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MONTHLY REVIEW
of Credit and Business Conditions
S econd

F e d e ra l

F ed era l R eserv e B a n k , N ew Y o r k

M o n e y M a r k e t in N o v e m b e r

Giving further effect to the credit policy announced
following the meeting of the Federal Open M arket Com­
mittee on September 12 (which was reported in the
October 1 issue of this Review), the Federal Reserve
Banks purchased approximately $38,000,000 of Govern­
ment securities in the three weeks ended ^November 24.
These purchases were made in anticipation of the large
seasonal increase in the amount of currency in circula­
tion between the latter p art of November and Christmas,
in connection with the holiday trade, and had the effect
of increasing tem porarily the amount of excess reserves
held by member banks.
An ample volume of reserves, during the autum n, had
already been largely assured the banks by the action of
the Treasury in disbursing the proceeds of $300,000,000
released from the inactive gold account, which was also
indicated in the announcement of the Federal Open
M arket Committee in September. This was especially so
in view of the fact that the demand for currency, since
the early part of September, has been less than had been
anticipated earlier, and that member bank reserve re­
quirements have declined in recent months accompanying
some reduction in member bank deposits caused chiefly
by liquidation of brokers loans. D uring much of the
past month, total excess reserves for all member banks
throughout the country held around $1,050,000,000
and increased on November 24 to $1,140,000,000. For
the principal New York City banks, excess reserves dur­
ing most of the month were between $325,000,000 and
$400,000,000, and near the end of November were some­
what above the latter figure. In the next three weeks the
seasonal increase in currency circulation will tem porarily
reduce excess reserves, but it now appears that, unless
other factors intervene, the total volume of excess reserves
for all member banks is not likely to fall below
$900,000,000 at the peak of the currency demand just
before Christmas, and th at the seasonal return flow of
currency after Christmas will increase excess reserves to
at least $1,250,000,000 by the end of January.
The maintenance of large amounts of excess reserves
at the member banks has had the effect of m aintaining
easy conditions in the money market, but in spite of the
effort of the banks to employ idle funds, there has been
some further shrinkage in the volume of loans and
investments and an accompanying shrinkage in the vol­
ume of deposits during the past month. Efforts of the




R e s e rv e

D is tr ic t

D ece m b er 1, 1937

large New York City banks to employ idle funds have
been reflected in an increase of $177,000,000 in Govern­
ment security holdings between October 20 and Novem­
ber 24, but the effect of these security purchases on the
total loans and investments of the New York City banks
was more than offset, first by further liquidation of
brokers loans, and more recently by a seasonal decline in
commercial loans, together with some reduction in hold­
ings of investments other than Government securities.
The reduction in loans to security brokers and dealers
was much more gradual after the first week in Novem­
ber than it had been during September and October, but
on November 17 the volume of such loans in the New
York City banks reached the lowest level since April,
1935. Commercial loans of the reporting New York City
banks on November 24 were $53,000,000 less than on
October 27, and were $115,000,000 below the peak on
October 13, but remained about $370,000,000 above the
low point of the year, which was reached last February.
In other principal cities, also, the weekly reporting
member banks have shown some further reduction in
their total loans and investments during the past month.
Government security holdings declined $107,000,000
between October 20 and November 24 and there were
small reductions in commercial loans and in loans to
security brokers and dealers.

Loans and Investments o f W eekly Reporting Member Banks
in New Y ork City

90

MONTHLY REVIEW, DECEMBER 1, 1937

The reduction in Government security holdings in
these banks coincident with the increase in Government
securities held by the principal New York City banks,
draws attention to the fact that additions to the avail­
able supply of such securities, in recent months, have
been greatly reduced. Between June 30 and October 31,
the total interest bearing debt of the Government in­
creased by $563,000,000, but the amount of new Govern­
ment securities available for purchase by banks and
other investors during this period was only $164,000,000,
as the bulk of the increase in the Government debt was
in the form of special securities issued for the employ­
ment of funds in the custody of the Treasury, including
the Old Age Reserve Account, the Unemployment Trust
Fund, and the Civil Service Retirement Fund. In the
fiscal year ended June 30, 1937, the increase in direct
obligations of the Government outstanding, exclusive of
special issues such as those mentioned above, was over
$2,100,000,000, and in the preceding fiscal year the in­
crease was in excess of $5,100,000,000. In each of the past
two fiscal years, investors and investing institutions other
than banks purchased approximately $2,000,000,000 of
Government securities. Since the early part of September
there has been no increase in the volume of Govern­
ment securities outstanding and available for general
investment, except for some increase in United States
Savings bonds. Under these circumstances, when banks
such as the New York City banks, undertake to increase
Government security holdings, their purchases must
result in a reduction in the holdings of other banks or
other investors.

panying a somewhat increased demand for Government
obligations on the p art of banks. D uring this period the
average price of Treasury bonds rose over % of a point
to about the same level as was reached in the first part
of August. A t this level Treasury bond prices averaged
approximately 2% points above the April, 1937 lows and
some 4% points below the December, 1936 highs. In the
latter p art of November, movements of Treasury bond
prices were irregular and a net decline of about % point
occurred. Changes in prices of Treasury notes were
similar in direction to those in Treasury bonds. Accord­
ingly the average yield on notes of 3 to 5 year m aturity
declined from 1.37 per cent at the end of October to 1.27
per cent on November 19 and then rose to 1.30 per cent.
Rates on Treasury financing by means of short term
bill issues declined further during November. On Novem­
ber 3, $50,000,000 of 133 day bills m aturing March 16,
1938 were issued at an average rate of 0.226 per cent and
in the succeeding weeks the average rate dropped to 0.119
per cent for the 107 day m aturity to be issued Decem­
ber 1. The November bill issues aggregating $200,000,000,
all of which m ature at the March tax period, replaced
m aturities of 273 day bills.
B il l s

and

C o m m e r c ia l P a p e r

The discount m arket continued in November to handle
only a small volume of bankers bills, and the rate struc­
ture remained at levels previously current. The amount
of bills outstanding at the end of October, $346,000,000,
was slightly above the September total, and continued
to exceed by a small amount the volume of a year ago.
M on ey R a te s
Approximately 82 per cent of all bills outstanding at the
Yields on the various classes of Government securities end of October were held by accepting banks and
during the past month have reflected the competition of bankers, which compares with 80 per cent a month ago,
the various investors and investing institutions for the and is the largest percentage since February.
available supply. Yields on Treasury bills declined to
(Millions of dollars)
the lowest levels in nearly a year, and yields on Treasury
Oct. 31, 1936 Sept. 30,1937 Oct. 30, 1937
notes and on Government bonds also declined. Yields on
Type of acceptance
high grade corporation bonds reflected a firm m arket for
127
127
110
82
77
67
such securities, despite the unsettled conditions prevail­ Domestic shipment....................................
8
11
10
62
66
65
Domestic warehouse credit.....................
ing in the m arket for stocks and lower grade bonds.
1
1
1
D ollar exchange..........................................
Based on goods stored in or shipped be­
tween foreign countries........................

Money Rates in New York
Nov. 30,1936 Oct. 30, 1937 Nov. 30, 1937
Stock Exchange call loans.......................
Stock Exchange 90 day loans.................
Prime commercial paper 4 to 6 months.
Bills— 90 day unindorsed........ ................
Customers’ rates on commercial loans
(Average rate of leading banks at
middle of m o n th )..............................
Average yield on Treasury notes (3-5
years)........................................................
Average yield on Treasury bonds (more
than 8 years to m aturity or call date)
Average rate on latest Treasury bill
sale 140 day issue..................................
107 day issue..................................
104 day issue..................................
Federal Reserve Bank of New Y o rk re­
discount r a te ..........................................
Federal Reserve Bank of New Y ork
buying rate for 90 day indorsed bills..

1

1

1

* 1X

*1X
1

*1H

%

3 /1 6

7 /1 6

1
7 /1 6

1.71

1.67

1.63

tO. 93

tl.3 7

tl.3 0

£2.23

J2.63

J2.57

0 .2 6

0.i2

1

1

0 .0 4

IX
X

X

* Nominal
t Substituted for series 1 to 5 years previously used.
t Substituted for series due or callable after 5 years previously used.

T o ta l............................................

77

66

62

330

344

346

There was a smaller volume of commercial paper avail­
able to dealers for resale during November, due in p art
at least to seasonal influences. On the other hand, bank
investment demand for business notes continued active
and readily absorbed the new paper currently offered.
The prevailing rate for average grade prime 4 to 6 month
commercial paper remained at 1 per cent. A total of
$323,400,000 of paper was reported by commercial paper
houses as outstanding at the end of October, as against
$331,400,000 a month ago, and $198,800,000 a year ago.

X

N e w F in a n c in g

Financing by means of security issues continued in
small volume during November. Including tem porary
G o v e r n m e n t S e c u r itie s
borrowing and private placements of securities, the total
Prices of Treasury securities followed a generally ris­ was only about $150,000,000, as compared with $200,ing course during the first 19 days of November, accom­ 000,000 in October and $350,000,000 in November, 1936.




91

FEDERAL RESERVE BANK OF NEW YORK

V irtually all of the corporate financing was arranged
through private sales of securities to insurance com­
panies. The total of such placements announced during
the month was $43,300,000 and consisted of $21,000,000
for Phillips Petroleum Company, $15,000,000 for Colom­
bian Petroleum Company, $5,000,000 for Potomac Elec­
tric Power Company, and $2,300,000 for General Ameri­
can Transportation Corporation. In addition there were
about $2,000,000 of small offerings of stock, mostly to
the present stockholders of the offering corporations.
This monthly total of $45,000,000 of corporate flotations
represents a sharp reduction from the October corporate
total of $125,000,000 and is the smallest amount for any
month since February, 1935.
The largest issues in November were $32,200,000 of
Federal Interm ediate Credit Bank short term debentures
for refunding purposes, and $25,000,000 Federal Home
Loan Bank 2 per cent three year debentures, priced to
yield 1.87 per cent. This Home Loan Bank issue, which
was of longer m aturity than any offered previously, was
floated to increase the amount of funds available for
future operations. Both issues were heavily oversub­
scribed. The other financing of the month was composed
of awards of about $33,000,000 of State and municipal
bonds and $15,000,000 of tem porary m unicipal loans.
S e c u rity M a r k e ts

The 15 per cent rise in the general average of stock
prices between October 18 and the end of October
proved to be the maximum extent of recovery to be
registered to date. Except for a sizable advance on
November 10, industrial and railroad shares generally
moved downward until the last few days of November,
and on the 19th broke through the October lows; by
the 24th industrial stocks as a group were 8 per cent
below the lowest closing quotations of October and rail­
road stocks averaged 6 per cent lower. The recovery
in public utility shares, however, continued through the
first part of November, apparently in reflection of news
reports construed as favorable to the future outlook for
the industry, and on November 13 the average of pub­
lic utility stock prices was 21 per cent above the October
low. Subsequently this group of stocks also declined,
but remained about 9 per cent above the October lows.
A fter the Thanksgiving Day holiday, the general level
of stock prices showed a moderate net advance.
As a result of the further decline in November in the
general average of share prices, approximately 80 per
cent of the March, 1935 to March, 1937 advance was
canceled, and at the lowest levels in November average
prices were the lowest since June, 1935. The average
decline from the March, 1937 high to the November low
amounted to 46 per cent, according to the Standard
Statistics combined index for the three m ajor stock
groups.
The activity of the stock market in November was
distinctly less than in October; on no day did turnover
on the New York Stock Exchange exceed two million
shares, and the average for the month as a whole was
about 1 y2 million shares.
Prices of medium and lower grade bonds continued
during November to follow the same general pattern as




PRICE IN D E X

1 9 2 6 a ve ra g e —

IO O

p e r ce n t)

stock prices, and reached new lows since 1935. For
example, the average price of a group of bonds rated
Baa by Moody’s Investors Service, which had recovered
about 4 points in the latter p art of October, began a
decline early in November which by the 24th amounted
to about 5 y2 points, carrying this average to a lower
point than at any time since April, 1935. Eailroad
bonds of this grade continued to be weaker than simi­
larly rated industrial or public utility bonds, but because
of the greater advances in railroad bonds during 1935
and 1936 the current level of the railroad bonds is
much the same, relative to 1935, as for other bonds.
High grade corporation bonds, in contrast to the weak­
ness in lower grade bonds and in stock prices, held
steady to firm during November. Although not quite
as high toward the end of November as at the end of
October, prices of high grade corporate issues averaged
1 point above the October low and 4% points above the
year’s low which was reached in April.
G o ld M o v e m e n ts

In November, for the first month since February, 1936,
the gold stock of the United States showed a reduction,
which amounted to approximately $30,000,000. This
decline in the gold stock was accompanied by a similar
reduction in the inactive gold account of the Treasury,
which amounted to $1,242,500,000 on November 29,
according to the daily statement of the Treasury, and
occurred at the time of exports of $25,000,000 of gold to
France and $5,000,000 to England.
W ith the London m arket price for gold holding above
the level at which gold shipments to New York would
have been profitable, and at one time rising above the
gold export point from New York, gold imports into the
United States during November were limited to $35,700,000 from Japan, $2,500,000 from Colombia, $2,300,000
from Australia, and $400,000 from India; most of this
gold was received on the Pacific Coast. In addition,
$1,300,000 of gold was released from earmarked foreign
account. These movements were not reflected in increases
in the gold stock figures, as they were offset by other
transactions.

92

MONTHLY REVIEW, DECEMBER 1, 1937

F o r e ig n E x c h a n g e s

The weakness of the dollar in the foreign exchange
market, of which there were indications at the end of
October, continued during the first part of November,
and was reflected in substantial advances in rates for
the m ajor European currencies. Sterling, which had
closed at $4.96 on October 30, reached $5.03 during the
course of trading on Monday, November 8, and the
French franc, over the same period, rose from $0.0337%
to $0.0342, the Swiss franc from $0.2312% to $0.2329%,
the guilder from $0.5529% to $0.5568, and the belga
from $0.1691 to $0.1709^.
A t the highest price for sterling on November 8, the
dollar equivalent of the London market price for gold
reached $35.24, as compared with a figure of $34.86 at
the end of October, and represented a price sufficiently
high to make profitable the export of gold from New
York. The wave of selling of dollars, which had had its
origin in rumors widely circulated in Europe to the effect
that the United States m ight raise its price of gold, came
to a halt when announcement was made on the same day
by the Secretary of the Treasury of a gold shipment to
France amounting to $10,000,000. The pound sterling
closed the day at $5.02% and the following day at
$4.99%? and other m ajor European currencies moved
similarly.
Throughout the rem ainder of the month, the dollar
held fairly steady against foreign currencies, as a con­
tinued though diminished outflow of capital was balanced
by the heavy merchandise export surplus. Sterling fluc­
tuated close to $5.00 in a narrow market, and the dollar
equivalent of the London gold price was around $35.00.
Only the guilder showed a divergent tendency, advancing
to $0.5560 at the end of the month.
The French franc benefited from the weakness in the
dollar during October and November; the Stabilization
F und was reported to have been a heavy purchaser of
gold and foreign exchange, and, in the week ended
November 10, sold gold amounting to 3,127,000,000 francs
to the Bank of France. The quotations for forw ard
francs improved, the discount on three month contracts
declining to the equivalent of 6% per cent per annum at
the end of the month, as compared with 12 15/16 per cent
on October 30, and 25% per cent on September 30.
Strength in the forw ard franc became especially marked
in the last week of November when the French T reasury’s
intention of repaying at m aturity in December the
£40,000,000 London credit in full became known.
F urth er weakness in most of the South American ex­
changes, resulting from continued increases in imports
for consumption and the recent sharp fall in world prices
of export commodities, became evident in November. The
Argentine free peso which had fallen below $0.30 in Sep­
tember for the first time since February, eased further
during November to $0.2940 at the end of the month from
$0.2975 in October. New measures calculated to tighten
official control of foreign exchange were pu t into effect
in Colombia, while restrictions affecting automotive im­
ports were imposed by U ruguay in an effort to conserve
supplies of foreign exchange. In the exchange markets,
official quotations for the Colombian peso have fallen
from $0.56% in October to $0.54:54 , while the free peso
?




has fallen further to $0.50%. Similarly, the U ruguayan
free peso dropped sharply at the end of November to
$0.51% from $0.58 in October and $0.60 the previous
month. In Brazil, suspension of service on its funded
foreign debt was announced on November 10. The official
milreis was abandoned, and the open m arket milreis ad­
vanced from $0.0558 at the end of October to $0.0599 on
November 16, but subsequently weakened to $0.0550 at
the month end.
No change occurred in F a r E astern exchange quota­
tions. The Japanese yen was supported by continued
shipments of gold to the United States for conversion
into dollars.
C en tra l B a n k R a te C h a n g es

Effective November 13 the Bank of France lowered
its discount rate from 3% to 3 per cent. The rate for
30 day advances on Government securities, which has
been the same as the discount rate since May, 1935, was
also reduced from 3% to 3 per cent, and the rate for 3
month advances on eligible collateral was lowered from
4% to 4 per cent.
F o r e ig n T r a d e

October merchandise exports from this country valued
at $333,000,000 showed an increase over the previous
month, while imports amounting to $224,000,000 were
smaller than in September. The gain in exports over
September was somewhat smaller than the usual seasonal
rise and the decrease in imports was contrary to the
customary movement in October. An increase of 26 per
cent over a year ago in exports, as compared with a 6 per
cent increase in imports, converted the im port balance for
the first 9 months of this year into an export balance of
$60,000,000 for the 10 months ended with October.
Large increases over a year ago occurred during Octo­
ber in shipments of metals, m anufactured products, ma­
chinery, automobiles, and petroleum products. On the
other hand, the volume of exports of raw cotton from the
United States, while seasonally larger than in the previ­
ous month, was smaller than a year ago, due to a heavy
reduction in Ja p a n ’s takings of American cotton. The
increase in the value of imports compared with October,
1936 was chiefly the result of larger receipts of crude
rubber, paper and paper materials, and nonferrous
metals, at higher prices this year. Im ports of agricultural
products were substantially reduced from a year ago.
B u s in e s s P r o fit s

As most of the current recession in business has
occurred since September, total corporation profits for
the third quarter of this year remained above those of
a year previous, but the increase was less than in the
early months of the year, reflecting a smaller increase
over a year ago in the volume of business and also a
narrowing of profit margins by reason of increased
operating costs. Net profits of 231 industrial and mer­
cantile companies in the July to September quarter of
this year were 19% per cent larger than in the corres­
ponding period of last year, whereas profits in the first
quarter were approximately 50 per cent above a year

FEDERAL RESERVE BANK OF NEW YORK

previous. Approxim ately three-fifths of the 231 com­
panies either increased profits, converted deficits into
profits, or reduced deficits between the third quarters
of 1936 and 1937; the other two-fifths of the companies
showed smaller earnings than in the third quarter of
last year. These figures and the data shown in the
accompanying diagram indicate that the upw ard trend
of profits of the past four years was checked before the
rapid decline in business during the past three months
got well under way.
The outstanding increase in industrial profits in the
third quarter was in the steel industry, United States
Steel Corporation alone showing an increase of 125 per
cent and 14 companies, including United States Steel,
a rise of 83 per cent over the third quarter of 1936.
Excluding the large increase in the steel industry, the
increase for other reporting companies amounted to 12
per cent. Among these other companies, the principal
increases were in the electrical equipment, machinery
and tool, metals and mining (excluding coal and coke),
and railroad equipment groups. The im portant auto­
mobile group had an increase in combined profits of
only 12 per cent, although automobile production in­
creased 23 per cent and industrial profits generally
tend to rise more rapidly than the volume of business
in periods of expansion. There were declines in profits
in the clothing and textile, food and food products,
household supply, printing and publishing, cigar, and
miscellaneous groups, and a deficit for 1937 supplanted
the small net profits of the coal companies in 1936.
Aggregate net profits, less deficits, of the 231 com­
panies for the first nine months of 1937 were 26 per cent
larger than a year ago, and were 24 per cent less than
in the corresponding period in 1929. Large increases
over a year ago in 9 month profits of the steel, railroad
equipment, paper and paper products, building supply,
and machinery and tool groups, and moderate increases
in several other lines were offset to a considerable extent
by declines in profits in the automobile industry and in
most of the groups which showed reduced profits for
the third quarter.
P ER C EN T
1JU

125

100

75

50

25

0

-2 5

Index o f Profits o f 168 Industrial and Mercantile Corporations,
A djusted for Seasonal Variation (1925-29 average= 100 per cent)




93

Owing to a rise in operating expenses, net operating
income of Class I railroads in the third quarter of 1937
was 13 per cent less than a year ago, and net income was
38 per cent less, although gross revenues were about 3
per cent larger. F or the first nine months of the year,
however, the net income of the railroads showed a sub­
stantial increase, reflecting the increases which resulted
from operations earlier in the year. Net operating
income of telephone companies in the third quarter fell
8 per cent below last year, but for the nine months was
slightly ahead. Net income of other public utilities for
the third quarter was 5 per cent above a year ago, and
for the nine months 8 per cent ahead.
( N e t p r o f it s i n m illio n s o f d o lla r s )

T h ir d Q u a rte r

F ir s t n in e m o n t h s

C o r p o r a tio n g ro u p
1936

1937

1929

8 6 .9 — 1 7 .9

4 8 .5

5 4 .4

2 9 6 .0 —

1 4 .6 2 2 5 .9

2 2 .0
8 .9
4 3 .0
2 .0
1 .0
3 5 .7
5 1 .3
5 .4
8 .4

1 2 .3
11 .3
4 .2
5 .3
4 3 .3
4 4 .9
1 .3
0
0 — 0 .3
1 5 .1
2 1 .7
3 8 .4
3 1 .1
4 .2
3 .3
1 0 .4
7 .1

7 8 .5
1 8 .7
1 2 4 .4
3 .2
2 .5
9 0 .3
1 3 7 .2
1 4 .2
2 5 .1

4 5 .2
5 2 .3
8 .2
1 5 .5
5 .6
8 .7
1 3 1 .4
4 0 .5 1 1 7 .1
1 .9
2 .2
0 .6
0 .2
0 .8 —
1 .6
4 3 .6
6 6 .7
1 .7
8 1 .7
9 9 .2
9 2 .3
6 .5
1 .6
6 .8
1 9 .2
3 1 .6
9 .2

1929
A u t o m o b i l e s ...................
A u t o m o b ile p a rt s a n d
a c c e s s o r i e s ( e x c l. t i r e s )
B u i l d i n g s u p p l i e s ...........
C h e m i c a l s a n d d r u g s . ..
C lo t h in g a n d t e x t ile s . ..
C o a l a n d c o k e ................
E l e c t r i c a l e q u i p m e n t . ..
F o o d a n d fo o d p ro d u c ts.
H o u s e h o l d s u p p l i e s ____
M a c h in e r y a n d t o o ls.. .
M e t a l s a n d m i n i n g ( e x c l.
c o a l a n d c o k e ) ...........
O f f i c e e q u i p m e n t ...........
Pap er an d paper

P r in t in g a n d p u b lis h in g .
R a ilr o a d e q u ip m e n t . . ..
S t e e l ..................................
T o b a c c o ( c i g a r s ) ...........
M i s c e l l a n e o u s .................
T o t a l, 2 3 1 c o m p a n ie s

1932

—
—

4 .6
1 .4
1 1 .7
0 .1
—
0 .6
—
1 .9
2 4 .1
1 .7
—
2 .7

—
—

—

0 .4
1 7 .0
4 .9
0 .5
9 3 .4
2 .1
1 .2

2 .4
6 7 .7
6 .9
1 1 .8
6 1 .9
2 .7
3 4 .8

4 .5
9 9 .5
5 .6
2 5 .4
1 6 3 .5
2 .5
3 9 .6

1 6 .3 81 4 .1

1 ,0 2 2 .8

9 4 4 .7
1 9 7 .8 4 3 4 .5
*
— 1 6 4 .3
4 3 .7

4 6 8 .4
7 8 .7

♦

1 6 9 .8

1 7 0 .2

1 5 2 .9 1 4 8 ,9

1 6 0 .9

4 6 .6
2 1 .8

0 .2
8 .0
0 .2
0 .7
— 3 4 .4
0 .8
—
2 .7

0 .9
2 9 .8
1 .8
5 .8
2 8 .9
1 .3
1 4 .9

1 .2
4 1 .6
0 .9
8 .7
5 2 .8
1 .2
1 3 .2

4 .1
1 1 5 .8
2 1 .8
3 0 .6
2 4 0 .8
9 .3
6 2 .7

4 7 0 .0 — 1 9 .6 2 7 6 .5 3 3 0 .5

1 ,3 4 3 .6

—

—

♦

5 5 O t h e r p u b l ic u t ilit ie s .
N e t i n c o m e .................

5 7 .2

*

4 1 .6

5 6 .4

5 2 .1

4 6 .5

4 8 .9

1 9 8 .1

6 8 .8
1 8 .6

2 2 .7
5 .1

1 .6
5 2 .5
6 .6
1 2 .3
8 3 .9
3 .6
2 1 .8

1937

4 4 .7
1 2 .5

1 6 .0
3 .7

8 1 T e le p h o n e c o m p a n ie s
N e t o p e r a t in g in c o m e

D e f ic it

—
—

1936

2 .4
1 .0

0 .2
0 .3

1 6 .2
6 .9 —

1 4 1 C la s s I R a ilr o a d s
N e t o p e r a t in g in c o m e 3 9 3 . 3
8 8 .2 1 9 6 .5 17 0 .2
*
N e t i n c o m e .................
6 6 .9
— 3 9 .0
4 1 .6

—

1932

*

1 8 7 .6

—

—
—
—

* N o t a v a ila b le

E m p lo y m e n t a n d P a y r o lls

The total num ber of workers employed in the m anu­
facturing and nonm anufacturing industries that report
to the United States D epartm ent of Labor decreased by
80,000 in the month ended October 15, as a decline of
approximately 145,000 in the number of factory workers
was only partially offset by seasonal advances in employ­
ment in trade and in coal mining. Compared with a year
ago, however, the num ber employed remained 600,000
larger and weekly payrolls were $43,000,000 higher.
The index of factory employment of the United States
Departm ent of Labor declined in October, contrary to the
usual movement, and after seasonal adjustm ent factory
employment showed the sharpest reduction since Septem­
ber, 1934 when widespread textile strikes occurred, but
the number of factory employees remained 4 per cent
higher than in October, 1936. The reduction in number of
employees was limited in some industries by curtailm ent
of working hours. Employment declined in a wide
variety of industries, including iron and steel, textiles,

94

MONTHLY REVIEW, DECEMBER 1, 1937

of a seasonal character, and departm ent store trade in
the M etropolitan area of New York showed nearly the
usual increase during the first half of November.
F inal data for October indicated further contraction
in the volume of industrial production and in railway
freight shipments, but no pronounced movement other
than seasonal was shown in available retail trade statis­
tics. Daily average output of steel ingots declined 24 per
cent from the September average, and the rate of con­
sumption of cotton by textile mills was 9 per cent lower.
The dollar volume of machine tool orders fell to the
lowest point of the year, and shoe production also was
reduced. There was an increase in automobile production
of larger proportions than in 1936 but smaller than in
1935. Sugar meltings advanced following the sharp
decline in September, and output of lead was seasonally
higher. In the meat packing industry, slightly more
than the usual seasonal increase appears to have occurred.
The index of industrial production compiled by the
Board of Governors of the Federal Reserve System for
October was at 103 per cent of the 1923-25 average, as
P r o d u c tio n a n d T r a d e
compared with 111 for September and 117 for August,
The recession in business which was evident in Septem­ and 110 for October, 1936.
ber and October, continued during November. Steel out­
October sales of departm ent stores, mail order houses,
put, as a result of a low level of new orders and closer and chain stores showed close to the usual seasonal adadjustm ent of output to incoming business, fell further
and at the close of the month operations, estimated at
about 30 per cent of capacity, were only about onethird the rate prevailing at the spring peak. In the auto­
mobile industry, the deferring of volume output by a
major producer, a recurrence of labor difficulties in some
plants, and a rather general adoption of production sched­
110
ules below those planned early in the season, contributed
to restrict expansion of automobile assemblies in Novem­
68
88
86
ber, and weekly estimates indicated that production in
88
100
November dropped below the corresponding month of
102
88
1936 for the first time this year, as the accompanying dia­
gram shows. I t was reported that cotton mill activity
82
101
86
declined further in November, and the generation of
electric power showed a considerable decrease. On the
other hand, the November decline in the movement of
102
freight over the railways appears to have been largely
88
shoes, and canning. In automobile plants, on the other
hand, the number of men employed was substantially
enlarged as volume production of new models began.
According to the indexes of the State Departm ent of
Labor, both employment and payrolls in New York State
factories declined 2 per cent from the middle of Septem­
ber to the middle of October, and on a seasonally adjusted
basis reached the lowest levels of the current year. Fac­
tory employment in October remained 6 per cent greater
than a year ago, however, and payrolls were 12 per cent
higher.
A further decline in factory employment to the middle
of November was indicated by a special telegraphic sur­
vey by the National Industrial Conference Board cover­
ing more than 1,200 firms in 27 m anufacturing industries.
This report revealed a decline of 4.3 per cent in employ­
ment at these concerns from the middle of October to the
middle of November, as well as further reductions in
hours of work.

(A d ju s t e d fo r se a so n a l v a r ia t io n s , fo r y e a r t o y e a r g ro w t h ,
a n d w h e re n e c e s s a ry fo r p ric e c h a n g e s )

1937

1936

O ct.

Aug.

Se p t.

O ct.

107
95
84

115
125
140
129

103

94
104
lO lr
114r
93
71
127

99
108
106
105
77
93
58
165

79
108
135
62
85p
98p
94p

96
90

104
95

34

33

27

26

53

68

44

47

74
80
70

74
83
91
95

74
85

86
88

71
80
83p
82p

89
82r
94p
95r
93r
107

88 p
82
94p
94
93
117p

Industrial Production

S t e e l ................................
C o p p e r ...........................
P a s s e n g e r c a r s r ...........
M o t o r t r u c k s r .............
B i t u m i n o u s c o a l ..........
C r u d e p e t r o l e u m .........
E l e c t r i c p o w e r .............
C o t to n c o n s u m p t io n ..
W o o l c o n s u m p t i o n . . ..
S h o e s ..............................
M e a t p a c k i n g ...............
T o b a c c o p r o d u c t s ........
C e m e n t ..........................
M a c h in e to o l o r d e rs *.,

145
124
92
98
96

84
90p

93
59
206

56p
87 p

95

143

Employment

E m p l o y m e n t , m a n u f a c t u r i n g , U . S ..........
E m p lo y e e h o u rs, m a n u f a c t u r in g , U . S . ..

THOUSANDS
OF CARS

lO O p
87 p

Construction
R e s i d e n t i a l b u i l d i n g c o n t r a c t s ...................
N o n r e s id e n t ia l b u ild in g a n d e n g in e e rin g
c o n t r a c t s .................................................

Primary Distribution
C a r l o a d in g s , m e r c h a n d is e a n d m is c .
C a r l o a d i n g s , o t h e r .............................. .
E x p o r t s .....................................................
I m p o r t s .....................................................

86

Distribution to Consumer
D e p a r t m e n t s t o r e s a l e s , U . S .................
D e p a r t m e n t s t o r e s a le s , 2 n d D i s t r i c t ..
C h a i n g r o c e r y s a l e s ..................................
O t h e r c h a i n s t o r e s a l e s ............................
M a i l o r d e r h o u s e s a l e s ........ .....................
N e w p a s s e n g e r c a r r e g i s t r a t i o n s r .........

93
87
96
96

80
91
91
86r

101
100

110

67
41

64
33

68

70

46

44

45

156
147
219

164
152
241

161
153
241

M oney Payments
B a n k d e b i t s , o u t s i d e N e w Y o r k C i t y ____
B a n k d e b i t s , N e w Y o r k C i t y . ...................
V e lo c it y
of d e m an d
d e p o s it s , o u t s id e
N e w Y o r k C i t y .............. . .........................
V e lo c it y o f d e m a n d d e p o s its , N e w Y o r k
C i t y ..........................................................
G e n e r a l p r i c e l e v e l f ...............
C o s t o f l i v i n g f .........................
C o m p o s it e in d e x o f w a g e s f r .

66
37

70

Daily Average Production of Passenger Automobiles and Trucks,

1937 Compared with 1936 (November, 1937
estimated from weekly reports)




66p
41p

p Preliminary,
r Revised.
* Not adjusted for price changes.
f 1913 average • 100; not adjusted for trend.

47
159p
153p
242p

95

FEDERAL RESERVE BANK OF NEW YORK
PRC N
E ET

Percentage Change in Average Daily Contracts

130i--------

N . Y . a n d N o rth e rn N .J .

Ja n .-O c t.
1937
co m p are d
w ith
J a n .-O c t.
1936

37 State s

O ct. 193 7
c o m p a re d
w it h
O ct. 1936

J a n .-O c t.
1937
co m p a re d
w it h
Ja n .-O c t.
1936

5
5
1
8

— 15
—
2
0
—
8

+ 2 0
+ 4 9
—
5
+ 2 0

+234
—
73
+
60

+
4
+ 5 2
+ 2 2

— 10
+ 1 4
—
5

— 20
+ 4 5
—
6

—

+ 1 9

—

O ct. 1937
c o m p a re d
w ith
O ct. 193 6

Building
R e s i d e n t i a l .....................................
C o m m e r c i a l a n d f a c t o r y .............
P u b l i c p u r p o s e * ............................
A l l b u i l d i n g ................................

—
+
—
—

29
1
24
23

+
+
+
+

1
3
1
1

Engineering
P u b l i c w o r k s ..................................
P u b l i c u t i l i t i e s ..............................
A l l e n g i n e e r i n g ..........................

60

A l l c o n s t r u c t i o n ...................

5 0 --------------------------------------------------------------- --------------------------------- ■
---------------------------------------------------- --

I

4 o L _____ ________ ________
1928
1S29
1930
1927

I

I
1931

1932

I

1
1933

1934

I
1935

1

I
1936

^

1937

Sales and Stocks of Reporting Department Stores in Second Federal
Reserve District, Adjusted for Seasonal Variation
(1923-25 average = 100 per cent)

vances over September. Registrations of new passenger
cars were estimated at 197,000 units, a decrease of 28,000
cars from the September figure, which is less than the
decline that occurred last year. The volume of check
transactions outside New York City was little changed
from the previous month, while in New York City some
advance was indicated.
Recent developments in retail trade in the Second Fed­
eral Reserve D istrict are indicated in the accompanying
diagram which shows indexes of sales and stocks of
departm ent stores, both series adjusted for usual seasonal
variation. It appears from this diagram th at stocks of
merchandise in the stores, adjusted for seasonal changes,
were reduced substantially during September and Octo­
ber from the rather high level of several preceding months
which resulted from the rapid rise in stocks between
August, 1936 and February, 1937, when there were sub­
stantial increases in prices. Sales, however, have held close
to the average level that has prevailed since the autum n
of 1936.
B u ild in g

Total building and engineering contracts awarded in
the New York and N orthern New Jersey area increased
34 per cent during October, following a sharp decline in
September. Heavy engineering projects registered an
advance of 90 per cent for the month, owing principally
to contracts for a single large bridge, and the value of
residential contracts was 35 per cent higher than in Sep­
tember. Total contracts in October were nearly the same
as a year earlier, although residential contracts were 29
per cent lower, and for the first ten months of the year
contracts for all m ajor types of construction were higher
than in the similar period of 1936, as is indicated in the
following table.
F or the 37 States covered by the F. W. Dodge Corpora­
tion reports, October construction contracts were practi­
cally unchanged from the September level, and totaled
approximately 7 per cent less than in October, 1936. Total
contract awards in the first ten months of 1937 remained
11 per cent above those in the corresponding period of
1936.




*

In c lu d e s e d u c a t io n a l, h o s p it a l,
r e c r e a t io n a l b u ild in g .

3

p u b lic ,

7

+11

r e lig io u s a n d m e m o r ia l, a n d s o c ia l a n d

D ata for the first three weeks of November indicate an
increase of 5 per cent over the October rate of construc­
tion contracts in 37 States. Residential and nonresidential
building contracts advanced contraseasonally and heavy
engineering projects declined less than usual for the time
of year. Compared with the corresponding period in
1936, total contracts were approximately unchanged,
reductions of 10 per cent in residential work and of 2 per
cent in heavy engineering construction being largely
offset by an increase of 10 per cent in nonresidential
building.
C o m m o d it y P r ic e s

The downward movement in wholesale commodity
prices, which has been in progress with only one sizable
interruption since early last April, continued during
most of November. Although a few individual com­
modities showed some recovery toward the end of the
month, prices of many im portant products during the
course of the month established new lows for the year,
and in some cases for three or four years.
Livestock prices showed further substantial declines
during November, and the average price of hogs on
November 22 reached the lowest level since February,
1935. The cash quotation for the Number 1 grade of
N orthern wheat at Minneapolis on November 6 declined
to $1.04% a bushel, the lowest since July, 1935, and
although the subsequent movement was irregularly
higher, the price at the end of November was $1.08%,
down 8% cents for the month as a whole. Cash corn,
after reaching in the middle of November the lowest
level since May, 1934, advanced slightly, but ended the
month at 53 cents a bushel, 3% cents below October’s
close. The price of silk moved 16 cents lower to $1.57%
a pound during November, and losses occurred also in
wool and crude rubber. On the other hand, the price
of raw sugar rose somewhat during November. The
spot price of cotton declined in the early days of
November to the lowest level since April, 1933, but
recovered subsequently, and showed only a small net
loss for the month as a whole.
In the metals group, a reduction of $2 a ton lowered
the price of scrap steel at Pittsburgh to $13.25, a level
$10.50 below the March high and the lowest since June,

96

MONTHLY REVIEW, DECEMBER 1, 1937

PER CEN T

ago, as compared with an average increase of 19 per
cent in the first seven months of this year. A pparel
store stocks were 5.4 per cent higher than a year ago.
October collections by the departm ent stores and also
the apparel stores were lower than last year.
P e r cent of
acco unts
o u t s ta n d in g
Se p te m b e r 30
c o lle c te d i n
O cto b e r

Pe rc e n ta g e
change
O ctob e r, 193 7
c o m p a re d w ith
O cto b e r, 193 6

Sto ck
on hand
end of
m o n th

1936

1937

—
2 .2
+
2 .0
+
7 .1
+
9 .4
—
4 .7
+ 1 1 .7
—
0 .2
—
4 .9
+ 0 .3
+
3 .1
—
8 .2
+
2 .2
+
2 .9
+
4 .4

+ 1 0 .7
+
7 .2
+
7 .8
+ 1 3 .4
+ 1 0 .9
+
5 .6
+
4 .4

5 2 .1
5 7 .0
5 2 .6
4 2 .9
4 4 .7
4 6 .6
3 7 .3

5 1 .4
4 4 .1
5 3 .0
4 4 .3
4 4 .9
4 3 .9
4 1 .2

A l l d e p a r t m e n t s t o r e s ..............................

—

1 .6

+ 1 0 .2

4 9 .4

4 8 .3

A p p a r e l s t o r e s ........................................

—

4 .3

+

4 8 .8

4 7 .9

L o c a lit y

Movement of Prices of Actively Traded Commodities (Moody’s
Investors Service index; December 31, 1931
100 per cent)

1936. Tin declined 5% cents to 4 2 ^ cents a pound dur­
ing November, lead receded y2 cent to 5 cents a pound,
and zinc decreased y2 cent to 5*4 cents a pound. In the
domestic copper m arket, the custom smelters ’ price was
reduced 1 cent to 10% cents a pound, and the leading
producers lowered their price 1 cent to 11 cents a
pound.
The extent of the recent decline in prices of actively
traded commodities is indicated in the accompanying
diagram, which shows fluctuations since 1929 in Moody’s
Investors Service index of 15 raw products. In the
four years following the low reached in February, 1933
the movement was steadily upward, and by early April,
1937 the increase from the 1933 low amounted to about
190 per cent, a rise of sufficient proportions to cancel
most of the 1929-1933 decline. In April, however, the
trend was reversed and with the exception of an up­
tu rn in June and July, the average price of these
commodities has moved steadily downward since that
time. As a result, toward the end of November Moody’s
index was about 35 per cent below the A pril high and
was at the lowest point since November, 1934, slightly
more than one-half the advance between February, 1933
and April, 1937 having been canceled.

N e w Y o r k ...........................................................
B u f f a l o .................................................................
R o c h e s t e r ............................................................
S y r a c u s e ................................................. . ..........
N o r t h e r n N e w J e r s e y ......................................
B r i d g e p o r t ...........................................................
E l s e w h e r e ............................................................
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 ..........................
C e n t r a l N e w Y o r k S t a t e .............................
H u d s o n R i v e r V a l l e y D i s t r i c t ...................
C a p i t a l D i s t r i c t .............................................
W e s t c h e s t e r a n d S t a m f o r d .........................
N i a g a r a F a l l s .................................................

Net
s a le s

5 .4

W h o le s a le T r a d e

In October total sales of the reporting wholesale firms
averaged about 6y2 per cent lower than last year, follow­
ing two months in which increases had been reported.
Sales of the shoe and paper concerns, and yardage sales
of rayon and silk goods showed the largest decreases in
over three years, and hardware sales were reduced by
the largest percentage since January, 1936. Sales of the
grocery, m en’s clothing, cotton goods, and stationery
firms were smaller than in October a year ago, following
the year-to-year increases in September, and the October
increase in sales of drug concerns was less than in the
previous month. The jewelry firms, however, recorded
a smaller decrease in sales than in September, and the
diamond concerns reported the largest gain since July.

D e p a rtm e n t S tore T ra d e

Sales of the reporting departm ent stores in the Metro­
politan area of New York tended, as in other years, to
rise during the first half of November, but were about
4 per cent below the relatively high level of sales in the
corresponding period of 1936.
October sales of the reporting departm ent stores in
this district showed virtually all of the usual seasonal
increase over September. As compared with a year ago,
total sales were about 1% per cent lower, but, after allow­
ing for one less shopping day this year than last, there
was an increase over a year ago of approximately 2 y2
per cent in average daily sales. Total sales of the lead­
ing apparel stores in this district were 4.3 per cent
below last year, and average daily sales about the same,
following a small advance in September.
Departm ent store stocks of merchandise on hand at
the end of October were 10 per cent higher than a year




P e r cent of
acco u n ts
o u t s ta n d in g
Se p te m b e r 3 0
c o lle c te d i n
O ctob e r

P e rc e n ta g e
change
O cto b e r, 193 7
c o m p a re d w it h
O ctob e r, 1936

Net
s a le s

C o m m o d ity

M e n *8 c l o t h i n g ...................................................
C o t t o n g o o d s ......................................................
R a y o n a n d s i l k g o o d s ......................................
D r u g s a n d d r u g s u n d r i e s .................................

P a p e r ....................................................................

W e i g h t e d a v e r a g e .....................................

—
—
—
—
—
+
—
—
—
+
—

2 .9
1 0 .5
6 .2
37. 1*
2 9 .1
2 .2 J
3 .9
5 .6
1 .7
2 3 .8
2 .5

—

6 .6

Stock
en d of
m on th
+

1936

+
—

7 .1
7 .1

}

9 4 .4
4 0 .9
3 8 .7
5 1 .4
3 6 .6

4 8 .0
5 1 .9
6 6 .8

+ 1 3 .2 *
+ 1 5 ‘6t
.
+ 2 2 .5

1937

9 3 .1
4 3 .6
4 2 .8
5 9 .2
4 0 .8

5 .1

4 3 .0
5 2 .5
4 9 .6

1 8 .7
5 9 .5

}

1 6 .6
5 6 .7

* Quantity figures reported by the National Federation of Textiles, Incorporated,
not included in weighted average for total wholesale trade.
% Reported by Department of Commerce.

FEDERAL RESERVE

BANK

OF N E W

YORK

MONTHLY REVIEW, DECEMBER 1, 1937
B u sin e s s C o n d it io n s in th e U n it e d S ta te s
(Summarized by the Board o f Governors o f the Federal Reserve System)
OLUME o f industrial production showed a further sharp decrease in October
and the first three weeks of November, and there was a reduction in
employment. Commodity prices continued to decline. Distribution o f com­
modities to consumers was maintained at the level of other recent months.

V

P r o d u c t io n

a n d

E m p l o y m e n t

In October the B oard’s seasonally adjusted index o f industrial production
was 103 per cent o f the 1923-1925 average as compared with 111 per cent in
September and an average o f 116 per cent in the first eight months o f this
year. There was a marked curtailment o f activity in the durable goods
industries. Output o f steel ingots, which had shown a steady decline since
August, was at an average rate o f 59 per cent o f capacity in October and by
the third week in November the rate had declined to 36 per cent. Automobile
production increased considerably in October as most manufacturers began
assembly o f 1938 model cars. In the first three weeks o f November output of
automobiles showed little change from the level reached at the end o f October,
with assemblies by one leading manufacturer continuing in exceptionally small
volume. Production of lumber and of plate glass declined further in October.
In the nondurable goods industries, where output had been declining since the
spring o f this year, there was a further decrease in October. Cotton consump­
tion showed a sharp reduction and activity at woolen mills and shoe factories
continued to decline. There was an increase in output at sugar refineries,
where activity had been at a low level in September. In most other lines changes
in output were largely seasonal. Mineral production continued at about the level
reached at the close o f 1936 and maintained throughout this year.
Value of construction contracts awarded in October and the first half o f
November was smaller than in the preceding six weeks, according to figures o f
the F. W. Dodge Corporation. The decline was chiefly in private nonresidential
construction.
Factory employment declined substantially in October and payrolls showed
little change, although an increase is usual at this season. Declines in the
number employed were reported by factories producing steel, machinery, lumber,
and textiles, and in many smaller industries. There was a seasonal increase in
employment at automobile factories. Employment and payrolls increased
seasonally at mines and at establishments engaged in wholesale and retail trade.

In d e x N u m b e r o f P r o d u c t io n o f M a n u f a c t u r e s
a n d M in e r a l s C o m b in e d , A d j u s t e d fo r S e a s o n a l
V a r ia t io n ( 1 9 2 3 - 2 5 a v e r a g e = 1 0 0 p e r c e n t)

In d e x o f F a c t o r y E m p lo y m e n t w it h A d j u s t m e n t
fo r S e a s o n a l V a r ia t io n (1 9 2 3 - 2 5 a v e ra g e =
1 0 0 p e r ce nt)

-------------

D is t r ib u t io n

FO O D S
O TH ER
c. OMMODIT I E S

,

r p

ka

A

a

’

C

i
■Tjd
/ f *

)

\ / \ \

)

v y p v *
r ‘ f a iRM
/ PROD U C T 5
I S
V-

Sales at department stores and mail order sales increased seasonally in
October. Throughout the year sales at department stores have been sustained,
with seasonal fluctuations, and the B oard’s adjusted index o f these sales has
shown little change.
Freight car loadings declined in October and the first half of November,
reflecting smaller shipments o f forest products, ore, and miscellaneous freight.
C

. .
G ro u p P r ic e
In d e x e s o f B u r e a u o f L a b o r
S t a t is t ic s (1 9 2 6 a v e ra g e =
1 0 0 p e r ce n t)

o m m o d it y

B a n k
5

7
5

3—

5 —

g

-------j ^ D E I UAND DEPC> S ITS| A D JU S TE] [>

~

BALANC .ES OF
__BANKS 1
E DEPOSIT!

m
.

3 '—
2
^U & G O V T. DEPOSITS
« “V J
*
1
0
’3 4

1935

1936

1937

1 93 7"

Wednesday Figures for Reporting Member Banks
(Latest figures are for November 17)




P

r ic e s

Prices o f industrial materials, particularly nonferrous metals, steel scrap,
rubber, and hides, declined further from the middle o f October to the third week
o f November, and there were some decreases in the prices o f finished industrial
products. Livestock and meat prices declined substantially and coffee prices
dropped sharply following the announcement by Brazil o f modification o f its
control policy.
C r e d it

During the first half of November the Federal Reserve Banks purchased
$28,525,000 o f United States Government securities, in accordance with the
policy adopted in September to provide additional reserves for meeting seasonal
currency and other requirements. From the middle o f October to November 17,
excess reserves of member banks increased from about $1,000,000,000 to
$1,100,000,000, reflecting the Federal Reserve security purchases and a con­
siderable decline in required reserves at member banks in New York City,
caused partly by a reduction in demand deposits arising from a liquidation of
brokers loans.
Loans to brokers and dealers reported by banks in leading cities declined
by $250,000,000 during the four weeks ended November 17. Commercial loans,
following a steady increase for several months, declined after the middle of
October. Member banks in New York City increased their holdings of United
States Government securities by over $150,000,000 while banks outside New
York City showed a further reduction. Deposits continued to show moderate
reductions.