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MONTHLY REVIEW
O f Credit and Business Conditions
FEDERAL
V
ol.
27
RESERVE
BANK
DECEMBER
OF
NEW
YORK
1945
No. 12
MONEY MARKET IN NOVEMBER
Among the principal banking developments during Novem
ber was the further extension at an accelerated rate of the
recent expansion in bank loans to business. On November
21, commercial, industrial, and agricultural loans of the weekly
reporting member banks in 101 cities reached 6,750 million
dollars, the highest figure since August 1942. The increase
since the middle of October amounted to 500 million dollars
and since May 30, the low point for the year, to 983 million
dollars. Although this advance is to some extent a normal
seasonal occurrence, other factors have undoubtedly played an
important part. This may be seen from the fact that in the
corresponding period of 1944 (from low point to late Novem
ber) the growth of commercial, industrial, and agricultural
loans of these banks came to only 454 million dollars.
Loan activity has increased particularly rapidly among
central reserve New York City reporting banks, which
accounted for 430 million dollars of the rise in business loans
since May 30, or 44 per cent of the total for all reporting
member banks. In contrast, in 1944 the New York banks
accounted for about 26 per cent of the increase. The more
rapid growth in business loans among the New York insti
tutions this year points to one of the factors responsible for
the greater expansion of business loans among all reporting
member banks. The New York banks have been actively
participating, frequently with banks in other parts of the
country, in the extension of large term loans to corporations,
the proceeds in a number of cases being used for the purpose of
retiring outstanding bonds and other fixed interest securities.
Obviously such loans do not indicate greater business demand
for funds, but rather competition between the capital market
and the banks. However, some portion of these term loans has
been for the purpose of meeting additional working capital
requirements.
The expansion in business loans, shown in the accompanying
chart, is particularly noteworthy in view of the accelerated
liquidation of guaranteed war production loans* of all financing
*
Loans guaranteed by the War and Navy Departments and the
Maritime Commission through the Federal Reserve Banks under
Regulation V of the Board of Governors of the Federal Reserve System.
institutions, a large part of which were made by the weekly
reporting member banks. Guaranteed war loans fell to 836
million dollars at the end of October, lowest since December
1942, and declined 644 million dollars from the end of May
1945 and 1,247 million from the peak at the end of July 1944.
Although there was a shift of war loans from a guaranteed to
an unguaranteed status in the first half of this year, unguaran
teed loans for war purposes have undoubtedly declined since
then, particularly since the end of the war in the Pacific.
Thus the expansion of nonwar business loans has been
greater than that indicated by total business loans. It may
reflect, in addition to the seasonal building up of inventories
and the substantial increase in term loans for refunding pur
poses, increased borrowing by business concerns whose opera
tions were curtailed during the war owing to restrictions on
labor and materials, but which are now in the process of
expansion following the lifting of controls. Thus * the
current situation may, to some extent, be a reversal of that
Business and Guaranteed W ar Production Loans
1942
-1943
1944.
1945
* Commercial, industrial, and agricultural loans and open market paper of
weekly reporting member banks in 101 cities as o f the last statement date
in each m on th ; latest date shown is N ovem ber 21.
f W ar production loans of all financing institutions guaranteed by W a r
and N avy Departments and Maritime Commission through the Federal
Reserve Banks under Regulation V as o f the end of each month.
90
MONTHLY REVIEW, DECEMBER 1945
obtaining in the period beginning in early 1942, when business
enterprises in the "nonessential” category were forced to cur
tail operations and so began paying off bank loans at a much
faster rate than war contractors expanded their borrowings.
Although new securities offered in the Victory Loan drive
were first placed on sale (to individuals) on October 29,
no appreciable increase in bank loans on Government securities
developed during the first half of November; in fact the total
of such loans outstanding at all weekly reporting member
banks was actually lower on November 14 than at the end of
October. In the week ended November 21 (which included
the issue date for marketable securities sold to individuals),
however, Government security loans of the New York City
banks increased 180 million dollars, of which 111 million were
to security brokers and dealers and 69 million to other nonbank
investors, and such loans at reporting banks in 100 other cities
increased 200 million, including 13 million to brokers and
dealers and 187 million to other borrowers.
Reporting member banks continued to accumulate Treasury
bonds, and in the four weeks ended November 21 made net
purchases amounting to 423 million dollars, which carried
their bond holdings to a new high level. However, holdings
of other types of Government securities, especially bills and
notes, were reduced 335 million dollars, so that total holdings
of Government securities of all types increased only 88 million.
Outside New York City, total Government security holdings
of reporting banks rose considerably more, as net purchases of
321 million dollars of bonds and 11 million of certificates sub
stantially exceeded net sales of 22 million of bills and 53 million
of notes. Among New York City banks, pressure on the
reserve position forced a net liquidation of 169 million dollars
of Government securities, involving the net of 271 million
of securities other than bonds (o f which 165 were bills) and
an increase of 102 million in bond holdings.
At the same time that weekly reporting member bank
portfolios of Government securities rose 88 million, net,
Federal Reserve Banks acquired 254 million dollars of such
securities, indicating net sales by nonreporting banks or (more
probably) by nonbank investors in the four weeks ended
November 21. Sales of outstanding securities by nonbank
investors apparently were partly for the purpose of acquiring
funds in order to subscribe to Victory Loan issues, but in part
reflected sales of temporary corporation investments to provide
funds with which to retire securities that had been called for
redemption.
Partly as a consequence of subscriptions for Victory Loan
issues, demand deposits (adjusted) of the reporting banks fell
124 million dollars in the four weeks ended November 21.
From the low point, following the Seventh drive (July 4 ) to
November 21, demand deposits (adjusted) have risen only
about 3.9 billion dollars, as compared with approximately 5.8
billion in the comparable period after the Sixth drive (January
3-May 23, 1945).
Government deposits following the
Seventh drive declined 7.6 billion dollars as against 8.5 billion
in the corresponding weeks following the Sixth drive.
Apparently a substantial portion of Government expenditures
of the funds withdrawn from War Loan deposits in weekly
reporting member banks was made in parts of the country
other than those served by these banks. The rise in adjusted
demand deposits after the Seventh drive therefore decreased
substantially relative to the decline in War Loan deposits
among the weekly reporting banks and increased among
banks in other areas. To a large exent, this shift in
the geographic distribution of Government expenditures prob
ably reflects the sharp drop in Treasury spending for munitions
in relation to other war disbursements including pay and
subsistence for the Armed Forces, which have been well sus
tained and many of which are made outside the major industrial
regions covered by the reporting bank figures.
M eM ber B a n k
R eser ve Po s it io n s
The position of the money market in November, on the
eve of the opening of the books to corporations and institutional
investors for subscriptions to Government securities offered
in the Victory Loan, was one of moderate pressure on member
bank reserves. The current banking position, however, is in
striking contrast to the heavy strain which marked similar
periods prior to past War Loan drives, such as November a
year ago, just before the Sixth drive. At that time, the banking
position was particularly tight; pre-Christmas currency
demands in 1944 were heavy, and money in circulation rose
665 million in the four weeks ended November 22. This
year, in what promises to be the most active Christmas shop
ping season in history, circulation in the four weeks ended
November 21 increased only 224 million dollars.
Reserve requirements of the member banks increased almost
650 million dollars in the four weeks ended November 22,
1944, as against a decline of 9 million in the four weeks ended
November 21, 1945. In the earlier period, heavy withdrawals
from War Loan deposit accounts, against which no reserves
are required, and the resultant shift of funds through
Treasury disbursement to private deposit accounts subject to
reserves, were not offset in any large measure by early sub
scriptions to the securities offered in the Sixth drive. In the
current period, Treasury disbursements, and consequently War
Loan withdrawals, were on a much smaller scale owing to the
decline of war expenditures, so that Victory Loan subscriptions
by individuals paid for through credits to War Loan deposits
tended to offset the withdrawals and reserve requirements
were practically unchanged.
Member bank needs for Reserve Bank credit, therefore,
were much less urgent prior to the Victory Loan than before
the Sixth War Loan, and total loans and discounts and Govern
ment security holdings of the Federal Reserve System increased
less than 500 million dollars in the four weeks ended November
21, in contrast to an increase of about 1,300 million in the
the corresponding four weeks of 1944.
FEDERAL RESERVE BANK OF NEW YORK
W A R T IM E SHIFTS IN TH E U NITED STATES
B A LAN CE OF IN T E R N A T IO N A L PA YM E N TS
91
United States Foreign Trade*
M IL L IO N S
The termination in August of about six years of war brought
to a close a period in which the United States balance of inter
national payments probably underwent more rapid and funda
mental changes than at any time in the financial history of the
country. While many factors are still not publicly available
for making a complete analysis of these wartime developments,
sufficient data have been released, including the Department of
Commerce reports on merchandise exports and imports and
the data on international gold and capital movements recently
published by the Board of Governors of the Federal Reserve
System*, to indicate the important shifts which have taken
place since 1939. The accompanying chart shows lend-lease
and other merchandise exports as well as imports through the
war period.
One of the most pronounced characteristics of the United
States wartime balance of payments was the huge excess of
merchandise exports, reflecting, of course, the heavy demand
by our Allies for American war materiel and food supplies
throughout the period— both prior to and after our entry into
the war. The merchandise export surplus— which occurred
despite an increase in our purchases abroad, especially of
strategic raw materials— rose to unprecedented heights, reach
ing a peak of slightly over one billion dollars in the month of
May 1944, and aggregating around 33 billion dollars for the
six years ended August 1945.
In the intial stage of the war, prior to the time lend-lease
operations were well under way, the large expansion in our
merchandise exports was accompanied first by net sales to the
United States of foreign-owned gold, and then by a liquidation
of both short and long term dollar assets. From the beginning
of the war through October 1941, there was a net inflow of
gold from abroad amounting to around 5.7 billion dollars, the
bulk of which had occurred by the time lend-lease was approved
on March 11, 1941. Late in 1941, however, the gold move
ment was reversed through sales of gold to foreign central
banks and governments which persisted throughout most of
the remaining months of the war; much of the gold so
acquired was "earmarked” here for their account. As a result
of this reversal, by the end of August 1945, foreign countries,
taken as a group, had recouped about 2.7 billion dollars of their
previous gold losses, so that their net loss of gold to the United
States for the entire war period was reduced to 3.0 billion
dollars. A large part of the acquisitions of gold in the later
period, however, were by countries other than those which had
sustained heavy losses of gold in the first two war years.
* September 1945 preliminary.
Source :
Department of Commerce.
purposes. From the beginning of the program, lend-lease aid
predominated as the means of financing the transfer of all
types of goods and the rendering of various services to our
Allies. The extension of lend-lease aid reached a peak of 1.6
billion dollars in March 1944, during the preparations for the
invasion of Europe. Although by June 1945 (the latest date
for which data on total lend-lease aid have been published),
the volume had declined irregularly to 1.2 billion dollars, the
cumulative amount through this date was somewhat over 42
billion dollars. This was partially offset by around six billion
dollars of reverse lend-lease aid provided to us.
As the chart shows, exports from this country turned down
ward after the middle of 1944, and dropped sharply following
the end of the war with Japan and the termination of lendlease by President Truman last August. Nevertheless certain
goods for which plans for repayment were completed have
continued to be exported under the lend-lease program. In
September, lend-lease exports amounted to 158 million dollars,
as compared with 414 million in August and 539 million in
July. Arrangements have been made, or are under discussion,
with a number of countries to finance over a long period goods
contracted for prior to the termination of lend-lease aid.
Under an agreement concluded with the Soviet Union in
October, for example, 400 million dollars of lend-lease goods
will be paid for in annual instalments over a 30-year period,
with
interest at 2 Ys per cent. In addition, the Export Import
The shift in 1941 from foreign sales to purchases of gold
Bank,
under its recently expanded lending program, has
reflected, of course, the rapid expansion in lend-lease aid to our
approved
so-called "lend-lease take out” loans to cover goods
Allies and our heavy outlays abroad for military and other
requisitioned under the lend-lease program but not contracted
*
See 'Federal Reserve Bulletin, August 1945, September 1945, and for as of V-J Day. Such loans have been approved for France,
Belgium, and the Netherlands. Moreover, the Export Import
subsequent issues.
92
MONTHLY REVIEW, DECEMBER 1945
Bank has approved reconstruction loans— not related to the
termination of lend-lease— for Denmark, Norway, the Nether
lands, the Netherlands East Indies, and Belgium. Discussions
have also been under way for large-scale United States Govern
ment loans to Great Britain.
Concurrently with the wartime changes in international gold
movements, numerous changes also occurred during the war in
both the character and the direction of the flow of capital
between the United States and abroad. In the first place, with
the virtually world-wide application of governmental controls
over international trade and finance, the peacetime flow of pri
vate capital between countries all but disappeared and interna
tional movements of capital became largely a matter of government-to-government transfers. As was true of international
gold movements, the wartime capital flow went through two
phases— one during the "cash and carry” period of our neu
trality and another during the lend-lease period. Following
the heavy inflow of gold during 1940, there was a fairly sizable
liquidation of foreign-owned assets in the United States,
particularly on the part of the British, in order to finance the
purchase of American goods that were essential to the war
effort of the allied nations. From the end of September 1940
to the end of February 1942, the net capital "outflow”, result
ing largely from this liquidation, amounted to about 680
million dollars; one half of this movement reflected sales by
foreigners of American securities. As our lend-lease aid began
to assume significant proportions and as our cash expenditures
abroad expanded, foreigners began to acquire dollar exchange
in amounts exceeding their current requirements. A capitaL
"inflow”, mainly in the form of an increase in foreign-owned
short term dollar assets, first became evident in March 1942 and
continued with little interruption throughout the war. From
the end of February 1942 to the end of June 1945 (the latest
available date), the recorded net "inflow” of capital aggregated
three billion dollars. (Large additional amounts of dollars had
been acquired by foreign countries and used for the purchase
of gold during the period.) For the entire war period through
June 1945 a net "inflow” of capital amounting to 3.1 billion
dollars was reported.
Of this movement, 985 million dollars
was for Canadian account, while roughly 850 million dollars
and 800 million dollars were for accounts of Asia and of the
Latin American Republics, respectively (all figures exclusive
of dollars used for the purchase of gold).
At the same time,
British holdings of banking assets and long term securities in
this country were reduced by a net amount of approximately
260 million dollars. As of June 30, 1945, total banking funds
held in the United States for foreign account amounted to 5.9
billion dollars, of which over one half, or 3.5 billion dollars,
was for official account alone.
These totals are the largest on
record and represent an increase of 2.9 billion dollars in total
banking funds and of 2.5 billion dollars in official funds for
the war period.
Estimated Monetary Gold Reserves*
(In millions of dollars)
Change
Aug. 1939
June 1941
Aug. 1945
Aug. 1939
to
Aug. 1945
June 1941
to
Aug. 1945
Country
United States..............
16,646
22,624
20,088
+ 3,442
-2,536
Estimated total foreign
(Excl. U .S .S .R .). . .
10,800
8,200
13,700
+ 2,900
+5,500
Estimated total
Latin America.........
710
845
2,700
+ 1,990
+1,855
431
4
35
30
20
4
7
8
29
20
68
52
**
4
62
30
18
5
7
11
59
20
108
40
1,1116
17
352
59
104
21
13
28
255
28
189
186
+
+
+
+
+
+
+
+
+
+
+
+
680
13
317
29
84
17
6
20
226
8
121
134
+
+
13
290
29
86
16
6
17
196
8
81
146
**
355
587
30
222
42a
192
528
97
427
109c
479
1,084
234
909
+
+
+
+
124
497
204
687
+
+
+
+
+
67
287
556
137
482
C hile.........................
El Salvador.............
Guatem ala...............
Venezuela.................
Other Countries
Switzerland.............
T u rk e y.....................
Union of So. A frica ..
—
* The individual countries listed here in general represent those which publish
figures regularly on their total gold reserves.
** Published figure for total gold reserves not available.
a December 1941.
b December 1944.
c July 1945.
While there were wide shifts, both during the various phases
of the war and as between countries, the net accumulation of
dollar assets by all foreign countries for the entire war period
was about offset by their 3.0 billion dollar net loss of gold to the
United States during the same period. This, however, is not to
say that total foreign gold reserves were reduced by that amount
during the war, since the value of new gold production abroad
outside the Soviet Union was close to 800 million dollars
annually in the six-year period.
Estimated total foreign monetary gold reserves (excluding
those of U.S.S.R.), which were about 10.8 billion dollars as of
August 1939, declined to 8.2 billion dollars by June 1941, but
rose again to reach 13.7 billion dollars by the end of the war as
a result of the foreign gold buying program, which first became
apparent in mid-1941. Thus, an over-all increase of 2.9 billion
dollars occurred in foreign gold stocks during the war. As the
accompanying table indicates, the principal gainers of gold for
the period were the Latin American countries and the neutrals,
many of which benefited largely from our purchases abroad.
The Latin American countries alone accounted for two billion
dollars of the net increase in all foreign gold holdings during
the war. Increases ranging from 125 to nearly 500 million
dollars were reported in the monetary gold reserves of Switzer
land, Turkey, and Sweden for the period. On the other hand,
the gold reserves of many other foreign countries, chiefly the
belligerents, have been substantially reduced as a result of the
war. The monetary gold reserves of the United States, which
stood at 16.6 billion dollars at the beginning of the war, rose
to a peak of nearly 23 billion dollars in November 1941 and
were 20.1 billion dollars at the end of August 1945.
FEDERAL RESERVE BANK OF NEW YORK
PROGRESS OF R E CO N VERSIO N
"The outstanding feature of the reconversion record to date
is the small amount of temporary reconversion disemployment
outside the automobile industry,” Administrator J. D. Small of
the Civilian Production Administration (which has succeeded
the War Production Board) declared on November 15. His
statement is substantiated by Census surveys which show that
in mid-October only about 1,500,000 persons in the country
were jobless and that unemployment declined by nearly 10 per
cent between September and October. The Social Security
Board reports that no increase occurred between October and
November in the number of applicants for unemployment
compensation. About 40 per cent of the war workers displaced
since V-J Day have found other employment; others, mainly
women and young people, are not presently looking for work.
More than 800,000 persons normally in the labor force, includ
ing many returned veterans, appear not to have been actively
seeking work in October. Some of these withdrawals from the
labor market are probably only temporary. Thus far, the labor
market situation reflects mainly displacement of war workers.
In the months to come absorption of the five to six million
veterans still to be discharged will be the major factor.
Meanwhile, physical reconversion is making satisfactory pro
gress and has already been virtually completed in a number of
industries. Most industries are either understaffed now or
anticipate additional labor needs early next year. Reports
collected in October by the War Production Board from lead
ing metal products manufacturers ( including aircraft, ship, and
ordnance, as well as machinery and consumers’ durable goods
producers) indicate that these industries as a whole do not plan
to reduce working forces any further. Additional layoffs at
war plants (particularly shipyards), which are still completing
Government contracts, are expected to be more than offset by
the expansion of civilian production. The manufacturers
reporting to WPB expect a 10 per cent increase in employ
ment by next June.
Industries producing materials such as steel, brass, industrial
chemicals, coal, textiles, lumber, and paper are unable to fill
demands from customers who want to expand rapidly their
civilian production and at the same time are trying to replenish
their inventories. By and large, basic industries have not had
an extensive changeover problem and have been able to retain
practically all their employees. The recent coal strike necessi
tated the shutting down of some blast furnaces in October and
reduced the output of steel for that month; but at present the
steel industry is operating at nearly 85 per cent of capacity
(which is the equivalent of at least 100 per cent of prewar
capacity), an unexpectedly high level, and the volume of
unfilled orders continues very large. Output of bituminous
coal in November may be larger than it has been in any month
in over a year. Lumber and textile production are handicapped
by labor shortages. Reports from employment offices show
93
many job openings, particularly in textile mills, which remain
difficult to fill because of relatively unattractive wage rates.
Although the reconversion employment situation appears
more favorable than was widely predicted three months ago,
the flow of basic materials to manufacturers and of finished
goods to distributors and consumers remains disappointing.
Shortages of steel sheets and castings, textiles, lumber, tires,
and component parts are retarding the expansion of civilian
production in many industries.
The flow of materials to the
construction, apparel, furniture, and printing industries, for
instance, is not sufficient to meet the urgent demand.
Strikes
for higher wages have also slowed down the return to peace
time production and apparently will continue to impede the
progress of reconversion. The present work stoppage at
General Motors plants throughout the country is only one
phase of the struggle for the maintenance of wartime takehome pay with a shorter work week. The wage question is
itself part of the cost-price problem which from the outset
has threatened to be the most difficult of the reconversion
adjustments. Delays in price fixing for goods not produced for
civilians during the war are reported to have had a retarding
effect in some cases. Uncertainty as to future costs, prices,
and profit margins pervades the entire economic system and
manifests itself not only in wage conflicts, but also in delays in
placing construction contracts and in the reluctance of pro
ducers to accept orders at fixed prices. In addition, the repeal
of the excess profits tax seems to have had the unexpected effect
of slowing down production and the movement of goods
through trade channels as many manufacturers and traders are
reported to have delayed expansion of output or to have built
up inventories in anticipation of the lower tax rates effective
January 1. This has prompted Reconversion Director Snyder
to issue a stern warning of the consequences of such a policy.
Finally, there is the uncertainty as to the foreign trade outlook
which will prevail until a more definite picture of postwar
international exchange of goods emerges.
The failure of consumers’ goods to reach the market
promptly aggravates the upward pressure on prices. Depart
ment store sales now are running more than 10 per cent above
last year’s record level, reflecting the urgent and almost indis
criminate demand for merchandise. Hotels, restaurants, and
places of amusement are overcrowded, and service establish
ments are doing an excellent business. Prolongation of the
transition period, rather than generating pessimism, and exces
sive caution on the part of consumers and businessmen, as had
been feared, now threatens to strengthen inflationary tenden
cies. While the cost of living index has remained unchanged
in recent months, its food component is almost certain to show
some further rise as food subsidies are gradually abolished
while export needs remain large. Strong upward pressures on
manufacturers’ and wholesale prices are apparent.
MONTHLY REVIEW, DECEMBER 1945
94
SECOND D IS T R IC T A G R IC U LTU RE
A T TH E END OF TH E W A R
Cash income from farm marketings in the Second District
will probably reach the 750 million mark this year and may
exceed last year’s farm income by about 4 per cent. This
increase stems from higher prices rather than a greater volume
of production, prices received by farmers in the country as
a whole being 4 per cent above last year’s average. Milk
production, which in this District usually accounts for about
40 per cent of total farm income, in 1945 has been at the
highest level in over a decade. This may be attributed in part
to favorable pasture conditions, and more adequate feed
supplies. To satisfy the great demand for milk farmers have
been able to sell a larger part of their output as fluid milk
and cream in 1945 than in previous years, with the result
that the output of butter has been relatively small. Since
farmers receive higher prices for fluid milk, this shift has
increased their income. The production of eggs fell below
the average of recent years, reflecting primarily a reduction in
the size of flocks.
Crop production as a whole did not surpass last year’s nearrecord volume. Variations for individual crops from 1944
output are due to weather conditions rather than any significant
changes in the acreage planted. Unseasonably high tempera
tures in March, followed by heavy frost, spoiled the larger
portion of fruit crops in the Northeast. Wheat and truck
crops, including potatoes, on the other hand, have been
unusually large. The output of corn, small grains, and hay in
the District was practically unchanged from last year. More
hired farm help was available during the harvest season than
in any of the previous three summers.
Cash Income from Farm Marketings
in the Second District 1929-1945*
Changes in Second District agricultural income between 1929
and 1945 and the major sources of such income in 1939 are
depicted in the chart below. Net farm income has fluctuated
less than the gross cash income from farm marketings shown
in the chart because of changes in production expenses for
wages, farm machinery, fuel, and feed. The physical volume
of agricultural output in 1945 was about 10 per cent above the
1935-39 average, while prices received by farmers nearly
doubled, leaving the farm population better off than it has
been at any time since the first World War despite mounting
production costs.
Partly reflecting the improvement in the financial position
of farmers, farm real estate values rose 30 per cent both in
New York State and in New Jersey during the last 5 years.
Increases in other assets, such as livestock on farms, represent
a rise in prices rather than in numbers. Data on the growth
of financial assets— principally currency, bank deposits, and
savings bonds— owned by farmers are not available for the
District, but in the country as a whole the financial assets of
farmers are estimated to have doubled between 1940 and 1945.
During the same period farmers in the District reduced their
liabilities, so that their proprietary interest is much greater
now than before the war. Farm mortgage debt declined
from 1940 to 1945 by over 20 per cent in New York State
and by about 8 per cent in New Jersey. The gradual fall of
interest rates on outstanding farm mortgages (from approxi
mately 6 per cent in 1929 to less than 5 per cent this year for
the Middle Atlantic region) has reduced the burden of the
remaining debt. Nonmortgage indebtedness of farmers for
Indexes o f B u sin ess
1944
MILLIONS
OF D O LLARS
1 9 2 9 ’ 3 0 ’ 31
’ 32
’ 33 ’3 4
’ 35 ’ 36
’ 3 7 ’3 8
’ 39
’4 0
’4 !
’4 2
’4 3
’4 4
’4 5
* 1945 preliminary.
Sources:
Bureau of the Census and Department of A gricu ltu re; partly
estimated by Federal Reserve Bank of New York.
1945
Index
Industrial production*, 1935-39 = 100.........
(Board of Governors, Federal Reserve
System)
Electric power output*, 1935-39 = 100........
( Federal Reserve Bank of New York)
Ton-miles of railway freight*, 1935-39 = 100
(Federal Reserve Bank o f New York)
Sales of all retail stores*, 1935-39 = 100........
(Department of Commerce)
Factory employment
United States, 1939 = 100...........................
(Bureau o f Labor Statistics)
New York State, 1935-39 = 100................
(New York State Dept, of Labor)
Factory payrolls
United States, 1939 = 100..........................
(Bureau o f Labor Statistics)
New Y ork State, 1935-39 = 100................
(New York State Dept, of Labor)
Income payments*, 1935-39 = 100...............
(Department of Commerce)
Wage rates, 1926 = 100...................................
(Federal Reserve Bank of New York)
Consumers’ pricesf. 1935-39 = 100...............
(Bureau of Labor Statistics)
Velocity of demand deposits*, 1935-39 = 100
(Federal Reserve Bank of New York)
New Y ork C it y .............................................
Outside New Y ork C it y ..............................
♦Adjusted for seasonal variation.
-{•Formerly called cost of living index.
Oct.
Aug.
Sept.
Oct.
232
187
171r
164 p
197
192
186r
180 p
224
198r
193p
185
189r
190p
164
143
123r
122 p
146
128
117
116 p
335
257r
216p
287
232
215
236
236r
230p
167
169
167 p
127
129
129
129 p
76
73
87
72
82
71
84
68
p Preliminary.
r Revised.
217 p
95
FEDERAL RESERVE BANK OF NEW YORK
the country as a whole declined by roughly 10 per cent over
the last 5 years. Although corresponding data for this Dis
trict are not available, the decline here probably has been of
the same order of magnitude.
TH E SU PPLY OF D E P A R T M E N T STORE M E R
CHANDISE FO R TH E 1945 CHRISTM AS TR A D E *
Consumer demand for department store merchandise during
the Christmas season is expected to break all previous records.
In addition to an unusually large dollar volume of gift buying,
the Christmas trade this year will be stimulated by the demands
of the returning servicemen, mainly for clothing and home
furnishings. Resumption of civilian goods production is bring
ing back limited amounts of many items in the durable
consumer goods field, but the demand far outstrips the supply.
Although department store stocks as a whole have been
maintained at fairly high levels, the breakdown by type of
merchandise reveals acute shortages in many lines. The
accompanying chart shows that stocks on hand in terms of
current sales (expressed as the ratio of stocks on hand at the
end of October to sales during the month) are exceptionally
low for men’s clothing, hosiery, lingerie, yard goods, and sheets
and pillow cases. Stocks of major household appliances still
are practically nonexistent.
Stocks of mens clothing, as shown in the table below, are
more than 40 per cent lower than last year at the same time,
whereas sales have increased nearly 50 per cent. Consequently
at the end of October the supplies on hand of men’s clothing
amounted to about six weeks’ sales, whereas a year ago inven
tories were two and a half times as large in relation to sales.
The customer’s choice is considerably narrowed by the deple
tion of stocks and actual shortages exist for particular articles,
qualities, and sizes. The dollar value of inventories of men’s
furnishings and boys’ wear is only slightly below last year’s
levels, but sales, particularly of men’s furnishings, are running
at a considerably higher level. This situation is reflected in a
decline of the ratios of stocks to sales in these two groups com
pared with last year’s ratios.
In the women’s wear department the picture is less uniform.
Sales have been increasing all along the line, but inventories
could not be maintained and in some cases limitation of stocks
hampers a further expansion of sales. In the lingerie and
hosiery departments, which normally are important elements
in the holiday trade, modest increases in October over the 1944
sales were supported out of inventories, with the result that
stocks at the end of the month were about one-third below last
year’s levels. Even in those women’s wear departments where
stocks are more ample than a year ago, their increase lags
behind the expansion of sales, again with the result that the
ratio of stocks to sales declined as compared with last October.
Only infants’ wear and neckwear supplies increased percentage
wise more than sales. However, increases in the dollar value
of inventories, here as in all other departments, do not
necessarily reflect larger supplies in physical terms, as price
increases and shifts to higher priced merchandise frequently are
important factors in the value of inventories.
Among other soft goods, supplies of sheets and pillow cases,
blankets and spreads, and also yard goods are particularly
scanty in the face of sustained demand. Stocks in these depart
*
Supplemental tabulations giving average monthly indexes of sales
ments range from less than October sales to not more than two
by departments for 1935-39, 1944, and 1945, and the estimated dollar
months’ sales at that rate. Shoe sales have been exceptionally
volume of sales and stocks in this period are available upon request.
R atio o f O ctob er S tock s to Sales b y T y p e o f M erchand ise fo r D epartm ent S tores in th e S econ d F ed eral R e se rv e D is trict*
(N u m ber o f m on th s’ sup p ly at the O cto b e r rate o f sales)
ratio
6
MEN’S
CLO TH IN G
MEN’ S
F URN I S H I N G S
WOMEN’ S
COATS & SUITS
WOMEN’S
SHOES
h o sie r y
-
5 -
H
ra t io
i!
I
AAWlm.
V/,
i
SHEETS L
PIL L O W CASES
YARD
GOODS
m m
7A I M
HOU SEWARES
1
fc j
w,
1
I
TOILET
A RTICLES
FURN ITU RE
w
iBna I
1942
1944
1945
J{ ^
1
4942 194 4
1945
* Stocks as of October 31.
S ource: Federal Reserve Bank of N ew York.
111 ill! I
<942
1944 1 9 4 5
\944
4945
^35
1 g42
i
4944
<g4 5
1935 {9A 2 19 4 4 19 4 5
96
MONTHLY REVIEW, DECEMBER 1945
D epartm ent S tore Sales and S tock s b y T y p e o f M erchand ise*
S econd F ederal R eserv e D is trict
Ratio of stocks to sales
Percentage changes in
sales and stocks
October 1945
compared with
October 1944
October 1945
compared with
average
October 1935-39
Type of merchandise
1
Sales
Stocks
1942
1945
+ 18
+ 5
+ 73
+ 55
2.5
3.4
2.3
+
+
+
+
+
+
+
+
+
+
+
+
+
25
23
20
25
27
17
22
17
34
4
10
31
10
—10
— 3
+14
+17
+23
+46
+ 8
+17
+ 6
—36
—28
+21
+25
+ 77
+ 70
+129
+151
+ 77
+152
+ 77
+ 71
+ 71
+ 61
+141
+101
+143
+ 51
+ 61
+135
+180
+ 62
+295
+116
+133
+ 13
— 27
+ 16
+ 61
+141
1.3
1.1
1.7
1.8
3.7
1.7
0.6
2.2
4.5
2.5
3.5
2.5
2.4
1.6
1.3
2.1
2.3
3.4
1.8
0.7
2.9
4.3
2.8
4.0
4.9
3.0
1.1
1.1
1.7
2.1
3.4
2.6
0.8
3.0
3.0
1.1
1.7
2.0
2.3
+ 47
+ 28
+ 18
—42
— 3
— 2
+ 61
+ 87
+ 90
— 41
+ 56
+ 81
3.8
3.9
3.0
5.8
6.4
4.6
1.4
3.3
2.9
+ 30
+ 3
+ 14
+ 24
+ 52
+308
+ 71
+ 5
— 2
+ 8
+19
+37
—92
+38
+
+
+
+
+
—
—
+
—
+
—
+
—
+
36
28
11
1
69
98
53
2.3
3.0
2.6
5.7
2.5
2.8
2.0
3.7
4.2
3.3
6.9
4.2
4.9
6.2
2.2
1.9
2.0
3.7
2.6
0.1
3.2
+
+
+
+
+
+
+
+
+
+
—
—
—21
—13
—24
—20
+12
+13
— 1
+41
+ 11
+10
+36
+10
+ 92
+ 70
+ 120
+ 97
+ 31
+ 149
+ 78
+170
+139
+ 25
+193
+104
+ 1
— 9
— 51
— 7
+119
+ 81
+ 36
+208
+ 44
+ 23
+129
+102
3.2
4.8
3.9
2.8
2.4
5.3
4.2
3.5
5.0
3.8
1.7
4.9
3.7
6.4
5.5
3.4
4.4
5.2
5.6
5.6
5.1
9.2
1.8
1.5
1.7
2.5
0.9
1.3
4.0
3.9
3.2
4.1
3.2
3.9
1.6
4.9
Women'8 and misses' wear
Coats, suits.......................
Dresses.............................
Juniors’ and girls’ wear----Blouses, sportswear...........
Furs...................................
Neckwear, scarfs..............
Millinery...........................
Handbags.........................
Shoes.................................
Hosiery.............................
Lingerie.............................
Corsets, brassieres.............
Infants’ wear....................
Average
1935-39
Stocks
Sales
Total................................
October
M e n 's and boys' wear
Men’s clothing..................
Men’s furnishings.............
Boys’ wear........................
Homefurnishings
Furniture..........................
Domestic floor coverings...
Draperies, upholstery.......
China, glassware...............
Housewares.......................
Major appliances..............
Musical instruments.........
49
15
51
53
65
14
4
All other
Yard goods........................
Linens, towels...................
Sheets, pillow cases...........
Blankets, spreads..............
Toilet articles, drugs.........
Jewelry.............................
Silverware.........................
Stationery.........................
Luggage............................
Sporting goods, cameras. . .
Groceries, meats................
Wines, liquors...................
26
17
49
27
5
16
25
11
10
34
5
8
* Stocks as of October 31.
Source; Federal Reserve Bank of New York.
active, increasing at a faster rate than stocks with the result
that stock-sales ratios have declined moderately.
In spite of the unusually high volume of furniture and house
wares sales, stocks have been fairly well maintained, as new
merchandise has been reaching the stores in substantial quan
tities. Toilet articles have shown no significant change in sales
during the past year, and the ratio of stocks to sales is sub
stantially higher than in 1944 and the 1935-39 average. Jewelry
sales, on the other hand, have increased faster than stocks, and
the ratio has declined somewhat.
In the accompanying table percentage change comparisons
for sales and stocks since 1935-39 are given for thirty-five of
the major departments. In addition, ratios of stocks to sales
are shown for the current year as well as for 1935-39 and 1942,
the year when total store inventories were at an all-time high
because of anticipated shortages.
D E P A R T M E N T STORE TR A D E
Department store sales in this District during November
exceeded 100 million dollars, approximately 15 per cent above
the record sales volume for that month reached last year.
Trade sources indicate that a substantial proportion of Christ
mas buying is again taking place in November. Last year sales
in that month accounted for 43 per cent of the combined
November-December volume, compared with the 1935-39
average of 39 per cent. Sales of mens clothing and furnish
ings, furniture, and housewares continued to show unusually
large year-to-year gains. Demand for women’s coats and suits
was exceptionally heavy last month. After adjustment for
seasonal variation, sales increased substantially from October
to November and were approximately equal to the record high
reached last March.
The dollar amount of merchandise received by the depart
ment stores during October approximately equaled the mer
chandise sold, and stocks on hand were unchanged for the
month. The dollar volume of inventory in Second District
department stores at the close of October was estimated at 215
million dollars, 5 per cent above the level a year ago and the
highest since the close of 1942. At their peak in September
1942 stocks on hand were estimated at about 250 million
dollars. Department stores report that their outstanding orders
have shown little change during the past six months. The
dollar volume of orders outstanding approximately equals the
value of stocks on hand, whereas in September 1942 they
equaled only one third of the dollar volume of stocks on hand.
D ep artm ent and A pparel S tore Sales and S to ck s, S econd F ederal
R ese rv e D istrict, P ercen tag e C hange from th e P re ce d in g Y ea r
Net Sales
Locality
Oct. 1945
Department stores, Second D istrict.. . .
New York C ity ......................................
Northern New Jersey...........................
+18
+19
+18
Westchester and Fairfield Counties. .
B ridgeport...........................................
Lower Hudson River V alley...............
Poughkeepsie......................................
Upper Hudson River V alley...............
+ 8
+ 4
+ 15
+14
Schenectady........................................
Central New York S tate.....................
Mohawk River V alley.....................
Northern New York State..................
Southern New York State...................
Bingham ton........................................
Elm ira..................................................
Western New Y ork S tate....................
Stocks on
Jan. through
hand
Oct. 1945 Oct. 31, 1945
+13
+14
+13
+14
+ 8
+ 3
+14
+14
+16
+23
+20
+22
+37
+ 9
+14
+ 8
+ 9
+17
+15
+14
+ 15
+12
Niagara Falls......................................
R ochester............................................
+16
+17
+13
+15
Apparel stores (chiefly New York C ity ).
+27
+
+
+
+
5
4
5
5
+10
+ 5
+ 1
+ 1
+ 6
+10
+10
+11
+ 4
+ 4
+14
+17
+13
+15
+ 9
+10
+ 8
+ 9
+12
+22
+
+
—
—
+
2
3
8
7
9
+
+
+
+
+
—
+
6
7
1
5
5
8
7
+ 4
Indexes o f D ep artm ent S tore Sales and S to ck s
Second F ederal R e se rv e D is tr ic t
(1 9 3 5 -3 9 a v e r a g e = 1 0 0 p er ce n t)
1944
1945
Item
October
August
Sept.
October
Sales (average daily), unadjusted.................
Sales (average daily), seasonally a d ju sted ..
173
152
120
165
171
161
197
172
Stocks, unadjusted*..........................................
Stocks, seasonally adjusted*..........................
167
148
173
170
174
161
175
155
* Indexes revised; available upon request from 1919 to date.
FEDERAL RESERVE BANK OF NEW YORK
MONTHLY REVIEW, DECEMBER 1945
General Business and Financial Conditions
(Summarized by the Board of Governors of the Federal Reserve System)
T NDUSTRIAL output declined somewhat further in October but in the early part of November production in important basic industries increased. Value of retail sales continued to advance consider
ably in October and early November reflecting in part small increases in prices.
In d u s t r ia l Pr o d u c t io n
1937
1938
1939
1940
1941
1942
19 43
19 44
1945
Index of Physical Volume of Industrial Produc
tion, Adjusted for Seasonal Variation
(1935-39 average= 1 0 0 per cent)
Output at factories and mines continued to decline in October reflecting a further curtailment
in munitions activity and reduced production as a result of industrial disputes in some industries.
The Board’s seasonally adjusted index decreased 4 per cent in October and at 164 per cent of the
1935-39 average the index was at the same level as in the middle of 1941. In the first half of
November output in such basic industries as coal, coke, petroleum, iron and steel, and automobiles
was above the October level.
Activity in the machinery and transportation equipment industries showed only small declines
in October in contrast to the sharp reductions in recent months when most of the war production in
these lines had been terminated. Activity at automobile factories rose substantially in October and
there were also important increases in output of civilian products in other reconverted factories.
Steel production was reduced in October as a result of a temporary curtailment in coal supplies
but since the end of October steel mill operations have increased considerably. Wage-rate disputes
in the West Coast lumber region resulted in a reduction of 18 per cent in total lumber output
in October.
Output of nondurable goods as a group was maintained in October. Further reductions in out
put of explosives and aviation gasoline and other products used for war purposes were offset by
increases in output of many peacetime products.
Output of coal and crude petroleum decreased sharply in the early part of October as a result
of industrial disputes. Since the last week of October production of these minerals has increased
considerably; in the early part of November bituminous coal production was at the highest rate since
the spring of 1944.
Em p l o y m e n t
Employment in munitions industries and in Federal war agencies declined further in October,
while in most establishments engaged in civilian activities employment increased. Employment at
automobile factories gained about 10 per cent in October, and there were important increases in
some other manufacturing lines, in construction, and in the trade and service industries. Employment
at coal mines dropped temporarily as a result of work stoppages.
Indexes of Value of Department Store Sales and
Stocks, Adjusted for Seasonal Variation
(1935-39 average= 1 0 0 per cent)
CENT
140
FARM PRODUCTS^
/
. S
l /
j^ ts r v
ALL COMMODITIES
[
__ ------ 1
C o m m o d it y Prices
"othei R *
>•*---- ^
"-Va/
j
* o t h E(
lPRODUCTS,AND
rooos.
Indexes of Wholesale Prices Compiled by Bureau of
Labor Statistics (1926 average = 1 0 0 per cent;
latest figures are for week ended November 17)
iflli-LIONS OF DOLLAR?
Member Bank Reserves and Related Items
(Latest figures are for November 14)
D is t r ib u t io n
Distribution of commodities to consumers continued to increase in October and the first half of
November. Sales at retail stores selling both durable and nondurable goods were about 15 per cent
higher than a year ago. At department stores sales advanced 8 per cent from September to October,
according to the Board’s seasonally adjusted index, and, on the basis of the rate of sales during the
first half of November a new peak is indicated this month.
Railroad shipments of revenue freight have increased since the early part of October, although
they usually decline during this season, and in the middle of November they were almost as large as
in the same period a year ago. The increased number of carloadings has reflected a sharp rise in coal
shipments since the miners have gone back to work as well as a steady expansion in shipments of
merchandise for civilian use.
Wholesale prices of farm products and foods continued to advance from the middle of October
to the middle of November and reached the previous peak levels prevailing in June. Prices of
cotton, grains, and various other products were above the June levels, while prices of fresh fruits and
vegetables were below the earlier seasonal peaks. Butter prices rose to the new maximum level after
the subsidy was discontinued in October; the subsidy on flour was increased for the month of
November.
Maximum prices for cotton goods, building materials, and various other industrial products
were raised somewhat further, while in certain other cases, like nylon hosiery, reductions in maximum
prices were announced. The prices announced for new passenger cars were close to 1942 levels,
which were substantially above 1939 prices.
B a n k C redit
Since the end of hostilities the rate of monetary expansion has slackened, reflecting reduced
Government expenditures. Government War Loan accounts at member banks in leading cities were
reduced 5.1 billion dollars between August 15 and November 14, compared with a decline of 7.8
billion in the same period last year. Adjusted demand deposits at these banks increased 2.1 billion
in the three months, compared with 4.5 billion last year. The growth in time deposits was only
slighdy less than in the same period a year ago. Currency in circulation has also grown at a much
slower rate; during the past three months the increase was less than half that of the same period
last year.
With reduced expansion in member bank required reserves and in currency, Reserve Bank credit
has increased more slowly than in previous interdrive periods. A part of the increase has been in
advances to member banks. Member bank excess reserves have increased somewhat and at 1.2 billion
dollars are larger than usual at this stage of war loan drives.
Commercial loans at reporting banks, both those in New York City and outside, have increased
somewhat more than the usual seasonal amount. Since the beginning of September these loans have
grown 650 million dollars compared with 340 million during the same period of 1944. Loans for
purchasing and carrying United States Government securities, though contracting as usual in periods
between War Loan drives, continued well above previous interdrive levels. By mid-November such
loans both to brokers and dealers and to other customers were already starting to expand in connec
tion with the current drive.
@FedFRASER