside the Second Federal Reserve District. The most obvious channel for correct cember 16, 1942, resulting in an expansion of $6,200,000,000 ing the adverse "balance of payments” of the Second Federal Reserve District would be through Government security trans Sales of Savings notes (formerly called Tax Savings notes) actions— through a greater relative participation in new Gov ernment security purchases in other Federal Reserve Districts (the effect of which would check losses of funds through Treasury transactions), and through heavy net purchases of offering had been maintained at $200,000,000 weekly since De during this period in the outstanding volume of Treasury bills. during July continued at a rate of about $450,000,000 monthly, while redemptions in payment of taxes somewhat exceeded $150,000,000. The attractiveness of these Savings notes as an outlet for investment of temporarily idle funds was enhanced already outstanding Government securities from the New York on July 27 when the Treasury eliminated the requirement of District (a factor which tends to bring gains through an inflow thirty days’ advance notice for their cash redemption. On July 22, the Treasury offered a new issue of % per cent of funds for investment). certificates of indebtedness due August 1, 1944 in exchange for W A R F IN A N C IN G Net funds received by the Treasury from public borrowing in July amounted to about $4,400,000,000, including payments for the Treasury note issue offered late in June. Distribution of the July borrowing was as follows: $2,707,000,000— i y 2 per cent Treasury notes 800.000.000— Savings bonds (estimated net receipts) 600.000.000— Treasury bills (net receipts) $1,609,000,000 of certificates maturing August 1, 1943. An additional $900,000,000, or thereabouts, of the new issue was offered for cash subscriptions by commercial banks only. Sub scriptions for the cash offering aggregated $5,484,000,000 and were allotted on an 18 per cent basis. Payment for the new certificates is due on August 2. T h ird W a r L o a n D rive 300.000.000— Savings notes (estimated net receipts) Secretary Morgenthau announced on July 22 that the goal for the Third War Loan drive starting September 9 would The 1 Vl per cent Treasury notes, dated July 12, 1943 and be $15,000,000,000, with the entire amount to be raised maturing September 15, 1947, were offered for cash subscrip from subscribers other than commercial banks. tion on June 28. Subscriptions were extremely heavy, totaling $19,544,000,000. Subscriptions for amounts of $100,000 or to be offered in the coming drive will be similar to those sold in the April drive consisting of: less, aggregating $1,347,000,000, were allotted in full. Sub scriptions for larger amounts were allotted on a 7 per cent basis, but not less than $100,000 on any one subscription. Allotments to subscribers in the Second Federal Reserve Dis trict of $696,000,000 amounted to only 26 per cent of the total, compared with 40 per cent for a similar note issue last October, but a considerable volume of the notes allotted in The securities Series E Savings bonds Series F and G Savings bonds Series C Savings notes 2 Vi per cent bonds of 1964-69 2 per cent bonds of 1951-53 Vs per cent certificates of indebtedness other districts were almost immediately resold in New York The three new issues will be dated September 15. None of these securities will be available for subscription by commer and transferred here. cial banks for their own account during the period of the Sales of Savings bonds, estimated at somewhat more than drive. Shortly after the drive closes, however, a 2 per cent bond $900,000,000 for the month, were apparently not slowed down and a 7 / s per cent certificate of indebtedness will be offered appreciably by the inauguration in July of current collections for subscription by commercial banks. of individual income taxes through payroll deductions. Series E sales during the drive to nonbanking investors only, the Treas In order to confine sales appear to have held at about the $700,000,000 average ury will request commercial banks not to buy in the market monthly level which has prevailed since last December, except the issues offered in the drive until the books for bank subscrip ing April and May when sales totals were enlarged by the Second War Loan drive. Redemptions of all series amounted tions are closed. The Treasury has also requested that all subscriptions by corporations and firms be entered and paid to with for through the banking institutions where the funds are $141,000,000 in June and slightly more than $100,000,000 in located, so as to avoid unnecessary transfers of funds from one locality to another. about $130,000,000 April and May. during July, as compared In the Second Federal Reserve District, sales MONTHLY REVIEW, AUGUST 1, 1943 60 S E C U R IT Y M A R K E TS B A N K IN G OF W IT H H E L D T A X E S The Current Tax Payment Act of 1943 allowed the Treasury During July, trading activity in Government securities wide discretionary powers in the issuance of regulations diminished somewhat following several months of sustained designed to facilitate the transmission of currently withheld demand which had pushed yields to new record lows. income taxes from employers to the Treasurer’s General early part of the month, interest centered on the new l l/2 per Account balances with the Federal Reserve Banks. cent Treasury notes, which went to a premium of slightly more Treasury In the Department Circular No. 714 sets forth the procedures that than half a point. have been adopted for the handling of such funds by employers of tax exempt securities declined following rumors that the and the banks. Under the Treasury Department’s regulations each employer Treasury might propose steps that would impair the value of is required to make quarterly returns of withheld taxes to the denied and prices of these securities recovered rapidly. Toward Collector of Internal Revenue of his district within a month the end of the month, however, there was a renewed decline reflecting selling in anticipation of the Third War Loan drive, after the close of each quarter. Smaller employers, those who Toward the middle of the month, prices tax exemption on outstanding securities. This report was withhold taxes to an amount not exceeding $100 a month, may and the average yield on long term tax exempt bonds was 1.84 make payment either to a depositary bank monthly or to the per cent on July 29 as compared with 1.80 per cent at the collector at the time of filing the quarterly returns. beginning of the month. Larger Average yields on long term taxable employers, those who withhold more than $100 a month, are to bonds advanced slightly during July from 2.26 per cent to 2.28 remit all such funds to a depositary bank within ten days fol per cent. lowing the close of the calendar month in which they were exchange certificates of indebtedness maturing on August 1 Following announcement on July 21 of the offer to deducted, except that payment for the last month of a quarter for a new issue, yields on the shorter maturities of certificates may be made to the Collector of Internal Revenue at the time declined substantially. of filing the quarterly return. Tax notes or other public debt During the first half of July, corporation stock prices con obligations are not acceptable forms of payment for withheld tinued to advance and on July 14 Standard and Poor’s index of taxes. Banks which are insured by the Federal Deposit Insurance 90 stocks was 69 per cent above the low reached at the end Corporation, and incorporated uninsured banks and trust com panies designated as depositaries under the Second Liberty Bond Act as amended, are eligible for qualification as deposi of April, 1942. Industrial shares declined slightly over the next ten days but railroad and utility issues extended their rise. On July 26 and 27, however, following news of Premier Mussolini’s resignation, stock prices fell sharply to the lowest taries for withheld taxes through application to and agreement point since June 22. with the Reserve Bank of the appropriate Federal Reserve Dis index of railroad stocks dropped seven per cent, while indus trict. Once qualified, a bank will maintain a special account in which all withheld taxes remitted by employers will be de posited. When the balance in this account equals or exceeds trials and public utilities showed declines of four per cent in each case. The volume of trading on the New York Stock Exchange was fairly heavy around the middle of July and also $5,000 it must be paid to the Reserve Bank by the end of during the period of falling prices toward the end of the month. the next business day for credit to the Treasury. The bal ance on the last business day of the calendar month, whatever its size, must be remitted to the Federal Reserve Bank not During the two days, Standard and Poor’s Standard and Poor’s index of municipal bond yields regisPE R C E N T later than the following business day. Only funds immediately available to the Reserve Bank are acceptable. Compensation for expenses incurred by the depositary bank through these activities will be provided by making avail able to them 2 per cent Depositary bonds (second series). Two alternatives are offered: by one method the bank may purchase the bonds with its own funds, by the other the de positary will receive a deposit of funds by the Treasury for use in purchasing Depositary bonds. The amount of Deposi tary bonds purchasable by the depositary will be based initially on the business transacted during the month following that in which the bank became qualified as a depositary of with held taxes. The amount may be changed periodically there after on the basis of the number of depositary receipts issued to employers and the dollar amount of remittances to the Federal Reserve Bank. Movement of Stock Prices (Standard and Poor’s 90 stock index; 1926 = 100 per cent) FEDERAL RESERVE BANK OF NEW YORK tered a marked decline during the month, dropping to 1.92 per cent, the lowest level since early in December, 1941. Cor poration bond yields also declined and Moody’s index of Baa bond yields reached a new low of 3.79 per cent July 24. Medium grade bond prices were off only slightly as a result of the change in the political situation in Italy, but lower grade 61 deposits of the reporting banks in 100 cities rose $293,000,000 to a new high of $20,829,000,000 on July 21, $850,000,000 above the level of April 14 at the start of the Second War Loan drive. In New York City, adjusted demand deposits rose $306,000,000 over the five weeks, but were still $460,000,000 below the April 14 figure. railroad issues declined somewhat more sharply. PR O D U CTIO N A N D TR A D E M EM B ER B A N K CR ED IT In June the seasonally adjusted index of production and Between June 16 and July 21 Government security holdings trade computed at this Bank fell one point to 124 per cent of of the weekly reporting member banks in New York City estimated long term trend. showed a decline of $462,000,000, principally as a result of down two points from May as small gains in munition indus The index of production was net sales of Treasury bills in the adjustment of reserve posi tions. From their peak of $2,373,000,000 on June 16, Treasury tries were more than counterbalanced by the decreased pro duction of coal and steel due to the recent strikes and the bill holdings of the New York banks dropped to $1,432,000,000 further curtailment of construction activity. on July 7, through sales to the Reserve Bank to meet heavy age production of bituminous coal in June was the lowest losses of reserve funds. since April, 1941 and daily average steel output declined for During the following two weeks, The daily aver ended July 21, holdings recovered to $1,633,000,000, reducing the third consecutive month. the decline in the bill portfolios of the New York banks for tinued to set record highs in June, while crude petroleum pro the five weeks as a whole to $740,000,000. duction remained fairly close to the May level, and cotton consumption decreased somewhat. Holdings of Government guaranteed obligations were reduced $100,000,000 over the five weeks’ period, reflecting the redemption of l}/8 per cent R.F.C. notes on July 15. On the other hand, the reporting New York City banks made sub stantial net purchases of other market issues, $125,000,000 certificates of indebtedness, $21,000,000 Treasury bonds, and $232,000,000 Treasury notes. The last increase represented Electric power production con The index of distribution to consumer increased one point over May owing chiefly to increases in department store and grocery chain sales on a seasonally adjusted basis. Variety chain and mail order house sales remained fairly close to the May levels, seasonal factors considered. According to preliminary indications, industrial activity in primarily purchases of the new issue of IV2 per cent notes, July showed an increase over June. due September, 1947. operations, which had dipped several points late in June, In contrast to the New York City banks, the weekly report ing member banks in 100 other cities added $418,000,000 net to their holdings of Government securities between June 16 and July 21. The rate of steel mill recovered to 98 per cent of capacity during the second half of July. In the meantime bituminous coal production recovered from the June work stoppages. These banks reduced their bill portfolios to the extent of $302,000,000, the redemption of R.F.C. notes resulted in a decrease of $90,000,000 in guaranteed obligations, and in addition these banks were net sellers of $83,000,000 certificates 1942 1943 June April = estimated long term trend) Index of Production and Trade................ 114 125 125p 124p Production................................................. 123 135 134p 132p Producers’ goods— total..................... Producers’ durable goods............... Producers’ nondurable goods........ 152 177 124 171 203 134 170p in their total Treasury note holdings, and these banks made 200p 135p 166p 195p 134p further net purchases of $225,000,000 Treasury bonds during the five weeks’ period. Consumers’ goods— total................... Consumers’ durable goods............. Consumers’ nondurable goods. . . . 88 45 102 37 104 87 p 34 p 105p 85 p 30 p 103 p of indebtedness. The reporting banks outside New York, however, absorbed a considerable share of the new IV2 per cent Treasury notes, as reflected in a $668,000,000 expansion Holdings of securities other than Government obligations by New York City banks remained at a fairly constant level, while total loans declined $176,000,000. Outside New York, other securities were reduced $101,000,000, but total loans declined only $24,000,000. Changes in the composition of member bank deposits con tinued to follow the usual pattern between War Loan drives. Adjusted demand deposits were built up, while Government deposits were reduced as the Treasury withdrew funds to meet current expenditures. Outside New York adjusted demand May June Indexes of Production and Trade* (100 88 Durable goods— total.......................... Nondurable goods— total................... 138 154 117 151 p 117 p 146p 116p Primary distribution................................ Distribution to consumer....................... Miscellaneous services............................. 130 84 120 153 ‘ 80 166 160p 80p 167p 156p 81p 168p 116 124 125 125p 137 150 151p 61 85 83 89 85 80 111 Cost of Living, Bureau of Labor Statistics (100 = 1935-39 average)............................. Wage Rates (100 — 1926 average).................................. Velocity of Demand Deposits* (100 = 1935-39 average) New York C ity............................................. Outside New York City. ............................ p Preliminary. * Adjusted forseasonal variation. 71 75 MONTHLY REVIEW, AUGUST 1, 1943 62 DEPARTMENT STORE SALES B Y DEPARTMENTS OVER THE W AR PERIOD Under the impact of forces generated by the war, sweeping changes have occurred in the field of retail trade. The rapid department store sales, reflecting changes in the wants and needs of consumers and in the kinds of goods available for expansion of consumer incomes and price advances have purchase, have become more marked with the intensification tended to swell the aggregate dollar volume of consumer pur of the war effort of this country. Shifts of population toward centers of war industry Style trends, affected by increased numbers of women hold have led to wide differences in the degree of retail trade ing jobs, and other war influences, have led to shifts in the chases. expansion from one locality to another. At the same time, demand for womens apparel. Sales of coats and suits, and the transfer of millions of men from civilian life to the blouses, skirts, and sportswear have expanded more rapidly armed forces, the imposition of rationing controls, shortages than sales of dresses. of certain vital materials, and the virtual unavailability of is apparent in the failure of millinery sales to increase to any A drift away from the wearing of hats certain classes of consumers’ durable goods have resulted in important extent; at the same time sales of neckwear and radical shifts in the composition of retail trade by types of scarfs have risen sharply. merchandise. Estimates of the aggregate volume of retail trade have been ernment for enlisted men presumably accounts for the dis parity between sales of men’s clothing and sales of boys’ wear. developed by the United States Department of Commerce, The rapid expansion in sales of infants’ wear is associated with making use in part of data covering department and furniture the marked rise in the birth rate during the war period, while stores gathered and published by the Federal Reserve System. the large number of war brides probably accounts for the Differences in the degrees of expansion in retail trade from increase in sales of lingerie as well as for part of the increase Provision of clothing by the Gov one locality to another may be observed in the Federal Reserve in sales of silverware and jewelry, although a further con reports on department store trade for particular cities as well tributing factor, as in the case of furs and also wines and as in compilations of the Department of Commerce and other liquors, is the tendency of many individuals to increase their agencies. purchases of such luxury items when incomes increase. The measurement of the changes in the composi tion of retail trade by types of merchandise is in many re Women’s and children’s hosiery has maintained steady year- spects more elusive than approximations either of the volume Data gathered by to-year gains in sales despite the virtual disappearance from store counters of silk and nylon stockings. On the other the Federal Reserve Banks from department stores in their hand, sales of corsets and brassieres appear to have been respective districts on the breakdown of sales by departmental limited by wartime restrictions on production. Despite ration classifications provide one important body of information concerning the make-up of retail trade by detailed merchan ing, dollar sales of women’s and children’s shoes this year have maintained a high level. dise classifications. For use in analyzing the broader shifts in the composition of retail trade, of course, they must be sup The increased sales of groceries and meats by department stores, in part due to price advances and buying in anticipa plemented by data relative to fluctuations in sales volumes of classes of merchandise not handled in significant volume by department stores, and allowance must be made for the com petitive factor of changes in the proportion of goods of par tion of shortages, also may reflect a gain in the number of customers buying food from department stores. Greatly increased rail travel, by civilians as a consequence of gasoline rationing, and by members of the armed forces, ticular classes handled by department stores. In the series of curves on the opposite page are portrayed is reflected in the accelerated sales of luggage. Travel by rail usually requires more luggage than travel by private auto changes in sales volumes for thirty-five departmental classi mobile. of retail trade, or of the regional shifts. fications based upon data reported to this Bank by a group Sales of yard goods did not show a substantial increase until of the larger department stores in the Second Federal Reserve 1942, when price increases in ready-to-wear apparel stimu District. lated home dressmaking. The sales of these stores accounted for 63 per cent of total department store sales in the Second Federal Reserve Sales of linens and towels, sheets and pillow cases, and blankets and spreads showed large gains District during 1939, using the figures of the Census of Dis in 1941, followed by decreases in 1942; so far this year sales tribution of that year as a benchmark. As is apparent from of linens and towels, and sheets and pillow cases show the chart, there is a decided predominance of departments increases over 1942, but sales of blankets and spreads have showing increases in sales since 1939, the year in which the failed to recover, probably as a result of a continued shortage war in Europe began. of woolen blankets for the civilian market. The degrees of increase, however, are highly variable, ranging from 12 per cent in the case of The boom in consumers’ durable goods during the summer china and glassware up to 130 per cent in the case of luggage. of 1941 is seen in the expanded sales of furniture, domestic A number of cases are apparent in which sales volumes have floor coverings and major household appliances. turned downward following periods of expansion during the quent decline in sales, which is most marked in the case earlier part of the war. These shifts in the composition of (Concluded on page 64) The subse FEDERAL RESERVE BANK OF NEW YORK SECOND D IS T R IC T D EPAR TM EN T STORE S A L E S 63 B Y T Y P E S OF M E R C H A N D IS E PER CENT CENT 17! WOMEN’ S & MISSES 1 5 --- i j o » OVI 1O m e n 's ---------------- 1 YARD GOO>DS Cl-OTHING 12 ----- 10< i MEN’S FURNISHING! 3 WOMEN’ S & MISSES* DRESSES «• 1 li JUNIORS’’ & GIRLS’ WEAR BOYS' CL<DTHING & FURNISHIN GS 1 5( ^ mm* 12i 101 BL OUSES jS K1R T S , & SPORTSWEAR 1 17 £ FURS ✓ 151 ✓ TOILET AkRTICLES 2 ---- DRUG 5 UNDRIES 12! 10 < J EWE LR Y --------- ^ ✓ * MILL INE RY SILVERW ARE \ \ \ ----------- ^ -----✓ ✓ HANDBAGS & SMAL L'LE ATHE R .GOODS. STATIONERY N E C K W E / >iR & S C A R FS 1 s< 121 1 0< 15C 12 S WOMEN’S & CHILDRIEN*S SHOE:S 1 10C WOMEN’ S & CHILDRENS* hqsifpy I — 175 —— LINGERIE \ \ \ 150 125 -- -------- 100 CORSETS II BRASSIEFtES 175 MAJOR HOUSEHOLD APPLIANCES S WINES & L.ia u o R s 150 1 25 .....— \ _____ ^ \ 175 100 V N N N 150 125 75 50 25 100 75 50 9 1940 1941 1942 1943 1939 1940 1941 1942 1943 1939 1940 1941 « r-w 1939 s 10°* DEPARTMENT STORE FISCAL YEARS GENERALLY EN0 JANUARY 31* THUS THE FIGURES FOR 1939, R EXAMPLE, ARE FOR THE TWELVE MONTHS FEBRUARY, 1939 THROUGH JANUARY. 1940. FIGURES FOR 1943 BASED ON EXPERIENCE OF FEBRUARY-JUNEa1943. 1942 1943 MONTHLY REVIEW, AUGUST 1, 1943 64 of major household appliances but has not affected sales of domestic floor coverings, is primarily due to curtailed pro D E PA R TM E N T STORE TR A D E duction of merchandise using vital metals. Sales of draperies department stores in this District were about 10 per cent and upholstery, which have continued to increase, may have greater than in the corresponding period last year, while been stimulated by demands for fabrics for the reconditioning apparel stores for the same period exceeded year ago sales by of furniture that normally would have been replaced. The During the four weeks ended July 24, sales of reporting about 27 per cent. Sales of department stores in July ap decline in sales of housewares and musical instruments also parently decreased from the June level by less than the usual shows the effects of shortages of metals and the conversion seasonal amount. of plant facilities. In June, department store sales in this District were 18 per cent greater than in June, 1942. E M P L O Y M E N T A N D PAYR O LLS Approximately 54,600,000 civilian workers will be needed by July, 1944 according to present estimates of the War Man power Commission. On a seasonally ad justed basis, the daily rate of sales in June was about the same as in May of this year. Sales of apparel stores in June were 33 per cent above sales a year before. Total civilian employment in June, 1943 At the end of June, department store stocks (valued at as reported by the Bureau of the Census was 53,400,000 retail prices) were 33 per cent lower than in June of last workers compared with year. 53,300,000 in June, 1942 and It appears, however, that the rapid shrinkage in depart 50,200,000 in June, 1941. There was a seasonal increase of 1,300,000 in employment ment store stocks, which proceeded through the autumn of between May and June resulting primarily from a shift of temporarily at least. students into summer jobs. on hand in this District increased by about 7 per cent during Most of the additional workers 1942 and the first four months of 1943, has been halted, On a seasonally adjusted basis, stocks were employed on farms and total agricultural employment June. continued slightly above the levels of 1942. in this District indicate that at the end of June outstanding Nonagricultural Returns from a limited number of department stores employment, as estimated by the Bureau of the Census, showed orders for merchandise purchased by the stores but not yet a small increase of 200,000 workers during June. delivered to them were 23 per cent above those at the end Further withdrawals of men into the armed forces were offset by of May, 1943, and 151 per cent above June, 1942. additional hiring of women, who now constitute 35 per cent of all nonagricultural workers. The Bureau of Labor Statis tics indicated that, within the nonagricultural field, manufac P e r c e n t a g e c h a n g e f r o m a y e a r e a r lie r D e p a r tm e n t stores N e t s a le s turing, and the transportation and public utilities group made the largest gains in employment, while employment in con struction continued to decline. Unemployment was reported to have increased in June N e w Y o r k C i t y .................................................... N o r t h e r n N e w J e r s e y ...................................... because of the number of students looking for summer jobs, W e s t c h e s t e r a n d F a ir fie ld C o u n t ie s . . . . but the estimated total of 1,200,000 unemployed remained small in comparison with the 2,800,000 estimated in June, L o w e r H u d s o n R i v e r V a l l e y ....................... P o u g h k e e p s ie .................................................... U p p e r H u d s o n R i v e r V a l l e y ....................... 1942 and 6,000,000 in June, 1941. The New York State Labor Department’s index of factory employment in June was only 0.1 per cent higher than in S c h e n e c t a d y ...................................................... C e n t r a l N e w Y o r k S t a t e ............................... M o h a w k R i v e r V a l l e y ................................ The index of N o r t h e r n N e w Y o r k S t a t e ............................ S o u t h e r n N e w Y o r k S t a t e ............................ B i n g h a m t o n ...................................................... payrolls showed an increase of 1.0 per cent over May and W e s t e r n N e w Y o r k S t a t e .............................. May but 14.4 per cent above June, 1942. 36 per cent over June, 1942. In New York City employment J u n e, 1943 J a n .th r o u g h J u n e, 1943 +19 + 11 + 13 + 6 + 4 + 12 +15 + 11 + 8 + 18 + 19 +26 +25 + 15 +10 +20 +29 — 3 +21 +20 +34 +21 + 8 — 1 + 1 — 2 — 3 + 2 + 4 — 2 — 9 + 7 + 11 + 14 + 13 + 10 + 3 + 10 +13 — 2 + 12 + 13 +35 + 9 N ia g a r a F a l l s ................................................... dropped 0.3 per cent between May and June as a result of a — — — — — — 36 39 41 24 28 12 — 7 — — — 5 — 26 — 23 — — 27 — — 11 — — — 22 — 15 — 6 — 34 Upstate there was A l l d e p a r t m e n t s t o r e s ....................... +18 + 7 — 33 Although Syracuse again reported the A p p a r e l s t o r e s ....................................... +33 +21 — 15 seasonal decline in apparel manufacturing. a rise of 0.4 per cent. S to ck s on hand J u n e 3 0, 1943 largest increase, 1.4 per cent, war plants expanded their work ing forces at a slower pace than they had early in the year. I n d e x e s o f D e p a r t m e n t S t o r e S a le s a n d S t o c k s , S e c o n d F e d e r a l R e s e r v e D is t r ic t (1 9 2 3 -2 5 a v e r a g e = 100 ) In the Utica area a gain of 1.2 per cent in employment 1 94 2 resulted from expansion in the metals and machinery group. The Binghamton-Endicott-Johnson City area showed a shift of employment from the shoe industry to war plants with employment in June 0.7 per cent above the May level. For the second consecutive month employment declined slightly in the Albany-Schenectady-Troy district. 1 94 3 June A p ril M ay June S a le s (a v e r a g e d a i ly ) , u n a d j u s t e d ..................... S a le s (a v e r a g e d a i l y ) , s e a s o n a lly a d j u s t e d . . . 92 97 116r 114 r 108 r 115 r 1 10 1 15 S t o c k s , u n a d j u s t e d ...................................................... S t o c k s , s e a s o n a lly a d j u s t e d ................................... 161 r 166r lO lr 99 104 102 1 04 109 r Revised. FED ERAL RESERVE BAN K OF NEW Y O R K MONTHLY REVIEW, AUGUST 1, 1943 General Business and Financial Conditions in the United States (Summarized by the Board of Governors of the Federal Reserve System) M activity was maintained at a high level in June while mineral production declined reflecting mainly reduced output of coal. In the early part of July coal produc tion was resumed in large volume. The value of retail trade continued large. ANUFACTURING INDUSTRIAL PRODUCTION Index of Physical Volume of Industrial Produc tion, Adjusted for Seasonal Variation, 1935-39 Average = 100 Per Cent (Subgroups shown are expressed in terms of points in the total index) F E D E R A L -N O N R E S D E N TIAL* B U IIL D IN G K Construction Contracts Awarded in 37 States. Total Construction Includes State and Local Government and Private Nonresidential Building not Shown Separately (F. W . Dodge Corporation data) The Board’s seasonally adjusted index of total industrial production declined slightly in June from the high level of other recent months. Activity continued to increase at plants producing war products in the chemical, rubber, and transportation equipment industries. These increases were more than offset by a sharp drop in coal production and a temporary reduction in output of coke, pig iron, and steel. Finished aircraft production, in terms of airframe weight, was 3 per cent higher in June than in May. Delivery of supplies for the Army ground forces rose 1 per cent over May. Tonnage of cargo vessels delivered from merchant shipyards was not up to the record May level; it was, however, higher than in any other month. In industries manufacturing nondurable goods output as a whole showed little change from May to June. Activity at cotton mills declined— consumption of 917,000 bales of cotton was 50,000 less than in June, 1942. Output at coal mines in June was 30 per cent below May owing to the work stoppages, but early in July both anthracite and bituminous coal production recovered to above the levels prevailing a year ago. Crude petroleum production was maintained in June and moved upward in July partly in anticipation of the completion of the pipeline from Texas to the East Coast. Lake shipments of iron ore in June were 6 per cent below the same month last year owing to unfavorable weather conditions. The volume of construction contracts awarded in June was about the same as in May. The value of awards in June was at the lowest level for this month since 1936, according to the F. W. Dodge Corporation. D is t r ib u t io n Value of consumer nondurable goods sold at retail was in near-record volume in June and the early part of July, while sales of durable goods, many of which are becoming increas ingly scarce, were generally below previous peak levels. Car loadings of revenue freight declined in June, reflecting the drop in coal shipments. Loadings of grain showed the usual increase at this season and the movement of most other commodities was maintained in large volume. C o m m o d i t y P r ic e s Wholesale prices of most commodities showed little change in the early part of July, following a decline during June of 1 per cent in the general index. This decline reflected chiefly reductions ordered in maximum prices of butter and meat and seasonal decreases in prices of fresh fruits and vegetables. A g r ic u l t u r e Member Bank Reserves and Related Items (Latest figures are for July 14) Aggregate crop production this year is expected to be 10 per cent smaller than last year but 5 per cent above the average of the preceding 5 years, according to the July 1 official report. Of the major crops, production prospects for grains are the lowest compared with last season, while there are indications of considerably larger harvests for dry beans and peas, flaxseed, and potatoes. Output of livestock products has continued in larger volume than a year ago. Ba n k 1938 1939 1940 1941 1942 1943 Wednesday Figures of Total Member Bank Reserve Balances at Federal Reserve Banks, with Estimates of Required and Excess Reserves (Latest figures are for July 14) C r e d it During June and the first three weeks of July there was an increase of about 1.4 billion dollars in Reserve Bank holdings of United States Government securities. Continued currency outflow, and increase in required reserves due to the growth of deposits, were reflected in the increased demand for Reserve Bank credit. The expansion in Reserve Bank credit was in the form of Treasury bills sold by member banks to the Federal Reserve Banks under options to repurchase. Holdings of bills showed wide fluctuations during the period as member banks adjusted their reserve positions through sales and repurchases. A large part of the Treasury bills came from New York City banks where excess reserves continued to be low. Total loans and investments of New York City banks have declined recently. Other report ing member banks have shown a continued growth in deposits and U. S. Government securities. The quarterly report of customer rates at commercial banks for the middle of June showed a further rise in rates charged on loans by large banks throughout the country.
@FedFRASER