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O f Credit and Business Conditions

V olume 34








No. 12

The conditions that had maintained pressure on the money
market during October were again in evidence and the money
market remained tight throughout November. Member bank
loans continued to expand seasonally, and the accompanying
growth in deposits increased bank demands for funds to pro­
vide the required reserves. At the same time the various
factors affecting the volume of reserves tended, on balance, to
drain funds out of the market. The increase in float and de­
crease in currency in circulation, which regularly supply funds
to the market around the middle of each month, provided
only a degree of temporary relief. By the end of November,
a large end-of-month and holiday drain on reserves, along
with a substantial increase in required reserves occasioned by
the large increase in Treasury Tax and Loan balances derived
from a new issue of tax anticipation bills, had placed the
money market under renewed pressure.
Some member banks met the need for additional reserves
through the security market, by selling securities to nonbank
investors, but a substantial part of the funds needed were
secured at the "discount window” of the Reserve Banks. Dur­
ing November, discounts and advances at the Federal Reserve
Banks reached the highest levels in more than thirty years.
The demand for Federal funds in the New York market ex­
ceeded the available supply on nearly every day, and quotations
on Federal funds held steady at a level only nominally lower
than the Federal Reserve discount rate (in a number of
instances, transactions took place at the discount rate).
The market for short-term Treasury securities reflected the
general tightness of money, and yields on most issues rose
gradually but steadily during the month. Price changes on
Treasury bonds and notes were mixed. Generally, the market
sentiment responsible for the improvement in Treasury bond
prices during October had weakened by the end of the first
week in November, and prices of fully taxable issues moved
erratically lower for the remainder of the month. Prices of
the longer bonds and the intermediate issues, after rising at
the beginning of the month, had receded to levels near or
below their end-of-October quotations by the close of trading
for November.

Treasury financing operations during November included
the sale of an additional 2 billion dollars in tax anticipation
bills and refunding of the 1,063 million dollars of 1% per
cent certificates of indebtedness maturing December 1. The
new tax anticipation bills were offered for tenders on Novem­
ber 13, dated November 21, to mature June 19, 1953 (they
are acceptable at par in payment of income and profit taxes
on June 15). Awards were made to successful bidders at an
average discount of 1.846 per cent. In refunding the maturing
certificates, the Treasury reopened the 2 per cent certificates
of indebtedness due August 15,1953, on a par for par exchange
plus accrued interest. Exchange subscriptions were received
for 82 per cent of the maturing issue. Also in November,
the Treasury announced that the 2 per cent bonds of September
1953 that were callable on November 15 for payment in
March 1953 will not be called for payment at that time.
M e m b e r B a n k R eserve B a l a n c e s

The usual turn-of-the-month influences tending to draw
down bank reserve balances appear to have been reinforced in
early November by the Election Day holiday. As a result,
Table I shows that member banks lost reserves totaling
more than 500 million dollars in the statement week ended
November 5 through an increase in currency circulation,
a reduction in float, and net Treasury receipts. In addition,
there was a reduction of more than 100 million dollars

Money Market in N ovem ber............................. ..169
Britain’s Economic Progress ............................. ..172
“What is Wrong with Department Store
Sales?” ................................................................. ..176
Selected Economic Indicators ........................... ..179
Department Store T ra d e ........................................181


Table I

System exceeded even the high level reached early in the

W eekly Changes in Factors Tending to Increase or Decrease
Member Bank Reserves, November 1952
(In millions of dollars; ( + ) denotes increase,
(— ) decrease in excess reserves)







Treasury operations*.........................
Federal Reserve float.........................
Currency in circulation......................
Gold and foreign account..................
Other deposits, etc.............................

-1 8 6
-1 7 8
-2 0 8
+ 11
+ 58

+ 14
-1 5 7
+ 3
+ 6

-2 0 5
+ 63
- 53
- 12

-2 1 9
-3 1 0
- 14
- 16

-6 1 2
- 53
+ 36


-5 0 3



-1 4 8

-1 1 3

-1 0 4

+ 47
- 79



+ 129

+ 137

Statement weeks ended

Operating transactions

Direct Federal Reserve credit transactions

Government securities.......................
Discounts and advances.....................




-10 2



Total reserves...........................................
Effect of change in required reserves.......

-1 1 5
+ 78

+ 9

-1 4 7

-3 2 8

-3 8 8

Excess reserves.........................................




-1 4 9

+ 80


Note: Because of rounding, figures do not necessarily add to totals.
* Includes changes in Treasury currency and cash.

in Federal Reserve security holdings. A part of this loss of
banking reserves was offset by a decline in required reserves,
but by far the largest part was met by a sharp increase in
borrowing from the Federal Reserve Banks. Discounts and
advances on November 5 amounted to 1,663 million dollars,
the highest Wednesday total since July 1921 and, despite some
net repayments from time to time during the course of the
month, borrowing from the Federal Reserve Banks at no time
in November fell much below 1,300 million dollars.
Changes in the volume of reserves held by the banking sys­
tem during the remainder of November followed the typical
intramonthly pattern for this season of the year. Currency in
circulation increased markedly over the four statement weeks
in November, tending to reduce bank reserves particularly in
the early part of the month and just before the Thanksgiving
holiday. On the other hand, float tended to add to banking
reserves, as its contraction after the midmonth peak was some­
what less than the preceding expansion.
The decline in float and increase in currency in circulation
in the latter part of the month were only partially offset by
the reserve balances released to the market through net ex­
penditures by the Treasury from its deposits with the Federal
Reserve Banks. During the same period, the increase in the
Treasury’s Tax and Loan Accounts with depositary banks
resulting from the sale of 2.0 billion dollars in new tax antici­
pation bills had the effect of increasing required reserves sub­
stantially. To meet part of the resulting pressure on bank
reserve positions, the Federal Reserve System in the last half
of the month added to its holdings of short-term Treasury
securities through outright purchases for System Account and
through repurchase agreements made with dealers by the
Federal Reserve Bank of New York. Member bank discount­
ing provided the other major source of reserves as the tight­
ness became progressively more severe in the closing days of
the month, and by the end of November borrowing from the

New York City banks were placed under particularly severe
pressure by the combination of forces making for money
market tightness in November. During the statement week
ended November 5, City banks increased their borrowing from
the Federal Reserve Bank by 383 million dollars in order to
provide for a heavy outflow of funds to other parts of the
country and a loss of reserves through Treasury operations.
Some net repayment of borrowing was made possible over the
following two weeks by a moderate flow of funds into New
York and other factors, but borrowing by the City banks con­
tinued in considerable volume throughout the month despite
the sale by the banks of some 340 million dollars of Govern­
ment securities in the three weeks ended November 19. The
New York banks acquired large amounts of the new tax
anticipation bills on November 21, but had redistributed a
moderate volume to other investors by the end of November.
T h e G o v e r n m e n t Se c u r it y M a r k e t

Yields on most short-term Treasury securities increased
steadily throughout the past month, extending the movement
that had started in the last half of October. Exceptions to the
general picture until the last week of the month were the
December and, to some extent, the early January bill maturi­
ties, which were in demand by corporations seeking short-term
investment of tax and dividend funds needed in December
and by commercial banks preparing for year-end adjustments.
The prevailing tightness in the money market and caution
induced by the possibility of somewhat tighter conditions
before the year end were reflected in higher yields for the
longer Treasury bills and the certificates of indebtedness.
Corporate investment, which had provided the major source of
demand in the short-term market during the past several
months, was considerably lighter in November, while at the
same time bank liquidation of these issues was substantial.
Average rates to successful bidders on new issues of threemonth Treasury bills rose week by week, from 1.796 per cent
on the issue dated November 6 to 1.931 per cent on the issue
dated November 28. The latter rate is the highest average
issuing rate since March 1933, during the bank holiday, and is
about equal to the highest rate reached in market trading dur­
ing the culmination of year-end pressures in December 1951.
A varying total of short-term securities was held during
November by the Federal Reserve Bank of New York under
repurchase agreements with dealers, and in the last half of the
month a limited volume of securities was purchased for the
System Open Market Account.
Treasury financing in short-term securities during Novem­
ber apparently had only limited direct influence on price and
yield movements in the security market. The largest part of
the 2.0 billion dollars of new tax anticipation bills was
absorbed initially by commercial bank investors, to be redis­
tributed in the secondary market as corporations accumulate

tax funds for payment in June. The Treasury certificate refund­
ing announcement was favorably received in the market, and
the quoted bid on the maturing issue held at a slight premium
during the exchange. In contrast with most other refunding
operations in recent years, the Federal Reserve System made
no purchases of the ’ rights” (i.e., the maturing certificates, to
be used in exchange when tendering for the offering).
Prices of taxable Treasury bonds moved sharply higher on
Thursday, November 6, in continuation of the price recovery
in the last half of the preceding month, but this initial
increase was subsequently lost as prices drifted unevenly lower
over the remainder of November. Treasury bonds closed
November at price levels not substantially changed from the
end-of-October quotations, with most issues quoted fractionally
lower. The most important influence on bond prices during
the month was a reappraisal by the market of the basis
underlying the bullish atmosphere that had developed dur­
ing October. In view of the somewhat more rapid seasonal
expansion of bank loans in recent weeks and the outlook for
continued pressure on bank credit facilities for the remainder
of the year, the expectations of a firmer security market
early in 1953, which had influenced the recent price advance,
were tempered. Furthermore, uncertainties with respect to the
Treasury debt management program of the new Administra­
tion, which it was believed might include greater emphasis on
medium and long-term financing, dictated a certain degree of
caution in the bond market. This cautious attitude character­
ized the bond market during the last three weeks of the month,
and day-to-day price changes were usually small on a limited
volume of trading. Most trading activity was in the inter­
mediate bonds and notes, largely representing switching for
tax purposes, while the long-term market mainly reflected a
modest volume of professional activity.
M e m b e r B a n k C r ed it

Business loans of the weekly reporting member banks con­
tinued to expand seasonally during the three statement weeks
ended November 19. Commercial, industrial, and agricultural
loans of these banks rose by 588 million dollars over the threeweek period; in the comparable periods in 1951 and 1950
the increases were 301 million and 499 million dollars, respec­
tively. Since June 25 of this year through November 19,
business loans of the weekly reporting banks have risen by
2,078 million dollars, compared with increases of 1,652 mil­
lion and 3,373 million dollars in 1951 and 1950.
While the over-all total of business loan expansion since
midyear this year is not substantially larger than the increase
for the similar period last year, the distribution of loans by
business of borrower shows a marked change. Between June
25 and November 19 of this year, loans to the food, liquor,
and tobacco group of manufacturing industries have accounted


for approximately one third of the total increase in classified
loans, and loans to commodity dealers account for another
one third. Most of the remainder represents Joans to whole­
sale and retail concerns, sales finance companies, and petro­
leum and other manufacturing industries. Loans to metals and
metal product firms actually declined. Data on the dollar
volume of loan expansion by industry are contained in Table
II. In the similar period in 1951, on the other hand, the
increase in loans to the metals and metal product indus­
tries amounted to nearly one third of the total gain in classi­
fied loans, a reflection of the defense retooling program then
in progress and now largely completed. This was partly offset
by a reduction in borrowings by the textile and apparel group,
reflecting inventory liquidation, which has had no parallel in
the latter half of 1952. It would appear that a much larger pro­
portion of the loan expansion this summer and fall has been
of a characteristically seasonal nature than was the case
last year.
The weekly reporting member banks in New York City
between June 25 and November 19 of this year have found
it necessary to obtain reserves to provide not only for the
seasonal increase in private credit demands but to provide,
as well, for an outflow of funds that has resulted in a net
decline in adjusted demand deposits over that period of 719
million dollars. To meet this situation, the City banks have
sold security investments from their portfolios, with the result
that, despite an increase of 491 million dollars in loans held
by these institutions since June 25 (including an 804 million
dollar increase in business loans), their total loans and invest­
ments have actually declined by 698 million dollars. The
record for the reporting member banks in the other 93 cities
shows that their total loans increased by 1,860 million dollars
between June 25 and November 19 (of which 1,274 million
was in business loans) while their security investments also
increased, by 535 million, giving a total increase in loans
and investments at the other 93 centers of 2,395 million
dollars for the period.
Table II
Changes in Business Loans of Reporting Member Banks
by Type of Business, 1951 and 1952
(In millions of dollars)

Business of borrower
Manufacturing and mining:
Food, liquor, and tobacco......................................
Textiles, apparel, and leather...............................
Metals and metal products....................................
Petroleum and other...............................................
Trade—wholesale and retail......................................
Commodity dealers....................................................
Sales finance companies..............................................
Public utilities and transportation............................
Construction and other..............................................
Classified changes— net..................................
Unclassified changes— net..............................
Net change in commercial, industrial, and
agricultural loans.........................................

June 25 to
19, 1952

June 27 to
21, 1951













+ 1 ,973

+ 1 ,941

+ 2 : 078

+ 1 ,652






One year has passed since the Churchill government, in the
midst of Britain’s third postwar balance-of-payments crisis, fell
heir to the task of formulating an economic program to halt the
unprecedentedly rapid drain on the sterling area’s gold and
dollar reserves. Today, while there is no cause for complacency,
Britain’s economic position stands greatly improved; infla­
tionary pressures have been brought under better control, a
small balance-of-payments surplus was realized during the first
six months of 1952, and, more recently, gold and dollar reserves
have shown a small gain.
T h e G o v e r n m e n t ' s P o l ic y P r o g r a m

The rapid deterioration in Britain’s international economic
position after mid-1951 was caused by a complex of forces,
both internal and external. Internally, the British authorities
had permitted commodity stocks to be heavily drawn down
during 1950, only to find in early 1951, when restocking could
no longer be postponed, that replenishment had become much
more expensive as a result of the sharp “post-Korea” rise in
prices of raw materials. The resultant strain upon the balance
of payments was intensified, as the year progressed, by the
rising burden of rearmament expenditure. Furthermore, net
invisible earnings fell sharply after midyear, chiefly because of
the loss of Abadan oil, a drop in net shipping earnings, and
the first payments on the United States and Canadian loans.
Exports rose only moderately during the second half of
1951 and therefore provided little relief. Superimposed on
Britain’s own drafts upon the gold and dollar reserves were
those of the overseas sterling area, whose imports continued
at remarkably high levels in 1951 after a downturn in their
earnings developed in the second quarter. Finally, the magni­
tude and speed of the resulting reserve drain gave rise to,
and was much intensified by, a flight from sterling mainly in
the form of accelerated payments for imports and delayed
receipts for sterling exports.
In these pressing circumstances, the prime requisite of policy
was to provide convincing evidence that the pound sterling
would be vigorously defended. This challenge, it may be fairly
stated, was successfully met by the new program, the principal
features of which took form over the period beginning with
the assembly of the new Parliament on November 8, 1951
and culminating with Chancellor of the Exchequer R. A.
Butler’s first budget in March 1952.1
Of crucial importance to the restoration of confidence in
sterling were the measures taken to rehabilitate traditional
monetary controls— the increases in the Bank of England’s dis­
count rate in November 1951 and March 1952 and the further
steps taken to reinforce the psychological impact of these
changes. These steps included increases in the special rate on
Bank of England loans against Treasury bills (the effective

rate at which central bank credit is available to the market),
the withdrawal of the central bank’s support for Treasury
bills, the funding of Treasury bills into short-term bonds in
order to reduce the liquidity ratios of the commercial banks,
the re-assumption by the Bank of England of the initiative
for providing relief to the money market under tight market
conditions, and finally, qualitative measures to restrain the
growth of consumer instalment credit and to limit the avail­
ability of both bank credit and capital funds to "essential” uses
In formulating the 1952-53 budget, on the other hand, the
Chancellor of the Exchequer did not attempt to budget for
an over-all surplus, notwithstanding the inflationary implica­
tions both of rising defense expenditure and of the hoped-for
recovery of Britain’s balance of payments. The 1952-53 budget,
as submitted, provided for an approximate over-all balance, in
which the "below-the-line” (i.e., capital account) deficit was
to be matched by an "above-the-line” (i.e., current account)
surplus, with rearmament outlays comprising almost one third
of the total estimated expenditure. Nevertheless, as originally
planned, Chancellor Butler’s budget represented an improve­
ment over the 1951-52 budget, which had resulted in an over­
all deficit of approximately 150 million pounds. The original
1952-53 budget, moreover, provided for a reduction in civil
expenditure, and made several changes designed to enhance
individual incentive and budgetary flexibility. In particular,
the fiscal burden of food subsidies was reduced by almost
40 per cent, the impact on the consumer being softened partly
by an increase in various welfare benefits and partly, as an
inducement to increased individual effort, by a reduction in
income taxes.
In the field of foreign economic policy, substantial import
cuts were announced in November 1951 and on three later
occasions, although the effects of these cuts were not realized
until well along in 1952. Other measures included a cut
in January in travel allowances and, on the export side, a
greater availability of export credit guarantees and increased
allocations of scarce raw materials to export industries. Further­
more, in December the Bank of England freed the forward
exchange rate and simultaneously broadened the spread be­
tween the official spot buying and selling rates to nearly one
per cent, thereby introducing a small but nevertheless useful
element of flexibility in the foreign exchange market.

The broader problems of the sterling area as a whole were
taken up in January 1952, when a conference of Common­
wealth finance ministers was convened to provide for con­
certed action, by national policy measures appropriate to the
special circumstances of each country, to bring the sterling
area into economic balance with the rest of the world, and with
the dollar area in particular. As a longer-run matter, the con­
ference laid particular stress on the development of the sterling
For a more detailed account of the government’s program, see
areas resources and, as a definite ultimate objective, on sterling
the May 1952 issue of this Review.



British Government Security Yields

convertibility. One prerequisite of convertibility was consid­
ered to be a rebuilding of the sterling areas central gold and
dollar reserve.

P rc n
e et


M o n e t a r y -F is c a l D e v e l o p m e n t s

The various new monetary restraint measures have appar­
ently succeeded in increasing the cost and reducing the avail­
ability of bank credit. The entire pattern of interest rates has
moved upward, with government bond yields reaching a peak
about midyear, while at the same time the range between short
and long-term rates narrowed (see the accompanying chart).
In addition, although the Bank of England’s ‘ special buyer” has
at times been active in relieving market stringency, the dis­
count houses, which serve as the medium through which such
central bank credit is channeled to the market, have had to
obtain assistance more frequently on relatively unfavorable
terms. Partly as a result of these changes and of the strengthen­
ing of qualitative controls, bank credit to the private sector has
noticeably contracted. Bank advances, which rose by 40 million
pounds in the quarter ended mid-February 1952, declined
contraseasonally by 52 million in the quarter ended in
mid-May, and by a further 156 million in the quarter ended in
mid-August, at which time they totaled 1,848 million. The
clearing banks’ commercial bill portfolios dropped from 187
million pounds to 102 million, and then to 64 million, over
roughly the same periods.

Latest figures are for November 21.
Long-term bonds: 2J4 per cent Consols (monthly average); short-term bonds:
2% per cent Exchequer Stock, 1955 (monthly average); Treasury bills:
three-month (approximate month end).

Sources: Central Statistical Office,

Monthly Digest of Statistics; The Econo­


ward trend of government bond yields after June. By October
these yields had returned to approximately the March levels.
Deficit financing has also tended to weaken the government’s
monetary restraints by increasing the liquidity position of the
Since the first quarter of 1952, however, the governments
commercial banks. After the short-term debt-funding opera­
monetary restraint program has been increasingly threatened
tion in November 1951, the clearing banks’ average liquidity
by a mounting budgetary deficit and the manner in which it
ratio dropped sharply, falling from 39.1 per cent in October to
has been financed. Although a seasonal deficit is normally
32.0 per cent in November, or almost to the conventional ratio
incurred during the first three quarters (April through
of 30 per cent. Since the April 1952 low of 31.6 per cent,
December) of the fiscal year, this year’s seasonal deficit has
however, this ratio has increased much more than seasonally,
been unexpectedly large. As of October 25, the "above-thereaching almost 38 per cent in September, and has thereby
line” or current account deficit was 382 million pounds, com­
increased the danger of a renewed inflationary expansion of
pared with a deficit of 82 million for the corresponding period
credit to private borrowers.
in 1951, while the "below-the-line” deficit was 301 million as
Thus far, however, the adverse budgetary development
against 309 million in 1951.2 The poorer budgetary showing
appears to have constituted more a potential than an actual im­
for 1952-53 to date, however, is partly due to the following
pairment of monetary restraint, since a continuing high level
special or temporary factors: (1) much of the budgeted addi­
of customer loan rates has discouraged borrowing, while quali­
tional revenue will not be received until after January 1; (2)
tative credit controls, including capital issues control and the
defense expenditures have been running at a higher level than
Bank of England directives regarding advances, have continued
a year ago; and (3) the full benefits from the reduced expendi­
to exert their restraining effect. Moreover, as a by-product of
tures on food subsidies did not appear until October.
a recent series of debt-funding operations, the condition of
The deficit has been financed chiefly through credit expan­ excessive bank liquidity has now been partially rectified in that
sion based on increased clearing bank holdings of Treasury these operations have permitted a sizable reduction in the out­
bills, which rose by 500 million pounds in the five months standing volume of bank-held Treasury bills. In consequence,
ended August 20. Thus, although private bank credit continued the average liquidity ratio of the clearing banks dropped to
to decline, net deposits on a seasonally adjusted basis rose 34.4 per cent in October. It may be further reduced by the
gradually from February through September— a fact that, with anticipated large government revenue surplus in the last quar­
the strengthening of confidence in Britain’s prospects following ter of the current fiscal year ending March 31, 1953.
Chancellor Butler’s July speech, helps to explain the downThe deteriorating budgetary position, which in addition to
The present budgetary deficit appears still more serious when it its potentially harmful effects on the monetary restraint pro­
is recalled that in 1951-52 an over-all deficit of about 150 million
gram has also had its own direct inflationary impact, has thus
pounds was finally realized for the entire fiscal year, while the over­
been the weak link in the government’s program to date. In
all 1952-53 objective is a balanced budget.



view of the present large size of the deficit, it is doubtful that
the last quarter’s revenue surplus will be sufficient to swing the
budget to an over-all balance for the whole fiscal year as
originally planned. At the same time, it is possible that the
economy has to some extent already absorbed the inflationary
impact of the large deficit, and now stands to benefit shortly
from the prospective transition to a revenue surplus in the last
quarter of the fiscal year.
On balance, the past year has seen a gradual diminution of
internal inflationary pressure and an increase in the flexibility
of the British economy. While these have been due in part
to an independent slackening of demand, both internal and
external, in certain lines of consumer goods, much of the
change must be credited to the new monetary policy. Aggre­
gate consumption expenditure during the first half of 1952
was 4 per cent below the corresponding period in 1951, chiefly
because of a reduced demand for textiles, clothing, hardware,
furniture, and housefurnishings. Retailers’ stocks had dropped
by 15 per cent in August 1952 from a year earlier and were
down in almost all categories of nonfood merchandise. While
this inventory readjustment is in part a natural reaction to
lower consumer demand, it undoubtedly also reflects the
efficacy of the new monetary restraints.
The checking of inflationary pressures has, as was to be
expected, led to a fall in production and a moderate rise
in the number of unemployed, but these phenomena have
been prerequisites to bringing about needed shifts in the dis­
tribution of labor. The average index of production for the
first eight months of 1952 was 4.5 per cent lower than in the
corresponding period of 1951 for manufacturing industries
and 3.3 per cent for industry in general. Unemployment rose
gradually to 2.4 per cent of the total labor force in the early
months of the year, but, following a gradual recovery of
demand for textiles and clothing, dropped to 1.9 per cent in
October, compared with 1.3 per cent in October 1951.
Although there has been some corresponding improvement in
the mobility of labor, additional workers are still required in
certain areas, especially in the engineering industries which
have been faced with convergent demands for production for
defense, export, and domestic investment.
The slackening of internal inflationary pressures may also
be seen in price and wage trends. Wholesale prices in October
were 2.5 per cent below their January peak— a rise in whole­
sale food prices being more than offset by a fall in prices of
basic materials. Retail prices, after a rise of about 5 per cent
in the first half of the year, declined slightly during the third
quarter, but rose again to the midyear level in October when
food subsidies were further reduced. Over the first three quar­
ters of the year, wage rates increased by 3 per cent or slightly
less than the cost of living.
Apart from the large budget deficit, the chief threat of
domestic inflation has loomed from the wage side. Although
the unions have exhibited a considerable measure of voluntary
restraint in response to government pleas, wage increases have

recently been granted to the railway, engineering, and ship­
building workers, and other wage claims are pending. Such
increases, if reflected in higher prices of exports, may tend to
weaken Britain’s competitive position abroad, but this effect
has not yet become evident.
T h e R e s t o r a t io n


Ex t e r n a l B a l a n c e

The measures taken by the government along the abovementioned policy lines, together with some favorable changes
in the international economic climate, succeeded in restoring
an over-all balance in Britain’s external accounts in the first
half of 1952, while the overseas sterling area countries have
apparently also made considerable progress towards a restora­
tion of external balance. In terms of the central gold and
dollar holdings of the sterling area as a whole, the drain on
reserves was halted in the second quarter of 1952, while the
October statement has revealed an 82 million dollar increase.
This has been achieved, however, partly at the expense of a
reversal of the United Kingdom’s trade-liberalization policy
in Europe and of cutbacks by the sterling area of dollar and
other imports. The sterling area has consequently a consider­
able road still to travel before it reaches its stated objectives
of sterling convertibility and of the restoration of freedom
to its foreign trade.
During the first six months of 1952, the United Kingdom
achieved a surplus on its international accounts of 24 million
pounds, even after excluding United States aid, as compared
with a deficit of 394 million in the last half of 1951. Most
of the 1952 improvement, which was substantially better than
had been generally expected, came from a considerably better
trade balance. January-June imports declined nearly 250 mil­
lion pounds from their July-December 1951 total, primarily
as the result of the governments import restrictions, while
exports rose by about 110 million (see Table I). There was
also a modest improvement in Britain’s invisible accounts,
stemming from the January reduction in tourist allowances,
from increased shipping earnings, and probably from some
increase in earnings from oil. The recovery in the over-all
trade and payments accounts has been greatly aided by the
improvement of Britain’s terms of trade; by June, import
Table I
The United Kingdom’s Over-all Balance of Payments on Current Account

(In millions of pounds)








Imports (f.o.b.).......... .............
Exports and re-exports............







Balance of trade...........



-7 7 9


Net shipping....... . . .................
Net interest and dividends___
Net travel................. _
Government transactions........
Other (net)...............................

+ 82
+ 78
- 30
-1 4 8

- 22


-1 3 9

+ 98
- 33
-1 5 1

+ 80
+ 80

Net invisibles...............



Balance of current transaC'

+ 6




- 74



+ 49
+ 45
+ 4
- 96



+ 49





+ 24



* Excluding defense aid.
Source: United Kingdom Balance of Payments 1949 to 1952, Cmd. 8666.

prices had fallen slightly below the 1951 average while export
prices had risen 6 per cent. The resulting increase in the
purchasing power of British exports has considerably eased
the twin problems of covering a higher proportion of imports
with exports while maintaining the former at adequate levels.
Britain has clearly achieved a noteworthy recovery in its
external position, but two qualifications must be noted con­
cerning the record outlined above. First, although export
receipts for the first six months of 1952 showed some improve­
ment over the second half of 1951, a disturbing downward
trend has developed since the first quarter. In the second quar­
ter of 1952, according to British trade statistics, exports were
15 per cent below the first quarter, and in the third quarter
they fell a further 8 per cent. However, the rise of 36 million
pounds in exports in October, although it does not necessarily
mean a reversal of the above trend, is encouraging. Secondly,
despite the over-all improvement in Britain's balance-ofpayments position, the geographical distribution of trade and
payments still leaves considerable scope for improvement. In
the first six months of the year, Britain earned a surplus of 268
million pounds from the overseas sterling area, or as much as
in any previous entire year; in its nonsterling accounts, on the
other hand, there was still a deficit of 244 million. While the
latter represents a reduction of nearly 60 per cent from the
last half of 1951, the deficits with the dollar area and with
the European Payments Union still were greater than in the
first half of 1951.
The major balance-of-payments problem facing Britain in
the second half of 1952 has been not so much the improving
of its over-all position (although this is, of course, also desir­
able), but rather the shifting of the pattern of its payments
so as to reduce the nonsterling deficit. So far, the progress
toward this objective has been secured primarily by discrimi­
natory cuts in imports from the dollar area and Continental
Europe. Britain’s nonsterling imports have continued to fall
as a result; in the third quarter of 1952 the nonsterling
monthly import bill was cut by 49 million pounds, compared
with the first half of the year.
The export outlook, on the other hand, is somewhat more
mixed. The decline in exports has been accounted for to date
by the marked fall in exports to the overseas sterling area
and to certain countries that have been experiencing sterling
shortages. Exports to the United States, Canada, and EPU
countries, on the other hand, have been well maintained, and
in October, exports to North America were the highest of any
month in the postwar period. Barring retaliatory import
restrictions on the part of the Continental countries, it appears
probable that export performance in these nonsterling markets
will be reasonably satisfactory during the next few months.
In general, therefore, the available data suggest that the United
Kingdom may well be making further progress in the second
half of 1952 in reducing its nonsterling deficit.
The outlook for sterling depends, of course, not only on
Britain’s own relationship with the nonsterling world but also,


to a very large extent, on the payments position of the overseas
sterling area with the dollar and other nonsterling markets.
Most of the overseas sterling area countries that have run heavy
deficits (as a rule these have been the independent members)
appear to be making strenuous efforts to bring their payments
positions into balance. As a whole, the area made considerable
progress in the first half of 1952 towards eliminating its imbal­
ance with the nonsterling world. A deficit of about 250 mil­
lion dollars’ equivalent with EPU countries in the second half
of 1951 was reduced to 50 million in the first half of 1952,
and there was a smaller improvement in the overseas sterling
areas balance with the dollar area. When sales of newly
mined gold to the United Kingdom are combined with the
above payments balances, the resulting overseas sterling area
deficit was reduced from about 320 million dollars in the last
half of 1951 to only 20 million in the first half of 1952. In
most cases, the success achieved through import restrictions
has been reinforced by internal anti-inflationary measures and
by a decline in import demand that followed the fall in
incomes after the collapse of the raw material price boom. In
addition, there appears to have been some revival of demand
for overseas sterling area exports, although these are still far
below their boom levels and their price prospects are uncertain.
One of the most striking features of the recent improve­
ment in Britain’s gold and dollar reserves has been the sweep­
ing change in the sterling area’s position in the EPU. By
May, Britain had completely exhausted its credit quota with
the EPU and was consequently forced to settle all further
deficits wholly in gold and dollars. In the first eight months
of the year, Britain lost 484 million dollars in gold and dollars
to the EPU (see Table II). Early in August, Britain intro­
duced a temporary plan by which British traders could pur­
chase certain dollar area goods for re-export to the Continent
against payment in sterling. Since the unexpectedly large
demand for licenses for such transactions threatened to lead
to a larger outlay on dollar goods than could have been
recouped from any resulting improvement of Britain’s position
with the EPU, the plan had to be withdrawn after less than
ten days of operation. Nevertheless, the plan appears to have
Table II
The Sterling Area’ s Gold and Dollar Position

(In millions of dollars)


1951-January-March, .
July-September. .

with the
+ 13
+ 76
+ 17
-1 0 6
- 98
-2 1 9
-1 4 3
-1 2 7
+ 37
+ 96

on other Total
gold and gold and United
dollar ac­ dollar
counts! balance
+ 37
-5 3 2
-8 4 2
-4 1 7
- 73
+ 10

+ 54
-6 3 8
-9 4 0
-2 1 6
-1 3 3
+ 47

+ 98
+ 55
+ 40
+ 6
+ 1


+ 35

Change Reserves
in re­ at end of
-5 9 8
-9 3 4
-6 3 5
- 15
+ 82


n.a. Not available.
* EPU settlements are made in the month following that in which the surplus or
deficit is incurred,
t Including minor amounts of defense aid prior to 1952.
Sources: United Kingdom Balance of Payments 1949 to 1952, Cmd. 8666; The Econ­
omist, November 8, 1952.



reinforced the recent general improvement in the sterling
area’s EPU position, an improvement that has stemmed mainly
from the decline in imports from EPU countries. In August,
the deficit was reduced to 4.7 million dollars, compared with
99 million in July, while in September and October the sterl­
ing area earned surpluses of 37 and 96 million dollars.
The improvement in the payments position of Britain and
the overseas sterling area with both the dollar area and the
EPU, together with the increased flow of United States defense
aid, has been reflected in recent months in the small but
encouraging increase in Britain’s gold and dollar reserves. In
the second and third quarters of 1952, the total gold and
dollar deficit of the sterling area was reduced to 349 million
dollars, of which 334 million was offset by United States aid.
In October, the return flow of gold from the EPU as the result
of the sterling area’s September surplus, together with the
small surplus earned in other gold and dollar accounts and the
receipt of United States aid, added 82 million dollars to
Britain’s gold and dollar reserves. A further rise in November
seems assured by the receipt of 96 million dollars from the
EPU for October settlements.

Pr o b l e m s


P r o spec ts

Chancellor Butler, in a speech on October 7, summarized
Britain’s current economic position by stating: ". . . in our
external finances we have gained an invaluable breathing space,
and internally we have succeeded in introducing an element
of flexibility”. The breathing space thus secured affords an
opportunity for consolidating some of the gains already
achieved and for minimizing probable or possible future

threats to Britain’s internal and external stability. Among these
dangers perhaps the most prominent are the threat to internal
balance that would result from a failure to improve the gov­
ernment’s budgetary position, the danger that any significant
increase in wages would pose for the maintenance of both
internal price stability and the competitive position of British
exports, the possibility of a further decline in exports (perhaps
aggravated by shortages of sterling and by retaliatory action
against British import restrictions), and the risk of excessive
inventory depletions arising from any prolonged continuation
of import cuts.
Nevertheless, the recent general improvement in Britain’s
economic position has been achieved on a relatively sturdier
basis— for example, without any over-all reduction in the
volume of raw material stocks— than previous recoveries in
the earlier postwar period. Moreover, the capacity of the
economy to cope with new problems as they may arise has
been enhanced by the greater reliance upon controls over the
cost and availability of credit to the private sector of the
The question of longer-run viability for the sterling area as a
whole is presently being subjected to extensive review at a
new Commonwealth conference now in session in London.
The conference is expected to undertake a broad reappraisal of
Commonwealth commercial, financial, and development poli­
cies in the light of the accomplishments and problems that
have been, in a limited way, mentioned here. It is to be hoped
that the proposals forthcoming from this meeting will provide
a further basis for sustained improvement in the sterling area’s
economic position, and for the eventual restoration of sterling

For more than a year now department store sales in this
District have been almost continually below year-ago levels.
The aggregate sales record of Second District department stores
for the first ten months in 1952 has been markedly less favor­
able ( in terms of year-to-year comparisons) than have sales of
department stores in the country as a whole. In addition,
department store sales generally have not fared as well as total
retail sales.
What accounts for this relatively unfavorable showing? No
simple answer to this question is possible. Too many influ­
ences have played a part to permit any fully satisfactory expla­
nation. In part, the cause may be found in incomplete
statistical reporting; in part, the difference may be attribut­
able to changes taking place in New York City, in the
distribution of its population, or in the income status of its
residents; in part, the changes may reflect underlying shifts in
the patterns of consumer spending and saving; and in part, the
changes may also reflect a tendency toward decline in the rela­
tive importance of department stores in the retail trade of this
District or of the country generally. It is the purpose here to
discuss briefly some of the factors which appear to have had

an important bearing on the course of department store sales
in this District in 1952, without attempting to assess their
individual importance.
R evised D a t a

It should be noted at the outset that the comparative sales
of Second District department stores, thus far this year, have
unavoidably been somewhat understated in the data published
by this bank. The opening of important new branch stores in
recent years has posed continuing problems in the collection
and tabulation of sales and other data. Frequently data are
not available, or are not reported, for some time after the open­
ing of branches. Oftentimes the branches handle limited lines,
and thus do not 'qualify” for inclusion in a department store
tabulation, or only become "qualified” after operations have
been diversified. It is illustrative of the problems involved
that extensive branch store data have just recently become
available, in suitable form, for revision of previously published
District totals through October of this year and for inclusion
in the regularly published department store trade reports in
the near future. The addition of these data for branch depart­

ment stores reduces somewhat the magnitude of the year-toyear decline that had earlier been indicated for the first ten
months of 1952. As shown in Table I, the over-all year-to-year
decrease in sales for the District as a whole is consequently
changed from minus 6 to minus 4 per cent for the period from
January through October of this year.
E x c l u s io n


Em p l o y m e n t



Table I
Department Store Sales
in Second Federal Reserve District and New York City
January-October 1952*
(Per cent change from preceding year)

District data

a ge s i n

N e w Y o r k C it y

There have been no pronounced recent changes in wages or
employment to account for the relative decline of department
store sales in New York City. Employment in New York City
from January through September (latest data available) has
averaged almost 24,000 more than in the comparable period
a year ago. The principal increases have occurred in service
industries, apparel and other finished fabric products industries,
and certain durable goods manufacturing industries, notably
in the manufacturing of electrical machinery, equipment, and
Moreover, wages in New York City’s major industries com­
pare reasonably well with wages in similar industries in the
country as a whole, in terms of both absolute level and rate
of change since last year. For example, weekly earnings of
production workers in manufacturing industries in 1951 aver­
aged $63.23 in New York City, while in the United States as
a whole the comparable figure was $64.88, reflecting the larger
proportion of heavy industries in other areas. In 1952, weekly
earnings in manufacturing industries have averaged about 3
per cent higher than in 1951 both here and in the entire
country. Average weekly earnings of employees in whole­
sale and retail trade, service, finance, and transportation and
public utilities industries— which account for more than half
of the City’s total nonagricultural employment— have generally
increased somewhat more since 1951 than have wages in com­
parable industries in the nation as a whole.

District data
to include

-1 6
- 5

-1 6
- 4

+ 3
- 4
-1 3
- 4
- 8
- 1
+ 2


N e w Y o r k C it y

It is also important to recognize that, after taking into
account the recent revisions, there has been a small increase in
the aggregate sales of District department stores outside New
York City over this ten-month period as a whole, although
declines were shown in four of the months (see Table I).
New York City sales, however, have accounted for about 55
per cent of the District total and have declined an average of
9 per cent. Moreover, when New York City sales are excluded
from the national totals, the sales record for the rest of the
country for the first ten months of 1952 also shows an increase
(1 per cent) from the corresponding period in 1951. Clearly
some further analysis of the factors affecting New York City
department store sales is called for, and that is attempted here
largely in terms of the current situation.1 Some of these factors
would be expected to exert a general influence on retail trade
in the City, while others might have had a particularly strong
influence on City department store sales.


- 2
- 2
- 6


-1 8
- 6
-1 3
- 2
- 6
-1 9
- 9


+ 4

-1 3
- 2
- 6
+ 3
- 1
+ 6
+ 1
+ 5




New York

District data
New York



+ 2


+ 5






* The per cent changes shown here are based upon data which include the sales of
a Brooklyn department store that closed early this year.

"C o s t


L i v in g ”


C o n s u m e r B u dgets

Retail prices in New York City, as measured by the Bureau
of Labor Statistics consumers’ price indexes for moderateincome families, have changed little on the average since the
beginning of the year, a situation similar to that of the country
as a whole. In both cases, however, the slight changes that
have occurred have been in an upward direction. Higher rents
have offset somewhat lower prices of food, apparel, and home­
Also pertinent to this phase of the discussion of consumer
behavior is a study of the relative importance of several major
consumer expenditures in various cities in 1950 published by
the United States Department of Labor in the August 1952
issue of its Monthly Labor Review . This study was based on
data derived from samples of all families and of families of
wage-earners and clerical workers in selected cities. While
the surveys show that New York City families spend propor­
tionately more for housing and food than do families in most
other large cities, New Yorkers allot about the same percent­
age of their budgets to expenditures for apparel and house­
furnishings as do families in the other major cities surveyed.
This is possible primarily because of the substantially smaller
proportion of family expenditures for transportation in New
York City. There may, of course, have been some change since
1950 in these proportions of income used for various pur­
poses; but no data are yet available to show that New Yorkers
devote a significantly different proportion of their incomes to
purchases of department store type merchandise, as compared
with residents of other large cities in the United States.
Sa v in g s

It is possible that the nation-wide rise of liquid savings over
the past year or more may have been relatively greater in New
York City than elsewhere, with perhaps some related shrinkage
of total consumer spending. The evidence is by no means con­
clusive. It may be of some significance, however, that there
has recently been a marked increase in savings bank deposits
in this City. Deposits (including accrued interest) at mutual
A discussion of long-term trends in department store sales in
savings banks in New York City have risen 6 per cent since
New York City appeared in the June 1952 issue of this Review.



the first of this year. The net addition to mutual savings
deposits in New York City from January through October
amounted to 615 million dollars, or triple the increase during
the same period last year.
How much of this recent increase in mutual savings deposits
represents a net increase in liquid savings in New York City
and how much was the result of shifts from other types of
savings, e.g., time deposits at commercial banks, cannot be
precisely determined. The rise in savings bank dividend rates
over die past year would certainly tend to encourage such
shifts. However, it is not likely that an increase in savings, if
it did occur, would have exerted any special effect on depart­
ment store sales as distinct from other retail outlets (at least
from others selling department store type merchandise). On
analogous grounds, the broad effects of the 3 per cent sales
tax on retail purchases of most items in New York City may
have hurt retail trade in this City, but these effects have not
been confined to any one type of store. These factors could,
however, have had an influence on the comparison between
department store trade in New York City and in the rest of
the country.

C o m p a r is o n W

it h

C o m p e t in g R e t a il O u t l e t s

Undoubtedly, one of the most important factors affecting
department stores sales in New York City (or anywhere else,
for that matter) is the competition of other types of stores
selling merchandise commonly found in department stores.
For many years, department stores have tended to lose ground
to other types of retail outlets. For example, according to the
Census of Business, sales of New York City department stores
increased 147 per cent between 1939 and 1948. During the
same period, furniture and apparel stores’ sales expanded 231
and 159 per cent, respectively. The relative decline in the
department stores’ share of the total market is even more
significant because in 1939 sales of department stores already
represented a much less important segment of the City’s total
sales of department store type merchandise than in any of
the next four largest cities in the nation. By 1948, department
stores accounted for only 23 per cent of total sales of depart­
ment store type merchandise in New York City, while in
Chicago, Philadelphia, Los Angeles, and Detroit, department
stores commanded 48, 45, 37, and 39 per cent of their respec­
tive markets.
Since 1948, this City’s department stores apparently have
continued to lose ground relative to competing retail outlets,
particularly since the beginning of this year. New York City
department store sales from January through October have
declined 9 per cent from year-earlier levels. Sales of furniture
stores, on the other hand, increased by 3 per cent while apparel
store sales remained unchanged. A further indication of the
competitive pressure from furniture stores is suggested by the
average year-to-year decrease of 18 per cent in sales of the
homefurnishings departments in City department stores. One
reason for the much more favorable showing of the furniture

stores since May has probably been their more widespread
use of easy credit arrangements to stimulate sales, following
the lifting of specific controls over this type of credit.
Sales of men’s and women’s apparel and accessories in
department stores, which accounted for almost half of total
store sales during the first ten months of this year, were 5 per
cent below corresponding 1951 levels, while, as just noted,
total apparel store sales were unchanged.
Perhaps the stiffest competition has come from the radio­
appliance stores that have generally placed far more emphasis
on payment terms, liberal “trade-ins”, and trial deliveries in
their promotional efforts than have the department stores.
Some indication of the relative sales performance of this type
of store may be gained from data published by the U. S. Bureau
of the Census, which showed that sales of household applianceradio stores in New York City and part of Westchester County
were down by only 12 per cent from year-ago levels from
January through September of this year. Sales of major appli­
ances, television sets, and radios in New York City department
stores, on the other hand, averaged 37 per cent below year-ago
levels for the first nine months of 1952.
It is evident from the foregoing data that the relative impor­
tance of department stores in total New York City retail trade
has been declining in recent months, perhaps at a faster rate
than had been the case for the last several years.
Po p u l a t io n

Another and probably more basic factor influencing the
general level of retail activity is population change. Inasmuch
as a comprehensive census of population is conducted only
decennially, however, it is difficult to determine year-to-year
changes in population and even more difficult to assess the
possible effects of these changes on consumer buying habits
and retail trade from year to year. Despite these limitations,
some analysis of shifts and growth in population is necessary
for any meaningful analysis of trends in retail trade.
While in the aggregate New York City’s population
increased by 6 per cent between 1940 and 1950, the net addi­
tion of about 450,000 persons was the smallest ten-year gain
in over 60 years. Moreover, the increase was due entirely to
the sharp rise in the excess of births over deaths in the early
postwar years as, for the first time in the City’s history, more
people moved out of the City during the ten-year period than
moved in. The net out-migration from 1940 to 1950 was
135.000 persons. According to estimates of the City Planning
Commission, over three quarters of a million people left the
City in the 1940-50 decade. This amounted to one out of
every ten persons living here in 1940. As a partial offset to
this movement out of the City, about 145,000 Puerto Ricans
had taken up residence in New York City and an estimated
125.000 quota immigrants and displaced persons were living
within City boundaries in 1950. There are two other large
sources of New York City in-migration: Negroes, predomi­
nantly from the South, and native whites from various parts

of the country who continuously move here for diverse eco­
nomic and personal reasons. Although no current data are
available, these shifts have presumably continued and are
exerting a cumulative effect on retail trade in New York City.
While it is impossible to assess accurately the effects of
these population shifts on retail trade, the out-migration of
a large segment of the City’s middle-income groups has
probably outweighed, incomewise, the in-migration of a large
number of persons of a generally much lower income status.
Thus, the net effect of this type of qualitative population shift
was likely to decrease the total amount of money available to
those City residents who are, in the main, the most frequent
patrons of department stores in New York City. Therefore,
in evaluating the changes in employment and wages discussed
earlier in this article, allowance should be made both for the
fact that those data include persons living outside of the City
as well as New York City residents and for the fact that these
shifts in the composition of the population have occurred.
In addition to the migrations into and out of the City, there
has been a notable shift in growth patterns within the City


itself. For example, substantial population increases have
accompanied the rapid residential development of the outlying
sections of The Bronx and Queens. These areas are almost
exclusively serviced by small specialty shops which have
greatly reduced the need for the local resident to make the
trip to the long-established downtown department stores.
Another very important population change that New York
City retailers have had to contend with is the tremendous shift
to the suburbs which has reached its peak during the last few
years. The New York State counties in the New York Metro­
politan area (outside New York City) increased, populationwise, by about 30 per cent from 1940 to 1950. The popula­
tion of the New Jersey counties in the New York Metropolitan
area grew by about 15 per cent. The rapid expansion of the
suburban population has, of course, been accompanied by a
tremendous growth in the number of retail stores in these
areas. These suburban trade centers have captured a part of
the market formerly held by New York City retailers.
While the nature of the net out-migration from New York
City is in most respects not unlike that which has occurred

United States and Second Federal Reserve District

Percentage change







Latest month Latest month
from previous from year

Production and trade

Industrial production*................................................................
Electric power output*................................................................
Ton-miles of railway freight*.....................................................
Manufacturers’ sales*X................................................................
Manufacturers’ inventories*J.....................................................
Manufacturers’ new orders, total*JJ.........................................
Manufacturers’ new orders, durable goods*tt.........................
Retail sales*tt.............................................................................
Residential construction contracts*...........................................
Nonresidential construction contracts*.....................................
Prices, wages, and employment
Basic commodity pricesf............................................................
Wholesale pricesf.........................................................................
Consumers’ pricesf......................................................................
Personal income (annual rate)*..................................................
Composite index of wages and salaries*....................................
Nonagricultural employment*....................................................
Manufacturing employment*......................................................
Average hours worked per week, manufacturingf ...................

24.5 p
43.3 p
25.1 p






Aug. 1939 = 100
1947-49= 100
1935-39 = 100
billions of S
1939 = 100

1 1 1 . 2p
41.5 p



273.3 p




millions of $
millions of $
millions of $
millions of $
millions of $
1947-49= 100
millions of $



29 ,146r



6 , 534p
4 ,245p



5 ,803r

-5 0
+ 8
- 3



+ 2
+ 2
- 3
+ 6
+ 6
+ 3


1935-39 = 100
1947-49= 100
1947-49 = 100
billions of $
billions of $
billions of $
billions of $
billions of $
1947-49 = 100
1947-49= 100

Banking and finance

Total investments of all commercial banks..............................
Total loans of all commercial banks..........................................
Total demand deposits adjusted................................................
Currency outside the Treasury and Federal Reserve Banks*..
Bank debits (U. S. outside New York City)*..........................
Velocity of demand deposits (U. S. outside New York City)*.
Consumer instalment credit outstandingf................................
United States Government finance (other than borrowing)

Cash income..................... ....................................................
Cash outgo................... . .............................................................
National defense expenditures....................................................

millions of $
millions of $
millions of $

12.6 p

12 .2


2 1.8





+ 1
+ 3
+ 3
+ 3
+ 3
+ 4
- 1



+ 1
+ 1










+ 9
+ 7
-1 4
- 2
+ 2
+ 6
+ 5
+ 2
+ 3
+ 2


+ 4
+ 4
+ 4
+ 8
+ 2
+ 15



Electric power output (New York and New Jersey)*.................
Residential construction contracts*......................................
Nonresidential construction contracts*........................................
Consumers’ prices (New York City)f...........................................
Nonagricultural employment*........................................................
Manufacturing employment*.........................................................
Bank debits (New York City)*.....................................................
Bank debits (Second District excluding N._Y. C. and Albany)*.
Velocity of demand deposits (New York City)*...........................

1947-49= 100
1947-49 = 100
1947-49 = 100
1935-39= 100
millions of $
millions of $
1947-49= 100


7 ,584.4p


Note: Latest data available as of noon, December 2 .
p Preliminary.

r Revised.
tt Revised back to January 1951.
* Adjusted for seasonal variation.
# Change of less than 0.5 per cent.
JJ Series revised 1948 to date,
t Seasonal variations believed'r
to!be minor; no^adjustment made.
} Series revised 1949 to date.
Source: A description of these series and their sources is available from the Domestic Research Division, Federal Reserve Bank of New York, on request.








Per Cent Change in Retail Sales by T y p e of Store in Localities
W ithin the N ew Y ork M etropolitan Area
(Change from January-October 1951 to
January-October 1952)

Table II
Retail Sales by Type of Store in New York
Metropolitan Area,t January-October 1952
( P e r c e n t c h a n g e fr o m p r e c e d in g y e a r )





New York City.......................................
Northern New Jersey.............................
Westchester County...............................
Fairfield County.....................................
Nassau County.......................................

- 9
- 4
+ 2
+ 2

+ 5
+ 6
+ 6


+ 3

Metropolitan Area*................................



+ 1



n.a. Not available.
* Includes data for Suffolk County.
f Comprises New York City, Westchester, Nassau, and Suffolk Counties in New
York State, Fairfield County in Connecticut, and Bergen, Essex, Hudson,
Middlesex, Monmouth, Morris, Passaic, Somerset, and Union Counties in New
Jersey. This differs somewhat from the standard metropolitan area defined by
the Bureau of the Census which includes Rockland County, New York, and
excludes Monmouth County, New Jersey, and Fairfield County, Connecticut.

favorable (in terms of year-to-year comparisons) than were
sales of the same types of stores in New York City.2
Of course, the more impressive showing of department and
apparel store sales in areas adjacent to New York City is
partly the result of newness. Larger increases are normally
expected in areas that are undergoing extensive economic
development, where a rapid expansion of population, housing,
and business activity is taking place, than in areas which have
attained a greater degree of economic maturity. An excellent
case in point is Nassau County which has undergone tremen­
dous expansion in both population and business activity in
recent years.
•Northern New Jersey includes Bergen, Essex, Hudson, Middlesex, Monmouth,
Morris, Passaic, Somerset, and Union Counties,
tFurniture store data available only for New York City.

in many other areas throughout the country, the shift in popu­
lation to the suburbs is perhaps unique in its effects on
department store sales both in New York City and in the
New York Metropolitan area. First, the large middle-class
exodus, as mentioned earlier, represented not only a net loss
of population but also a change in the income composition of
the population that remained, since the in-migrants were pre­
dominantly of a much lower income status. This undoubtedly
resulted in a net loss of spendable income available to City
department stores, possibly of somewhat greater proportions
than would be felt by retail trade in general. Second, the rapid
suburban population growth occurred, in many cases, in areas
where apparel store branches had already been established, a
phenomenon which may not have been generally the case in
the suburban areas of other large cities.
Su b u r b a n R e t a il in g

Some indication of the effects of the large out-migration
to suburban areas on retail sales in New York City is shown in
Table II and in the accompanying chart. In every case for
which adequate data were available, department and apparel
store sales in the peripheral sections of the New York Metro­
politan area, through October of this year, were much more

It is particularly significant to note that, except for Nassau
County, apparel store sales in the New York Metropolitan area
have increased relatively more, in terms of year-to-year com­
parisons, than have department store sales. This may be due
(at least to some extent) to what may be described as the
dominating competitive position of the small specialty stores
in many of the more recently developed suburban areas. In
addition, the large New York City apparel stores generally
began their branch store operations well in advance of the
department stores. Consequently, branch apparel stores were
integrated into community shopping centers much sooner and
in some localities have undoubtedly achieved a favored posi­
tion in the buying habits of not only local consumers but also
shoppers living in sections of New York City adjacent to sub­
urban areas.
A more precise indication of the over-all competitive posi­
tion of apparel stores is obtained from the data presented in
Table II. Apparel store sales in the New York City Metro­
politan area were up 1 per cent from year-ago levels during
the first ten months of 1952, while department store sales
were down 6 per cent.
Co n c l u s io n

This brief survey of some of the factors influencing Second
District department store sales should indicate, at the least,
Data for furniture store sales in areas outside New York City
were not available on a sufficiently comprehensive basis. Hence, no
precise measure of their recent sales performance is possible.

that there is no single explanation for their recent puzzling
behavior. The inherent technical difficulties of maintaining a
continuous statistical series for a changing business popula­
tion suggest that, however useful it may be to have some data
rather than none at all, there is always need for caution in
using these data as precise and complete indicators of changes
either at department stores or at other particular types of
retail outlets, or for retail trade in general.
This article has deliberately avoided analysis of marketing
techniques, or competitive sales and operating methods, in


an effort both to focus attention on some of the more important
external causes of the recent changes apparent in department
store sales, particularly in New York City and, at the same
time, to point up the changing importance of department store
sales as an economic indicator. It is indeed significant, how­
ever, that, while all retail trade in New York City has been in
some measure adversely affected by what has been termed
"a qualitative shift in population”, department stores in the
City have also continued to lose ground to local apparel and
furniture stores.

The hopes of Second District department store retailers for
a continuation in November of the favorable sales perform­
ance made in October failed to materialize. On the basis of
preliminary information, it appears that sales of District
department stores fell sharply below those in November 1951,
only partially because of one less shopping day this year; even
on a daily average basis, sales were estimated to have been
approximately 7 per cent below those a year earlier.
The movements of department store sales this fall have left
many local retailers perplexed, with most relying on the con­
troversial explanation of adverse weather conditions. After an
encouraging spurt in sales in late summer, unseasonably warm
weather in September apparently delayed interest in fall
apparel lines. Subsequently cooler weather in October did
seem to whet customers* interest; at any rate, sales pushed
ahead to the highest level (on a seasonally adjusted basis)
for the year. November sales increased less than usually, how­
ever, from the previous month. Warmer weather, on the
whole, than was the case a year before was held largely respon­
sible for lagging sales. The relatively small amount of buy­
ing on Election Day was also felt keenly by the stores, and
Armistice Day sales in the next week not only failed to make
up for the poor showing of the previous week but were unable
to bring the week in which it fell up to year-earlier figures.
District sales for the three months as a whole (September,
October, and November) were estimated to be about 4 per
cent below the same period in 1951.
After four successive greater-than-seasonal monthly increases
in outstanding orders, commitments by Second District depart­
ment stores for additional merchandise fell more than sea­
sonally from the end of September to the end of October. The
seasonally adjusted value of stocks on hand on October 31
showed no change from September.

Department and Apparel Store Sales and Stocks, Second Federal Reserve
District, Percentage Change from the Preceding Year

Net sales
Oct. 1952
Department stores, Second District___
New York City*.................................
Nassau County...................................
Northern New Jersey.........................
Westchester County...........................
Fairfield County.................................
Lower Hudson River Valley..............
Upper Hudson River Valley..............
Central New York State....................
Mohawk River Valley....................
Northern New York State.................
Southern New York State.................
Western New York State...................
Niagara Falls...................................
Apparel stores (chiefly New York City).

Stocks on
Oct. 1952 Oct. 31, 1952

+ 2




1 (+2)
+ 3
4~ i
+ 8
+ 7
+ 7
+ 8
+ 5
+ 3
+ 5
+ 4
+ 2
+ 5
+ 7
+ 4
+ 8
+ 10
+ 4



9 ( -7 )
- 4
- 5
+ 1
+ 2
+ 1
+ 3
+ 3
- 1
- 3
+ 2
- 2
- 1
- 2
+ 4
+ 2
+ 2
+ 2
+ 1
+ 4
- 3

+ 9



7 (-3 )
- 3
- 4
+ 5
+ 5

- 4
+ 4
- 1
- 2
- 1
- 3
- 6
- 1
- 3
- 6


+ 1


n.a. Not available.
* The year-to-year comparisons given in parentheses exclude the 1951 data of a
Brooklyn department store that closed early in 1952.

Indexes of Department Store Sales and Stocks
Second Federal Reserve District

(1947-49 average=100 per cent)






Sales (average daily), unadjusted................
Sales (average daily), seasonally adjusted..





Stocks, unadjusted........................................
Stocks, seasonally adjusted..........................







(Summarized by the Board of Governors of the Federal Reserve System, December 1, 1932)

Industrial production in October and November was slightly
above the sharply advanced September level. Average whole­
sale prices of industrial commodities remained steady, while
prices of farm products and foods eased further. Consumers’
prices showed little change in October at a level slightly below
their summer high. Bank loans to business increased sharply
after mid-October.

period a year ago. Output of most other nondurables con­
tinued at about the levels of the preceding month.
Minerals output declined in October and rose again in
November, owing mainly to fluctuations in coal output. Crude
petroleum production rose throughout the period, and output
of metals was maintained in large volume.

I n d u st r ia l Pr o d u ctio n

Value of new construction work put in place, seasonally
adjusted, during October was larger than in other recent
months. Value of contract awards was below the near record
September total, which included a large volume of atomic
energy awards, but was about one-fourth larger than in
October 1951. Housing starts in October rose to 101,000, as
compared with 98,000 in September, and were at a seasonally
adjusted annual rate of 1,156,000.

Reflecting mainly continued gains in durable goods indus­
tries, the Board’s index of industrial production rose 1 point
further in October to 227 per cent of the 1935-39 average.
In November a similar gain is likely. Since September, out­
put at factories and mines has averaged about 3 per cent above
the levels prevailing during 1951 and early 1952.
Steel ingot production in October and November was at
a new record rate of 106 per cent of rated capacity as of the
beginning of this year. Activity in most metal-fabricating
industries also advanced further. Television production rose
to the near record annual rate of about 10 million sets in
late October and continued at this level in early November.
Passenger automobile assemblies were maintained at the high
September-October rates until mid-November but subsequently
declined owing mainly to model change-overs. Aluminum
production was reduced further in October as a result of elec­
tric power shortages and was about 9 per cent below the very
high August level.
Nondurable goods production showed a slight decline in
October, as textile mill activity was reduced somewhat follow­
ing marked recovery in the summer and early fall. Output
of paper and paperboard, however, advanced further. Meat
production was maintained in October and the first three weeks
of November at levels well above those in the corresponding


C o n s t r u c t io n

Em p l o y m e n t

Seasonally adjusted employment in nonagricultural indus­
tries in October was maintained at the record September level
of 47.2 million. Employment in manufacturing rose slightly
to a new postwar peak of 16.2 million, and average hours
of work and hourly and weekly earnings increased further.
Unemployment declined again in October, to a new postwar
low of 1.3 million.
D istr ibu tio n

Retail sales rose sharply further in October to a level 9
per cent above a year earlier. IJoth durable and nondurable
goods shared in the October advance, with the rise in automo­
bile sales especially marked. Department store sales in the
first half of November were running below their high October
level, on a seasonally adjusted basis. Stocks at department
stores are estimated to have continued little changed through
October after seasonal adjustment.
c o n s t r u c t io n

co ntracts aw arded


F ederal R eserve in dexes.

M on th ly figures, latest shown are for October.

D ata for selected industries reported by over 20 0 o f the largest w eekly report­
ing m em ber banks. “ M e ta ls ” includes m etal products, m achinery, and tra n s­
portation equipm ent. ‘ ‘P etroleu m , e tc .” includes coal, chem icals, and rubber
“ F ood s, e tc .” includes liquor and tobacco. W e d n e sd a y figu res;
latest shown are for N ovem b er 19.

Commodity Prices
Wholesale prices continued to decline in November, largely
reflecting further decreases in prices of cotton, livestock, and
meats. Cotton has declined to about 34 cents per pound since
release in early November of a substantially larger crop esti­
mate, and is now 8 cents below a year ago and 2 cents above
the Federal support level. Prices of some industrial materials
strengthened and prices of finished goods other than foods
generally changed little.
The consumers’ price index was about unchanged in October.
Small decreases in foods and textile products were offset by
advances in rents, fuels, and services.


ties were reduced somewhat. The average level of member
bank borrowings exceeded IV a billion dollars over the period.
Se c u r it y M a r k e t s

Common stock prices rose steadily in the first three weeks of
November. Yields on high-grade corporate bonds receded to
the levels of early September. Yields on Treasury bills and
other short-term Government securities increased substantially.
In addition to tax anticipation bills, the Treasury announced
the offering of an additional amount of 2 per cent certificates of
indebtedness maturing August 15, 1953 in exchange for
the 1.1 billion dollars of VA per cent certificates maturing
December 1, 1952.

B a n k C r e d it

Business borrowing from banks expanded sharply in late
October and the first three weeks of November. This expan­
sion was more widely distributed than the earlier rise which
had been concentrated in such industries as food processing,
commodity dealing, and trade where loans normally increase
at this season of the year. Consumer and real estate loans also
continued to rise. The Treasury’s issue of 2.5 billion of tax
anticipation bills in October was bought at first largely by
banks, but subsequently was purchased in substantial volume
by corporations. Most of a second issue of such bills amounting
to 2 billion dollars in mid-November was also taken up
initially by the banking system.
Member bank reserve positions tended to be fairly tight
during the mid-October to mid-November period. Reserve
drains resulted principally from a currency outflow and an
increase in Treasury balances at the Reserve Banks. In addi­
tion, Federal Reserve System holdings of Government securi­



F. W . Dodge Corporation data for 37 Eastern States. Monthly figures; latest
shown are for October.