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M O N T H L Y REVIEW
O f Credit and Business Conditions
F E D E R A L

R E S E R V E

26

V o l.

B A N K

FEBRUARY

1,

O F

N E W

Y O R K

1944

No. 2

T h e F e d e r a l B u d g e t a n d th e F o u r th W a r L o a n
The Federal budget estimates for the next fiscal year (July

financial support of the war effort.

War expenditures at a

1, 1944-June 30, 1945) provide a measure of the war financ­

peak level, and their corollary (under existing tax rates) of

ing job to be done in coming months.

War expenditures, the

monthly deficits approaching $5,000,000,000 afford no ground

dynamic and dominant element in the Federal budget, had

for relaxation of efforts by individuals and other nonbank

evidenced, during the second half of 1943, a tendency to

investors to buy and to hold War bonds in the largest pos­
sible amounts.

flatten out, at a general level
approaching $7,500,000,000 a
month. That expenditure level

Federal Government Receipts, Expenditures, and Borrowing*

The purchase of War bonds

BILLIONS
OF DOLLARS

serves a number of ends, of
reciprocal advantage to citizen

has been projected into the

and country.

estimates for the next fiscal
year.

It reflects the prospect

and demonstrating unity in sup­

of continued large-scale military

port of the Governments finan­

operations, permitting changes

cial needs; it retards the com­

of kind and composition of ex­

petition of private spending

penditures rather than aggre­
gate size.

It fulfills a major

"home-front” duty of achieving

with essential Government war

In the preparation

spending; it eases the pressures

of the budget estimates no at­

which private spending exerts

tempt was made to forecast

against prices and thus helps to

when military operations might

protect the purchasing power

come to an end in Europe or

of the dollar; it provides pri­

in Asia.

The unpredictable

fortunes of war will determine
when reductions in war expen­

* Compiled from Daily Statem ent o f the United States Treasury and Presi­
dent’s Budget Message of January 13, 1944. Data are for fiscal years ending
June 30; 1944 and 1945 estimated.
t Estimates for fiscal years ending June 30, 1944 and June 30, 1945 do not
allow for increases in tax rates.

ditures can begin.

vate resources for use in meet­
ing the problems of postwar
adjustments, for spending when
civilian goods are again plenti­

Meanwhile, military and financial officers of the Govern­

ful, and for the "rainy day” of the individual investor.

ment must carry on under the assumption of continuing all-

The Fourth War Loan drive, which opened January 18,

out war on all fronts, and the rank and file of American

presents an opportunity to fulfill a duty of citizenship and to

citizens must carry on under the same assumption, maintain­

promote private financial well-being. It demands the unstinted
support of all.

ing and wherever possible enlarging the measure of their

*

LET’ S

F O U R T H




W A R

/

4

tl

L O A N

BACK
D R I V E ,

THE

J A N U A R Y

ATTACK
18

—

F E B R U A R Y

*
15

MONTHLY REVIEW, FEBRUARY 1, 1944

10

M O N E Y

M A R K E T

IN

JA N U A R Y
Distribution of Excess Reserves of Member Banks*

The money market during the past month showed little
of the easing experienced in January of past years, when there
was a seasonal return flow of currency to the banks and a flow
of funds to the New York money market for investment.

A

moderate demand for various classes of Government securities
did develop in the early part of the month, but tended to dry
up as the opening of the Fourth War Loan drive approached.
At the same time, offerings of some types of securities— notably
Treasury certificates of indebtedness— tended to increase, re­
flecting the desire of institutional investors to dispose of tem­
porary investments in order to increase their available funds
for the purchase of new securities offered in the drive.
Currency circulation, which in peacetime has almost in­
variably declined during January, increased slightly further
during January of this year.

The rise, however, was smaller

than that of January 1943, partly, no doubt, as a result
of currency payments for War bond purchases during the
early stages of the Fourth War Loan drive.

1942.

1943

1944

* Monthly averages of daily figures. Data for January 1944 partly estimated.

Aside from the

increase in currency circulation, member banks lost reserve

serve Banks’ holdings of Treasury bills increased $128,000,000

funds to the extent of approximately $325,000,000 through

and certificates of indebtedness $270,000,000. Transactions in
other classes of Government securities by the Reserve Banks

post-Christmas contraction in outstanding Federal Reserve
tions (transfers of gold to foreign accounts and enlarged

were limited and holdings showed little change. Member
bank borrowings from the Reserve Banks contracted from

foreign central bank and government deposits on the books

$101,000,000 on December 29 to $24,000,000 on January 26.

"float” and about $160,000,000 through foreign account opera­

of the Federal Reserve Banks).

At the same time, reserve

The central reserve city banks of New York gained reserve

requirements showed a rise of roughly $175,000,000, asso­

funds to the extent of about $360,000,000 through Treasury
operations during the four weeks ended January 26, as a

ciated with expansion in the level of private funds on deposit
with the member banks.
The losses of reserve balances and enlarged requirements
were roughly offset by a reduction in Treasury deposits with
the Federal Reserve Banks (from $764,000,000 December 29
and $961,000,000 January 5 to $351,000,000 January 26)
and net purchases of Government securities by the Federal
Reserve Banks.
As a result, excess reserves of all member banks maintained
an average level of about $1,100,000,000 during January,
closely corresponding to the average level prevailing toward

result principally of the drawing down of Treasury deposits
with the Reserve Banks and the related slackening of with­
drawals from War Loan deposit accounts. This gain of funds
provided an offset to enlarged required reserves and loss of
reserve balances through gold and foreign account operations.
There was an outflow of commercial and financial funds from
New York during the month, probably associated with the
accumulating of funds in other centers by nonbanking investors
for payments upon subscriptions for securities to be purchased
in the Fourth War Loan, but the outflow was much smaller

the end of December but somewhat above the holdings of

than that occurring during the corresponding period of the

November and December.

Third War Loan.

The central reserve city banks

The Treasury Department has requested

of New York and Chicago continued to keep their funds
Changes in Holdings of U. S. Government Securities
by Federal Reserve Banks, Direct and Guaranteed
(In millions of dollars)

fully employed and were practically without excess reserves.
Presumably the distribution of the excess reserves in January
was similar to that prevailing in the immediately preceding
months— seven to eight hundred million held by "country”

Week ended

banks and the remainder by banks in the reserve city
classification.
Reflecting the needs of individual member banks for addi­
tional reserves and the character of offerings in the Govern­

Dec.
Dec.

1943
1 ...............
8 ...............

Dec. 2 2 ...............
Dec. 2 9 ...............
1944
5 ...............

ment security market, the securities purchased by the Reserve

Jan.

Banks were chiefly Treasury bills and certificates of indebted­

Jan. 1 9 ...............
Jan. 2 6 ...............

ness.

During the four weeks ended January 26 Federal Re-




Treasury
bills

Certificates
of indebt­
edness

Treasury
notes

Bonds

4* 2
+375
- 73
+426
- 81

+ 66
+176
+101
+ 87
+134

+ 12
+
5
- 34
0
0

+
3
+ 13
+
4
+ 25
+ 10

+ 83
+569
2
+538
+ 63

- 43
+165
8
+ 14

+
+
+
+

+

+
+
+
+

+ 36
+204
+ 58
+113

70
37
64
98

1
0
0
0

8
2
2
1

Total

FED ERAL RESERVE B A N K OF NEW Y O R K

that subscriptions to securities being offered in the drive be
entered and paid for through the banking institutions where
the funds of the subscribers are located, in order to avoid
unnecessary shifts of deposit balances from one part of the
country or from one institution to another.

11

M EM B ER B A N K CR ED IT
The contraction, since the latter part of October 1943, in
loans and investments of the weekly reporting member banks
in 101 leading cities was interrupted during the statement
week ended January 12, 1944. In the following week, total

In an effort to avoid padding of subscriptions to the Fourth
War Loan drive with speculative, bank financed purchases,

made net additions to their holdings of Government securi­

the Secretary of the Treasury early in January addressed a

ties, partly by purchasing securities offered by nonbanking

letter to banks throughout the country stating that loans to

investors seeking to enlarge their capacity to purchase new
issues during the Fourth War Loan drive.

finance speculative subscriptions are not consistent with the
Treasury’s policy and program.

earning assets of the banks rose sharply, as member banks

Shortly afterward the Presi­

During the four weeks ended January 19, the weekly

dent of this bank (and the Presidents of the other Federal

reporting member banks in New York City showed a net

Reserve Banks)

addressed letters to security dealers and

increase of 98 million dollars in their holdings of Government

brokers requesting them to limit the amount of their sub­

securities.

scriptions, in the drive, to the amount of securities that they

indebtedness, Treasury bonds, and a small amount of guar­

These banks were net purchasers of certificates of

would be able to retail to customers, other than commercial

anteed obligations; Treasury bill and note portfolios were

banks, for investment after the drive has closed, plus the

reduced moderately.

amount required for the investment of their own funds to

in 100 cities increased their holdings of Government securi­

the extent these are, and are expected to continue to be, idle.
At the same time, the public has been asked to refrain from

were limited to bonds and a small amount of bills; they were

entering subscriptions if subsequent prompt sale of the securi­

net sellers of other types of securities.

ties is intended.

Outside New York the reporting banks

ties by 85 million dollars.

Their net purchases, however,

Over the same period, December 22, 1943 to January 19,

Discouragement of speculative subscriptions, which were

1944, total loans of the reporting banks declined 234 million

a growing element in the first three War Loan drives and

dollars chiefly as a result of contraction in the commercial,

introduced a fictitious element into the record of sales to
nonbank subscribers, naturally will have the effect of reduc­

industrial, and agricultural loan and in the "all other” loan

ing the volume of securities sold in the Fourth drive below

City, loans to banks were reduced 50 million dollars.

the volume that would otherwise have been reached. It is,
however, in terms of the amount of securities purchased by

of these declines, however, were offset by increases in loans
for purchasing or carrying securities, apparently in anticipa­

individuals and other nonbanking investors and retained by
them, that the real success of the Fourth War Loan drive will

tion of the Fourth War Loan drive.

In New York
Part

Most of the increase in

this category in New York City represented a rise in loans
to dealers, while outside New York loans to others were the

be measured.

principal factor.
Although adjusted demand deposits (primarily deposits of

Changes in Holdings of U. S. Government Securities
by the Weekly Reporting Member Banks
(In millions of dollars)

Week ended

(including consumer credit) classifications.

Certificates
of
Treasury indebted­ Treasury
bills
ness
notes

Bonds

individuals and business concerns) rose 677 million dollars
further between December 22 and January 19, in neither

Guaranteed
obligations

Total

N<?w York City
1943
Dec. 1 ...............
Dec. 8 ...............
Dec. 1 5 ...............
Dec. 2 2 ...............
Dec. 2 9 ...............

+112
-1 5 7
+
3
-1 2 1
+ 63

—
—
—
—
—

28
28
73
77
8

—

4
0
— 56
— 19
— 6

—
—
—
+
+

6
28
10
12
21

_ 15
— 20
+ 12
+ 6
2
+

+ 59
-2 3 3
-1 2 4
-1 9 9
+ 72

1944
Jan. 5 ...............
Jan. 1 2 ...............
Jan. 1 9 ...............
Jan. 2 6 ...............

- 65
-1 5 9
+ 83
-2 3 1

+
+
+
+

16
33
39
56

+ 10
— 20
— 23
~~ 8

+ 49
25
+ 60
+ 68

_
8
_
4
+ 40
+ 11

+
2
-1 7 5
+199
-1 0 4

New York City nor the 100 other cities did such deposits
re-attain the level of September 8, just prior to the Third
War Loan drive. However, Government deposits with the
reporting banks, although drawn down more than 7 billion
dollars since the peak of October 20, still amounted to over
6 billion on January 19, at the opening of the Fourth War
Loan drive, compared with 2.8 billion before the Third drive.
SEC U R ITY M A R K E TS
During January, activity in the Government security market

100 Other Cities

reflected for the most part the adjustment of investment

1943
Dec. 1 ...............
Dec. 8 ...............
Dec. 1 5 ...............
Dec. 2 2 ...............
Dec. 2 9 ...............

-1 0 3
-2 0 7
+ 58
-2 9 6
- 23

+
—
—
—
—

10
79
28
36
86

— 5
— 26
— 35
— 14
7
-

2
+
+ 26
+ 40
3
- 14

+
+

1
1
12
— 5
2
-

- 95
-2 8 5
+ 23
-3 5 4
-1 3 2

1944
5 ...............
1 2 ...............
1 9 ...............
2 6 ...............

4* 6
+ 70
- 19
+166

—
+
+
+

96
74
43
80

— 13
— 5
+ 9
6

+ 26
+ 52
+ 71
+ 105

_
—
+

- 78
+186
+109
+337

Jan.
Jan.
Jan.
Jan.




1
5
5
8

positions by nonbanking groups, in preparation for the Fourth
War Loan drive, and adjustments of investment and reserve
positions by banks. Nonbanking investors sold Treasury bonds
and certificates of indebtedness, as a means of increasing their
capacities to purchase securities being offered in the Fourth
War Loan drive, but apparently added moderately to their

MONTHLY REVIEW, FEBRUARY 1, 1944

12

portfolios of Treasury notes. Securities sold by nonbank in­
vestors were absorbed by commercial banks and dealers, and

for high grade industrial and utility bonds, bond prices in
general advanced during the month. Railroad bonds, partic­

On the other

ularly the medium and lower grade issues, showed the most

hand, the Federal Reserve Banks purchased certificates from

pronounced gains. Moody’s index of yields on the Baa bonds

to some extent by the Federal Reserve Banks.

The bulk of

declined from 3.80 per cent at the end of December to 3.74

the trading in bonds was in tax-exempt issues and in taxable

per cent at the end of January, a record low for the index.

issues eligible for bank holding, and yields on these securities

Moody’s index of Aaa bond yields stood at 2.74 per cent toward

some banks experiencing losses of reserve funds.

displayed a tendency to decline as the month progressed. Cer­

the end of the month, showing little net change since Decem­

tificates of indebtedness, particularly those sold in the previous

ber 31. Standard and Poor’s index of municipal bond yields

drives, were in supply but there was an active demand for

continued to decline, and on January 26 was at 1.88 per cent,

the certificates maturing February 1. Holders of these certi­

about the same level as mid-November.

ficates on January 24 were offered the opportunity to exchange

Share prices, as measured by Standard and Poor’s index of 90

them for 0.90 per cent 13 months’ Treasury notes. At the

combined stocks, rose approximately 1 per cent during Janu­

close of the month the new notes were quoted on a yield

ary. While prices of railroad issues increased about 6 per

basis of 0.85 per cent bid, when issued.
The volume of trading in the corporate bond market during
January rose to the highest level since early last spring. Except

cent, the gain of the combined index was modified by the
industrial and utility groups, which showed only small net
changes.

FE D E R A L

B U D G E T

E S T IM A T E S

On January 13 the President sent to Congress a budget
for the fiscal year 1944-1945 which anticipates total expendi­
tures ( including net outlays of Government corporations other

FO R

F IS C A L

Y E A R

1945

nitions, (2 ) pay, subsistence, agricultural lend-lease, and other
civilian war activities, and (3 ) war construction.

War con­

struction has been of declining importance in the total since

than for debt retirement) of 100 billion dollars— about Vi

1942, although the average annual rate of expenditure (10.9

billion more than the revised estimates for the current fiscal
Net receipts (without allowance

billion) in the November 1942-December 1943 period was
slightly higher than in December 1941-October 1942. Muni­

for new tax legislation) are estimated at 41 billion, slightly

tions expenditures, on the other hand, have continued to

year ending June 30, 1944.

less than estimates for the current fiscal year; thus an indi­

increase both absolutely and relative to the total, and are

cated deficit of 59 billion is left to be met by borrowing.
Somewhat more than 1 billion additional will have to be
borrowed to redeem guaranteed debt obligations, so that the

expected to reach a peak in the first half of 1944 with an

estimated rise in the direct public debt totals 60 billion dollars
— from 198 billion on June 30, 1944 to 258 billion on
June 30, 1945.
E x p e n d it u r e s

average annual rate estimated at 62 billion dollars.

Pay,

subsistence, and other war expenditures also have increased
in absolute amount and in proportion to the total.
Expenditures other than those specifically classified for war
purposes are estimated at 9.8 billion dollars for the fiscal year
1945, an increase of 2.5 billion over the estimate for the cur­
rent fiscal year. Interest on the public debt, estimated at

War expenditures, of course, continue to dominate the
budget picture. On the assumption that the war will con­
tinue through June 30, 1945, such expenditures are tentatively
estimated at 90 billion dollars (including net war outlays of

3.75 billion dollars in the 1945 budget, accounts for 1.1 billion
of the increase over the preceding year. Refunds of taxes in
the amount of 1.8 billion are the other important factor, being

Government corporations) in the fiscal year 1945, compared

1.4 billion higher than the estimate for the current fiscal year.

with a revised estimate of 92 billion for the current fiscal
year.

In order to achieve the estimate for the current year,

War Expenditures
(Including net outlays of Government corporations)

war expenditures during January-June 1944 will have to
reach an average annual rate of 97 billion dollars.

(The

average annual rate during July-December 1943 was about
87 billion.)

Period

From the inception of the defense program in

July 1940 through December 1943, war expenditures totaled
153 billion dollars.

If the budget estimates are realized, these

cumulative expenditures will rise to 202 billion by the end
of June 1944 and to 292 billion by June 30, 1945.
In his budget message, the President included the following

Preparedness:
J u ly 1940-N ovem ber 1 9 4 1 ..........
D efensive w ar:
Decem ber 1941-O ctober 1942 . .
Aggressive deploym ent:
N o vem b er 1942-D ecem ber 1943
O ffensive w ar:
Jan u ary 1944-June 1944f ...........
J u ly 1944-June 1945
(fiscal yea r 1 9 4 5 )........................

E s tim a te d per cent of to ta l
Average
annual
P a y,
W ar
ra te
M u n itio n s ,
construc­
( In billions including
subsist­
ence*
tion
of dollars)
ships
9 .8

50

4 5 .7

56

22

20
22

8 3 .5

59

28

13

9 7 .0

64

30

6

9 0 .0

63

33

4

30

table showing the rate of war expenditures in different periods
and the percentage distribution of the total between (1 ) mu­




♦Including als o 'a g ric u ltu ra l lend-lease and o ther civilian w a r activitie s.
fOn basis of 92a,billion^dollars fo r fiscal yea r 1944.

FEDERAL RESERVE BANK OF NEW YORK
Summary of the Federal Budget, 1943-45
(In millions of dollars)
Fiscal years ending June 30
Classification

13

future payments on public debt account (such as accrued
interest on Savings bonds and issuance of postwar excess
profits tax refund bonds). In the budget derivation of net
public borrowing, adjustment is also made to include refund­
able corporation excess profits tax payments as public borrow­

1943
Actual

1944
Est.

1945

Receipts
Direct taxes on individuals..............................
Direct taxes on corporations...........................
Employment taxes.............................................
Excise taxes and customs.................................
Miscellaneous receipts.......................................

6,952
9,916
1,508
4,101
907

19,423
14,137
1,882
4,694
2,443

18,113
15,404
3,182
4,690
2,037

Total receipts..................................................
Less transfer to old age trust fund................

23,385
1,103

42,578
1,392

43,425
2,656

1945, compared with 54.2 billion in fiscal 1944.
The amount of this borrowing which will have to be

Est.

ing rather than as tax receipts.

After these adjustments, net

public borrowing is estimated at 52.7 billion dollars for fiscal

Net receipts.....................................................

22,282

41,186

40,769

obtained through the banking system will depend, of course,

Expenditures
Regular budget
W a r....................................................................
Interest on public debt.................................
Veterans’ pensions and benefits..................
Refunds............................................................
Other..................................................................

72,109
1,808
600
79
3,583

88,500
2,650
865
411
3,525

88,200

viduals, corporations, and institutional investors.

T otal..............................................................

78,179

95,951

97,954

on the net absorption of Government securities by indi­

Government corporations
(net expenditures)
W a r....................................................................
Other (excluding debt retirement).............

2,976
-1 ,4 7 6

Total.............................................................

3,750
1,252
1,799
2,953

3,500
175

1,800
15

1,500

3,325

1,815

Total expenditures.............................................

79,679

99,276

99,769

Excess of expenditures..........................................

57,397

58,090

59,000

Trust account net expenditures......................
Retirement of Government corporation debt
Increase in Treasury balance...........................

-

333
694
6,515

-

-

2

2,770
46

-

47
1,346

101

Net increase in public debt..................................

64,274

60,904

60,400

Net borrowing from the public............................

60,564

54,227

52,694

During the

calendar year 1943, net takings by nonbanking investors
(excluding Federal agencies and trust funds) amounted to
about 28 billion dollars.

This total consisted of 9.0 billion

dollars of Series E War Savings bonds, 3.3 billion of Series F
and G bonds, 2.2 billion of Tax and Savings notes, about
5.3 billion taken by insurance companies and savings banks,
and about 8.2 billion of market issues taken by individuals,
corporations, etc.

Unless this net absorption by nonbanking

investors is increased substantially, the banking system will
still be called upon to furnish between 20 and 25 billion
annually if the deficit is of the magnitude indicated by the
budget estimates.
CONSTRUCTION

R e ce ipts

from

T a x a t io n

and

B o r r o w in g

Net receipts from taxation and miscellaneous sources are

The volume of construction in the United States, after an
unprecedented increase in 1942, declined sharply in 1943, as

estimated, on the basis of existing legislation, at 41 billion

the peak in construction for war purposes was passed and as

dollars for fiscal 1945.

restrictions were continued in force on nonessential civilian

This figure is slightly below the

revised estimate for the current fiscal year, primarily because
the transition to the pay-as-you-go system resulted in a tempo­

building.

rary bulge in receipts during July-December 1943.

Corporation, was 60 per cent below the record figure attained

The estimated excess of expenditures over receipts in fiscal
1945 is about the same as the revised estimate of 58.1 billion
dollars for fiscal 1944 and an actual total of 57.4 billion in
fiscal 1943. In addition to financing the deficit, the Treasury
will have to borrow an estimated 1.3 billion dollars in fiscal
1945 for the retirement of Government corporation debt, in
contrast to an estimated 2.8 billion in fiscal 1944 and an
actual 0.7 billion in fiscal 1943. No significant change is
assumed over the two fiscal years 1944 and 1945 in the 9.5

The value of construction contracts awarded in

37 Eastern States, according to reports of the F. W . Dodge
in 1942 and about the same as the average for 1938-39.
The decline last year reflected largely a sharp decrease in
the volume of contracts awarded for public construction, which
had risen substantially in 1942; although awards for private
construction also were less than a year earlier, the decline in
dollar value was relatively unimportant, in view of the low
level of such awards in 1942. The ratio of private to total
awards, however, rose a little— from 13 per cent in 1942 to
18 per cent last year.

billion Treasury general fund balance held on June 30, 1943.

Among the various classes of building, the greatest 1943

In fiscal 1943, the Treasury borrowed additional funds to build

decrease was shown in awards for nonresidential construction.

up its balances by 6.5 billion dollars.

The bulk of this decline occurred in contracts for manufac­

From the viewpoint of the magnitude of Treasury financing

turing plants, which dropped 66 per cent below the high

operations and the absorption of Government securities by

level of 1942 when facilities for war purposes were expanded

banks and nonbanking investors, a more significant measure

sharply.

than the increase in the public debt is the amount of net bor­

works and utilities also were well below those of the earlier

rowing from the public.

year.

The latter figure is obtained by

Both residential awards and contracts for public

deducting from the increase in public debt the retirement of

Contract awards in New York and Northern New Jersey,

Government corporation debt, borrowing from Federal trust

which had shown only small annual changes for several years,

funds and agencies, and noncash accruals of liabilities for

dropped sharply in 1943 to a level lower than in 1932-33, as




M O N T H L Y R E V I E W , F E B R U A R Y 1, 1944

14

Value of Construction Contract Awards in 37 Eastern States and in

New York and Northern New Jersey*

1942

B IL L IO N S
OF D OLLARS

Oct.

Nov.

Indexes of Production and Trade*
(100 = estimated long term trend)
Index of Production and Trade................

123

125

127p

124p

Production.................................................

136

133

135p

133p

Producers’ goods— total.....................
Producers’ durable goods...............
Producers’ nondurable goods . . . .

171
207
131

167
195
134

166p
196p
132p

164p
194p
130p

Consumers’ goods— total...................
Consumers3 durable goods.............
Consumers’ nondurable goods. . . .

91
39
108

87
25
107

91p
25p
113 p

91p
26p
112p

Durable goods— total.........................
Nondurable goods— total...................

157
117

145
118

146p
121p

145p
119p

Primary distribution...............................
Distribution to consumer.......................
Miscellaneous services............................

142
82
147

158
85
171

149p
90p
174p

152p
79 p
174p

Cost of Living, Bureau of Labor Statistics
(100 = 1935-39 average)...........................

120

124

124

124p

Wage Rates
(100 = 1926 average).................................

146

157

157p

Velocity of Demand Deposits*
(100 = 1935-39 average)
New York C ity.............................................
Outside New York City..............................

69
82

74
81

70
76

to

1919*20

*22

*24

'26

*2Q

’30

*32

*34

* Data of the F. W . Dodge Corporation.

indicated by the accompanying chart.

Dec.

65
74

This marked decline
*Adjusted for seasonal variation.

reflected decreases both in Upstate New York and in Metro­
politan New York and Northern New Jersey.

For 1942,

however, a substantial rise had been reported for Upstate
New York, where plant facilities to meet the requirements
of war industries were increased; contracts for Metropolitan
New York and Northern New Jersey in that year dropped
considerably. The share of the entire region in total contracts
for the 37 Eastern States declined to about 7 per cent in 1943,
compared with 9 per cent for 1942 and about 20 per cent
for the decade of the thirties.

p Preliminary.

data have recently been made public) remained substantially
unchanged, seasonal factors considered.

Output of electric

power, seasonally adjusted, declined for the first time since
March 1942, and preliminary estimates for crude petroleum
production indicate a slight recession from the November
peak.

Several of the nondurable goods industries showed con­

tractions during December.

Reduced activity at cotton textile

mills resulted in a 7 per cent decline in daily average cotton
consumption; and operations in the chemical industry de­
creased, reflecting cutbacks in Government orders for small

P R O D U CTIO N A N D T R A D E
By the second week of January 1944, the rate of operations
at steel mills had recovered from the recession of late Decem­
ber to approximately 99.6 per cent of estimated capacity. This
rate was sustained, more or less, during the remainder of the
month. Daily average production of bituminous coal in the
first half of January was about 2.6 per cent greater than in
December. Output of electric power and of crude petroleum,
however, remained substantially unchanged, and a slight de­
cline took place in the average number of freight cars loaded
during the first half of the month.

1943

Dec.

On the whole, the few

indexes that are now available for January indicate a continua­

arms ammunition. An industry that showed a sizable gain in
December was coal mining, which had recovered from the
effects of the November strike and was operating under a new
wage agreement. The daily average output of bituminous
coal increased 19 per cent and that of anthracite approximately
11 per cent.

Suspension of Production and Trade Indexes
of the Federal Reserve Bank of New York
With the figures for December, published in the

tion of the narrow fluctuations in general industrial activity

foregoing table, the monthly indexes of production and

which have been characteristic of the past several months.

trade of this bank are being suspended.

The indexes

stand in need of considerable revision, in the light of
P r o d u c t io n

and

T rade

in

D ecem ber

Total industrial output, after allowance for seasonal changes,
was somewhat smaller in December than in November. Steel

the radical shifts that have occurred in the economy
during the war period, and it is not possible to undertake
the work of revision under existing conditions. Suspen­

production declined moderately reflecting partial observance of

sion was chosen as an alternative to continuation on a

the Christmas holiday and a brief strike that occurred toward

basis that we did not consider satisfactory.

the end of the month.

the inconvenience caused users of the indexes by this

Daily average production of pig iron

showed a slight decline for the third consecutive month, and
output of nonferrous metals such as copper and zinc ( for which




necessary wartime curtailment.

W e regret

FEDERAL RESERVE BANK OF NEW YORK
Daily Average Production of Electric Power in the United States
and in New York and New Jersey, without Adjustment
for Seasonal Variation*

15

showed diverse movements between November and Decem­
ber; the net result was a small increase in the total number
employed. In trade an addition of 250,000 persons, due
largely to seasonal factors, was reported. Factory employment,
on the other hand, declined, reflecting both cutbacks in war
production and the general tightness of the labor market.
During the past several months, employment in manufactur­
ing industries in general has tended to level off; in fact the
only line reported as showing a substantial increase in the
number of workers between December 1942 and December
1943 was the munitions industry.

The Bureau of Agricul­

tural Economics reports that the number of workers on
farms on January 1, 1944 was slightly greater than a year
earlier but smaller than on the same date of any other year
in the 18-year period for which records are available.
Estimates of the War Manpower Commission indicate that
both the civilian labor force and total employment in July
* Based on data from Federal Power Commission, Production o f Electric
E nergy in the United States. Plotted on ratio scale to show proportionate
changes.

1944 will be a little smaller than in July 1943.

Although the

munitions industry is expected to gain workers, employment
in most other industries is expected to decline.

Additional

The expansion in retail trade between November and De­

requirements of the Army and Navy over the twelve months

cember was less sharp than in most other years. Since gift
buying in November was exceptionally active, sales figures for

are estimated at about 2,000,000 men, not including re­
placements.

Seasonally adjusted indexes

Factory employment in New York State declined in Decem­

showed declines between November and December of 18 per

ber, according to the State Department of Labor— the first

cent for sales of department stores and mail order houses,

November-December decline in four years. Decreases oc­
curred not only in industries producing consumers’ goods,

that month were unusually high.

and 14 per cent for sales of variety chain store systems.
The accompanying chart shows the course of electric power
production for the years 1929 to date.

Since the beginning of

such as food and clothing, but also in war industries, such as
munitions, machinery, and steel plants.

In the food and

the war, production in the country as a whole has increased

apparel industries, seasonal factors were at least partially

rapidly and steadily, primarily because of the greater utilization
The chemical industry, the

responsible for the decline; and strikes at steel mills caused
a lowering of employment. In addition, the Labor Depart­

largest user of electric energy in 1943, increased its consump­

ment reports that illness among workers was considered by

tion by an estimated 170 per cent between 1939 and 1943;
the nonferrous metals industry by 225 per cent; and the trans­
portation equipment industry by 250 per cent.

many employers as a major factor in reducing the numbers

of electrical power by industry.

Regional differences in the growth of electric power output
have been quite marked in the past few years. Areas such as
the Tennessee and Columbia River Valleys have attracted
industries because of the unused resources of new power imme­
diately available at the start of the war. The most rapid
expansion in electric power output, therefore, took place in
the East South Central region and in the Pacific States.

In

New York and New Jersey the rate of growth between 1939
and 1942 lagged behind that of the rest of the country, but
estimates for 1943 indicate that output in this area is again
keeping pace with that in the country as a whole.

at work. All industrial areas of the State reported decreases
with the exception of the Binghamton-Endicott-Johnson City
area, where war industries added a few additional workers.
This area also was the only one in which payrolls remained
approximately the same as in November; for all other regions
declines ranging from 2.0 to 5.2 per cent occurred. The
decline in factory payrolls for the State as a whole was the
first December decrease in six years.
D E P A R T M E N T STORE T R A D E
Department store sales in the Second Federal Reserve Dis­
trict during January are estimated to have been about 3 per
cent greater than in the corresponding month of 1943.

The

seasonally adjusted index of sales was approximately 15 per
cent above the index for December (which was affected by

EM P LO YM E N T A N D PAYR O LLS
Employment in the various nonagricultural industries of
the country, as estimated by the Bureau of Labor Statistics,




an unusual amount of early Christmas shopping), only 3 per
cent below the high figure of November, and 6 per cent below
the all-time peak reached in February last year.

16

MONTHLY REVIEW, FEBRUARY 1, 1944

In 1943 department store sales in this District reached the
highest total of any year on record. Although receipts of mer­
chandise were in fairly substantial volume, they were less than

1943 occurred in women’s and misses’ wear. Sales for this
group of merchandise rose substantially in 1943, but receipts
were in even greater volume than sales, and stocks at the year

sales, and stocks at the end of December were somewhat lower

end exceeded those at the close of 1942 by 16 per cent. Stocks of

than they had been a year earlier.

mens wear, on the other hand, dropped sharply, although sales

The downward movement

in stocks began in the second half of 1942 and continued with

for the year were about the same as those for 1942.

practically no interruption through April 1943 (see accom­

and stocks of homefurnishings decreased.

panying chart).

As stocks reached a low level during the

together comprise close to three fourths of total department

early months of the year, when sales were exceptionally heavy
New

store stocks. At the close of 1943, stocks of women’s and
misses’ wear amounted to about 32 per cent of all stocks, men’s

orders were placed in such large volume throughout the first

wear to 11 per cent, and homefurnishings to 27 per cent; the

half of the year that unfilled orders in July were 3V^ times as

respective percentages for 1942 were 25, 12, and 33.
During the four years since the outbreak of war, department

for that season, outstanding orders increased rapidly.

great as in December.

Subsequently, merchandise receipts

rose fairly sharply, and for most months in the second half of
the year they exceeded sales. Stocks increased in this six months*

Both sales

These three groups

store stocks and unfilled orders have fluctuated widely. In­
creases in outstanding orders were particularly marked at the

period so that by the year end they were 12 per cent above the
level of April; when compared with the peak figure of August

middle of 1941 and in the early months of 1942, as well as in

1942, however, they showed a decline of 34 per cent. Although

of merchandise were exceptionally large for those seasons of

the first part of 1943— periods in which sales of certain classes

outstanding orders, as the year closed, were considerably smaller

the year (reflecting either real or anticipated shortages of

than they had been in the summer months, they were 2 Vi times

goods), and receipts failed to keep pace with sales. Likewise,

Trade sources indicate that depart­

sales in the months that followed these periods of heavy buying

ment stores last year were placing orders from four months to

were accompanied by receipts in excess of sales, increases in

one year ahead of expected deliveries.

stocks, and declines in unfilled orders.

those at the end of 1942.

Among the various broad departmental groupings, the great­
est increase in stocks between the end of 1942 and the end of
Indexes of Sales, Receipts of Merchandise, Stocks on Hand, and Out­
standing Orders of Department Stores, Second Federal Reserve
District* (1940 monthly average=100 per cent)

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

PER C EN T

1943

D e c.

Department stores, Second District.. .
New York C ity ....................................
Northern New Jersey.........................
Westchester and Fairfield Counties..
Bridgeport........................................
Lower Hudson River Valley.............
Poughkeepsie....................................
Upper Hudson River Valley.............
Schenectady......................................
Central New York State...................
Mohawk River Valley................
Northern New York State.................
Southern New York State.................
Binghamton......................................
Western New York State...................
Niagara Falls....................................
Rochester..........................................
Apparel stores (chiefly New York City)

-

1

0
_ 8
- 9
- 7
-1 0
+ 5
+
+
+
+
+
+
+
+
+
+

2
4
3
5
7
3
1
2
4
5
4
7
5
0

+13

Stocks on
hand
Jan through D e c. 31,1943
D e c . 1943
+ 6
+ 7
- 2
- 2
- 3
- 6
+ 7
+ 9
- 1
- 4
+ 2
+11
+11
+ 13
+ 11
+ 3
+ 9
+14
- 2
+ 9
+ 11
+24
+ 6

- 7
- 6
- 15
-1 6
0
- 7
- 2
-

4

+ 2
+ 1
-1 5
'
+10
-

2

+
-

3
2
3
5

+14

+20

Indexes of Department Store Sales and Stocks
Second Federal Reserve District
1942

1943

Item

* Compiled by Federal Reserve Bank of New York from returns from a
limited number of stores. For sales and receipts, data pertain to entire month;
for stocks and orders, to end of month. The receipts series is derived from
sales and changes in stocks, and represents approximately the new merchandise
received during each month. The figures presented are not corrected td l
seasonal changes.




Dec.

Oct.

Nov.

Dec.

1935-39 average. — 100
Sales (average daily), ufiail#ug|Ml .............
Sales (average daily), seasonaliy'^ttjusted*.

229r
124r

156
136

181
148

227
123

1923-25 average = 100
Stocks, unadjusted...........................................
Stocks..se&sonaJlY adjusted............................

119r
121r

131
119

132
115

112
115

Iltd|te«^^reftA419I8DtN(iAt4 available upon request.
Revised.

FEDERAL RESERVE BANK OF NEW YORK
MONTHLY REVIEW, FEBRUARY 1, 1944

General Business and Financial Conditions in the United States
(Summarized by the Board of Governors of the Federal Reserve System)
activity declined slightly in December from the record levels reached in pre­
ceding months. Prices of commodities at retail showed little change and distribution was
maintained in large volume.

I

NDUSTRIAL

In d u s t r ia l Pr o d u c t io n

Index of Physical Volume of Industrial Produc­
tion, Adjusted for Seasonal Variation, 1935-39
Average — 100 Per Cent. (Groups shown
are expressed in terms of points
in the total index.)

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

The Board’s seasonally adjusted index of industrial production, which had been at 247
per cent of the 1935-39 average in October and November, declined to 245 in December,
reflecting largely decreases in output of steel and chemicals.
Steel production dropped 6 per cent in December to the same rate as in December 1942.
Output for the year, however, totaled 88.9 million tons, which was 2.8 million tons larger
than the year before. Activity in the transportation equipment and machinery industries
was maintained in December at a high level. The number of aircraft accepted during the
month was slightly larger than in November and was at approximately the average monthly
rate scheduled for 1944. The average weight of planes to be produced, however, will con­
tinue to increase. Deliveries of merchant vessels in December were the largest on record,
bringing the total for the year to 19,238,626 deadweight tons, as compared with 8,089,732
tons in 1942. Lumber production in the last two months of 1943 was above the level of a year
ago in contrast to the first 10 months of 1943 when output averaged 10 per cent below the
same period in 1942.
Activity in the chemical industry declined 5 per cent in December, reflecting a large reduc­
tion in output of small arms ammunition in accordance with plans of the armed forces. Cotton
consumption declined further in December to a level 13 per cent below December 1942.
Newsprint consumption declined seasonally. Further restrictions on its use, as well as on
the use of printing paper in books and magazines, were made effective January 1, 1944,
owing to inadequate supplies of pulpwood. Output in the petroleum refining and rubber
products industries increased further.
Crude petroleum production showed little change in December and output of coal was
restored to a high level. Bituminous coal production for the year exceeded 1942 output by
1.6 per cent. Iron ore production continued to decline seasonally in December and output
for the year was approximately 4 per cent below 1942.
The value of construction contracts awarded in December, according to reports of the
F. W . Dodge Corporation, was greater than in recent months, reflecting mainly increased
Federal awards for manufacturing and other nonresidential buildings.
D is t r ib u t io n

December department store sales were slightly larger than a year ago and combined with
November sales were 11 per cent larger than in the corresponding months last year. For the
year 1943 total value of sales reached a new peak— about 12 per cent larger than 1942 and
55 per cent larger than 1939. Sales during the first two weeks of January were about the
same as last year.
Railway freight traffic in December and the first part of January was unusually heavy for
this season. For 1943 total freight carloadings were about the same as in 1942. Shipments
of grain and livestock averaged about 20 per cent above 1942, while loadings of ore, forest
products, and less-than-carload-lot freight averaged 8 per cent lower.
C o m m o d it y Prices

Indexes of the Cost of Living as Compiled by
Bureau of Labor Statistics. (1935-39
average = 100 per cent.)

1

____________

—'‘goldstocK

/ \
M
EM
BER8ANK
RESERVESALANCES
VV,W v v

/
V

S

'

*—

^ T R E A S

M
ONEYINCIRCULATION

RES)ERVEBANKCR'EOiT J*
>URYDEPOSITS

Member Bank Reserves and Related Items.
(Latest figures are for January 19.)




Wholesale prices of agricultural and industrial commodities showed little change from the
middle of December to the middle of January and the general index of the Bureau of Labor
Statistics remained at 103 per cent of the 1926 average.
Retail food prices declined slightly from mid-November to mid-December, while other
groups of cost-of-living items increased and the total index advanced 0.2 to 124.4 per cent
of the 1935-39 average.
B a n k Credit

During the latter part of December and the first two weeks of January excess reserves at
all member banks were maintained at an average level close to 1.1 billion dollars. Purchases
of Government securities by the Federal Reserve Banks offset the effect on reserves of increases
in nonmember deposits at the Reserve Banks and the increase in currency in circulation.
The System portfolio of Government securities increased by 900 million dollars in the five
weeks ended January 19. After allowance for expected seasonal movements, currency in
circulation increased less in December than in November but there was little post-Christmas
return flow.
Loans and investments of reporting member banks in 101 leading cities, which had been
decreasing steadily since late October, declined by an additional 620 million dollars during the
five weeks ended January 19. A large part of the decline reflected sales of Government securi­
ties, principally Treasury bills, to the Federal Reserve Banks. Holdings of United States
Government securities were reduced by 370 million dollars. Total loans declined by 230
million dollars, representing reductions in loans to banks, in commercial and industrial loans,
and in "other” loans, mainly instalment credit. Adjusted demand deposits, which had
increased sharply from the middle of October to the middle of December, declined some­
what over the year end, but increased again in the first half of January. United States Gov­
ernment deposits at banks continued to decline.