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o f C r e d it a n d
S e c o n d

B u s in e s s

F e d e r a l

R e s e r v e

C o n d itio n s
D is t r ic t

February 1,1940

Federal Reserve Bank, New York

M o n e y M a r k e t in J a n u a r y
The volume o f excess reserves held by member banks
rose rapidly in January and before the end o f the month
reached new high levels in New Y ork City banks and also
in all member banks. Excess reserves o f the New Y ork
City banks on January 24 were $3,160,000,000, and the
total for all member banks was $5,590,000,000, or
$60,000,000 above the high point reached on October 25,
F or the country as a whole, the largest single factor in
the expansion o f bank reserves was the seasonal retire­
ment of currency from circulation. In the five weeks
ended January 24, the net amount o f currency returned
to all Federal Reserve Banks was $314,000,000. This
figure, however, is less than half the amount o f currency
paid out by the Reserve Banks between the summer low
point on July 26, 1939, and the seasonal peak on Decem­
ber 20, thus indicating a continuation o f the strong
upward trend in currency circulation, which has been
due in part to foreign demands fo r our currency, but
more largely to increased use o f currency in the United
A second factor of considerable importance in increas­
ing member bank reserves was the continued inflow of
gold from abroad. W hile a large part o f the current gold
movement is fo r foreign official accounts, so that pay­
ments fo r the gold by the Treasury do not go directly
into member bank reserves, the proceeds on the whole
have apparently been disbursed rapidly, as foreign
deposits in the Reserve Banks have shown little net
change. In the fou r weeks ended January 24, the
increase in United States gold stock amounted to
$259,000,000, and the gold flow was continuing in
substantial volume toward the close o f the month.
The third principal factor was an excess o f Govern­
ment disbursements over receipts. In the fo u r week
period the total o f cash in the Treasury and Treasury
deposits in Federal Reserve Banks was reduced by
$175,000,000, the disbursements tending to increase
member bank holdings of reserve funds by a like amount.
W hile in New Y ork City, as well as in other parts o f
the country, the seasonal return flow o f currency was a
factor in the increase in bank reserves, larger elements in
the case o f the New Y ork City banks were the disburse­
ment o f the proceeds o f incom ing gold, a substantial
inflow o f funds from other parts o f the country, and
redemptions o f maturing Treasury bills. The New Y ork
market bid successfully fo r only a small part of the

new Treasury bills issued in January, as most o f them
were taken by Chicago institutions which had placed
very high bids in order to obtain tax exempt securities
maturing shortly after A p ril 1, the date on which a tax
on bank deposits in the Chicago area is assessed. In addi­
tion, the Treasury bill issues on January 17 and on Janu­
ary 24 were $50,000,000 less than the amount m aturing
in each case. A s a result o f these two factors, the net
amount o f maturing bills redeemed by the Treasury in
New Y ork over the amount o f new bills sold here was
about $240,000,000 in the fou r weeks ended J anuary 24.
M o n ey R a te s

The unusual demands fo r Treasury bills and the reduced
supply resulted in the sale o f new issues in January at
prices so high that the new bills brought no interest yield
to most o f the purchasers. In fact, bids fo r a substantial
part o f the new issues were slightly above par, despite
the fact that these securities carry no interest coupons,
so that such bidders actually paid the Treasury fo r the
privilege of holding the bills fo r three months.
The market fo r the highest grade securities o f all
maturities was strong at the beginning o f January, and
yields declined further. Yields on high grade corporation
and municipal bonds reached new low levels, and yields
on Treasury notes and bonds declined to the lowest levels
since last summer. Thereafter the market for such

--------- ---------------- ----------------- ---------------- ----------------- -------- -------- ----------------6O.0.------

Excess Reserves of New York Central Reserve City Member Banks
and of All Member Banks in the United States



securities was subject to conflicting forces— on the one
hand there was the pressure of the increasing volume of
idle money in the banks, tending to lift prices and depress
yields still further, and on the other hand there were
reports from Europe which were interpreted as fore­
shadowing an intensification of the war which might
have greater effects on this country than have been
experienced thus far, and which, therefore, tended to
depress security prices and raise yields somewhat.
Security prices, consequently, fluctuated irregularly
during the latter part of the month, and in general
yields on high grade bonds showed a small net rise.
M oney Rates in New York
Jan. 31, 1939
Stock Exchange call loans.........
Stock Exchange 90 day loans . .
Prime commercial paper 4-6
m onths........................................
Bills— 90 day iinindorsed...........
Average yield on Treasury notes
(3-5 yea rs)................................
Average yield on Treasury bonds
(not callable within 1 2 years).
Average rate on latest Treasury
bill sale, 91 day issue..............
Federal Reserve Bank of New
Y ork discount rate..................
Federal Reserve Bank of New
Y ork buying rate for 90 day
indorsed bills.............................

Dec. 30, 1939

Jan. 30, 1940







x -y 8

'A rV s

H -H

0 .62

0 .4 6

0 .5 0

2 .4 5

2 .3 0

2 .3 4



0 .004







M e m b e r B a n k C r e d it

Total loans and investments o f weekly reporting New
Y ork City member banks declined substantially between
December 20 and January 3, but subsequently turned u p ­
ward again. The decline in the two weeks before Janu­
ary 3, which amounted to $453,000,000, reflected chiefly
reductions o f $198,000,000 in the holdings of Treasury
bills and $128,000,000 in loans to security brokers and
dealers supplemented by smaller reductions in holdings
of other Government securities and in commercial
and industrial loans. A n exchange of Treasury notes
maturing in March, 1940, fo r Treasury bonds affected
the composition of Government security portfolios, but
aside from this factor it appears that the New Y ork
City banks were sellers of Government bonds on
balance in this period when the market was especially
strong. In the follow ing three weeks Treasury bill hold­
ings decreased $40,000,000 further, as the New Y ork
City banks were outbid by Chicago banks fo r the new
issues, but Treasury bond holdings were increased
$152,000,000, largely in the week ended January 17,
when the market was weakened by selling from other
quarters, apparently induced by news from Europe.
Commercial and industrial loans and loans to security
brokers and dealers, however, showed some further
Total loans and investments of reporting member
banks in 100 other principal cities throughout the coun­
try increased $112,000,000 further in the five weeks ended
January 24, owing entirely to the heavy purchases of
Treasury bills by the Chicago banks, whose holdings
increased $294,000,000.
Commercial and industrial
loans showed a seasonal decline of $59,000,000, loans to
security brokers and dealers declined $43,000,000, and
there were small reductions in other types o f earning

assets. Total holdings o f Treasury bonds and notes by
these banks rose $72,000,000 in the week ended December
27, but declined $85,000,000 in the follow ing fou r weeks.
Demand deposits of the reporting banks declined sub­
stantially over the year end in New Y ork and elsewhere,
but in the follow ing three weeks rose to new high levels
in New Y ork City and increased considerably in other
cities also.
G o v e r n m e n t S e c u r it ie s

The Government security market continued firm dur­
ing the first ten days o f January. In this period the
average price o f Treasury bonds not callable within 12
years rose an additional *4 point, reflecting both smalllot buying and several sizable orders, and also some
operations involving switches o f holdings b y investors.
In the succeeding week, however, the average price o f
long term Treasury bonds eased about % o f a point,
as some selling pressure from various sections o f the
country appeared in the market, owing to interpreta­
tions placed on news o f foreign developments. A ccom ­
panying this selling there soon developed fairly heavy
buying by New Y ork City banks, and prices o f long
term Governm ent’s subsequently recovered nearly %
point. In the closing days o f the month, however, prices
tended to ease again, and the average price o f long term
issues at the end o f the month was about % o f a point
lower than at the end o f December. Treasury note prices
also advanced further early in January, but subsequently
declined somewhat, and at the close o f January the
average yield on 3 to 5 year maturities was 0.50 per cent,
as compared with 0.46 per cent at the end o f December.
The weekly sales o f Treasury bills during January
were subject to special demands connected with the future
use of these bills (which mature in A p ril) to obtain ex­
emption from taxes on bank deposits, particularly in the
Chicago Federal Keserve District. F o r the issue dated
January 3, to which tenders aggregated $580,000,000,
a larger amount than fo r any previous issue, and also
fo r the issue dated January 10, the accepted bids were
all at slight prem ium s; for the issue o f January 17 the
accepted bids were at prices at or slightly above par,
and fo r the January 24 issue the accepted bids ranged
from prices slightly above to slightly below par, the
average price being only slightly below par. The issue
dated January 31 was sold at an average rate o f 0.004
per cent, as com pared with 0.007 per cent on the last
issue o f December. Another factor operating to reduce
the yields on Treasury bills was a decline in the
amount outstanding as a result o f the m aturity during
the month o f the three issues which had been sold
three months previously in the increased amount o f
$150,000,000, in replacement o f which the Treasury sold
$100,000,000 issues during the past month. In the aggre­
gate, January bill maturities totaled $650,000,000, and
new issues $500,000,000.
C o m m e r c ia l P a p e r a n d B il l s

Average grade prime fo u r to six month commercial
paper continued to be sold principally within a range
o f % -% per cent during January. The amount sold
at % per cent, however, has diminished further, while
the amount sold at % per cent has increased, and


occasional sales have been reported at % per cent, when
paper o f unusually choice grade and short maturity
became available to dealers. As is usual in January,
the supply of commercial and mercantile notes acquired
by dealers increased somewhat, but the rapid move­
ment o f paper from dealers’ to investors’ portfolios
continued, as the bank investment demand remained
active. The amount o f paper outstanding through com­
mercial paper houses at the end of December totaled
$209,900,000, as compared with $214,400,000 at the end
o f November, and $186,900,000 in December, 1938. The
decline from November to December was less than the
usual seasonal decrease, and the indicated increase of
12 per cent over the level of the previous year is the
largest to appear since January, 1938.
No change occurred during January in the quiet
conditions that have prevailed in the bill market fo r
some time past, and dealers’ quoted rates were steady.
A t the end o f December, the value o f bills outstanding
totaled $233,000,000, an increase o f about $10,000,000
over November, the largest portion of which occurred
in the im port classification, which reached the largest
total in nearly two years. In addition, domestic ware­
house credit bills expanded to the highest total in a
year. The prim ary influences in the $37,000,000 decline
in outstandings from the level o f a year previous have
been reductions in bills based on goods stored in or
shipped between foreign countries, and in export bills.
(Millions of ^dollars)
Type of acceptance

Dec. 31,

N ov. 30,

Dec. 30,

Im port......................................................................
E xp ort......................................................................
Domestic shipm ent...............................................
Domestic warehouse credit..................................
Dollar exchange.....................................................
Based on goods stored in or shipped between
foreign countries................................................



10 2









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






The recovery in high grade corporate bonds which
occurred in the last three months o f 1939 carried through
the first ten days o f January, with a consequence that
the average price o f Aaa bonds computed by M o o d y ’s
Investors Service reached a new high level, exceeding
by about % point the high o f last July. Follow ing the
attainment o f this new high some net decline occurred
in top grade industrial and utility issues, and although
high grade railroad issues continued to advance, the
average price o f the several types o f Aaa bonds at the
close o f January was about % point below the peak
reached earlier in the month. Prim e municipal bonds
likewise rose to new highs during the first ten days o f
January, but subsequently eased somewhat, according
to the Standard Statistics Company yield average.
N e w F in a n c in g
D uring J anuary there was some increase in the amount
o f corporate financing to raise new capital, and some of
this increase represented equity capital. In the case of
almost every public flotation, the securities were sold
rather quickly by the offering syndicates, and invest­
ment demand caused the issues to go to small premiums
over the offering prices. The total o f about $30,000,000
of new capital raised through corporate bonds, notes,
and stocks offered to the public or sold privately, was the
largest fo r any month since last July, and the amount of
stock issues, at $12,000,000, exceeded that of any month
since last A pril. Common stock flotations of two aircraft
companies accounted fo r the bulk of these stock issues.
In addition to the new capital issues, corporate refunding
offerings totaled $135,000,000. A m ong the m ajor cor­
porate issues of the month were the follow in g:


S e c u r it y M a r k e t s
Stock prices tended to be firmer during the first week
o f January, but declined about 5 per cent during the
second week o f the month. Subsequently, the general
average o f prices fluctuated irregularly at levels slightly
above the midmonth low point. Both industrial and
railroad stocks showed some net decline fo r the month,
while public utility shares remained virtually unchanged.
Trading volume on the New Y ork Stock Exchange re­
mained at a very low figure fo r January, and daily
turnover reached as much as one million shares in only
two trading sessions. The general level o f share prices
at the end o f January was at least one-fourth lower
than in the first part o f 1937 when the level o f produ c­
tion and trade was no higher than at the present time.
Prices o f medium grade railroad bonds advanced
about 1 % points in the first week o f January, follow ing
an advance o f more than 1 point in the last week o f
December, and industrial and public utility bonds o f
the Baa grade also firmed somewhat. Subsequently the
movement was reversed, but both railroad and utility
Baa bonds ended the month somewhat higher than at
the end o f December.








American Gas and Electric Company refunding securi­
ties, of which $8,000,000 were ten year 2 % ’ a priced
at 102^ to yield about 2.47 per cent; $10,000,000
were twenty year 3 y 2 ’ a priced at 103*4 to yield
about 3.26 per cent; $12,000,000 were thirty year
3% ’s priced at 1 0 3 y2 to yield about 3.56 per cent;
also 355,600 shares of 4% per cent cumulative pre­
ferred stock offered first to holders of the out­
standing 6 per cent preferred stock, and then to
the public at 105
Chicago, Rock Island and Pacific Railway 2 y2 per
cent equipment trust certificates of 1940-47 awarded
at 100.815 (average interest cost of 2.29 per cent),
for refunding— privately sold
Consumers Power Company first mortgage 3 % per
cent bonds of 1969 priced at 105^ to yield about
2.97 per cent, for refunding
Consolidated Telegraph and Electrical Subway Com­
pany debenture 3 % ’s of 1960 sold privately at
102.22 to yield about 3.10 per cent, to repay inter­
company loans
Pennsylvania Water and Power Company refunding
mortgage and collateral trust S ^ ’s of 1970 priced
at 105 to yield about 3.00 per cent
Libby, McNeill and Libby first mortgage sinking
fund 4 per cent bonds of 1955 priced at 100,
chiefly for refunding
Lockheed Aircraft Corporation common stock priced
at $28.50 per share, for new capital purposes
Vultee Aircraft, Inc., common stock priced at $10
per share, for new capital purposes

The supply o f new m unicipal securities which came
on the market during the month was somewhat less than
usual. This situation helped the issuing authorities to



obtain high prices fo r their security flotations, and also
was probably a factor in causing prices o f outstanding
municipal issues to reach new highs around the 10th
o f the month. It was announced on January 24 that
two banking houses had purchased from the R econ­
struction Finance Corporation (at a price o f 103), and
placed privately, $20,050,000 o f Philadelphia Gas R ev­
enue Trust 3
per cent certificates due from 1940 to
1957. The certificates represent one half o f the unma­
tured portion o f a total issue of $41,000,000, which was
divided equally between the Reconstruction Finance
Corporation and Philadelphia bankers last July. Am ong
the other m unicipal bond offerings were $5,500,000 Los
Angeles, California, water works refunding revenue
2 % per cent and 3% per cent bonds of 1943-59, which
were awarded at par and reoffered to yield 1.25 to 3.00
p er cent.
Tem porary financing, totaling $145,000,000, included
$35,000,000 New Y ork City 0.25 per cent three month
revenue bills, $34,500,000 local housing authorities ’
0.45 per cent six month notes, and $29,500,000 Federal
Intermediate Credit Bank 0.75 per cent three month
and five month consolidated debentures.
Registration statements filed with the Securities and
Exchange Commission were not as numerous in January
as during other recent months, a fact which is partially
explainable b y the desire o f some companies to post­
pone registration o f securities until final year-end finan­
cial statements are available.
Those filed included
$25,000,000 Dayton Pow er and Light Company bonds,
$16,000,000 first mortgage bonds and 75,000 shares o f
preferred stock o f the Southwestern Gas and E lectric
Company, and a statement outlining the optional terms
upon which the Republic o f Panama proposes to refund
approxim ately $18,000,000 o f outstanding defaulted
debt held by Americans.
C e n tr a l B a n k R a t e C h a n g e s
Effective January 25 the discount rate o f the National
Bank o f Belgium was lowered from 2 % to 2 per cent,
or the third successive reduction since A pril, 1939, when
the rate was 4 per cent. The 2 per cent rate has been
in effect only once before (M ay 16, 1935 to M ay 9, 1938)
and is the lowest ever fixed by the National Bank of
Belgium since its establishment in 1850.
G o ld M o v e m e n ts
Im ports o f gold into the United States during January
appear to have been in smaller volume than in
December, but the amount o f gold held under ear­
mark fo r foreign account at the Federal Reserve Bank
o f New Y ork decreased about $40,000,000 during the
month, as compared with an increase o f $200,000,000
in December. Consequently the gold stock o f the United
States increased about $290,000,000 in January, or about
the same as in December, and reached a new high o f
approxim ately $17,935,000,000. A s is shown in the accom­
panying chart, gains to the United States gold stock
during the past three months have been among the
largest o f the whole period since 1934, excepting only
certain months marked b y crises abroad. A t the end
o f January, the amount o f gold held under earmark
fo r foreign account at the Federal Reserve Bank o f
New Y ork was about $1,125,000,000.

M onthly Change In United States Gold Stock
(January, 1940 figure partly estimated)

A s reported by the Department o f Commerce, gold
imports into the United States during the fou r weeks
ended January 24, totaled $229,200,000, o f which
$68,800,000 came from Canada, $37,700,000 from Japan,
$20,600,000 from the Netherlands, $19,600,000 from
England, $17,600,000 from South A frica, $16,700,000
from Norway, $15,300,000 from Sweden, $8,600,000 from
India, $6,100,000 from Australia, $5,000,000 from H ong
Kong, $2,300,000 from Italy, and $1,200,000 from
F o r e ig n E x c h a n g e s
Trading in foreign exchanges during January was
featured by continued strength in rates fo r the A llied
currencies, outside the official markets, and b y rather
wide and irregular fluctuations in quotations fo r Dutch
and Belgian exchanges.
A fte r opening the month at $3.95% , the pound-dollar
rate in the New Y ork market underwent a rather sharp
recession early in the month, accom panying a tem porary
reaction in the Amsterdam market. Quotations went
as low as $3.91% on January 5, three days p rior to the
application o f the British order-in-council imposing
closer official supervision over transfers o f sterling assets
from resident to nonresident accounts. Subsequently,
however, renewed strength developed in British exchange
and toward the end o f January the rate reached $4.00,
the highest level since early in November and only 2 %
cents below the new official London selling rate fo r
dollars, referred to below. In sym pathy with the spot
rate, forw ard sterling deliveries also showed a firmer
tendency; discounts on one and three month contracts
narrowed from 4 9 /1 6 and 5 1 /1 6 per cent per annum,
respectively, at the end o f December, to 2 % and 3% per
cent at the end o f January. The past m onth’s im prove­
ment in the pound sterling may be associated in some
part with a dim inution o f offerings as a result o f the
tightening o f exchange regulations on January 8. A
further contributing factor, however, was a tem porary
demand fo r sterling in New Y ork in the latter part o f
the month, fo r use in arbitrage transactions involving
the acquisition o f French francs against sales o f sterling
in neutral European markets.

Accom panying the tightening o f the exchange control
on January 8, the Bank o f E n gla n d ’s quotations fo r the
dollar and fo r other m ajor currencies were altered
slightly so as to narrow the “ spreads” between selling
and buying rates. The new pound-dollar rates o f $4.02%
and $4.03% compare with the form er rates o f $4.02 and
$4.04, which had been in effect since September 14. The
current London rates fo r French exchange are 176%
and 176% francs to the pound.
In this market, the franc continued to move approxi­
mately in line with sterling, although there was some
independent demand fo r French exchange in the latter
part o f the month. The New Y ork rate declined, along
with sterling, to $0.0221% on January 5, but appreciated
during the remainder o f the month to close at $0.0226%
fo r a net gain o f 2 % points fo r the month as a whole.
Stimulated largely by short covering, the rate fo r
Dutch guilders advanced 26 points during the first half
o f the month to $0.5354, the highest level since the begin­
ning o f the European war. A ccom panying reports that
the Low Countries were taking m ilitary precautions
against a possible violation o f their neutrality, how­
ever, the guilder subsequently declined considerably,
to reach $0.5313 on January 17. D utch exchange was
further depressed later in the month, coincident with
the announcement on January 24 o f the Netherlands
Governm ent’s plan to defray mobilization expenditures
and to reimburse the Bank and the Equalization Fund
for losses on sterling and gold operations, respectively,
by revaluing upward the National B an k ’s gold reserve.
A ccord in g to this proposal, the B an k ’s gold would be
marked up sufficiently to offset 18 per cent out o f the
22 per cent depreciation which the guilder had under­
gone in the exchange market. A t the end o f the month
the guilder was quoted at $0.5309, as against $0.5328
a month earlier.
The belga moved irregularly within a range o f $0.1687
and $0.1674 until January 24, when the rate firmed,
accom panying a reduction from 2 % to 2 per cent in
the Belgian National B ank ’s discount rate. Toward
the end o f January Belgian exchange rose to $0.1697,
the highest rate in about fou r months. In contrast to
the movements o f the guilder and the belga, the Swiss
franc continued to hold steady at about the rate which
has prevailed since early last October.
A m ong other exchanges, the Mexican peso declined
further in terms o f the dollar at the beginning o f the
month, but subsequently steadied at about $0.1672. This
rate represents a depreciation o f about 18 per cent from
the level existing p rior to the decline which began on
December 11. The Cuban peso, on the other hand,
showed some advance during the past month, its dis­
count against the dollar narrow ing to about 9 % per
cent, the smallest since the latter part o f last October.


Steel Mill A ctivity (In got output expressed
as percentages o f capacity)

month fell considerably behind shipments, indicating that
current production was sustained to a large extent by
the backlog o f orders accumulated during the fall o f
1939. There is some evidence, however, that steel con­
sumers are now using more steel than they are b u y­
ing. F o r example, automobile production, shown in the
diagram below, has been running at a level comparable
with that o f the 1937 model season, and the indicated
decline from December to January was smaller than in
any o f the preceding fo u r years.
Ordinarily railroad car loadings o f merchandise and
miscellaneous freight show little change between Decem­
ber and January, but figures fo r the first three weeks
o f January o f this year indicate a rather pronounced
decline from the high level reached in Decem ber; ship­
ments o f bulk freight, however, advanced seasonally.
W hile cotton textile mills maintained a high rate o f
activity in January, mill sales o f cotton goods were
reported to have continued below current production.
December data indicated a further rise in the general
level o f business activity, seasonal factors considered.
A lthough industrial production in general was lower

P r o d u c t io n a n d T r a d e
The substantial rise in business activity which oc­
curred in the last seven months o f 1939, was follow ed
by a downturn in January.
Steel production, which ordinarily begins a seasonal
rise in January, continued to recede from the high point
reached in November, as the accom panying diagram
indicates. New business booked by steel mills during the


Daily Average Production of Passenger Automobiles
and Trucks (January, 1940 estimated)



than in November, the reduction was smaller than
usual fo r the time o f year, and similarly, railroad car
loadings o f merchandise and miscellaneous freight de­
clined less than in most other years, although the decline
in shipments o f bulk freight was more pronounced than
usual. Retail trade showed a greater than seasonal rise
in December, owing mainly to exceptionally large ad­
vances in mail order house and chain store sales, while
department store sales rose about as usual. Electric
power production, which usually reaches the peak of
the year in December, increased more than seasonally.
(Adjusted for seasonal variations,"for'estimated long term trend,
and where necessary for price changes)
Industrial Production
Passenger cars........................................ ..
M otor trucks.................................................
Bituminous co a l...........................................
Crude petroleum..........................................
Electric p ow er...............................................
Cotton consum ption...................................
W ool consumption r .....................................
Meat packing................................................
Tobacco p roducts.........................................
Employment, manufacturing, U. S..........
Employee hours, manufacturing, U. S . . .
Residential building contracts..................
Nonresidential building and engineering
Primary Distribution
Car loadings, merchandise and m isc.......
Car loadings, other......................................
E xports...........................................................
Im ports...........................................................
Distribution to Consumer
Department store sales, U. S ....................
Department store sales, 2nd D istrict----Chain grocery sales......................................
Other chain store sales................................
Mail order house sales................................
New passenger car registrations...............

79 r

10 1



N ov.





12 2

12 0


85 p
98 p
10 1 p
12 2




10 2



94 p









78 r






10 1
10 0


10 0



10 2 p

95 p



93 p
72 p

10 1

Velocity of Deposits*
Velocity of demand deposits, outside New
York C ity (1919-25 a v era g e= 10 0 ) . . .
Velocity of demand deposits, New York
C ity (1919-25 a v era g e= 10 0 ) ...............









Cost of Living and Wages*
Cost of living (1913 average = 10 0 ) . . ..
Wage rates (1926 average = 100)...........







112 p

p Preliminary.


*N ot adjusted for trend.

industrial building and public works projects. Contracts
for public purpose buildings showed a large decline from
the high level o f December, 1938, when a heavy volume
of contracts fo r this type of building was awarded to
meet the dead-line for projects under the Public W orks
Adm inistration program. Public utility contracts were
also considerably below the high level o f a year previous
and residential contracts were slightly lower.
Reflecting especially gains early in the year, aggregate
construction contracts for 1939 were 11 per cent larger
than in 1938, and constituted the largest annual total
since 1930. The leading factor in this increase was a
35 per cent gain in residential building awards, which
were the largest since 1929. Contracts fo r commercial
and industrial building showed an increase o f 24 per
cent over 1938, and in the public works category a gain
of 13 per cent occurred. On the other hand, awards
fo r public purpose buildings were 27 per cent below the
1938 level, and public utility contracts were about un­
In the New Y ork and Northern New Jersey area, the
comparisons o f construction contracts fo r 1939 with
those awarded in 1938 were less favorable than fo r
the country as a whole. F or the year 1939, total con­
struction contracts were 4 per cent below the 1938 level,
despite a 21 per cent increase in residential building.
Commercial and industrial building contracts were
slightly larger than in 1938, as a result o f advances in
recent months in this type of building activity. In
December, contracts in the New Y ork and Northern
New Jersey area were 47 per cent below the previous
month and 44 per cent lower than in December, 1938.
Most o f the m ajor construction categories participated
in these declines; commercial and industrial building
was the only class o f construction to show an increase
over a year previous.
D uring the first three weeks o f January construction
contracts in the 37 States were awarded at a daily rate
39 per cent below the December average, largely because
of the inclusion of the aforementioned Tennessee V alley
A uthority p roject in the December figures. Compared
with the first three weeks of January, 1939, total con­
tracts declined 16 per cen t; the effect o f substantial de­
creases in nonresidential building and heavy engineering
construction was partially offset by a moderate increase
in contracts fo r residential building.

B u il d i n g

F o r e ig n T r a d e

Owing to the inclusion in the December total o f
$117,000,000 fo r a Tennessee V alley A uthority project,
the average daily volume of construction contracts dur­
ing December in the 37 States covered by the F. W .
Dodge Corporation survey was somewhat in excess of
the November figure and was the largest since December,
1938. Contracts both fo r residential construction, and
fo r all other types of building, including commercial,
industrial, and public purpose buildings, were about
one-third lower than in the preceding month, partly
in accordance with the usual tendency toward curtail­
ment at this season of the year. Compared with the
relatively large volume in December, 1938, aggregate
contract awards registered some decline, despite sub­
stantial increases in the categories of commercial and

Stimulated by some increase in foreign demands for
American goods follow ing the outbreak o f war in Europe,
and even before the war started, the value o f merchan­
dise exports from the United States in the second half
of 1939 showed progressively larger increases over the
corresponding months o f 1938. E xports in December
amounted to $368,000,000, which represented a 37 per
cent increase over December, 1938 and constituted the
largest export total fo r any month since March, 1930.
F o r the year 1939, however, the total value o f exports,
$3,177,000,000, was only slightly more than fo r 1938,
as decreases in the first half o f 1939 largely offset the
substantial gains in the latter part o f the year. But
with the exception o f 1937, the 1939 export total was
larger than in any year since 1930.


Throughout most o f 1939 the value o f imports into
this country was materially larger than in 1938, reflecting
especially industrial demands fo r such foreign raw
materials as crude rubber, tin, wool, and hides and
skins. Total receipts from abroad in December were
valued at $247,000,000, a gain o f 44 per cent over a
year previous. Imports fo r the calendar year 1939
amounted to $2,318,000,000, an increase of 18 per cent
over the 1938 level.
The resulting excess o f exports o f $859,000,000 in
1939 was substantially smaller than the 1938 export
balance— $1,134,000,000— but was larger than in any
other year since 1928.
The accom panying diagram shows the monthly values
o f merchandise exports from the United States during
1938 and 1939 to several countries, or groups o f coun­
tries, which have been the largest importers o f A m eri­
can goods. E xports to all the countries indicated in
the diagram, excluding Germany, were 22 per cent
higher in the second half o f 1939 than in the com pa­
rable months of 1938. E xports to France, reflecting in
considerable measure accelerated orders fo r Am erican
aircraft, were 70 per cent larger in the last half o f 1939
than in the corresponding months of 1938. In the same
period an increase o f 31 per cent occurred in Am erican
exports to Latin Am erican countries, indicating the
extent to which these nations have recently drawn upon
the United States fo r supplies, some o f which probably
were form erly purchased from European countries.
E xports to Canada were 27 per cent larger than in the
last six months o f 1938, and shipments to Japan and
to the United Kingdom showed small net advances fo r
the period as a whole, although in several months o f
1939 the totals were below the 1938 figures. Shipments
to Germany were a notable exception to the rising trend
o f Am erican exports, dropping from an average o f about


$13,000,000 a month in 1938 to around $8,000,000 in the
first eight months o f 1939 and to negligible amounts
since September.
C o m m o d i t y P r ic e s
Wholesale prices o f a number of commodities turned
downward during January, and in some cases quotations
reached the lowest levels since the outbreak of the war
or earlier. M oody's Investors Service index of 15 raw
products declined 6 per cent and thereby lost all o f its
December gain.
A fte r rising about three cents during the first few
days o f the month, wheat quotations declined about 9
cents subsequently and fell below $1.00 a bushel.
More favorable weather conditions in the winter wheat
area were an important factor in the decline. Cash
corn, aided by export sales and light country offerings,
advanced 2 cents to 5 9 % cents a bushel by the third
week in January, a new high level since September, but
receded subsequently to show little net change for the
month as a whole. H og quotations moved irregularly
lower and reached $5.19 a hundredweight, the lowest
price since August, 1934, while steers showed little net
change fo r the month. The average quotation o f cotton
at ten Southern markets declined 60 points to 10.16
cents a pound by January 23, accom panying weakness
in foreign markets and reports o f further large sales
o f 1938 loan cotton. Eaw silk quotations in New Y ork
declined almost continuously to $2.96 a pound, $1.63
below the ten year peak established December 26; the
sharp recession here accompanied falling prices in the
prim ary markets and uncertainty over the Japanese
Governm ent’s plan to control domestic silk consumption.
Hides declined 2 ^ cents to 12% cents a pound, and rub­
ber receded % cent to 18% cents a pound, the lowest levels
^ tL

Merchandise Exports from the United States to Various Countries, 1939 Compared with 1938 (December, 1939 data preliminary)




since early September. Raw sugar in New Y ork, after
dipping to 2.79 cents a pound, the lowest point since
last March, recovered as refiners offered guarantees
against price declines in refined sugar.
In the absence o f substantial new buying, prices in
the principal metal markets eased further during Janu­
ary. The prod u cers’ price o f electrolytic copper was
reduced to 12 cents a pound, % cent below the quota­
tion which had prevailed fo r more than three months.
Zinc was cut % cent to 5.50 cents a pound, and lead was
reduced ^ cent to 5.25 cents a pound, the lowest levels
since early September. Tin declined another 4 cents
during January to 45^4 cents a pound, a new low since
last February. Scrap steel receded somewhat further.
E m p l o y m e n t a n d P a y r o ll s
Em ploym ent at New Y ork State factories in December
showed little change from the November level, although
there is often some decrease at this time o f yea r; the
expansion o f about 2 per cent which occurred in fa c­
tory payrolls was seasonal in character. This bank’s
seasonally adjusted index o f New Y ork State factory
employment has advanced fo r seven consecutive months,
and in December was 12 per cent higher than in May,
1939. In December the average weekly wage o f em ploy­
ees in factories reporting to the New Y ork State D epart­
ment o f Labor was the highest fo r any month since the
fall o f 1930. Em ploym ent was 12 per cent above the
level o f December, 1938, and payrolls were 18 per cent
Expansion o f working forces at metal and machinery
plants continued during December. The largest advance
in this group occurred in the shipbuilding industry;
increased employment was also reported at automobile,
airplane, and railroad equipment shops. On the other
hand, continued seasonal losses at canning factories more
than offset gains in other sections o f the food industry,
and declines also occurred in the textile and clothing
F or the country as a whole an increase in nonagri­
cultural employment o f nearly 250,000 workers was
reported fo r December by the Department o f Labor, a
gain due prim arily to the hiring o f 390,000 additional
workers in the retail trade lines during the Christmas
season. There was a small contraseasonal gain in factory
employment, but construction, transportation, mining,
and the service industries all employed fewer workers
than in the previous month. Compared with a year
ago, nonagricultural industries were estimated to be
em ploying over 1,200,000 more workers in December,
The slight increase in factory employment in Decem­
ber was contrary to the usual decline at this time o f
year, and factory payrolls were 2 per cent greater than
in November. Em ploym ent in the automobile industry
was increased 16 per cent and payrolls 18 per cent,
follow ing the resumption o f production by a m ajor p ro­
ducer after settlement o f a strike. Other industries
which reported employment gains were foundries and
machine shops, steel mills, and meat packing firm s;
declines occurred in the canning, lumber, woolen, and
radio industries.

D e p a rtm e n t S tore T r a d e
F or the three weeks ended January 20, the daily
rate o f sales o f the reporting department stores in this
D istrict showed about the usual decline from the Decem­
ber average, but total sales were about 9 % per cent
higher than in the corresponding 1939 period.
In December, total sales o f the reporting department
stores in this D istrict were about 1 % per cent higher
than in December, 1938, and after allowing fo r one less
shopping day in December, 1939, the increase in average
daily sales amounted to approxim ately 5 % per cent,
a somewhat smaller year-to-year advance in daily average
sales than in November. The daily rate o f sales during
December, however, showed nearly all o f the usual
seasonal advance from November, which was a relatively
good month fo r retail trade. December sales o f the
leading apparel stores in this D istrict were about 3 %
per cent higher than in December, 1938, and on an
average daily basis the increase was approxim ately 7 %
per cent, as com pared with an increase o f 5 % per cent
in November.
Total sales o f the reporting department stores in this
District during the year 1939 were 2.2 per cent higher
than in 1938, as compared with a decrease o f 6.9 per
cent from 1937 to 1938. A pparel store sales were 2.1
per cent higher than in 1938, as com pared with a decrease
o f 9.2 per cent between 1937 and 1938.
Stocks o f merchandise on hand in the department
stores, at retail valuation, were practically the same at
the end o f December, 1939, as at the end o f December,
1938, while apparel store stocks continued lower. Collec­
tions during December were at a slightly lower rate
than in 1938 in the department stores, but were prac­
tically unchanged in the apparel stores.
Percentage change from
a year ago
Net sales

Per cent of
November 30
collected in

on hand
end of



— 1.0
+ 0 .8
+ 8 .7
+ 1 .7
— 1.0
+ 3 .8





to Dec.

New York and Brooklyn.............

Northern New York State.. . .
Southern New York State. . . .
Central New York State.........
Hudson River Valley District.
Westchester and Stamford.. . .
Niagara Falls............................

-1 .0

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

All department stores..........

+ 1 .3

+ 2 .2




Apparel stores.......................

+ 3 .7

+ 2 .1




Northern New Jersey..................

Department Store Sales and Stocks, Second Federal Reserve District
(1923-25 average == 100)





Sales, unadjusted................................................
Sales, seasonally adjusted................................. , 91r








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



Business C onditions in the U nited States

1 4 0 1-----------

(Summarized by the Board of Governors of the Federal Reserve System)



NDUSTRIAL activity, after a rapid rise in recent months, declined less than
seasonally in December. In the first half of January activity did not show
the usual seasonal increase. Distribution of commodities to consumers was
maintained in large volume.



P r o d u c tio n




Index of Physical Volume o f Industrial Produc­
tion, Adjusted for Seasonal Variation
(1923-25 average = 100 per cent)

Indexes of Value o f Department Store Sales and
Stocks, Adjusted for Seasonal Variation
(1923-25 average = 100 per cent)

Industrial output decreased in December, but by a smaller amount than
is usual at this season, with the consequence that the Board’s index, which
allows for usual seasonal variations, advanced further from 124 to 128 per
cent of the 1923-1925 average. As in other recent months, the rise in the index
continued to reflect mainly increased activity in industries producing durable
goods. Automobile production rose sharply in December owing to the
reopening of plants of one large producer which had been closed for almost
two months. Plate glass production also increased. At steel mills activity
was maintained near the high level that prevailed in October and November;
fourth quarter production of steel ingots was greater than in any other three
month period on record. Output of zinc and deliveries of tin continued to
increase in December, and lumber production declined less than seasonally.
In the nondurable goods industries, where production had been at high
levels throughout the autumn, changes in output in December were largely
seasonal in character. At woolen textile mills, however, there was a considerable
reduction in activity, and activity at silk mills declined to a low level, reflect­
ing in part continued high prices of raw silk. Output of crude petroleum
continued at a high rate in December, while coal production was reduced,
following a large volume of output in the two preceding months.
In the first half of January steel ingot production was at a somewhat
lower level than in December, while automobile assemblies were maintained
at about the same high rate as in the previous month.
Value of construction contracts awarded, as reported by the F. W. Dodge
Corporation, increased further in December, owing to the inclusion in the
December figures of a large amount for a dam under construction by the
Tennessee Valley Authority. Contracts for private building, both residential
and nonresidential, declined seasonally.
E m ploym en t

According to reports from leading industrial States, factory employment
decreased less than seasonally in December and payrolls showed a further
D is t r ib u t io n

Distribution of commodities to consumers increased further in December.
Sales at variety stores showed about the usual sharp rise and sales at depart­
ment stores and mail order houses increased more than seasonally.
Freight car loadings declined by more than the usual seasonal amount from
November to December, reflecting chiefly a further reduction in coal ship­
ments and a decrease in loadings of ore, which had been at a high level in
the previous month.
C o m m o d it y P r ic e s
Index o f W holesale Prices Compiled by the
United States Bureau o f Labor Statistics
(1926 = 100 per cent)

Prices of wheat, which had advanced sharply early in December and
continued at the higher level during the rest of the month, declined considerably
in the first half of January. Smaller decreases occurred in some other com­
modities, including hides, tin, and zinc. Prices of most other basic commodities,
such as cotton, wool, lead, and steel scrap, showed little change.
G o v e r n m e n t S e c u r it y M a r k e t

Prices of United States Government securities continued to advance during
December and were steady during the first two weeks of January.
B a n k C r e d it

Wednesday Figures for Reporting Member Banks
in 101 Leading Cities (Latest figures
are for January 10)

Total loans and investments of reporting member banks in 101 leading
cities declined in the four weeks ended January 10, following an increase
during the first half of December. These changes reflected largely a temporary
rise and a subsequent decline in loans to security brokers and dealers in
connection with the Government’s flotation of a new issue of bonds. Total
holdings of United States Government obligations at city banks showed
little net change during the period.
As a result chiefly of further increases in gold stock as well as the postholiday return of currency from circulation, excess reserves of member banks
increased sharply in the four weeks ended January 10.