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

Federal Reserve Bank, New York

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
January 1,1940

spring, failure o f tourist money to return to this country
in the usual volume, and some foreign demands fo r
Substantial withdrawals of currency from the Reserve
United States currency within this country— all com­
Banks, by member banks, to meet customers’ require­ bined with a continuation of the upward trend, appar­
ments for the holiday trade, and payments out of the
ently attributable to the use o f currency in place of
market into the Reserve Banks fo r a new issue o f
checks, that has been noted in recent years.
Treasury bonds, caused a further reduction in member"
In general, however, the effects on bank reserves of
bank reserves during the first half of December, despite
the large demand fo r currency in recent months, have
a continued large inflow of gold from abroad. The re­
continued to be more than offset by the heavy flow o f
duction was chiefly in New Y ork City with smaller
gold to this country. D uring the last quarter of 1939
declines in other parts of the country. The amount of
the increase in the United States gold stock has averaged
excess reserves held by the banks remained so large,
about $230,000,000 a month, an amount substantially in
however, that the reduction had no visible effects on the
excess o f the current rate o f gold production throughout
money market situation. A round the middle of the month
the world, despite war-time restrictions imposed in
excess reserves in New Y ork City were about $2,450,belligerent countries on movements of capital fo r private
000,000, as compared with nearly $3,000,000,000 at the
accounts, which had been responsible fo r a large part
end of October, and for the country as a whole amounted
of the gold flow to the United States before the war
to $4,850,000,000, or $680,000,000 below the peak of
began. Some o f the gold shipments in the last quarter
$5,530,000,000 reached on October 25.
of 1939 apparently were to cover commitments made here
A moderate upturn in excess reserves occurred outside
by foreign countries before the beginning o f the war,
New York, in the week ended December 20, and a sub­ some covered payments fo r the continued excess o f our
stantial increase in New Y ork in the follow ing week.
merchandise exports over imports, and some reflected
A n acceleration of the increase is expected in January
transfers o f funds to the United States by neutral
as a result of the seasonal decline in the amount of
countries. As a consequence o f this continued heavy gold
currency in circulation, net Government disbursements,
movement to the United States, it appears that, disregardand further inflows of gold.
As the accom panying chart shows, net withdrawals
of currency from the Federal Reserve Bank of New
Y ork during the past year have been far greater than
in other recent years. On December 27, the amount of
currency outstanding through this bank was approxi­
mately $255,000,000 larger than on the corresponding
date a year previous. The comparable increase during
1938 was only $75,000,000, and in 1937, when business
activity declined sharply in the closing months o f the
year, there was a small net reduction. F or the country
as a whole, the increase in the volume o f currency out­
standing during 1939, while not proportionately as large
as at New Y ork, has also been much greater than in pre­
ceding years.
The net increase in 1939 was about
$750,000,000, as compared with an increase of
$340,000,000 in 1938 and little net change in 1937. The
unusually large demand fo r currency during the past
year has reflected larger payroll requirements, incident
to rapidly expanding industrial production in the latter
part o f the year, shipments o f United States currency to
foreign countries, especially in the period preceding and
C h a n g e s in V o l u m e o f C u r r e n c y O u t s t a n d i n g t h r o u g h F e d e r a l R e s e r v e
B a n k o f N e w Y o r k ( W e e k l y d a t a f o r e a c h y e a r c u m u la t e d
follow ing the German occupation of Czecho-Slovakia last
f r o m l a s t W e d n e s d a y o f p r e c e d in g y e a r )
M o n e y M a r k e t in D e c e m b e r



ing more or less tem porary influences such as payments
for new securities sold by the Treasury and by Govern­
ment agencies, the underlying trend of member bank
excess reserves is still upward.
A pparently reflecting this situation with respect to
member bank reserves (as well as the character of the
war in E u rop e), and also continued accumulations of
funds for investment in institutions such as insurance
companies and savings banks, prices of high grade
securities have advanced further during the past month,
despite the tem porary decrease in excess reserves, and
security yields have declined accordingly. In the first
half of the month prices of high grade securities showed
little net change as the markets were inactive, apparently
awaiting the outcome of Treasury financing operations,
but in the latter half o f the month a fairly strong rise
occurred. Yields on long term Treasury bonds reached
the lowest average levels since August 23. In this period
sales of Government securities from the Federal Reserve
open market account were resumed, and the account
showed a net reduction of about $23,000,000 in the two
weeks ended December 27. Prices of the highest grade
corporation bonds also were firm during December and
yields declined to the lowest levels since the third week
of August, and yields on high grade municipal securities
reached new low levels. Short term money rates were
virtually unchanged.
M oney Rates in New York
Dec. 31, 1938 N ov. 30, 1939 Dec. 28, 1939
Stock Exchange call loans.......................
Stock Exchange 90 day loans.................
Prime commercial paper 4-6 months. . .
Bills— 90 day unindorsed.........................
Average yield on Treasury notes (3-5
Average yield on Treasury bonds (not
callable within 1 2 y ea rs)......................
Average rate on latest Treasury bill sale
91 day issue............................................
Federal Reserve Bank of New York
discount ra te...........................................
Federal Reserve Bank of New York
buying rate for 90 day indorsed b ills.




*lV x
Mr Vs






0 . 47f



2 .3 0





**Is 3ue sold at par.
tChange of +0.07 in average yield due to inclusion of the new issue of 1 per cent
Treasury notes maturing September 15, 1944, and dropping of the 1 % per cent
Treasury note issue maturing December 15, 1942, because it matures within three

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

Total loans and investments of weekly reporting mem­
ber banks in New Y ork City rose somewhat further to
new high levels in the four weeks ended December 20,
largely because o f a substantial increase in loans to
security brokers and dealers, which apparently was
related chiefly to Government financing operations in
December. H oldings o f direct obligations of the Govern­
ment showed little net change, despite purchases, of the
new Treasury bonds issued on December 8, as a moderate
increase in holdings of Treasury bonds was largely offset
by a reduction in Treasury bill holdings. In the third
week of December acquisitions of the new issue of
Treasury bills were substantially less than the amount of
maturing bills held by the New Y ork banks, as higher bids
fo r a substantial part of the new issues were received
from other banking institutions and industrial corpora*
lions, which apparently wished to acquire the bills for
year-end statement purposes. H oldings o f Government

guaranteed securities showed a further small increase.
Commercial and industrial loans were reduced slightly,
apparently reflecting a belated seasonal decline.
In other reporting cities throughout the country there
was also a fairly substantial increase in total loans and
investments, which again was due in part to an increase
in loans to security dealers. In these banks there was
some further increase in commercial and industrial
loans, contrary to the usual seasonal tendency, and hold­
ings of Government and other securities also increased
moderately. Investments in Treasury bonds increased
more than $100,000,000, largely as a result of purchases
of the new issue of December 8, but in these banks
holdings of Treasury notes were reduced by more than
$50,000,000 during the fou r weeks ended December 20,
and holdings of Treasury bills and Government guaran­
teed obligations also showed some net decline.
Demand deposits declined somewhat in the New Y ork
City banks during the fou r week period, but increased
further in the 100 other principal cities that are covered
by the reports, to reach new high levels.
G overnment

S e c u r it ie s

Allotments on public subscriptions to the new issue of
2 per cent Treasury bonds o f 1948-50, which was
offered November 28 and dated December 8, amounted
to $521,347,000, including $21,693,000 which was allotted
to subscribers for amounts o f $5,000 or less, who specified
that delivery be made in registered bonds 60 days after
the issue d a te ; in addition, $50,000,000 o f the new bonds
were sold to Treasury investment accounts. Follow ing
the completion o f this “ new m oney’ ’ financing, the
Treasury on December 12 announced a refunding opera­
tion involving the issuance o f 2 % per cent Treasury
bonds of 1951-53 and 1 per cent Treasury notes matur­
ing September 15, 1944, in exchange for Treasury notes
maturing March 15, 1940.
O f the approxim ately
$1,378,000,000 o f March, 1940, notes outstanding,
$1,018,000,000 were exchanged on December 22 fo r the
new bonds and $283,000,000 were exchanged for the
new notes, leaving about $77,000,000 to be redeemed
next March. In addition the Treasury announced that
$73,000,000 o f the new bonds had been sold to Govern­
ment investment accounts.
D uring the early days o f December prices o f Treasury
bonds eased somewhat, owing to a slackening o f invest­
ment demand, presumably reflecting investors’ reaction
to the Russian invasion o f Finland. B y the 6th o f the
month, however, prices began to firm and this advance
was accelerated for a week after the terms o f the Treas­
u r y ’s refunding program were announced on December
12. Subsequently, price movements became somewhat
more irregular, but a small net advance occurred, and
the average price o f long term Treasury bonds toward
the end o f December showed a net advance o f about
1 y 8 points from the quotations prevailing at the end of
November and reached the highest level since August
23, before the outbreak o f war. As com pared with the
June high level o f Treasury bond prices, quotations at
the end o f December were only 2 points lower, whereas,
at the bottom o f the market in September, prices were
some 91/4 points lower. A t the end o f December the
average yield on Treasury bonds not callable within


12 years was within % per cent of the low point o f last
Treasury note prices also advanced during
December, as is indicated by a net decline of 0.20 per cent
in the average yield on 3 to 5 year issues.
The usual weekly Treasury bill financing was consum­
mated in December. Four weekly issues of $100,000,000
o f 91 day bills, to replace similar maturities, were sold
at average rates which ranged from 0.019 per cent down
to 0.007 per cent.
C o m m e r c ia l

P aper and

(Millions of dollars)
Type of acceptance

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

N ov. 30, 1938 Oct. 31, 1939 Nov. 30, 1939















S e c u r it y M a r k e t s
D uring December there was a continuance in the stock
market of the inactive trading and narrow price move­
ments of the two preceding months. On only five days
of the past month was the volume of trading as much as
one million shares, and the maximum range in the general
average of the stock prices was only about 2 per cent.
As the month closed, industrial and public utility stocks
were slightly higher than at the end of November, while
railroad shares were virtually unchanged. The accom­
panying diagram indicates the general level o f stock
prices, and also o f corporate bond prices, at the end
o f the year, in comparison with the quotations prevailing
during the previous three years.


B il l s

A range o f % to % per cent continued to be the pre­
vailing level of rates fo r average grade prime fou r to
six month commercial paper during December, although
the larger portion o f dealers’ sales was made at % per
cent. Bank investment demand fo r mercantile and in­
dustrial paper remained active, but largely unfilled,
owing to the small quantities of new paper acquired by
dealers for sale in the open market. The amount o f com­
mercial paper outstanding through dealers reporting to
the Reserve Bank, at $214,000,000, was approxim ately
$9,000,000 larger on November 30 than a month earlier.
This increase of about 4 per cent occurred at a time
when outstandings usually decline. The November total
was approxim ately 4 per cent higher than that o f a
year previous.
Trading activity in the bill market during December
continued to be of small proportions. Bankers’ bills
were outstanding at the end of November in slightly
larger amount than a month earlier, reflecting further
increases in the volume of import bills and domestic
warehouse credit bills. The increase of $18,000,000 dur­
ing October and November raised the volume o f import
bills outstanding to the highest level since February,
1938. A decrease of $50,000,000 from November, 1938
in the total volume of outstanding bills has been due
chiefly to reductions in export bills and in those based
on goods stored in or shipped between foreign countries.

Im port..........................................................
E xport..........................................................
Domestic shipment....................................
Domestic warehouse credit......................
Dollar exchange.........................................
Based on goods stored in or shipped
between foreign countries....................


Movements of Stock and Bond Prices (Standard Statistics Company
index of 90 stocks and M oody's Investors Service average
prices of corporate bonds)

Medium and lower grade corporation bonds, like stocks,
showed small mixed price changes in December. Medium
grade public utility bonds advanced about % o f a
point on the average to reach a new high level, and
industrial issues also were firmer although they remained
slightly below recent highs. Railroad bonds rose about
point but were quoted at prices about 5 % points
below their March highs, according to M ood y ’s Investors
Service average price o f Baa railroad bonds.
In the high grade corporation bond market, further
recoveries in prices occurred during December. The
average advance o f 1 % points fo r the month was less
than that o f the previous month, but it carried average
prices of these bonds to the highest level since August 14
and to about % o f a point o f the July high. Thus, most
o f the 10 point drop in high grade corporate bond prices
which occurred between J uly and late September, has
now been recovered. Prices o f high grade municipal
bonds reached new highs fo r recent years, ju dging by
the decline in the average yield on representative high
grade municipals com puted by the Standard Statistics
N e w F in a n c in g
A ccom panying the continued strength in high grade
corporate and m unicipal bond prices in December, the
market for new security issues exhibited a substantial
increase in activity, and on the last fu ll business day o f
the month there was publicly offered the largest piece o f
railroad bond financing since June, 1936— the $60,000,000
o f Louisville and Nashville Railroad refunding bonds.
The December volume o f corporate and municipal financ­
ing, $330,000,000, was approxim ately 75 per cent larger
than that o f the preceding month and larger than that
o f any month since the start o f the war in Europe. The
amount representing new capital, however, still remained
small. The m ajor corporate offerings, in almost every
case, were quickly absorbed by investors, quotations gen­
erally going to a premium over the offering price. Private
sales o f only three small corporate issues were reported
during the month. The follow ing were the principal cor­
porate securities offered during December.









Louisville and Nashville Railroad refunding col­
lateral trust bonds, of which $30,000,000 were
ten year 3 ^ rs priced at 101 to yield about 3.40
per cent, and $30,000,000 were twenty year 4 Js
priced at 100^ to yield about 3.95 per cent
Public Service Company of Indiana refunding
securities, of which $38,000,000 were first mort­
gage 4 per cent bonds of 1969 priced at 102, to
yield about 3.90 per cent, and $10,000,000 were
debenture 3 % ' s of 1940-49 priced to yield 0.65
to 4.20 per cent
Northern In dian a Public Service Company first
mortgage refunding 3 % per cent bonds of 1969
priced at par
Pennsylvania W ater and Power Company refund­
in g mortgage and collateral trust 3% per cent
bonds of 1964 priced at 104, to yield about 3.00
per cent
W est V irg in ia Pulp and Paper Company first mort­
gage 3 per cent bonds of 1954 priced at 99, to
yield about 3.08 per cent, for refunding
National Supply Company first mortgage 3 % per
cent bonds of 1954 priced at 101, to yield about
3.65 per cent— $5,600,000 for refunding
Southwestern L ig h t and Power Company first mort­
gage 3 % per cent bonds of 1969 priced at 102, to
yield about 3.60 per cent, for refunding

O f the m onth’s total financing, municipal obligations
accounted fo r $90,000,000. A m ong the larger bond
awards of this type were $10,500,000 State of New Jersey,
unemployment relief 1*4 Per cent bonds of 1942-49 (re­
deemable at par at the option o f the State after December
15, 1942), awarded at 100.521 and reoffered to yield 0.40
to 1.30 per cent; and $10,000,000 Commonwealth of
Pennsylvania Turnpike Revenue 3 % per cent bonds o f
1968 (redeemable on and after August 1, 1947 at prices
from 104 to p a r ), priced at 99% to yield about 3.80 per
cent. Tem porary financing, other than the $14,500,000
Federal Intermediate Credit Bank 0.75 per cent consoli­
dated debentures awarded toward the end of the month,
totaled $60,000,000. Some slowing up in new registra­
tions was evident during the past month, owing in part,
perhaps, to the desire on the part of some companies to
defer filing until financial statements covering the full
calendar y e a r’s operations are available.
Prelim inary figures indicate that fo r the entire year
1939 domestic corporate security issues averaged about
$176,000,000 a month, o f which an average o f only
$30,000,000 was fo r new capital purposes. This compares


M onthly Average Volume o f Dom estic Corporate Security Issues
Refunding and for New Capital (In millions o f dollars)

with an average o f $178,000,000 a month during 1938, o f
which $73,000,000 was fo r new capital. As is shown in
the accom panying chart, the monthly average rate o f cor­
porate financing in the last quarter o f 1939 was about 20
per cent below the level o f the previous two quarters.
The monthly average rate o f corporate flotations fo r new
capital during the last quarter was at the lowest level
since the first quarter o f 1935.
F o r e ig n E x c h a n g e s
In a quiet market, New Y ork rates fo r several leading
foreign exchanges registered some advance during
The rate for the pound sterling, which had declined
to as low as $3.87% on November 30, accom panying the
outbreak of Soviet-Finnish hostilities, moved irregularly
higher during the first half o f the past month to reach
$3.951/4 on December 14. Subsequently it held relatively
steady, closing the month at $3.951/4. The discount on
three month deliveries narrowed slightly during the
month. F ar Eastern and especially European holders
continued to liquidate their sterling balances, but these
offerings apparently were readily taken up by American
importers and others owing debts expressed in terms o f
British exchange. Meanwhile, the English authorities
are reported to have under contem plation plans to
tighten exchange restrictions fo r the purpose o f prevent­
ing unauthorized transfers of sterling assets from
British to nonresident accounts, and thereby reducing
the amount of sterling available fo r sale by nonresidents
in outside “ fr e e ” markets.
A ccordin g to an agreement between the British and
French Governments, announced on December 12, the
franc will be linked to the pound at the rate o f 176%
until six months after the signing of a peace treaty.
The French franc in New Y ork continued to move about
parallel to the pound rate throughout the month, quota­
tions advancing from the November 30 low o f $0.0220 to
a high o f $0.0224% on December 18 and ending the
month at $0.0223%, for a net gain o f 3 % points. In
the forw ard market, discounts on three month francs,
which were nominally quoted at the equivalent o f about
16% per cent per annum at the end o f November, nar­
rowed to about 9% per cent in the latter part of
Am ong the neutral European currencies, the Dutch
guilder, which had been maintained around $0.5309 for
about two months, firmed to as high as $0.5325 on Decem­
ber 18. This gain was subsequently canceled, follow ing
reports that an internal bond issue o f 300,000,000 guild­
ers had been incom pletely subscribed by the public, but
toward the end o f the month Dutch exchange again
firmed to $0.5320%. The rate fo r Belgian exchange
showed a net improvement o f 19 points fo r the month,
closing at $0.1670, while the Swiss franc continued to
move within relatively narrow limits.
Trading in the non-European exchanges was featured
by an abrupt depreciation of the Mexican peso, which
began on December 11, follow ing the suspension by the
Bank of Mexico o f its supporting operations. The peso,
which since the latter part of September had held near
$0.2050, was quoted at about $0.1695 near the end of
December, indicating a depreciation o f 17 per cent since


December 9. The Mexican authorities, who on December
15 declared the existence of a “ condition of em ergency’ ’
in foreign exchange, have attributed the present situa­
tion to the deterioration of Mexican export trade. The
Cuban peso, on the other hand, improved somewhat dur­
ing the month, particularly follow ing the signature o f
a trade agreement providing for the restoration o f the
preferential duty on Cuban sugar imported to this
country. The discount on Cuban exchange closed the
month at about 11% per cent, as against 12% per cent at
the end of November. The Canadian dollar also showed
a stronger tendency, and its discount against the United
States dollar narrowed from 13% to 11% per cent.
Some demand fo r silver in this market appeared to
have developed in the latter part of December and the
New Y ork market price fo r foreign silver rose to as high
as 37 cents on December 20, or considerably above the
United States Treasury D epartm ent’s buying price of 35
cents an ounce, fo r the first time since the British and
Indian authorities subjected importation of the metal
to a licensing control toward the end of October. The
Indian Government is reported to have relaxed its re­
strictions somewhat in order to ease the recent specula­
tive rise in the Bombay price, which accompanied in­
creased hoarding demand.
G o ld M o v e m e n ts
Imports of gold into the United States during Decem­
ber were considerably larger than in November and, in
fact, appear to have been in the largest volume since
last A pril. However, the amount of gold held under
earmark for foreign account at the Federal Eeserve Bank
o f New Y ork increased about $205,000,000 during the
past month follow ing a reduction of approxim ately
$340,000,000 in the preceding fou r months. A s is shown
in the accom panying chart, the amount o f gold held
under earmark, after declining from the peak of
$1,300,000,000 reached last July to about $960,000,000
at the end of November, rose during December to about
$1,165,000,000. D uring December, the gold stock of
the United States increased about $285,000,000, reaching
a new high of approximately $17,640,000,000. F or the
year 1939, the gold stock rose about $3,130,000,000, as
compared with a gain of $1,750,000,000 in 1938.




1 93 7



Gold Held Under Earmark for Foreign Account at Federal
Reserve Banks


As reported by the Department of Commerce, gold im­
ports into the United States during the three weeks
ended December 20, totaled $361,000,000, of which
$286,000,000 came to this country from Canada,
$21,400,000 from Holland, $9,400,000 from Sweden,
$7,200,000 from England, $6,300,000 from South A frica,
$5,900,000 from Japan, $5,600,000 from Italy, $4,000,000
from Norway, $3,400,000 from Switzerland, $2,900,000
from India, $2,100,000 from Colombia, and $900,000 from
H ong Kong.
C e n tr a l B a n k R a t e C h a n g e s
The discount rate of the State Bank o f Sweden was
advanced from 2 % to 3 per cent on December 15. The
lower rate had been in force since December 1, 1933.
B u ild in g
The daily rate at which construction contracts were
awarded in New Y ork and Northern New Jersey in­
creased 52 per cent between October and November.
Although each of the m ajor construction categories regis­
tered an advance in November, the most pronounced
gains were in large contracts placed for public purpose
building and public utility projects, which included con­
tracts fo r a central courts building in New Y ork City and
a unit of a steam generating plant in up-State New York.
Awards for residential work showed an increase of 4 per
cent and contracts fo r commercial and factory building
were 28 per cent higher than in October. A s compared
with November, 1938, total contract awards in this area
were 48 per cent greater; the largest gains were in the
types of construction that showed the principal increases
over October, but commercial and industrial contracts
were more than 50 per cent larger than a year ago, and
residential building contracts were about 10 per cent
D uring November the average daily rate o f construc­
tion contract awards in the 37 States included in the
F. W . Dodge Corporation survey was the highest since
December, 1938, and at a level 24 per cent above that of
October. The gain over the previous month reflected ex­
pansion in all the m ajor construction categories, the
largest of which occurred in the heavy engineering classi­
fication owing to the inclusion in the November figures of
$35,000,000 for a Tennessee V alley A uthority project.
Contracts for public purpose buildings increased 26 per
cent over the relatively small volume in October ; com­
mercial and industrial contracts were 9 per cent larger,
and residential building awards increased 7 per cent.
The total volume of contracts was about the same as in
November, 1938, as increases o f 57 per cent in commer­
cial and industrial awards, 22 per cent in residential
building, 21 per cent in public utilities, and 15 per cent
in public works were approxim ately offset by a 60 per
cent reduction in contracts for public buildings.
F or the first three weeks o f December the daily rate of
construction contract awards in 37 States was 19 per cent
higher than in November and the same percentage above
the corresponding period o f 1938, owing to the inclusion
in the public works classification o f $117,000,000 for a
Tennessee V alley A uthority project. Residential build­
ing awards registered a 14 per cent gain over the first
three weeks o f December, 1938, but contracts for other
types o f building were reduced about 50 per cent.



The follow ing table shows percentage changes fo r the
first eleven months of 1939 from the corresponding period
of 1938 in construction contracts awarded in New Y ork
and Northern New Jersey, in other areas, and in the 37
States covered by the F. W . Dodge Corporation survey.
The total value of contracts awarded in New Y ork and
Northern New Jersey was approximately the same in
1939 as in 1938, owing principally to a large decline in
contracts for public utility projects which about offset a
substantial gain in residential building. In other areas,
however, total construction contracts showed an 18 per
cent increase over the first eleven months of 1938; all
the principal types of construction except public purpose
building contributed in some measure to the advance.
The increase of 57 per cent in contracts for public utility
projects in other areas was in contrast to a decrease of 58
per cent in this class of awards in New Y ork and Northern
New Jersey. Contracts for commercial and industrial
building also showed considerable expansion during 1939
in other areas, while in the New Y ork area the volume
was somewhat smaller than in 1938. Furthermore, the
gain in residential building was larger in other areas than
in the New Y ork area. On the other hand, contracts for
public purpose buildings showed a 22 per cent decline in
other areas, compared with a slight increase in Ne^
Y ork and Northern New Jersey.
Percentage Change ^ C on stru ction Contracts
First eleven months of 1939 compared with same period of 1938
N. Y . and
Northern N.J.
Commercial and industrial..................
Public purpose*......................................
All b u ild in g ...................................

— 8
+ 4

Public works...........................................
Public utilities........................................
All engineering...............................
All construction.............................

Other areas

37 States

+ 30

+ 39

— 22

+ 19

— 17
+ 18

+ 6
— 58
— 24

+ 6
+ 57
+ 15

+ 6
+ 7
+ 6


+ 18

+ 14

Daily Car Loadings of Merchandise and Miscellaneous
Freight, Adjusted for Seasonal Variation
(Four week moving average)

the increase over November appears to have been of
about the usual seasonal magnitude.
Business activity continued to rise in November,
although at a somewhat slower pace than in either of
the two preceding months. There was a further sub­
stantial gain in the production o f durable goods, while
production of nondurable goods in general was main­
tained at the level reached in October. The movement
of freight over the railways, reflecting prim ary distri(Adjusted for seasonal variations, for estimated long term trend,
and where necessary for price changes.)


•Includes educational, hospital, public, religious and memorial, and social and
recreational building.

P r o d u c tio n a n d T r a d e
A fter allowing for usual seasonal variations, it ap­
pears that business activity in general increased some­
what further in December.
Steel mill operations
slackened somewhat as the month progressed, though
the decline was less pronounced than in most other
years. Autom obile production showed a marked in­
crease in December, owing principally to the resump­
tion of operations at the plants of a m ajor producer
which had been shut down on account of a labor
controversy during most of October and November.
A ccordin g to trade reports, cotton textile mills continued
to maintain a high rate of activity in December, although
mill sales o f cotton goods fell short of current production
except for a brief period around the middle of the month.
Usually railroad car loadings of merchandise and mis­
cellaneous freight show a large decline in Decem ber;
this year, however, the reduction appears to have been
less marked than usual, and on a seasonally adjusted
basis the movement of this type of freight continued the
sharp advance which began in September, as the accom­
panying diagram indicates. E lectric powder production
was at the peak of the year, as is usual in Decem ber;


1 93 9

1 93 8






1 10

1 48
69 p
106 p

92 p
99 p





Industrial Production
Passenger cars................................................
M otor trucks..................................................
Bituminous coal............................................
Crude petroleum ...........................................
E l e c t r i c p o w e r ..........................................................

Cotton consum ption....................................
W ool consum ption........................................
Meat packing................................................
T obacco products..........................................
Employment, manufacturing, U . S..........
Employee hours, manufacturing, U . S .. .
Residential building contracts...................
Nonresidential building and engineering

















Velocity of Deposits*
V elocity of demand deposits, outside New
York City (1919-25 a ve ra g e = 1 0 0 ). . . .
V elocity of demand deposits, New York
City (1919-25 a v e ra g e = 1 0 0 ).................









Prices and Wages*
General price level (1913 average— 100).
Cost o f living (1913 a verage=100)..........
W age rates (1926 average— 100)...............





Primary Distribution
Car loadings, merchandise and misc........
Car loadings, other.......................................

Distribution to Consumer
Department store sales, TJ. S.....................
Department store sales, 2nd D istrict. . . .
Chain grocery sales......................................
Other chain store sales................................
Mail order house sales.................................
New passenger car registrations................

p Preliminary.

r Revised.

* N ot adjusted for trend.




oution, increased further, seasonal factors considered.
Distribution of goods to consumers in November also
was higher than in the preceding month, as is indicated
by the larger than seasonal advances in sales o f depart­
ment and chain stores, and trade reports indicate that
the retail demand fo r automobiles was active.
E m p lo y m e n t a n d P a y r o lls
F or the fourth consecutive month increases were
reported in New Y ork State factory employment and
payrolls in November.
The gains, though somewhat
less than one per cent in each case, came at a time of
year when there are ordinarily sizable decreases in both
employment and payrolls. Sharp seasonal declines in
the apparel and food industries were more than offset
by continued gains at metal and machinery, chemical,
and textile plants. A ll subgroups except shipbuilding
in the metals and machinery classification reported in­
creased working forces in N ovem ber; iron and steel,
nonferrous metal, automobile, and airplane factories
showed increases in number of employees of over 7 per
cent each.
Total factory employment in New Y ork
State advanced 13 per cent from J uly to November,
and payrolls increased 16 per cent in the same period
to reach the highest point since the spring of 1930.
Compared with a year ago, employment in November
was 14 per cent higher and payrolls were 20 per cent
F or the country as a whole, the United States D epart­
ment of Labor reports a decrease in working forces in
nonagricultural pursuits of about 100,000 persons in
November, a much smaller reduction than ordinarily
occurs at this time of the year. Further increases in
durable goods m anufacturing, in retail trade, and in
mining partially offset declines in construction and
transportation. It is reported that over 1,250,000 more
persons were employed in nonagricultural occupations
than in November, 1938.
United States factories employed 20,000 more work­
ers in November than in the previous month, although
usually working forces decline by about 150,000 persons
during this period. Payrolls also increased slightly,
contrary to the usual experience in November. Most of
the employment increases occurred in durable goods
lines, and were particularly marked at steel plants,
foundries and machine shops, and at factories producing
electrical apparatus, aircraft, and railway rolling stock.
The nondurable goods classification as a whole showed a
decline, substantial decreases being reported in food
m anufacturing, and in clothing and shoe plants. Total
factory employment was 11 per cent above the level of a
year ago while payrolls were 21 per cent higher.
Although farm employment in the United States de­
clined less during November than is usual at this time o f
year, the Department o f A griculture estimates that the
number of farm workers on December 1 wras the smallest
fo r that date in at least 14 years.
C o m m o d i t y P r ic e s
Follow ing two months of irregularity, prices in several
com modity markets rose substantially during December,
both here and abroad. M ood y ’s Investors Service index
o f 15 raw products advanced 6 per cent to about the
same level as that prevailing at the end of September.


Probably the chief factor stimulating the rise in wheat
prices to the highest levels in two years has been the
protracted drought in the Southwest which, according to
the Government estimate, may result in a 1940 winter
wheat crop of only about 400,000,000 bushels, one o f
the smallest since the turn o f the century. ^ Other im por­
tant factors include the spread o f hostilities abroad and
reports of frost damage to the Argentine crop. W heat
prices at Kansas City rose IS1/^ cents to $1.08% a bushel
on December 19, but declined 5 or 6 cents subsequently
as snowfalls im proved crop prospects somewhat. Cash
corn reached 58% cents a bushel, up 5y 2 cents from the
end of November but 4 % cents below the September high
point. H og prices, under the pressure of large supplies,
declined further to $5.22 a hundredweight on December
15, the lowest since August, 1934, but rallied to show
little change for the month as a whole. The average quota­
tion of cotton at ten Southern markets rose to 11.11 cents
a pound on December 13, about V /2 cents above the level
prevailing at the end o f November. Later in December
the price reacted to 10% cents. Im portant factors in the
rise were the enlarged exports induced by rapid price
advances in foreign markets, active demand by domestic
mills, and anticipation o f the successive reductions in the
export subsidy (from 1 y2 cents to 1 /5 cent a poun d).
Repossessions of 1938 cotton from the Government loan
stock on a considerable scale have been reported. Little
change took place in wool quotations, while silk moved
up $1.14 to $4.59 a pound, approxim ately three times
the lowest price in 1938, reflecting scarcity of supplies
and a high rate o f consumption in Japan. H ide prices
were one cent higher at 15 cents a pound as demand
from tanners increased, while rubber declined to 19*4
cents a pound, a new low point since before the war, de­
spite continued large domestic consumption. The price
o f raw sugar in New Y ork eased 13 points to 2.82 cents
a pound, the lowest level since August 15, follow ing the
announcement o f the new Cuban-American trade agree­
ment reducing the sugar duty from $1.50 to 90 cents
per hundred pounds, effective December 27, and the
restoration o f sugar marketing quotas, effective Janu­
ary 1, 1940.
A n easier undertone prevailed in metal markets gen­
erally during December. The Iron A ge composite price
o f scrap steel, continuing its decline from the high point
of $22.50 on October 3, receded 91 cents during December
to $17.67 a ton. The price o f zinc was reduced y2 cent to
6 cents a pound, the first decline in more than a year,
and the export price o f copper moved somewhat lower.
Tin displayed a declining tendency throughout the
month as the International Tin Committee announced
that the permissible export quotas fo r the first three
months of 1940 would be 120 per cent of basic tonnage,
instead of 100 per cent as originally announced.
F o r e ig n T r a d e
During November merchandise exports from this
country were valued at $293,000,000 and imports at
$235,000,000, both substantially larger than in Novem­
ber, 1938. Exports, however, showed a larger decline
from the comparatively large volume for October than
is customary at this season of the year, while imports
registered a material advance over October, contrary to
the usual seasonal movement between these two months.
The resulting export balance of $57,000,000 in November



was smaller than in other recent months and was also
less than the November, 1938 figure, which amounted to
The accom panying table shows the year-to-year changes
which have occurred in the principal export and import
classifications, for the first eleven months of 1939 and for
the period since the outbreak of the European war. F or
the first eleven months of 1939, the value of all exports
was slightly lower than in the same period o f 1938, as
large reductions in the first half of the year somewhat
more than counterbalanced gains in recent months. In
the three months follow ing the beginning of the war,
aggregate exports showed a 17 per cent increase over
the comparable period of 1938, and the year-to-year gain
in November amounted to 15 per cent. Increased foreign
demand for wholly and partly finished Am erican manu­
factures, especially aircraft, products of aluminum,
copper, iron and steel, and certain chemicals, machinery,
and petroleum products, were leading factors in the
expansion of aggregate exports since last September.
Shipments o f unm anufactured cotton among the crude
materials also showed large gains, while exports of
tobacco, in the same category, were greatly reduced.
Despite war activities abroad, exports of foodstuffs from
this country have continued to run substantially below
those of a year ago.
Percentage Change in Values
Different periods of 1939 compared with corresponding
periods of 1938

Im ports**

Sept. to

Jan. to

N ov.

Sept. to

Jan. to

Crude materials............. — 2 .6
Crude foodstuffs............ — 55.2
Manufactured foodstuffs — 0 .9
Semimanufactures......... + 5 8 .2
Finished manufactures. + 1 8 .5

+ 6 .3
— 10.5
+ 1 9 .5
+ 4 9 .8
+ 16.1

— 14.9
— 56.7
+ 1 1 .4
+ 1 8 .4
+ 6 .4

+ 4 3 .9
+ 1 7 .2
— 5 .2
+ 3 8 .2
+ 9 .2

+ 3 4 .7
+ 10.6
+ 1 1 .3
+ 2 6 .6
— 0 .7

+ 2 5 .8
+ 1 1 .9
— 2 .2
+ 2 3 .3
+ 5 .4

+ 1 4 .9

+ 1 6 .5

— 0 .9

+ 2 4 .9

+ 1 8 .7

+ 1 4 .5

N ov.

T ota l........................

*Domestic exports only.

D e p a r tm e n t S tore T r a d e
F or the three weeks ended December 23, total sales of
the reporting department stores in this District were
about 5 % per cent higher than in the corresponding
period of 1938, and the daily rate of sales fo r this portion
of December showed about the usual seasonal advance
from November, which was a relatively good month for
retail trade. Total department store sales for the year
1939, based on final figures for 11 months and an estimate
for the fu ll month of December, were about 2y2 per cent
larger in dollar volume than in 1938, as com pared with a
decrease o f about 7 per cent between 1937 and 1938.
Total November sales of the reporting department
stores in this D istrict were about 8y2 per cent higher
than in November, 1938, the largest year-to-year increase
in over two years, and sales of the leading apparel stores
in this D istrict were 5y2 per cent larger. D uring Novem ­
ber, the daily rate o f sales in the department stores ad­
vanced considerably more than usual from the October
F or all reporting department stores, stocks o f merchan­
dise on hand, at retail valuation, were slightly higher at
the end of November, 1939 than at the end o f November,
1938, the first increase in two years; New Y ork and
B rooklyn department store stocks, however, remained
slightly smaller than a year previous, and apparel store
stocks continued lower. Collections during November
were at a somewhat higher rate than in 1938, both in the
department and the apparel stores.

November, 1939
compared with
November, 1938

Per cent of
October -31
collected in
Novem ber

**Imports for consumption only.

W ith respect to imports the aggregate value fo r the
first eleven months o f 1939 showed a gain of 15 per cent
over the level in the same months of 1938. In the Sep­
tember to November period the expansion of imports
amounted to 19 per cent, and in November the value of
imports was 25 per cent greater than a year previous.
The greater increase for the period since last September
reflected principally larger demand for foreign raw
materials, such as crude rubber, raw silk, unmanu­
factured wool, and hides and skins, accom panying accel­
erated industrial activity in this country. Imports of
such semimanufactured products as copper, nickel, tin,
and woodpulp also registered comparatively large yearto-year gains in recent months. The rather large Novem­
ber increase in imports of crude foodstuffs was due
chiefly to larger receipts of cocoa and coffee. The gain
o f 9 per cent over a year previous in imports o f manu­
factured goods was due principally to larger receipts
o f burlap and newsprint p ap er; fo r the September to
November period, however, finished manufactured im­
ports were less than a year ago, as compared with a
gain for the eleven months. Imports of manufactured
foodstuffs, including especially sugar, edible vegetable
oils, and liquors, registered a decrease of 5 per cent from

November, 1938, although for the September to Novem­
ber period as a whole they were larger than a year

on hand
end of



— 1.2
+ 5 .8
+ 6 .3
+ 9 .0
+ 4 .6
+ 3 .5
+ 6 .4

4 2.7
5 5.0
4 3.4
4 1.0
3 6.3

4 3.8
4 0.8

+ 8 .7

+ 0 .9

4 7.6

4 8.7

+ 5 .5

— 2 .3

4 8.0

4 9.1



New York and B rooklyn................................
Buffalo........ ........................................................
Northern New Jersey.......................................
Northern New York State.........................
Southern New York State..........................
Hudson River Valley D istrict...................
Westchester and Stam ford.........................
Niagara Falls.................................................

+ 7 .4
+ 1 1 .3
+ 1 1 .7
+ 1 3 .1
+ 10.7
+ 1 5 .6
+ 1 3 .2
+ 1 1 .9
+ 9 .6
+ 16.1
+ 14.6
+ 10.9
+ 13.8

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

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


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

r Revised.

N ov.



N ov.










Business C onditions in the U nited States


14 0 1----------

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


OLLOWING a rapid rise after the outbreak of the European war industrial
activity continued at a high level in November and the first half of December.
There was a considerable increase in distribution of commodities to consumers
while prices of basic commodities, which had been steady during November,
rose somewhat in the first two weeks of December.



P r o d u c t io n





Index o f Physical Volum e o f Industrial
Production, Adjusted for Seasonal Variation
(1923-25 a v e ra g e s 100 per cent)






Index o f Total Loadings o f Revenue Freight,
A djusted for Seasonal Variation (1923-25
a v e r a g e s 100 per cent)



The Board’s seasonally adjusted index of industrial production advanced
from 121 to 124 per cent in November, reflecting sustained activity at a period
of the year when a decline is usual. Production of durable goods, which had
advanced rapidly for several months, showed a further expansion. Record pro­
duction of steel ingots continued in November and was followed by a less than
seasonal decline in the first half of December. Automobile production increased
in November, notwithstanding the fact that plants of one important company
remained closed pending settlement of an industrial dispute. After this was
settled at the end of November assemblies rose sharply. Retail sales of new
automobiles were in large volume in November and at the end of the month
dealers’ stocks of new cars apparently were smaller than at the corresponding
time in other recent years. Lumber production declined less than seasonally in
November but plate glass production, which had reached a high level in October,
showed a reduction.
Output of nondurable goods continued at a high level in November. At
cotton and woolen mills activity increased somewhat further and was close to
the record levels reached three years ago. Rayon production advanced to new
high levels but at silk mills there was a sharp decline following substantial
increases earlier this fall. Output of flour and sugar declined further from the
levels reached in September while changes in activity at shoe factories and
meat packing establishments were largely seasonal in character.
Coal production in November declined somewhat from the high level reached
in October. Output of crude petroleum increased further and iron ore shipments
continued in exceptionally large volume until the Great Lakes’ shipping season
closed in the latter part of the month.
Value of construction contracts, as reported by the F. W. Dodge Corpora­
tion, increased in November following a sharp decline in October. In both
months changes in total awards reflected principally fluctuations in the volume
of contracts for public construction. Private residential awards declined some­
what less than seasonally in November, while awards for other private projects
showed little change. Contracts for private work, both residential and non­
residential, were larger than a year ago, while those for public projects were
below the high level of that time when contracts under the Public Works
Administration program were being awarded in large volume.
E m ployment

S ALES/V A - - V \

y \ A - /




Factory employment and payrolls continued to increase in November,
reflecting chiefly further sharp advances in industries producing steel,
machinery, and other durable goods.



j ^

D is t r ib u t io n



.......-^ 5 T < O CKS




Indexes o f Value o f Department Store Sales and
Stocks, Adjusted for Seasonal Variation
(1923-25 average= 1 0 0 per cent)

In November distribution of commodities to consumers increased con­
siderably. The Board’s seasonally adjusted index of department store sales,
which had been around 90 in the three preceding months, advanced to 94, a
level about the same as at the peak in 1937 when prices of commodities sold at
department stores were generally somewhat higher than at present.
Freight car loadings showed less than the usual seasonal decrease from
October to November and the Board’s adjusted index increased from 80 to 82,
which was only slightly under the recovery peak reached in the early part of
1937. Shipments of ore and miscellaneous freight declined less than is usual
in November, while loadings of coal decreased more than seasonally from the
relatively high October level.
C o m m o d it y P r ic e s

Prices of both industrial materials and foodstuffs advanced from the latter
part of November to the middle of December. Wheat and silk prices rose con­
siderably and there were smaller increases in cotton and hides. Prices of steel
scrap and nonferrous metals, on the other hand, showed declines.

jK. r ------TRE
12 YE: ars & o \ ^ER





| V






3 -5 YEARS

*t --------- Tnr
aei inv qii i c




■'~A-----'\ _ _____



M oney Rates in New York City

Governm ent

S e c u r it y M a r k e t

Prices of United States Treasury bonds advanced sharply during the last
half of November to a level not far below the all-time high point of last June
and remained steady during the first half of December.

............"TR E A S U R Y NOTES**





C r e d it

Total loans and investments at reporting member banks in 101 leading
cities rose substantially during November and the first half of December,
reflecting largely purchases of new United States Government securities. Com­
mercial loans, which had been increasing since August, continued to rise until
the third week in November. Deposits increased further.