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MONTHLY REVIEW of Credit and Business Conditions S econd F e d e ra l F ed er a l E eserv e B a n k , N ew Y o r k M o n e y M a r k e t in J a n u a r y Total reserves of all member banks rose to successive new high levels in January and on January 26 were close to $7,300,000,000, an amount more than three times the average volume in the years 1927 to 1929. Despite the higher level of reserve requirements, member banks had $1,440,000,000 of excess reserves on January 26, or more than twice the amount held at the low point of the past year, which was reached early last August, and a far larger amount than was held by member banks at any time during the two years of deepest depression, 1932 and 1933. The increase in excess reserves in the five weeks be tween December 22 and January 26 was $430,000,000, and was due chiefly to the seasonal reduction in the amount of currency in circulation. D uring the five week period, the amount of currency outstanding declined $387,000,000, as compared with a total increase between July 28 and December 22 of $257,000,000. This rela tively large reduction in the amount of currency out standing during the past month indicates a continuation of the downward trend in currency circulation, which appeared after the early part of last September, accom panying the rapid recession in business activity. The large New York City banks obtained a substantial share of the increase in excess reserves during the past month, partly because banks in other localities deposited idle funds in their accounts with their New York City correspondents instead of placing them on deposit in their reserve accounts with their respective Federal Reserve Banks. Consequently, on January 26, the New York City banks held more than $500,000,000 of excess reserves, the largest amount since the latter p art of April, before the final increase in reserve requirements became effective. As the accompanying diagram indicates, the amount of deposits held by the New York City banks for other banks also rose in January to the highest level since April. Since early last September the volume of excess reserves held by the New York City banks has increased by more than $400,000,000, partly because of the renewed accumulation of idle funds of banks in other localities in New York balances, and partly be cause of the payments received by the New York City banks from the Treasury for m aturing Treasury bills after the middle of September, following the release by the Treasury of $300,000,000 of gold from the inactive gold account. R e s e rv e D is tr ic t F e b r u a r y 1, 1938 A pparently reflecting the increasing volume of idle funds available for employment, the banks have shown an increased tendency to add to their investment hold ings, especially as the demand for loans has continued to diminish. Holdings of Government securities by the weekly reporting New York City banks during the four weeks ended January 26 increased $119,000,000, and showed a total increase of $365,000,000 from the low point reached in the latter part of last September. In vestments in Government guaranteed securities and other securities have also increased during recent weeks, but by smaller amounts than direct obligations of the Gov ernment. Reporting member banks in other principal cities also have increased their investments slightly dur ing the past few weeks. Reflecting the increased demand for high grade securi ties, yields on all classes of Government securities de clined further during the first three weeks of January, and there were accompanying declines in yields on high grade m unicipal and corporation bonds, except for rail road issues, which, even in the case of high grade securities, appear to have been adversely affected by the failure of the Erie Railroad to meet its interest payments on January 1 and by the subsequent application of the Erie for reorganization under Section 77 of the Bank ruptcy Act. Later in the month, however, there was some recession in the general level of prices of high Changes in Excess Reserves of New York City Banks Compared with Changes in the Volume of Funds of Other Domestic Banks on Deposit in the New York City Banks 10 MONTHLY REVIEW, FEBRUARY 1, 1938 grade securities, and an accompanying rise in yields. advanced to 1.17 per cent, but receded to 1.15 per cent Short term money rates in the New York m arket re near the end of the month. Four weekly issues of $50,000,000 of 91 day Treasury mained at the previous low levels. bills were sold during January at average rates ranging Money Rates in New York from 0.065 to 0.111 per cent, in replacement of 273 day bills which m atured in corresponding amounts. Jan. 30, 1937 Dec. 31, 1937 Jan. 29, 1938 Stock Exchange call loans....................... Stock Exchange 90 day loans................. Prime commercial paper— 4 to 6 months Bills— 90 day unindorsed......................... Customers’ rates on commercial loans (Average rate of leading banks at middle of month).............................. Average yield on Treasury notes (3-5 years)........................................................ Average yield on Treasury bonds (more than 8 years to maturity or call date) Average rate on latest Treasury bill sale 273 day issue........................................... 91 day issue........................................... Federal Reserve Bank of New York re discount rate........................................... Federal Reserve Bank of New York buying rate for 90 day indorsed bills. 1 1 1 nx H *1H *1H Va % 1 1 1.71 1.63 1.22 1.23 1.63 1.15 2.32 2.51 2.47 0.36 IX olio l 61 io l X X X * Nominal A downward tendency, partly seasonal in character, continued in the loans of the reporting member banks. In the New York City banks, loans to security brokers and dealers were reduced $68,000,000 further during the four weeks ended January 26, and were $365,000,000, or about one-third, lower than a year ago. Commercial loans in these banks declined $101,000,000 further dur ing the past month, and were about midway between the high point of last October and the seasonal low point of a year ago. In other principal cities, also, the seasonal decline in bank loans continued, although at a less rapid rate than in the New York City banks. B il l s and C o m m e r c ia l P a p e r Bill dealers continued to transact only a moderate volume of business during January, the active invest ment demand in existence for some time past remaining in considerable p art unfilled, as only small quantities of acceptances continued to be made available to dealers for resale in the discount market. Rates for bankers acceptances held at the levels in effect since the begin ning of last summer. Bills outstanding declined about $5,000,000, during December, an amount sufficient to cancel the aggregate increase of the preceding three months. The decrease for the month was due to a smaller volume of bills representing im port transactions, storage of goods in or shipments between foreign coun tries, domestic shipments of goods, and goods stored in domestic warehouses; some increase occurred in out standing bills drawn to finance export and dollar ex change transactions. As against a year ago, bills at the end of December showed a reduction of $30,000,000. Accepting banks and bankers continued to hold about 80 per cent of all bills drawn, leaving approximately $65,000,000 for investment by others. (Millions of dollars) Type of acceptance G o v e r n m e n t S e c u r it ie s Prices of Government securities advanced strongly in the first two and a half weeks of January, under the impetus of an expanding demand, chiefly on the part of commercial and savings banks. D uring this period, the average gain in Treasury bonds of more than 8 year term to call date or m aturity amounted to more than % of a point, an increase which followed a rise of nearly % of a point in December. As a result the average price of Treasury bonds came within approximately 3 points of reaching the December, 1936 high, and was about l 1/^ points above the intervening peak of August, 1937. The 2% per cent Treasury bonds of 1945 which were issued on December 15 at par rose as high as 103 19-21/32 on January 20. Subsequently, a recession occurred which canceled about two-thirds of the rise in the first three weeks of January, but the m arket became steadier near the end of the month. The average yield on Treasury bonds of more than 8 year term, after declining as low as 2.43 per cent, rose to around 2.48 per cent near the end of January, but was then only slightly more than % per cent above the lowest average yield reached in December, 1936. Prices of Treasury notes likewise advanced consider ably during the first p art of January, so th at by Jan u ary 18 the average yield on 3 to 5 year m aturities reached 1.07 per cent, as compared with 1.23 per cent at the end of December, and a low of 0.92 per cent in December, 1936. In the latter part of January there was some reversal of the movement of the earlier p art of January in the Treasury note m arket also, and the average yield Domestic shipment.................................... Domestic warehouse credit..................... Dollar exchange.......................................... Based on goods stored in or shipped be tween foreign countries........................ Dec. 31, 1936 Nov. 30, 1937 Dec. 31, 1937 126 86 12 71 2 122 84 9 71 1 117 87 8 70 2 76 61 59 373 348 343 Although dealers reported a somewhat larger supply of new commercial paper during January, the amounts currently acquired and reoffered to banking investors again fell short of the continued active demand for busi ness notes. The new paper entering the m arket included a sizable volume of choice notes m aturing in three months or less, which were readily absorbed at an interest rate of % per cent, indicating a slight tendency toward lower rate levels in the commercial paper market. For the average grade prime 4 to 6 month notes, however, the rate remained at 1 per cent, and this class of commercial paper continued to represent the larger portion of sales. A total of $279,200,000 of paper was outstanding through commercial paper brokers at the end of December, as compared with $311,000,000 at the end of November, and $215,200,000 in December, 1936. S e c u rity M a r k e ts Coincident with the strength in Government security prices in the first p art of the month, the high grade corporation bond list advanced during the first eleven days of January, and then held these higher average quotations until after the middle of the month. The average price of Aaa bonds, according to Moody’s In- FEDERAL RESERVE BANK OF NEW YORK 11 P RICE N e w F in a n c in g Movements of Stock and Bond Prices (Standard Statistics Company index of 9 0 stocks, and Moody’ s Investors Service average prices of Aaa and Baa corporation bonds) vestors Service, reached a figure about 3% points above the October, 1937 low, nearly 6% points above the April, 1937 low, and only 2% points below the January, 1937 high. H igh grade industrial and public utility bonds at this period nearly equaled the highest prices reached in January, 1937, but high grade railroad bonds remained some 6 points lower. A fter the middle of the past month, declines developed in high grade bond prices, the largest declines occurring in railroad and industrial issues. The average price of second grade bonds also showed a firmer tendency during the first ten days of January, reaching a figure some 3 points above the low of late November. The advance, however, was limited entirely to industrial and public utility issues, as railroad bonds continued to be adversely influenced by declining traffic volumes, and were greatly affected by the financial diffi culties of the Erie Railroad Company which culminated in the filing by th at company of an application on January 18 to reorganize under Section 77 of the Bank ruptcy Act. Subsequent declines in railroad issues, to gether with moderate declines in medium grade indus trial and public utility bonds in the second half of the month reduced the average price of Baa issues by 6% points to a new low for several years. An advance likewise occurred in stock prices during the first eleven days of January and was followed by steadiness through the middle of the month. Prices around this time averaged approximately 18 per cent above those prevailing at the lowest points reached in the last quarter of 1937, and indicated the recovery of about one-fifth of the loss sustained on the decline which was in progress during much of 1937. The rise in in dustrial stocks amounted to about 21 per cent, while the recovery in railroad and public utility shares was con siderably smaller. In the second half of the month, stock prices generally followed a downward course, so that toward the end of January the industrial share prices were not greatly above the November, 1937 low, and the rails and utilities were down to new low levels since the first p art of 1935. Trading on the New York Stock Exchange generally was in small volume throughout January. Prelim inary figures for new security financing during January indicate a volume of $60,000,000 of corporate issues, as against $57,000,000 reported by the Commer cial and Financial Chronicle for December, and a total for m unicipal bonds of about $40,000,000, or about half the Chronicle’s total for December. Both groups are far below the levels prevailing a year ago. The principal corporate isues were $30,000,000 of Consolidated Edison Company of New York 3% per cent debentures of 1958, offered at 101% ; $9,000,000 Consumers Power Company first mortgage 3% per cent bonds due 1967, offered at 102; $15,000,000 Pacific Gas and Electric Company first and refunding mortgage 3% per cent bonds of 1966, placed privately with insurance companies; and $3,618,000 of preferred and common stock of Bausch and Lomb Optical Company. About $10,000,000 of the corporate issues was for refunding. The Consolidated Edison and Consumers Power issues were both oversubscribed and went to small premiums. The municipal bond offerings, owing partly to the very limited volume, met with a satisfactory reception. Corporate new capital issues of $1,160,000,000 during 1937, as reported by the Commercial and Financial Chronicle, reached practically the same total as in 1936, as a fairly large volume of issues during the first and second quarters made up for the greatly reduced volume of the last two quarters. Corporate refunding issues, on the other hand, fell off rapidly after the first quarter, and for the year were only about one-third of the total during 1936, though still almost up to the average of predepression years. M unicipal bond issues totaled $900,000,000 during the year, about 20 per cent less than the 1936 total, but the reduction was confined to refunding issues. While m uni cipal issues, other than refunding, were reported as $727,000,000, estimates published in the annual report of the Secretary of the Treasury on the fiscal year basis, indicate that the net outstanding municipal debt declined $184,000,000 during the year ended June 30, 1937, ap parently indicating that the retirem ent of municipal debt (apart from refunding) through m aturities and sinking fund purchases continued to exceed new bor rowing. 467 Monthly Average Volume of Domestic Corporate Security Issues for Refunding and for New Capital, Excluding Investment Trust Issues (Commercial and Financial Chronicle data— in millions of dollars) 12 MONTHLY REVIEW, FEBRUARY 1, 1938 F o r e ig n E x c h a n g e s G o ld M o v e m e n t A fter getting off to an uncertain start in the first few days of the new year, the dollar steadied in the foreign exchange m arket and remained firm for the greater p art of January, but reacted again under selling pressure from abroad at the end of the month. The pound went as high as $5.01% against the dollar on January 4, when foreigners were momentarily disturbed over the political news from W ashington, but returned to $4.99 13/16 in New York the next day and held close to that level for three weeks. Accompanying the monthend decline in the stock market, a further movement out of dollar balances again carried the pound above the $5.00 level. The Swiss franc fluctuated in similar fashion, settling from a high of $0.2317% on January 4 to $0.2313% on January 5, and, after easing slightly fu r ther, rising at the end of the month to $0.2319. Prim ary interest in the foreign exchange m arket cen tered in the political and exchange crisis in the French franc which resulted in the form ation of a Radical Socialist m inistry headed by Prem ier Chautemps. The franc declined to $0.0322% and was quoted at 154% francs to the pound sterling on January 27, as compared with quotations of $0.0339% and 147% francs to the pound at the close of business in December, but recovered slightly near the end of January. Trading in foreign exchange was suspended on the Bourse in Paris on Friday, January 14, after the Popular F ront Cabinet resigned; it was resumed on Monday and Tuesday, when the new cabinet was formed, and conducted through the remainder of the week with dealings limited to com mercial transactions at the request of the Bank of France. The franc had weakened sharply ju st prior to the cabinet resignation. Serious labor and political difficul ties, accompanied by Socialist demands for foreign ex change control, induced a capital flight in early January, which continued at an accelerated pace until January 13, French official support being withdrawn on that day, the currency fell to $0.0323 during the course of trading, but recovered to $0.0329 at the close of business in New York. Short covering on the 15th and 17th brought the rate back to $0.0337%, from which it again declined in a nervous and erratic market. Forw ard rates weakened over the month, on balance, one-month and three-month contracts being quoted at discounts of 3 points and 10 points, respectively, at the close on December 31, when the spot rate was $0.0339%, at 13% and 21% points discount, respectively, on January 12 when the spot rate was $0.0338%, and at 5 3/16 and 13 11/16 points discount at the month end with spot francs at $0.0328%. The capital flight from France during January in duced fears for the belga, which weakened from $0.1696 at the end of December to $0.1688%. In company with the weakness of the dollar, however, it served to bid up the guilder which reached a new post-devaluation high in January at $0.5592, as compared with a previous high of $0.5572 in December. The F ar Eastern exchanges remained pegged in narrow markets as a result of official support. The Canadian dollar recovered from a dis count of 7/64 per cent on December 31 to a discount of 1/32 per cent at the opening of trading on January 3, reached par by the eighth of the month, and went to a premium at the month end. In January the reported gold stock of the United States showed a reduction for the third successive month. The January decline amounted to $5,000,000, bringing the total drop since October 31 to $48,000,000. It was accompanied by a sim ilar reduction in the inactive gold account of the Treasury which coincided with an export of $5,000,000 of gold to France on January 3. Prelim inary figures of imports during January show receipts of $700,000 of gold from India at New York and $800,000 from A ustralia at the W est Coast, the smallest gross inflow into the United States since Sep tember, 1934. These imports were not reflected in the reported gold stock figure, as they were offset by other transactions. The inactive gold account on January 26 totaled $1,223,000,000. C en tra l B a n k R a te C h a n g es Effective January 5 the Bank of Norway lowered its discount rate from 4 to 3% per cent. The earlier rate had been in force since December 7, 1936. N e w C o m p o s ite W a g e In d e x The accompanying diagram shows a new composite wage index recently compiled at this bank to replace the index previously published. This index is based on data on the pay received by workers employed in a number of fields, including m anufacturing, railway transportation, mining, construction, public utilities, farms, retail trade, and several service lines. The old index, in the absence of current data on rates of pay or hourly earnings for im portant classes of workers such as factory employees, was based to a considerable extent on weekly earnings, whereas it is now possible to obtain data on average hourly earnings in most cases where data on hourly or daily rates of pay are not available. In earlier years, fluctuations in weekly earnings corre sponded in a general way with fluctuations in hourly earnings, but after 1929 weekly earnings were greatly affected by changes in the number of hours worked, owing first to part-tim e employment during the period of rapidly declining business, then to a deliberate policy of spreading the available employment by reducing workPER CEN T 120|---- * J'T............. ..... ............. ........ ..... ..... ..... .......... r------------^ 70.. . __ L 1919’20 ’21 ’2 2 ’23 ’2 4 ’25 ’2 6 ’2 7 ’2 8 ’29 ’30 ’31 ’3 2 ’3 3 ’3 4 ’35 ’36 37 Composite Index o f W ages (Federal Reserve Bank o f New York index; 1926 average= 100 per cent) FEDERAL RESERVE BANK OF NEW YORK 13 ing hours, and subsequently to a rather general reduc tion in regular working hours. Rates of pay were slow in turning down with the slackening of business activity following 1929, but par ticularly in the latter half of 1931 and in 1932 sharp reductions were made. Subsequent increases, most pro nounced in the second half of 1933 and in the first half of 1937, have more than offset the earlier decline, and the index for December, 1937 was 8 per cent higher than the general average of 1929-30. sugar deliveries rose, contrary to the usual movement, and lead output was increased. There was also an in crease in the dollar volume of machine tool orders, due to substantial foreign sales, which, as the accompanying diagram indicates, were in excess of domestic orders for the first time since December, 1933. Departm ent store, mail order house, and chain store sales, and the volume of check transactions throughout the country rose seasonally during December, but the movement of railway freight traffic showed somewhat more than the usual recession. Registrations of new P r o d u c tio n a n d T r a d e passenger cars are estimated at 185,000 units for Decem a decline of about 5,000 cars from the November From prelim inary evidence, it appears that the decline ber, figure, whereas increases occurred in 1935 and 1936. in business activity which began in September did not (Adjusted for seasonal variations, for year to year growth, proceed further in January. Steel operations, which had and where necessary for price changes) dropped from 84 per cent of capacity in August to 25 per cent in December, are estimated to have averaged some 1936 1937 what higher in January. Trade reports indicate that cotton textile mill operations also increased slightly during Dec. Oct. Nov. Dec. January, following a 32 per cent decline from August Industrial Production 116 79 52 38 to December. However, shipments of freight by railway, 97 108 92 83 after allowance for seasonal variation, compared unfavor Passenger 110 135 cars................................................ 79 61 108 62 Motor trucks................................................. 106 113 ably with the December level, electric power generation Bituminous coal............................................. 99 86 83 79 p 91 97 94 Crude petroleum........................................... 94 p declined more than is usual, output of bituminous coal Electric 94 96 90p power............................................... 87 p was curtailed, and automobile assemblies fell below the Wool 123 88 Cotton consumption.................................... 79 73 145r 58 consumption........................................ 45 49p December average. Sales of reporting departm ent stores 140 86 91p 81p 102 84 Meat packing................................................. 86 87 throughout the United States during the first three weeks Tobacco 107 95 94 products.......................................... 95 83 of January were about equal to those of the correspond Cement............................................................ 63 62 63 ing 1937 period, and, after allowance for the usual Machine tool orders*................................... 245 143 121 128 seasonal decline, appear to have been well m aintained as Employment 100 Employment, manufacturing, U. S.......... 100 95 90p compared with December sales. Employee hours, manufacturing, U. S. . . 96 88 81 73p Except for seasonal increases in retail trade, there was Construction 34 building contracts................... 25 28 19 a further substantial decline in the level of business Residential Nonresidential building and engineering 59 contracts..................................................... 46 54 63 operations during December. Production of steel ingots, reduced by one-third from the November level, was at Primary Distribution 84 loadings, merchandise and misc........ 71 68 66 the lowest rate since October, 1934, and recessions also Car 80 73 73 86 88 94p occurred in copper output, bituminous coal production, Car loadings, other....................................... 1028567 82 86 82 p and textile mill operations. Automobile assemblies, as to Consumer a result of disappointing sales to consumers and the Distribution 89 Department store sales, U. S..................... 93 87 85 store sales, 2nd District. . . . 90 82 81 83 well-stocked position of dealers, were reduced, and the Department Chain grocery sales r.................................... 94 98 98 98 p generation of electric power, which usually reaches a Other chain store sales................................ 99 98 93 96 Mail order house sales................................. 108 100 90 92 seasonal peak in December, showed little change from New 120r passenger car registrations............... 80r 115 65 p November. However, shoe production, which ordinarily M oney Payments falls off in December, was not substantially changed, Bank 74 Bank debits, outside New York C ity .. . . 67 63 64 p debits,.New York City..................... 50 40 P E R C EN T 40 43 p 72 69 Velocity of demand deposits, outside New York City * * ............................................. Velocity of demand deposits, New York City * * ......................................................... 74 56 47 44 50 General price level#...................................... Cost of living #.............................................. Composite index of wages f ....................... 159 147 102 158r 153 112 156 152 112 155p 151 p 111 p 70 p Preliminary. r Revised. * Not adjusted for price changes. ** 1919-1925 average=100 per cent. # 1913 average=100; not adjusted for trend. | 1926 average=100; not adjusted for trend. E m p lo y m e n t a n d P a y r o lls Domestic and Foreign Machine Tool Orders (1926 av. for total= 1 0 0 per cent; data from National Machine Tool Builders’ Association) The total number of people employed in m anufactur ing and nonm anufacturing industries reporting to the United States Bureau of Labor Statistics decreased by approximately 300,000 in December, following a reduc tion of nearly 570,000 workers in the preceding month. The engagement of about 320,000 additional people for Christmas trade in retail stores offset only in part a sharp reduction in working forces in other nonmanufac 14 MONTHLY REVIEW, FEBRUARY 1, 1938 turing lines and in m anufacturing industries. Part-tim e work occasioned an even greater decline in payrolls than in number of employees, the reduction for all reporting industries amounting to nearly $16,000,000 in weekly pay rolls despite a rise of $1,800,000 in retail trade payrolls. According to the Secretary of Labor there has been no evidence of any general tendency toward reduced wage rates. The decline in factory employment from November to December was the largest recorded for any like period since 1920, and the heaviest reductions in working forces occurred in the durable goods industries. Factory em ployment in December was 10 per cent below the cor responding month of 1936 and payrolls were 15 per cent lower. As the result of reduced employment, to gether with the shortening of the average length of the work week, this bank’s index of employee-hours in m anufacturing shows a net decline of 24 per cent from December, 1936 to December, 1937. From November to December, New York State factory employment and payrolls again declined by more than the usual seasonal proportions. This bank’s seasonally adjusted index of New York factory employment has declined for the past four months and that of payrolls for the past five m onths; in December employment was 4% per cent below the level of the previous December and payrolls were 6 per cent lower. All of the eleven m ajor industrial groups reported decreases in working forces in December, the largest reductions occurring in the metals and machinery, textile, and building m aterial industries. C o m m o d it y P r ic e s The rising tendency which prevailed during December in the general average of actively traded commodity prices was continued through the early part of January. D uring this upw ard movement, Moody’s index of 15 raw products rose about 5% per cent above the low point on November 24, though a relapse in the latter p art of January canceled part of this advance. The comprehen sive index of wholesale prices compiled by the Bureau of Labor Statistics, however, has not followed this movement. Since the close of September the latter index has receded with virtually no interruption, but the entire decline amounted to 8 per cent, as compared with a net decline of about 24 per cent in the basic com modity index since the middle of September. Among the individual commodities, the cash price of Number 1 grade of dark Northern wheat at Minneapolis reached $1.25% a bushel on January 13, the highest price in three months, but closed the month at $1.18 cents a bushel, or 4% cents above the closing level of December. On January 11, spot cotton established a new high since October at 8.72 cents a pound, but sub sequently declined to 8.43 cents a pound, showing a net gain of 5 points from December 31. Net increases oc curred also in the price of raw silk and in the average price of hogs in Chicago. The average price of steers, however, receded $1.38 to $8.08 a hundredweight, and cash corn, following a small gain in the early part of the month, declined to 57% cents a bushel, somewhat below the level prevailing at the end of December. PERCENT 1929 1930 1931 1932 1933 1934 1S25 1S36 1S37 1933 Wholesale Prices of Raw Materials and Finished Products (Bureau of Labor Statistics indexes; 1926 average= 1 0 0 per cent) Among the metals, the price of scrap steel at Chicago increased 25 cents to $13 a ton and lead rose 15 points to 4.90 cents a pound. The leading custom smelters advanced their price of copper to 10% cents a pound during the first half of January, but subsequently low ered it to 10 cents a pound, a net decrease of % cent for the month as a whole, and copper producers reduced their price 1 cent during the month to 10 cents a pound. A slight decline occurred in the price of tin during J anuary. The accompanying diagram compares the changes in finished goods and raw m aterial prices, as reflected in the Bureau of Labor Statistics indexes. From the end of September to January 8, the index of finished goods prices declined 6 per cent, reaching the lowest level since January, 1937, and subsequently has shown a tendency to flatten out near that level. The raw materials index declined much more rapidly through the end of November, recovered slightly in the middle of January, and since then has receded further to the lowest level since December, 1934, and 18 per cent below the April, 1937 peak. F o r e ig n T r a d e Merchandise exports from the United States during December increased slightly from the preceding month while imports declined, both of which movements were contrary to the usual seasonal tendencies. Exports, val ued at $320,000,000, showed an increase of 39 per cent over a year previous, while imports, amounting to $209,000,000, were 15 per cent less than a year ago—the first decrease from a year previous in imports since Decem ber, 1934. The increase over a year ago in the total value of merchandise exports, although shared in by the m ajority of individual commodities, was due especially to larger shipments of agricultural products, automobiles, indus trial and agricultural machinery, copper, iron and steel products, petroleum, and tobacco. On the other hand, most of the leading individual imports were smaller in volume and value than a year previous, notably agri cultural products and textiles. Exceptions occurred in the case of im ports of copper, crude rubber, and sugar, which were larger than in December, 1936. FEDERAL RESERVE BANK OF NEW YORK F or the calendar year 1937, exports totaled $3,346,000,000 and imports $3,084,000,000, in both cases the largest annual totals since 1930. Im ports showed greater gains than exports in the first half of the year, but exports considerably outstripped im ports in the last six months of 1937, so th at for the year as a whole, there was an excess of exports of $262,000,000, as compared with an export balance of $33,000,000 in 1936. While there was a general increase over 1936 in exports of individual commodities during 1937, shipments of ma chinery, automobiles, and metals accounted for more than half the total expansion in exports. Sizable gains were shown also in shipments of grains, lumber, and petroleum products. Among individual imports, the largest increases during 1937 occurred in receipts of such commodities as crude rubber, copper, tin, wool, burlap, newsprint paper, and flaxseed. Im ports of wheat, coffee, crude petroleum, and raw silk were smaller in volume than in 1936. B u ild in g Total contract awards in December, 1937 were little changed from a year earlier as reductions in residential, commercial and factory, and public utilities construction were offset by gains in contracts for buildings for public purposes and in public works. The total value of building and engineering contracts awarded in the 37 States covered by the F. W. Dodge Corporation reports was 9 per cent greater in 1937 than in 1936, as compared with an increase of 45 per cent from 1935 to 1936. The 1937 total was more than double that for 1933, the low year of the depression period, and represented the largest annual volume since 1931 but remained considerably below predepression levels, repre senting only 44 per cent of the dollar value of contracts in the peak year 1928. W ith the exception of public works, which declined approximately 19 per cent during the year, all of the m ajor classifications of construction showed at least moderate increases for the year. Percentage Change in Average Daily Contracts 37 States N.Y . and Northern N.J. Dec., 1937 compared with Dec., 1936 1937 compared with 1936 Dec., 1937 compared with Dec., 1936 1937 compared with 1936 Building Residential.................................... Commercial and factory............. Public purpose*............................ All building................................ — 36 — 22 +130 0 +13 +37 + 6 +17 — 21 — 25 + 175 +43 + 9 +25 +19 +15 Engineering Public works.................................. Public utilities.............................. All engineering......................... + — + 6 8 2 — 19 +35 — 7 +31 — 90 —41 + 9 +18 +13 All construction................... + 1 + 9 — 14 +14 * Includes educational, hospital, public, religious and memorial, and social and recreational building. In the New York and Northern New Jersey area total construction awards in 1937 were 14 per cent larger than in 1936, and all of the m ajor classifications showed greater volumes than in the preceding year. In Decem ber, however, total contracts were 14 per cent lower than in the corresponding month of 1936. D uring the first half of 1937, as the accompanying diagram indicates, privately financed construction work 15 M IL L IO N S OF D O LLA R S Daily Average Value of Publicly and Privately Financed Construction Contracts Awarded in 37 States (F . W . Dodge Corporation data) in the 37 States continued the upw ard trend which started in 1935. Since July, however, a sharp reduction has occurred in this class of construction, and the daily average rate of contracts for such work in December was lower than that for publicly financed construction for the first time since August, 1936. F or the entire year 1937, private work recorded a gain of 31 per cent over 1936, while public work was 14 per cent lower. D ata for the first three weeks of January indicate an increase of 8 per cent over December in the daily rate of construction contract awards in the 37 States. A large increase in heavy engineering construction more than offset a seasonal decline in residential building and a larger than seasonal decrease in nonresidential build ing. The gain in heavy engineering contracts reflected mainly awards for a New York City water supply project and for a sewage treatm ent plant at Buffalo. Compared with the corresponding period of January, 1936, total contracts were 4 per cent lower; heavy engineering awards were more than double the rate of a year ago, but this gain was offset by reductions of approximately 50 per cent in residential and nonresidential building. D e p a rtm e n t S tore T ra d e Total sales of the reporting departm ent stores in this district during the first three weeks of January were 0.7 per cent below the corresponding 1937 period; after allowance for the usual seasonal decline, sales appear to have been well m aintained between December and J anuary. For the month of December, total sales of the reporting departm ent stores in this district were only about 1 per cent lower than in December, 1936, and on an average daily basis, the decline was smaller than in November. The Rochester, Syracuse, and Capital D istrict stores recorded larger increases in average daily sales than in November, and the N orthern New York State, W est chester and Stamford, Hudson River Valley District, and Niagara Falls departm ent stores reported advances in the daily rate of sales following recessions in the pre vious month. Daily average sales of the New York and Brooklyn, Buffalo, N orthern New Jersey, Bridgeport, 16 MONTHLY REVIEW, FEBRUARY 1, 1938 P ER C E N T W h o le s a le T r a d e * 130 December sales of the reporting wholesale firms aver aged 18.2 per cent lower than in December, 1936, the 110 largest decrease from a year previous since March, 1933. The largest reductions in sales in more than four years 100 were reported by the grocery, shoe, paper, diamond, and jewelry concerns, and the largest decline since July, 1934 90 was registered by the cotton goods firms. Sales of m en’s clothing and rayon and silk goods also remained far 80 below those of a year ago, and there were moderate de 70 clines in sales of hardware, stationery, and drugs. For the year 1937, total sales of the reporting whole 60 sale firms averaged 3.4 per cent higher than for the year 1936, compared with an increase of 10.1 per cent 50 from 1935 to 1936, and an advance of 5.5 per cent from 40 1934 to 1935. At the end of December, the grocery, rayon and silk Sales and Stocks of Reporting Department Stores in Second Federal goods, drug, hardware, and diamond firms again reported Reserve District, Adjusted for Seasonal Variation larger stocks of merchandise on hand than a year pre (1 9 23 -2 5 a v e ra g e s 100 per cent) vious, while stocks of the jewelry concerns remained Southern New York State, and Central New York State below the 1936 level. Collections of accounts outstanding reporting stores were below those of a year ago, but the were slower in December than a year previous in prac declines were less than in November. Sales of the leading tically all reporting lines. * Beginning with the January, 1938 figures, the Bureau o f Domes apparel stores in this district were 6.7 per cent below tic and Foreign Commerce o f the United States Department of December, 1936, a smaller decline than in November. Commerce is taking over the work formerly done by Federal Reserve F or the year 1937, total sales of the reporting depart Banks in collecting data and issuing reports on wholesale trade ment stores in this district were 3.7 per cent higher conditions. than in 1936, as compared with an increase of 9.7 per cent from 1935 to 1936. Apparel store sales were only Per cent of Percentage accounts slightly higher than in 1936, following an increase of change outstanding nearly 15 per cent between 1935 and 1936. December, 1937 November 30 compared with collected in Percentage Stocks of merchandise in departm ent stores, at retail December, 1936 December change net sales valuation, were % per cent lower at the end of December, year 1937 Stock 1937, than at the end of December, 1936, the first yearcompared Commodity Net end of with to-year reduction since March, 1936. As is indicated in sales month 1936 year 1936 1937 the accompanying diagram, which shows indexes of sales — 4 .6 + 1 1 .3 95.0 9 7.9 + 4 .6 Men’s clothing......................... — 2 9.6 52.3 37.4 + 0 .2 and stocks of Second D istrict departm ent stores, both Cotton goods............................ — 22.7 4 9.4 — 2 .4 46.6 series adjusted for seasonal variation, stocks of mer Rayon and silk goods............ — 34.8* + 8 .9 * 68.3 59.3 — 1 .0* 37.2 —4 1 .6 — 5 .5 35.5 chandise declined considerably during the last four Shoes.......................................... Drugs and drug sundries. . . . — 6 .1 ** + 2 7** + 7 .2 * * — 6 .1 + 1 8 .6 47\7 + 4 .4 47l2 months of 1937, while sales held close to the level that Stationery................................ — 3 .2 72.2 + 4 .3 62.8 has prevailed since the latter p art of 1936. Collections Paper......................................... — 12.2 58.7 + 1 1 .1 51.9 — 43.7 + 2 3 .7 + 3 7 .0 of accounts outstanding were lower in December, 1937 } 25.1 } 18.1 — 4 0.5 — 7 .4 + 3 .3 than in December, 1936 in the departm ent stores, but Weighted average........... — 18.2 + 3 .4 63.7 59.0 were somewhat higher in the apparel stores. 120 Percentage change from a year ago Net sales Locality Dec. Jan. to Dec. Stock on hand end of month Per cent of accounts outstanding November 30 collected in December 1936 1937 New Y ork......................................... Buffalo............................................... Rochester.......................................... Syracuse............................................. Northern New Jersey..................... Bridgeport........................................ Elsewhere.......................................... Northern New York State . . . . Southern New York State........ Central New York State........... Hudson River Valley District.. Capital District........................... Westchester & Stamford........... Niagara Falls............................... — 0 .5 — 3 .7 + 4 .6 + 5 .3 — 5 .0 — 0 .3 + 1 .3 + 5 .3 — 1.7 — 7 .4 + 4 .9 + 1 .7 + 0 .8 + 9 .3 + 3 .4 + 5 .1 + 6 .6 + 9 .3 + 3 .1 + 7 .9 + 3 .4 — 1.6 + 3 .2 + 3 .2 + 4 .3 + 3 .7 + 0 .8 + 7 .0 — 1.3 + 7 .4 + 1 .7 + 6 .5 — 1.9 — 1.6 + 3 .2 45.7 50.6 50.7 4 0.8 43.7 45.1 37.1 4 4.8 44.6 48.5 39.7 4 4.0 4 2.6 35.4 All department stores........... — 0 .9 + 3 .7 — 0 .5 45.2 44.1 — 6.7 + 0 .1 — 0 .5 45.5 46.4 Apparel stores......................... * Quantity figures reported by the National Federation of Textiles, Incorporated, not included in weighted average for total wholesale trade. ** Reported by Department of Commerce. C h a in S to r e T r a d e Total December sales of the reporting chain store systems were unchanged from the December, 1936 level, and on an average daily basis, the year-to-year com parison was somewhat more favorable than in November. Sales of the ten cent and variety chain stores were slightly higher than in December, 1936, and sales of the candy chains declined by the smallest amount in a number of months. Grocery and shoe stores continued to report moderate reductions in sales. For the year 1937, total sales of the reporting chain stores were 2.9 per cent higher than for the year 1936, as compared with an increase of 8.4 per cent from 1935 to 1936, and an advance of 1.8 per cent from 1934 to 1935. FED ER AL RESERVE BANK OF N E W YORK MONTHLY REVIEW, FEBRUARY 1, 1938 fS*CENT B u sin e s s C o n d it io n s in th e U n it e d S ta te s (Summarized by the Board of Governors o f the Federal Eeserve System) I NDUSTRIAL output declined further in December and, according to pre liminary reports, showed little change in the first three weeks o f January. Prices o f raw materials, which had declined sharply in October and November, have been maintained since that time. P r o d u c t io n Index Number of Production of Manufactures and Minerals Combined, Adjusted for Seasonal Variation (1 9 2 3 -2 5 av e rage = 1 0 0 per cent) Volume o f industrial production declined further in December and the B oard's seasonally adjusted index was at 84 per cent o f the 1923-1925 average as compared with 89 in November. The decline reflected chiefly a continued sharp curtailment o f activity in the durable goods industries. Steel ingot pro duction averaged about 26 per cent o f capacity, output o f automobiles and plate glass was reduced considerably, and production o f lumber and cement also declined. Total output o f nondurable goods declined seasonally. There was a sharp decrease in output at silk mills, and cotton consumption declined further. At woolen mills and shoe factories, however, output was maintained, following a considerable period o f sharp decline. Activity at sugar refineries increased further. Mineral production in December, as in other recent months, was at a high level. Output o f crude petroleum and bituminous coal declined seasonally, while anthracite production increased somewhat. In the first three weeks o f January output o f steel and automobiles increased somewhat from the extreme low levels reached in the latter part of December. Value o f construction contracts awarded in December continued in about the same volume as in the preceding three months. During this period there was a decline in awards for privately financed projects, reflecting in large part further reductions in residential building, while publicly financed work increased. E m p l o y m e n t Index Numbers of Factory Employment and Payrolls, W ithout Adjustment for Seasonal Variation (1 9 23 -2 5 a v erage= 100 per cent) Factory employment and payrolls showed further declines between the middle o f November and the middle o f December, and employment at mines, on the railroads, and in the construction industry also continued to decrease. The decline in the number employed at factories was larger than in earlier months in industries producing durable goods, and was particularly marked in the steel, machinery, and automobile industries. For the nondurable goods industries as a group, the decline in December was about the same as in each o f the previous three months, after allowance for seasonal changes. There was some increase in employment at shoe factories and little change at plants pro ducing tobacco products, while most other industries in this group showed further decreases. D is t r ib u t io n PER CENT Department store sales increased in December by about the usual seasonal amount, and the B oard’ s adjusted index was 90 per cent o f the 1923-1925 average as compared with 91 per cent in November and an average o f 93 per cent in the first ten months o f the year. Mail order business and sales at variety stores showed somewhat more than the seasonal increase, while sales o f automobiles declined substantially. Preliminary reports indicate that in the first half o f January sales at department stores were at about the same level as a year ago. Railroad freight car loadings continued to decline in December, and in that month were 18 per cent lower than the average for the first half o f the year, making allowance for usual seasonal change. C o m m o d it y Group Price Indexes of Bureau of Labor Statistics (1 9 2 6 = 1 0 0 per cent) P r ic e s Wholesale prices o f basic commodities, after declining sharply in the autumn, showed little change in December and the first three weeks o f January. Grains, cotton, print cloths, steel scrap, and bituminous coal increased somewhat, while leather, rayon, and woodpulp prices were reduced. Prices o f a wide variety o f finished industrial products showed further declines, and livestock products continued to decrease sharply. B a n k C r e d it Excess reserves o f member banks increased in the four weeks ended Janu ary 19 from $1,010,000,000 to $1,370,000,000 and were larger than at any time since May 1. The post-holiday decline in money in circulation, which accounted for this growth o f excess reserves, was larger than the increase that occurred before Christmas. The volume o f loans at reporting member banks in 101 leading cities declined sharply in the five weeks ended January 19, while their holdings o f investments showed little net change. Declines occurred in loans to security brokers and dealers and in commercial loans, which decreased both in New York City and in other leading cities. Interbank balances were built up during the period, while other deposits decreased somewhat, reflecting largely the repay ment o f bank loans, partly offset by a return flow o f currency from circulation. M o n e y Excess Reserves o f Member Banks (Latest figures are for January 19) R a t e s a n d B o n d Y ie ld s The average rate on new issues of 91 day Treasury bills continued in January at less than % o f 1 per cent, and yields on Treasury notes and bonds declined to new low levels for recent months. Yields on the highest grade corporate bonds also declined somewhat, while those on the lower grade railroad issues rose.
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