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o f C r e d it a n d B u s in e s s C o n d it io n s

F e d e ra l

R e se rv e


Federal Reserve Bank, New York

M o n e y M a r k e t in D e c e m b e r
In the money market, the month of December was
characterized on the one hand by a sharp, though tem­
porary, reduction in excess reserves of the member banks,
and on the other by further expansion in member bank
credit. Meanwhile, a further net decline occurred in
yields on United States Government and municipal secur­
ities, attributable at least in part to the issuance of a fully
taxable Treasury note issue and to further indications
that efforts will be made in the near future to eliLjua^
tax exemptions from future issues of long term United
States Government securities, as both developments
tended to increase investment interest in outstanding
United States Government and m unicipal issues.
Excess reserves of all member banks were reduced by
a net amount of $490,000,000 from $6,930,000,000 on
November 27 to $6,440,000,000 on December 24, owing to
two principal factors—an increase of $282,000,000 in
Treasury deposits in the Reserve Banks and a further
increase of $352,000,000 in the amount of currency out­
standing. Absorption of reserve funds from these causes
considerably exceeded an increase in the gold stock
amounting to $175,000,000, which, although the principal
factor of gain to member bank reserves during the four
week period, represented the smallest rise in the gold
stock in many months. The increase in Treasury balances
at the Reserve Banks was due largely to payments to the
Treasury for the $531,000,000 Treasury note issue of the
National Defense series, about three fourths of which
was paid for in cash on December 18, and one fourth
by credits to the W ar Loan Deposit accounts on the
books of subscribing banks. The increase of $352,000,000
in the amount of currency outstanding between November
27 and December 24 was considerably in excess of the
usual seasonal rise at this time of year, continuing the
tendency for currency circulation to rise to progressively
higher levels. Ordinarily, a substantial amount of cur­
rency returns to the Reserve Banks after Christmas, and
the resultant additions to member bank reserves, supple­
mented by Treasury disbursements and increases in the
gold stock, should cause a renewed accumulation of
excess reserves in the member banks in January.
The accompanying diagram indicates the changes
which have occurred during each of the past four years

D is tric t

January 1 , 1941

in the amount of currency outstanding through the
Federal Reserve Bank of New York, cumulated from
the last W ednesday of the preceding year. As the
diagram shows, the increase during 1940 was even
larger than in 1939, and on December 24 approximately
$325,000,000 more currency was outstanding through
this bank than on the last weekly reporting date in
1939. This net outflow of currency followed an out­
flow of more than $250,000,000 during 1939. A number
of factors are believed to have been responsible for the
continued " ‘°e in currency circulation, although 11 °
relative importance of these factors, such as bank service
charges, low level of interest rates on savings accounts,
foreign demands for United States currency manifested
both in this country and abroad, and the level of busi­
ness activity, is not known. It is of some significance,
however, that in the latter part of 1937, when business
activity was undergoing a sharp reduction, the amount
of currency called into use showed only a slight sea­
sonal rise in the closing months of the year. In 1940,
with business activity rising sharply, a substantial in­
crease in currency circulation was to be expected from
this factor, quite aside from other influences.


+ 350
+ 300
+ 250

+ <50

+ 100
+ 50



- too
- 150

Changes in Volume of Currency Outstanding through Federal
Reserve Bank of New York (Weekly data for each year
cumulated from last Wednesday of preceding year)


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

Owing in part to loan expansion and in part to p u r­
chases of securities, total loans and investments of
the weekly reporting banks in 101 cities increased
$700,000,000 further during the four weeks ended De­
cember 24, to reach a new high level, approximately
$1,200,000,000 above the 1929 peak. W ith respect to
loans, those classified as commercial, industrial, and
agricultural increased $105,000,000 further at a time
when there is usually some seasonal reduction; this
expansion was fairly widespread throughout the country.
Loans to brokers and dealers in securities, although still
at very low levels, rose by a net amount of $78,000,000,
of which nearly two thirds occurred at New York City
banks, the increase apparently being only partly ac­
counted for by borrowings by dealers in Government
securities in connection with December Treasury
The investment holdings of the reporting banks showed
an increase of $476,000,000 which was about twice the rise
in their loans. To a considerable extent the increase in
investment holdings reflected acquisition of United States
Treasury notes, holdings of which rose $276,000,000 dur­
ing the four weeks ended December 24; $234,000,000
of this increase occurred in the week ended December
18, presumably indicating that a substantial part of
the $531,000,000 new issue of National Defense notes
was taken by the reporting banks for their own account.
The United States bond holdings of the reporting banks
also showed an increase of $61,000,000 during the four
weeks ended December 24, which was entirely accounted
for by increases in holdings of such obligations by New
York City banks. Holdings of Government guaranteed
securities and of miscellaneous securities by New York
City banks likewise increased during this period, and
holdings of miscellaneous securities by banks in 100 other
cities also tended to rise.
A djusted demand deposits of the reporting banks
rose to new high levels in December. Domestic inter­
bank deposits in New York City banks stood at
$3,800,000,000 on December 24, an increase of
$400,000,000 during the past year.
G overnment S ecurities
Government bond price fluctuations were indecisive
in the first five trading sessions of December but, sub­
sequently, prices moved higher both in anticipation of,
and after, the T reasury’s announcement on December
10 that the T reasury’s midmonth financing would be
confined to a cash offering of $500,000,000 of taxable
notes. The notes, dated December 18, carrying a % per
cent coupon, and m aturing in five years, comprised the
first issue of National Defense securities other than bills
under the authorization of the (first) Revenue Act of
1940, and they were also the first Treasury notes that
have been issued which are subject to all Federal income,
estate, and gift taxes. The new Defense notes, heavily
oversubscribed on December 11, were allotted on the

basis of 13 per cent of individual subscriptions but not
less than $100 on any one subscription. Total subscrip­
tions allotted amounted to $530,838,700, of which about
half was allotted in the Second Federal Reserve District.
A fter establishing a new record high on December 10,
the average price of long term Treasury bonds declined
% of a point by December 20, but subsequently showed
a net recovery of about % point. The medium term
Treasury issues acted in much the same way.
Treasury note prices moved up slightly from the
beginning of December to the 9th, the average yield on
3 to 5 year Treasury notes declining from 0.35 per cent
to 0.31 per cent (a new low). Through most of the
remainder of the month prices held at a somewhat lower
Treasury bill financing during December consisted of
four weekly issues in the National Defense Series, each
in the amount of approximately $100,000,000 and each
a replacement of similar m aturities. The accepted bids
for the issue dated December 4 were awarded at 0.002
per cent and those for the December 11 issue at 0.001
per cent. Except for $30,000 tendered at slightly above
par, the bids accepted for the December 18 issue were
tendered at p ar; those for the December 26 issue were
at prices slightly above par and at par.
M oney Rates in N ew Y o rk
Dec. 30, 1939 N o v. 30, 1940 Dec. 30, 1940
Stock Exchange ca ll lo a n s ......................
Stock Exchange 90 day lo a n s ................
P rim e com m ercial paper 4-6 m o n th s . .
B ills — 90 day u nindorsed........................
Average y ie ld on Treasury notes (3-5
Average yie ld on Treasury bonds (not
callable w ith in 12 ye ars).................
Average rate on latest Treasury b ill
sale, 90 day issue..................................
Federal Reserve B a n k o f N ew Y o rk
discount r a te ..........................................
Federal Reserve B a n k of N ew Y o rk
b u yin g rate fo r 90 d ay indorsed b ills






y2- %

0 .4 6

0 .3 5

0 .36#


2 .0 4



0 .004







* N om in al.
X N egative yield .
# Change of + 0 .0 3 per cent fro m previous yields due to drop p ing fro m the
average the 1 Y% per cent Treasury note issue of December 15, 1943, w hich
matures w ith in three years.

C ommercial P aper and B ills
During December the limited supply of paper remained
the prim ary influence restricting transactions in the com­
mercial paper market. Rates previously in effect were
m aintained. The amount of paper outstanding through
reporting commercial paper houses at the end of Novem­
ber was $231,800,000, or approximately $20,000,000 less
than a month earlier—a decline sufficient to cancel the
increases of the preceding three months. A year ago
outstandings aggregated $214,400,000.
The bill m arket continued during December in the
same dorm ant condition that has prevailed for some time
past, and quoted rates held steady. The total amount
of bankers acceptances outstanding at the end of No­
vember was approximately $196,700,000, a further



monthly increase of $10,000,000. This increase was ac­
counted for by moderate rises in outstandings of im port
bills and domestic warehouse credits. As compared with
November, 1939, bills outstanding were down $26,000,000,
principally because of a decline in export bills.
N ew F in a n c in g
D uring December a total of $560,000,000 of corporate
and municipal new security issues was publicly offered
or privately sold; more than two thirds of the total financ­
ing was concentrated in the first half of the month. This
was the largest total for any month since June, 1939,
with the exception of October, 1940. Corporate financing,
which amounted to $380,000,000, exceeded that of any
month during the last three and one-half years with the
for Refunding and for New Capital (In millions of
exception again of October, 1940. However, the amount
dollars; fourth quarter 1940 data preliminary)
representing new capital, $55,000,000, was below the aver­
age of recent months.
bonds. A substantial amount of other new security flota­
The principal corporate and municipal new security tions is reported to be under consideration by various
issues marketed during December were as follows:
companies, but few of the issues have yet progressed
the point of registration with the Securities and
$101,800,000 Appalachian Electric Power Company securities
consisting o f $70,000,000 o f 3 % per cent first
As indicated in the accompanying chart, the monthly
mortgage bonds o f 1970, priced at 107 to yield
average of corporate new security issues during the final
2.90 per cent; and 300,000 shares ($31,800,000)
quarter of 1940 was the largest for any quarter in more
o f 4:Y2 per cent preferred stock priced at 106; for
than two years. For the calendar year as a whole, cor­
refunding purposes
porate financing averaged $225,000,000 a month, which
70.000.000 National Dairy Products Corporation securities
consisting o f $55,000,000 3 % per cent term de­
with the exception of 1936 was the highest level reached
bentures of 1960, priced at 104% to yield 2.93
since 1930. Corporate flotations representing new capital
per cent; and $15,000,000 0.375-2.10 per cent
averaged $60,000,000 a month in 1940 or almost double the
serial debentures maturing 1941-50, priced at
average for 1939. The portion of corporate financing
par; $2,600,000 o f the above for new capital
arranged through the private placement of securities
53.000.000 Boston Edison Company 2 % per cent first mort­
represented about one third of the grand total, approxi­
gage bonds o f 1970, priced at 105 to yield 2.51
mately the same proportion that prevailed in 1938 and
per cent; for refunding purposes
50.000.000 Detroit Edison Company 3 per cent general and
refunding bonds o f 1970, priced at 107*4 to yield
2.65 per cent; for refunding purposes.
M unicipal
$55,000,000 City o f New York 2 % per cent serial
1941-70, priced to yield 0.30-2.85 per
new capital purposes
27,750,000 Port o f New York Authority 3 per cent
1975, priced at 102% to yield 2.875 per
refunding purposes
25.000.000 New York State 1V2 per cent serial bonds
1941-80, priced to yield 0.15-1.56 per
new capital purposes.

bonds o f
cent; for
bonds of
cent; for
cent; for

Short term State and m unicipal awards not included
in the $560,000,000 total accounted for an additional
$105,000,000. Included in this classification were $45,000,000 New York City 0.25 per cent revenue bills m atur­
ing in March and April, 1941, and $25,000,000 Common­
wealth of Pennsylvania 1% per cent tax notes m aturing
in April, 1941. The latter were reoffered to yield 0.15
per cent.
Public announcements made during December indicate
the following forthcoming issues: $35,000,000 Phillips
Petroleum Company debentures and notes, $12,570,000
Union Pacific Railroad Company equipment trust certifi­
cates, and $11,500,000 Southern Counties Gas Company

S e c u rity M a rk e ts
Stock prices, which had been declining in the latter
part of November, continued to ease early in December.
Slightly firmer quotations prevailed between December
6 and 13, however, owing in p art perhaps to news of
Greek and B ritish m ilitary successes. Subsequently,
prices again weakened and at the month ’s low on Decem­
ber 23 the average price of common stocks included in
Standard Statistics 90 stock index showed a cancellation
of 42 per cent of the June-November rise and was 19
per cent below the y ear’s high reached on January 3,
1940. As the month neared its close a stronger tone was
in evidence. In contrast to the experience in November,
public utility stocks were steadier in December than in­
dustrial or railway issues. The volume of stock trading
picked up somewhat after the first week of December
but did not approach the early November level.
Prices of high and medium grade bonds reached new
highs during December. The price average of the prime
corporate bonds constituting the Aaa list of Moody's
Investors Service advanced about % point between
November 30 and December 12 to another record level,
but, subsequently, this gain was lost. The average price



of Moody’s Baa (medium grade) corporate bonds moved
up % of a point between December 2 and 17, again estab­
lishing a new high, which, in turn, was slightly exceeded
on the 30th, after an intervening period of somewhat low­
er quotations. High grade m unicipal bonds, as measured
by the Standard Statistics price index, moved irregularly
after setting another record high on December 11. As in
November, the possibility that tax exemption features of
m unicipal bonds might be eliminated from future issues
apparently had a bearing on the strong showing of the
municipals early in December.
G o ld M o v e m e n ts
Im ports of gold into the United States during Decem­
ber were considerably smaller than in other recent months,
and the increase of about $195,000,000 in the gold stock
of the United States was the smallest for any month since
October, 1939. The amount of gold held under earmark
for foreign account at the Federal Reserve Banks was
reduced about $5,000,000 during December to a total
of approximately $1,810,000,000. For the year 1940,
the rise in the gold stock was far greater than in any
previous year, amounting to about $4,350,000,000, as
compared with the previous record of $3,130,000,000 in
1939. Earm arked gold holdings for foreign account rose
$650,000,000 during the past year.
In the five weeks ended December 25, the Departm ent
of Commerce reported the receipt of $200,800,000 of
gold in the following principal amounts: $142,300,000
from Canada, $15,000,000 from Australia, $13,000,000
from Argentina, $9,100,000 from B ritish India, $4,200,000
from Japan, $4,100,000 from the Philippines, $3,200,000
from South Africa, $2,800,000 from Colombia, $1,500,000
from Portugal, and $1,100,000 from Chile.
F o re ig n E x c h a n g e s
D uring the month of December trading in the New
York foreign exchange m arket continued inactive and
exchange rate fluctuations were insignificant. The low
volume of turnover in the exchange m arket is, of course,
the result not only of the various legal obstructions to
capital movements, both here and abroad, but also of
the greatly increased tendency for exports and imports
to be invoiced in term s of dollars instead of foreign
The Canadian m onetary authorities have issued sev­
eral additional regulations, at least one of which should
have the effect of restricting further the demand for the
Canadian dollar in the free market. The regulations have
been revised to prevent the use by nonresidents of “ free
m arket” Canadian dollars in paym ent for various busi­
ness services rendered in Canada, although certain small
services are exempt from this order. In the New York
market, the unofficial discount on Canadian dollars
widened from 13 per cent at the beginning of the month
to 14% per cent on December 10, but narrowed again
to close the month at 13% per cent.
Some movement occurred in the rate for the Shanghai
dollar during the past month. Following the announce­

ment that $100,000,000 was to be made available to the
Chinese authorities by United States Government agen­
cies, the quotation for the Chinese currency appreciated
somewhat to 6 cents in the early p art of December. Sub­
sequently, however, a weaker tendency developed, ap­
parently in anticipation of the early establishment of a
new central bank in the area controlled by the Nanking
Government. The prospect of the substitution of a new
currency for National Chinese dollars now circulating
in this area may have stimulated a speculative demand
for foreign exchange in the Shanghai market* The
Chinese dollar was quoted as low as 5% cents on Decem­
ber 23. By the end of the month, however, the rate had
recovered slightly.
The discount on the Cuban peso tem porarily widened
somewhat on December 10, but showed no net change for
the month as a whole. A tem porary reaction also oc­
curred in the Swiss franc in mid-December, when the rate
declined to $0.2318, but a recovery to around $0.2321
occurred shortly afterw ard.
F o re ig n T ra d e
Exports of merchandise from the United States, at a
value of $328,000,000 during November, showed a de­
crease of about 5 per cent from the previous month,
though exceeding the figure of a year earlier by 12 per
cent. On the other hand, imports, valued at $223,000,000,
were 8 per cent larger than in October but 5 per cent
less than in November, 1939. The resulting excess of
exports of $105,000,000 in the past November was nearly
double that of a year previous but was smaller than the
export balance in most months of 1940.
The decline between October and November in the
value of exports was due in part to decreases of a sea­
sonal nature in exports of agricultural products, and in
part to reductions in shipments abroad of a num ber of
nonagricultural products. Cotton exports were valued
at approximately $3,000,000 less than in October and
were equal to only about one-fourth the November, 1939,
figure. Shipments abroad of aircraft—largely to Great
B ritain—declined to $26,738,000 in November from
$31,389,000 in the previous month, but were four times
as large as in November, 1939. There was also a sizable
drop between October and November in exports of iron
and steel semimanufactures. On the other hand, exports
of automobiles (both passenger cars and motor truck s),
gasoline, metal-working machinery, and firearms exceeded
those of October, and the m ajority of these exports showed
exceptionally large gains over November, 1939.
Among the imports, the principal factors in the increase
between October and November were considerably larger
receipts of silk, ferro-manganese, furs, new sprint paper,
coffee, and hides and skins. Im ports of copper, burlap,
fruits and nuts, and tobacco, however, were somewhat
smaller than in the previous month. Compared with
November, 1939, large dollar gains were recorded in
receipts of such commodities as rubber, silk, tin, sugar,
wool, and copper, while considerable reductions were
shown in im ports of woodpulp, coffee, diamonds, and
expressed vegetable oils.


For the first eleven months of 1940, total exports
amounted to $3,703,000,000 and imports to $2,372,000,000.
The Departm ent of Commerce estimates that exports and
imports for the entire year of 1940 will aggregate
$4,000,000,000 and $2,600,000,000, respectively. On the
basis of these estimates, exports for 1940 would exceed
those for any calendar year since 1929; imports, with the
exception of 1937, would be the largest since 1930.
Exports from this country to Canada during the first
ten months of 1940 amounted to $561,000,000, repre­
senting 17 per cent of the aggregate value of shipments
io all nations, and imports from Canada amounted to
$327,000,000, which was equal to 16 per cent of the
total value of imports into the United States from all
countries. Exports to Canada in the ten months ex­
ceeded the dollar volume in the corresponding period of
1939 by $178,000,000—a 46 per cent increase; receipts
of products from Canada showed a gain of $58,000,000,
or 22 per cent over the first ten months of 1939. As is
indicated in the accompanying table, more than one half
of this country’s exports to Canada in the first ten months
of 1940 consisted of finished manufactures. Large gains
compared with the corresponding period of 1939 in
exports of these products, as well as of semimanufac­
tures were no doubt due chiefly to increased demands
from Canada for war materials. As in the case of ex­
ports, finished m anufactures were the leading economic
group among imports from Canada, although the increase
over the comparable period of 1939 in imports of this
classification was relatively small. Im ports of semimanu­
factured goods, however, showed a substantial gain, owing
in part to greater requirements in this country of Cana­
dian woodpulp and nickel.
U nite d States Merchandise Trade w ith Canada
(In m illions of dollars)
Value, firs t 10 months
of 1940

Change in value fro m
corresponding period of 1939

E x p o rts *

Im p o rts * *

E xp o rts*

Im p o rts * *

Crude m a te ria ls.............
Crude foodstuffs............
M a n u fa ct’d fo o d stu ffs..
Sem im anufactures.........
Finished m anufactures.

9 5.3

4 2.7
2 9.3

+ 20.7
6 .3
0 .8
+ 42.1
+ 1 0 7 .6

+ 1 1 .1
+ 0 .6
— 1.0
+ 3 0 .8
+ 16.9

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



+ 1 7 7 .5

+ 5 8 .4

*D om estic exports

* *Im p o rts fo r consum ption

B u ild in g
The average daily rate at which construction contracts
were awarded in 37 E astern States during November
showed an increase of 8 per cent over October and
reached the highest level for any month since June,
] 930, according to data of the P. W. Dodge Corporation.
In comparison with November a year ago the daily rate
of awards was 27 per cent higher. More than one
quarter of the November total was accounted for by pro­
jects associated with National defense, a considerably
larger proportion than in October.
Well above half of the National defense construction
contracts during November was concentrated in non­
residential building. On a daily average basis, awards



Daily Average Contracts Awarded for Industrial Building in 37 States
(F. W . Dodge Corporation data; six month moving averages
of monthly seasonally adjusted data)

in this category also reached the highest level since
June, 1930, and were 18 per cent larger than in October
and 91 per cent greater than in November, 1939. Indus­
trial building was the im portant factor in the rise in the
nonresidential classification; public purpose building
made the poorest comparisons. Augmented to some de­
gree by cantonment construction, residential building
contracts in November attained the highest level since
July, 1929, were 12 per cent larger than in October, and
31 per cent above those a year earlier. Owing to a
falling off in public works awards, heavy engineering
construction lagged 12 per cent behind the October
volume and 25 per cent behind that of a year previous.
The accompanying chart portrays the sharp rise
which has occurred in industrial building. In the six
months ended with November the volume of contracts
awarded in this class exceeded that of any other six
m onths’ period since 1929, and awards in November
alone, aggregating $79,000,000, reached the largest
monthly total in the sixteen years for which records are
available. Industrial building was im portantly stimu­
lated by the National defense program during the second
half of 1940; projects identified with the defense effort
accounted for a little less than half of the total value of
industrial building awards in the period June to Novem­
ber, inclusive. Contract awards for industrial building
usually account for 10 per cent or less of awards of all
classes; in November this percentage rose to 21.
In New York and N orthern New Jersey, building
contracts in November showed quite different tenden­
cies from those prevailing in the 37 Eastern States.
Defense construction bulked somewhat larger in the
total for this area in November than in October, but
the daily average rate of contract awards of all classes
declined 13 per cent below October and 33 per cent below
November, 1939. The decline from October in this area
was caused wholly by a sharp drop of 54 per cent in
nonresidential building, which was down 65 per cent
as compared with a year before. In this category, the
industrial, public purpose, and commercial classifica­
tions all showed substantial reductions from October
levels, while miscellaneous building rose 29 per cent.



Largely as a result of new defense construction, the rate
of awards for heavy engineering projects was up slightly
from October, but nevertheless was 28 per cent below
the level prevailing in November, 1939. A 21 per cent
increase in residential building over the October level
was largely accounted for by defense projects. November
residential building awards were in about the same daily
volume as a year before.
D uring the first two weeks of December, the daily rate
of construction contract awards in the 37 States declined
7 per cent from the level prevailing in the month of
November, but was 82 per cent above the corresponding
weeks of 1939. The decline from November was attribu­
table prim arily to a decrease of 26 per cent in the rate of
residential building awards. The daily average rate of
heavy engineering awards was also off slightly. Non­
residential building, however, was 10 per cent above the
November rate, and for the first time since January, 1939,
the value of contracts awarded for nonresidential build­
ing was greater than awards made for residential
C o m m o d ity P ric e s
Although some rising tendencies were apparent in the
principal wholesale commodity m arkets during Decem­
ber, prices of most basic commodities moved within rela­
tively narrow limits and registered only small net
changes for the month as a whole.
The accompanying chart shows the course, since the
outbreak of the present European war, of the Bureau
of Labor Statistics daily price index of 28 basic com­
modities. The combined index has held relatively steady
for the past six weeks, following an advance of about
11 per cent from the August, 1940, low point. The cur­
rent level is nearly 1 8 ^ per cent above the prewar
(August, 1939) average.
W heat prices sagged slightly in the first half of De­
cember, refleeting some seasonal increase in country offer­
ings and reports of favorable crop weather, but tended

Daily Index of Wholesale Commodity Prices, Computed by Bureau
of Labor Statistics (August, 1939=100 per
cent; weekly plottings)

to display strength throughout the rem ainder of the
month. A Government forecast, announced on Decem­
ber 20, placed the 1941 winter wheat crop at 633,000,000
bushels, which would be the largest since 1938. Spring
wheat in Minneapolis at 89 cents a bushel on December
30 was 2 cents higher than at the end of November.
Corn in Chicago, however, showed little net change for
the month. Hog quotations advanced 98 cents further
to $6.96 a hundredweight, and steers at $12.58 a hundred­
weight on December 27 were the highest since November,
1937. Following the Government announcement of the
1941 sugar quota at the lowest initial figure since 1936,
the price of sugar advanced to 2.95 cents a pound on
December 11, but subsequently moved lower, with a net
gain of 5 points for the month.
Under the stabilizing influence of the cotton loan pro­
gram, cotton prices fluctuated only slightly during most
of the past month, but strengthened considerably in the
last few days’ trading. The Government’s estimate, pub­
lished on December 9, of the 1940 crop based on condi­
tions as of December 1, shows a downward revision to
12.686.000 bales, compared with the previous estimate of
12.847.000 bales. There was a net advance during the
month of 33 points to 9.83 cents a pound in the average
price for spot cotton in 10 Southern markets. Wool tops
rose 4 cents further to $1.24 a pound on December 17,
but subsequently lost most of that gain. Silk quotations
remained steady throughout the month, but prices of
hides and rubber drifted somewhat lower.
The metal markets were generally firm in December.
According to the composite indexes of the Iron A g e , pig
iron prices were advanced 83 cents during the month to
$23.44 a ton, the first change since September, 1939,
and scrap steel prices rose 83 cents further to $21.83 a
ton, the highest price since October, 1939. Custom
smelter and export copper prices were up somewhat,
but the quotation for lead in New York was lowered on
December 2 from 5.65 to 5.50 cents a pound, at which
level it was m aintained throughout the rem ainder of
the month.
P ro d u c tio n a n d T ra d e
Available data for December indicate a further rise
in the general level of business activity, seasonal factors
considered. In retail trade there was the usual sharp
expansion, and departm ent store sales apparently reached
the highest Christmas level since 1929. Industrial opera­
tions in many cases showed marked resistance to the
curtailm ent which ordinarily characterizes December,
and building construction was unusually active consider­
ing the season of the year.
Despite tem porary interruptions for necessary repairs,
steel mill operations again averaged about 96 per cent
of capacity (after making allowance for Christmas holi­
day shutdowns). In most past years there has been a
substantial seasonal contraction in steel making between
November and December. E arly in the month the cur­
rent scale of steel prices was reaffirmed for the first
quarter of 1941, but incoming orders continued in heavy


volume throughout the month and trade comments indi­
cated that there was a further increase in backlogs of
unfilled business. A formal order priority system under
Government sponsorship was reported under discussion,
but no definite action instituting such a system was
announced. Automobile m anufacturers maintained
heavy production schedules in an effort to satisfy a strong
retail demand for cars and trucks, as well as to build
up dealers’ stocks. Although mill sales of cotton gray
goods were comparatively light, it was reported that the
mills continued at a high rate of activity on orders
previously booked. Railway freight traffic was reduced
less than in most other years, and electric power pro­
duction, at the peak of the year as is usual in December,
appears to have increased more than seasonally over
In November the upswing in business activity con­
tinued vigorously; this bank’s index of production and
trade—to some extent aided by the failure of usual sea­
sonal contractions to develop in a number of lines—
moved up 3 points further to 99 per cent of estimated
long term trend, the highest level in more than ten years.
In November, 1939, the index stood at 93. Each of the
m ajor segments of the index—production, prim ary dis­
tribution, and distribution to consumers—contributed
to the general advance in November.
In production, both durable and nondurable goods
industries continued to benefit from a sustained flow of
National defense and w ar orders and an active demand
for goods from civilian sources. Near capacity opera­
tions again prevailed at steel mills, machine tool plants,
shipyards, and airplane factories. The daily rate of
automobile production in November exceeded that of
any other month since the spring of 1937, although the
gain over the relatively high rate of October was not so
pronounced as in some recent years. The sharp rise in
operations at cotton and woolen textile mills, which
began last summer, proceeded further in November, as
the accompanying chart indicates, and new record levels
were attained. Shoe production declined much less than
is usually the case in November, and electric power pro­
duction moved steadily higher.

Railroad freight car loadings as a whole declined con­
siderably less than usual in November; coal shipments,
which had been curtailed in the previous month, recov­
ered sharply in November. Retail trade made an excep­
tionally favorable showing; the brisk demand for auto­
mobiles was unabated, and, after allowance for seasonal
factors, sales of departm ent stores, mail order houses,
and chain store systems expanded markedly.
(Adjusted fo r seasonal varia tio n s and estim ated long te rm tre n d ;
series reported in dollars are also adjusted fo r price changes)


N o v.



N ov.




P roduction of:
Producers’ durable goods.......................
Producers’ nondurable goods.................

96 p



lO lp
lO lp


Consumers’ durable goods.....................
Consumers’ nondurable goods...............




80 p
lO lp

P rim a ry d is trib u tio n ....................................
D is trib u tio n to consum er............................



87 p
97 p




99 p

86 p





Index of Production and Trade

Industrial Production
A u to m o b ile s ...................................................
B itu m in o u s coal............................................
Crude p e tro le u m ...........................................
E le ctric p o w e r...............................................
C o tto n co nsum ption....................................
W ool consum ption........................................
M e a t p ackin g .................................................
Tobacco p ro d u c ts .........................................

Manufacturing Employment
E m p lo y m e n t..................................................
M an-hours of e m plo ym e nt.........................

R esidential b u ild in g contra cts...................
N onresidential b u ild in g and engineering
c o ntra cts.....................................................












85 p
















Primary Distribution
R y. fre igh t car loadings, mdse, and m isc..
R y. fre igh t car loadings, o th e r..................

Distribution to Consumer
D epartm ent store sales (U.S.) r ...............
Grocery chain store sales............................
V a rie ty chain store sales.............................
M a il order house sales.................................
N ew passenger car sales..............................


Velocity of Deposits*
V e lo city of demand deposits, outside New
Y o rk C ity (1919-25 average = 1 0 0 ) ___
V e lo city of demand deposits, New Y o rk
C ity (1919-25 a v e ra g e = 10 0 ).................

Cost of Living and Wages*
Cost of liv in g (1935-39 average=100) . . .
Wage rates (1926 a v e ra g e = 10 0 )..............

p P re lim ina ry

Average Daily Mill Consumption of Cotton and Wool

r Revised

* N o t adjusted fo r tre n d

E m p lo y m e n t a n d P a y ro lls
D uring November, New York State factories increased
their working forces and payrolls 1 per cent further,
contrary to the usual seasonal tendencies. The largest
increases in employment occurred mainly at firms in the
metal and textile industrial groups. Shipyards, rail­
road repair shops, and plants producing structural steel,
nonferrous metal products, automobiles, and airplanes
hired more workers in November, as did m anufacturers
of cotton and woolen textiles. Clothing and millinery
firms and canning factories, on the other hand, reduced
working forces seasonally. Compared with November,



mately 1,100,000 more than in November, 1939. These
totals do not include persons in the m ilitary branch of
the Government, which increased 90,000 in November to
more than 800,000, nor do they include Federal emer­
gency employment.

1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940
Factory Employment and Payrolls in New York State, Adjusted
for Seasonal Variation and to Census Data
(1925-27 averages 100 per cent)

1939, factory employment was 10 per cent greater, and
payrolls were 15 per cent larger. All of the principal
industrial districts of the State shared in these advances.
As the accompanying diagram indicates, this bank’s
seasonally adjusted index of New York State employ­
ment in November was above the 1929 peak, and at the
highest point in seventeen years. The payrolls index
was higher than at any other time since 1929, but was
still 5 per cent below that y ear’s peak. The fact that
the normal working week is much shorter today than
in 1929 accounts for the lower relative level of the pay­
rolls index. However, as a result of increased basic wage
rates, and increased actual working hours in many plants
(with overtime paid for at premium rates), the increase
in the payrolls index has been greater than the advance
in the employment index in each of the last seven months.
In the United States as a whole, working forces and
wage payments in factories increased slightly further
during November, whereas ordinarily both employment
and payrolls decrease at this time of year. The employ­
ment gains occurred largely in durable goods industries;
working forces in the nondurable goods group as a whole
declined, though somewhat less than seasonally. Fac­
tories producing machine tools, aircraft, electrical ma­
chinery, and automobiles continued to take on more work­
ers, while m anufacturers of clothing, shoes, and food
products reduced their forces. Compared with Novem­
ber, 1939, employment was 6% per cent higher and
payrolls were 13 per cent larger.
D uring November, approximately 40,000 more persons
were estimated to have been employed in all nonagricul­
tural pursuits than in October, although in the preceding
eleven years there was an average decline between these
two months of around 400,000 persons, according to the
Secretary of Labor. M anufacturing plants hired 50,000
more workers in November, and wholesale and retail trade
establishments added 60,000 employees, while employ­
ment in the transportation and public utility fields de­
clined. Total employment in all nonagricultural occu­
pations was estimated at 36,500,000 workers, approxi­

D e p a rtm e n t S to re T ra d e
For the four weeks ended December 28, total sales of
the reporting departm ent stores in this D istrict are esti­
mated to have increased by about 6% per cent from the
corresponding 1939 period, and the daily rate of sales
for this portion of December advanced about as usual
from the relatively high November level.
Total November sales of the reporting departm ent
stores in this D istrict were about 7 per cent higher than
in November, 1939, and the daily rate of sales for
November advanced considerably more than usual from
the October level. Departm ent stores in nearly all locali­
ties reported substantial increases in sales from Novem­
ber, 1939, while sales of the leading apparel stores in
this D istrict were practically unchanged from November,
Stocks of merchandise on hand in the departm ent
stores, at retail valuation, were about 5 y 2 per cent higher
at the end of November, 1940, than at the end of Novem­
ber, 1939, while apparel store stocks were little changed.
Collections of accounts outstanding continued slower in
1940 than in 1939 in the departm ent stores, but were
practically unchanged in the apparel stores.
N ovem ber, 1940
compared w ith
Novem ber, 1939

Per cent of
o utstanding
October 31
collected in
Novem ber

on hand
end of
m onth



+ 4 .4
+ 5.9
+ 6 .0
+ 1.9
+ 9 .5
+ 1 1 .9
+ 4 .1

43 .8
3 8.2

4 9.6
4 5.4
4 3.8

N orth e rn New Y o rk S ta te .........................
Southern N ew Y o rk S ta te .........................
C en tra l N ew Y o rk S ta te ............................
Hudson R iv e r V alley D is tr ic t...................
W estchester and S ta m fo rd .........................
N iagara Falls ...............................................

+ 6 .4
+ 12.5
+ 7 .1
+ 1 2 .2
+ 7 .4
+ 18.0
+ 4 .4
+ 7 .5
+ 6 .9
+ 1 4 .8
+ 2 .3
— 14.2
+ 4 .3

A ll departm ent stores..............................

+ 7 .1

+ 5 .4



A pparel stores...........................................

+ 0 .2

+ 0 .6

4 9.4

4 9.3

L o c a lity

N et

New Y o rk and B r o o k ly n ................. ..............
B uffalo
N orth e rn New Jersey......................................

Indexes of D ep a rtm e n t Store Sales and Stocks, Second Federal Reserve D is tr ic t
(1923-25 average=100)


N ov.



N ov.

Sales (average d a ily ), una d justed .................
Sales (average d a ily ), seasonally adjusted..

96 r




Stocks, u na d ju s te d ...........................................
Stocks, seasonally a d ju s te d ............................





r Revised


Business Conditions in the U nited States
(Summarized by the Board o f Governors o f the Federal Reserve System)
N D U STRIAL activity continued at a high rate in November and the first
half o f December and distribution o f commodities increased considerably.
Commodity prices generally showed little change following earlier advances.


Index of Physical Volume of Industrial Produc­
tion, Adjusted for Seasonal Variation
(1935*1939 average=100 per cent)

Value of Construction Contracts Awarded
(Three month moving averages of F. W .
Dodge Corporation data for 37 States, ad­
justed for seasonal variation)

P roduction
Volume o f industrial production, which usually declines at this season,
showed little change from October to November, and the B oard’s seasonally
adjusted index rose 3 points further to 132 per cent o f the 1935-1939 average.
Reflecting work on a large volume o f orders for National defense purposes
and for civilian needs, activity in the machinery and textile industries con­
tinued to increase sharply. A t machinery plants and at cotton textile mills
activity reached new high levels and at woolen mills output was close to the
previous peak reached early in 1937.
Steel ingot production, which had been at about 94 per cent o f capacity
in October, increased somewhat further in November and the first half o f
December. Automobile production continued in unusually large volume, amount­
ing in November to around 500,000 cars and trucks. Retail sales o f new cars
have been large this autumn and production has been maintained at high levels
in order to supply this demand and to build up dealers 9 stocks. Lumber produc­
tion declined less than seasonally from October to November. New orders for
lumber continued somewhat above the current rate o f production although
below the high level o f the three preceding months when large orders were
placed for cantonment construction. Lumber stocks at mills continued to decline
and were smaller than at any time in recent years. Bituminous coal production
increased considerably in November, following a sharp decline in the previous
month, while output o f crude petroleum was maintained at about the October
rate. Production o f most metals continued in large volume.
Value o f total construction contract awards declined less than seasonally
in November. In the 37 eastern States for which F. W. Dodge Corporation data
are available total contracts showed little change; awards for public construc­
tion increased further and those for private work declined by somewhat less
than the usual seasonal amount. In the far western States contract awards
showed a decline from the unusually high level reached in October.
Distribution o f commodities to consumers increased considerably in Novem­
ber. Sales at department stores and mail order houses rose sharply, while
variety store sales increased by about the usual seasonal amount. In the first
half o f December there was the customary large expansion in retail sales.
Total freight car loadings showed considerably less than the usual seasonal
decline in November and the early part o f December. Loadings of coal, which
had been curtailed in October, increased sharply and shipments o f ore and o f mis­
cellaneous merchandise declined much less than is usual at this time of the year.

Index of Total Loadings of Revenue Freight,
Adjusted for Seasonal Variation (1923-1925
average=100 per cent; miscellaneous, coal,
and all other car loadings expressed in
terms of points in total index)

W holesale Commodity P rices
Prices o f basic commodities, which had risen substantially since August,
generally showed little change from the middle o f November to the middle o f
December. Prices o f a few imported commodities, particularly cocoa, burlap,
and shellac, increased considerably and there were small advances in steel
scrap and some other domestic commodities, while moderate declines were
reported for such varied commodities as lead, grains, and lard.
B ank Credit
Total loans and investments at reporting member banks in 101 leading
cities have increased sharply since the beginning o f October. Commercial loans
continued to increase in November and the first half o f December, and holdings
o f United States Government obligations at New York City banks rose sharply.
Principally as a result o f the expansion o f bank loans and investments, Gov­
ernment expenditures, and foreign disbursements financed by additional gold
imports, bank deposits increased to new high levels. At the same time there
has been a considerable increase in currency in circulation partly in response
to seasonal trade demands.

Wednesday Figures for Reporting Member
Banks in 101 Leading Cities (Latest
figures are for December 11)

U nited S tates Government Security P rices
Prices o f United States Government securities continued to rise during the
latter half o f November and the early part of December, and the 1960-65 bonds
advanced to successive new high levels, with a peak of about 111% on Decem­
ber 10. The yield on this issue declined to a low point of 2.03 per cent on the
latter date, but increased slightly toward the middle o f the month, reflecting
some easing in prices.