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M ONTHLY R E V IE W of Credit and Business Conditions Second Federal Reserve District Federal ReserveBank,NewYork M o n e y M a r k e t in D e c e m b e r The change inthe United States fromanation at peacetoanationat war, onDecember 7-8, 1941, had onlyalimitedeffect onthemoneymarket andinterest rates. TheshockfeltbytheGovernmentsecuritymarket, forexample, couldnotbecomparedwithitsreactionat theoutbreakof theEuropeanwarinSeptember, 1939. (RelativechangesinTreasurybondpricesareshownin thechartwhichappearsonpage3). Ofallthedomestic financial markets, thestockmarket aloneshowedmore thanamoderatereaction, andprices of stocks, already depressedbyyear-end“taxsales’ 9 andtheprospect of stillhighertaxes, reachednewlowssince1935. IntheperiodbetweenDecember6andDecember26, the average yield onlong termTreasury bonds rose about Ysto3/16 of oneper cent, whileTreasurynote yields roseonly0.03 to0.07 per cent andtheaverage rate onweeklyissues of Treasurybills roseby alike amount. Thesmall riseinratesonshort termGovern ment securities inDecember must be considered, how ever, in the light of a preceding increase averaging around *4 per cent fromthe lowlevels of the year recordedinSeptemberandOctober. Ratesof NewYork Citybanksforloanstoprimecustomers, maturingwithin ayear, haveshownnoupwardtendency, andbankers acceptance rates have beenunchanged. Openmarket commercial paper has been sold at %-% per cent recently, representing only afractional change inthe quotationfromthepreviouslevel of Y2 Per cent. January1,1942 requirements. Thelargest factor intheincreaseinre servebalanceswasanet gainof fundsthroughforeign account disbursements, whicharereflectedintheitem “foreignaccount andgoldtransactions’ 9 intheaccom panying diagramshowingthe principal movements of fundsaffectingreservebalancesof banksintheSecond Federal Reserve District since the beginning of 1941. Theseforeignaccount disbursementsonaccount of war purchasesinthiscountry, investment of dollarbalances inGovernmentsecurities, andothertransactions, which directly or indirectly affected member bank reserves, amounted to $250,000,000 between November 5 and December24. Thisfiguredoesnotincludetransfersof dollarbalancesintoearmarkedgold,whichdidnotaffect bankreserves. ThenextmostimportantinfluenceonNewYorkbank reserveswasanetgainof around$100,000,000of funds throughTreasurytransactionsfortheperiodNovember 5-December 24. This gainoccurreddespitelarge pay mentstotheTreasuryintheweekendedDecember17, duringwhichweekpaymentwasmadeforthenewand additionalissuesof TreasurybondsonDecember15and largeamountsof quarterlyincometaxcollections were made. Thelossof reservefunds duringthat weekwas limitedbythefact that banks inthis District elected topayfor55percentofthenewTreasurybondsallotted inthisDistrictbythebookcreditmethod, whichresults innoimmediatedrainonreserves of thebanks. With drawalsfromthebanksof suchcreditsbelongingtothe M ember B a n k R eserve P osition The relative stability of moneyrates intheface of wardevelopmentsmaybeattributable, at least inpart, tothefact thatinNewYorkCitytheactual declinein excess reserves of member banks during December in the period up to Christmas was less than had been anticipated. Onthe December 24 statement date the excess amounted to $935,000,000, as compared with the lowof $775,000,000 reachedonNovember 5, and $1,130,000,000 on December 3. The lowest statement datefigureinDecemberwasreachedonthe17thwhen excessreservesamountedto$890,000,000, andonnoday in December didthe excess drop below$850,000,000. Theriseof$160,000,000inexcessreservesfortheperiod betweenNovember 5 andDecember 24 reflectedanet increaseofabout$200,000,000inmemberbankbalances, aboutonefifthofwhichwasabsorbedbyariseinreserve Principal F actors A ccou n tin g for M ovem e n ts o f Funds Into and O ut o f R eserve Balances of M em ber B an ks in Second Federal R eserve D istrict (C u m u lative since January 1, 1 9 4 1 ; ( 4 - ) = g a i n to reserve balances, ( — ) = l o s s to reserve balan ces) 2 MONTHLY REVIEW, JANUARY 1, 1942 Treasuryaremadeonlyabout asfast asthe Treasury reserve balances and an increase of more than disbursesfundsfromitsbalancesintheReserveBanks, $200,000,000inreserverequirements, whichaccompanied andthus havelittleeffect ontheaggregatereserves of alargeincreaseinGovernment depositsinthecommer all banks inthecountryalthoughthey mayaffect the cialbanksandsomeriseinprivatedeposits. Theprincipal reserves of particular banks. In October whenexcess influence onmember bankreserves during the period reserveswerearound$1,700,000,000inNewYorkCity, wasanincreaseof $803,000,000intheamountofmoney approximately35percentofthenewTreasuryissuesold incirculation, anexceptionallylargeincreaseevenfor inthatmonthwaspaidforbythebookcredit method. aseasonoftheyearwhenasubstantialincreaseincircu Banks inother parts of the country, whichholdrela lationisexpected. However, this drainonreserveswas tively more excess reserves thanNewYork banks, in counterbalancedtoalargeextent byanet additionof theaggregatepaidforonly32percentof theDecember reservefundsthroughotherfactors, theprincipal ones allotmentsof Treasurybondsbythebookcreditmethod. beingareductionof nearly$400,000,000innonmember Anadditionalfactorof considerableimportancetending depositsandotherFederalReserveaccounts(principally tomaintainacomfortablereservepositioninNewYork the decline in foreign deposits at the Reserve Banks Citybanks hasbeenanincreaseinTreasurydisburse previouslymentioned), andanincreaseof $192,000,000 mentsintheNewYorkarea,apparentlyreflectinglargely intheamount of Federal Reservefloat outstanding (a payments ondefensecontracts. SinceAugust the ten usual development aroundChristmas, duetocongestion dencyforNewYorktolosefundsinTreasuryoperations, inthe mails), and anincrease of $59,000,000 in the whichwas typical of the first half of 1941, has been FederalReservesecurityportfolio. Despitelargefluctua reversed. tionsinTreasurydepositsintheReserveBanks, thenet Another factor whichhas tendedto increase excess effectfortheperiodwasminor. reserves inNewYork has beenpurchases of Govern mentsecuritiesbytheFederalReserveBanks,underdirec tionof theOpenMarketCommittee. Suchoperationsin theperiodbetweenthiscountry’sentranceintothewar 1M nx 1 *1 1Y Kt-1 andDecember24amountedto$59,000,000. Thisamount *1 / x-y* isonlyabout oneseventhof thepurchasesof securities A A % madeforReserveBankaccount inSeptember, 1939, on theoutbreakofwarinEurope. 1.02 The movement of commercial and financial funds betweenNewYorkandtherestof thecountryhasbeen subjecttosizableweeklyswings, butonbalanceasmall net gainof fundstoNewYorkresultedfortheperiod November 5-December 24. As the bottomline inthe 1 1 diagramindicates, the movement of commercial and y* financial funds (otherthanbankfunds) betweenNew Yorkandtherest of thecountryhas stabilizedinthe t Negative yield. period since October. The movement of bank funds inandout of NewYorkalso stabilizedinthe period M B C throughDecember17, asanincreaseinthedepositsof During the fiveweeks endedDecember 24 the total Chicago banks withNewYork banks servedto offset floansandinvestmentsoftheweeklyreportingmember withdrawalsoffundsbyotherbanks. Intheweekended o banks increased $637,000,000 further to reach a new December24, however, therewasawithdrawal of over h ighfigureof $30,293,000,000. Increasesinholdingsof $125,000,000 of out-of-town bank deposits fromNew va rious categories of UnitedStates Government securi YorkCitybanks. t i e accountedfor $477,000,000 of thetotal increasein Thelargest absorptionof bankreservesinNewYork mesm er bankcredit, andarise incommercial, indus occurred through an increase of $190,000,000 in the trial,ba dagricultural loansaccountedfor$160,000,000. amount of currency outstanding in the seven weeks Other n t y pes of loans and investments showed minor endedDecember24. Fortheyear1941throughDecem changesw ichintheaggregateoffseteachother. ber 24, currency andcoinwithdrawals fromthe New Theincrh e of $477,000,000 inGovernment security YorkReserveBankexceededdeposits byslightlymore holdings ofaste h e reporting banks reflected principally than$500,000,000. Approximatelyonehalfoftheexcess arise of $408,000 ,000 inholdings of Treasury bonds. withdrawalsoccurredinthefirstsixmonthsof theyear The reporting ban cquired $54,000,000 of Govern andhalf inthesecondhalf of theyearuptoChristmas. ment bonds duringkstha e weekendedDecember 10, the Forall memberbanksinthecountry, excessreserves weekinwhichwar was declared, andincreasedtheir of $3,060,000,000 onDecember 24 showedareduction holdings $355,000,000 intheweekendedDecember 17 of $800,000,000fromtheDecember3figureandadrop when$1,600,000,000 of 2 and2% per cent Treasury of $350,000,000fromthefigurereachedonNovember5, bonds wereissuedbytheTreasury. Bankholdings of followingtheincreaseinreserverequirementpercentages Treasury bills rose an additional $61,000,000 and whichbecameeffectiveonNovember 1. The decline of holdings of Government guaranteed obligations rose $350,000,000fromthepreviouslowof November5was $33,000,000 while Treasury note holdings dropped causedby adecrease of $147,000,000 inmember bank $25,000,000. Money Rates in New York Dec. 31, 1940 Nov. 29, 1941 Dec. 31, 1941 Stock Exchange call loans........................ Stock Exchange 90 day loans................. Prime commercial paper— 4 to 6 months Bills— 90 day unindorsed......................... Yield on % per cent Treasury note due March 15, 1945 (tax exempt)............. Average yield on taxable Treasury notes (3-5 years)............................................... Average yield on tax exempt Treasury bonds (not callable within 12 years). . Average yield on taxable Treasury bonds (not callable within 12 years)............... Average rate on latest Treasury bill sale 91 day issue............................................. Federal Reserve Bank of New York dis count rate................................................ Federal Reserve Bank of New York buy ing rate for 90 day indorsed bills___ 0.46 0.60 1.99 * Nominal. 1.92 ank r e d it 2.07 2 .24 2.40 0.267 0.310$ $ 76 day issue ember 0 .5 8 0.9 4 FEDERAL RESERVE BANK OF NEW YORK 3 In NewYork City, expansioninloans andinvest ments amountedtoonly$91,000,000 inthe fiveweeks ended December 24, and the total remained some what belowthe October high. Commercial loans rose $51,000,000 further, and total United States Govern ment security holdings advanced $48,000,000, as the result of ariseof $154,000,000inTreasurybondhold ings ($120,000,000occurringintheweekwhenthenew Treasurybondswereissued) andariseof $25,000,000 in Government guaranteed issues, partly offset by a declineof $90,000,000 inTreasurybill holdings anda decreaseof $41,000,000inTreasurynoteholdings. Adjusted demand deposits of all reporting banks rosenearly$500,000,000inthethreeweeksendedDecem ber 10, toreachanewpeakof $24,680,000,000, but in the succeedingtwoweeks droppedabout $700,000,000, owingtocollectionof incometaxchecks, payments for newGovernment issues by bankcustomers, andwith drawals frombankdeposits of funds inthe formof currency. UnitedStatesGovernmentdepositsinreport December4, of anadditional $1,000,000,000of taxable ingbanksnearlydoubledinthefiveweeksendedDecem 2Yz per cent Treasury bonds of 1967-72 (identical ber24, onwhichdatetheyamountedto$1,400,000,000; iththe $1,200,000,000 issue offered October 9), and theincrease reflectedchieflybookcredit payments for w $500,000,000 of taxable 2 per cent Treasurybonds of theTreasurybondissuesintheweekendedDecember17. 1 51-55, wasconsummatedsuccessfully. Undertheterms In NewYork City, adjusted demand deposits rose o9 f heoffering, small investorswerefavoredbyprefer about $360,000,000betweenNovember 5andDecember enttia llotmentsandnewrestrictionsaimedatchecking 10, but inthefollowingtwoweekslost all of this rise, exceslsia v subscriptionswereimposed. Theofferingwas returning to a figure about $1,100,000,000 belowthe heavilyeov ersubscribed, allotments onthe2%per cent highreachedinMay, 1941. UnitedStates Government bonds bein 15 per cent of subscriptions andonthe deposits rose $440,000,000 in the seven weeks ended 2percentg is s 11percent. Subscriptionsinamounts December 24, while domestic interbank deposits were up to $5,000ue fo r registered bonds deliverable ninety reduced$190,000,000. daysafterissuancewereallottedinfull. Bothof these issues wereunder pressure December 8through11 as G S theusual distributionprocess was complicatedby the TheGovernment securitymarket sustainedtheshock effects of the entrance of the United States into the of theoutbreakof hostilities withJapanandthesub war. OnDecember31, however, bothissueswerequoted sequentdeclarationofwaragainstthechiefAxispowers slightlyabovepar. withgreatersteadiness thanwasthe caseat theopen Thewarnewsalsohadanunsettlingeffect onprices ing of the war in September, 1939. Indeed, as the of Treasurynotes andyields ontheseissues somewhat accompanying chart indicates, the rise inthe weekly extendedtheirriseof OctoberandNovember. Theyield averageyieldonlongtermtaxexempt Treasurybonds onthetaxexempt%percentTreasurynotedueMarch betweenDecember 6and13wasalsoless thanthat at 15, 1945movedupfrom0.60percentonNovember29 thetimeof thefall of theLowCountries andFrance to 0.72 per cent on December 11—the highest level orthantheincreaseearlyin1941, followingtheFederal reachedsinceAugust, 1940. Subsequently, theyieldon Reserve System’s special report to Congress and the this issue declined and for the month as a whole a revelations at about thesametimeof thelargevolume netdecreaseof0.02percentwasrecorded. Theaverage offinancingwhichwouldhavetobedonebytheFederal yieldonthe3to5yeartaxableTreasurynotesfollowed Government. Between September 2 and 23, 1939 the aroughlysimilarcourse, althoughanetriseof 0.08per weeklyaverageyieldonlongtermpartiallytaxexempt centwasshownforthemonthasawhole. Treasury bonds increasedfrom2.33 per cent to 2.74 Acceptedbids onthefiveweeklyissues of Treasury percent; betweenDecember6and13, 1941theweekly bills duringDecemberweretenderedoninterest bases averageroseonlyfrom1.87 per cent to1.98 percent. increasingfrom0.242percent ontheDecember3issue Followingaweekof littlemovement, theaverageyield to0.310percent (highest ratesinceOctober20, 1937) increasedfurther to2.02 per cent for theweekended ontheissuedatedDecember31. TheDecember3issue December27. Theaverageyieldonthetwolongterm was intheamount of $200,000,000 andthefour other taxableTreasurybondsmovedinasimilarwayduring issueswereintheamount of $150,000,000. Sinceeach December. Sales to establish losses for tax purposes replaceda$100,000,000maturity, atotal of$300,000,000 andtopreserveasmuchaspossibleof theappreciation of “newmoney” was put at the Treasury’s disposal. onsomeof theoutstandingissues sellingat largepre The first three issues in December were of 91 day miumswereindicatedtohavebeenfactorsintheDecem maturity, but theDecember24issuewascutto82days berrecessioninprices. andtheDecember31issueto76days. TheTreasuryis Despitecomplicationsresultingfromoursuddenentry shorteningthematuritiesfortheselatterissuesandalso intothewar, theTreasury’spublicoffering, announced that of theJanuary7, 1942, issuesothat theseissues "P E R C E N T A v era g e Yield on “ T a x E x em p t” U nited S tates T reasu ry B onds not Callable W ith in 12 Y e a rs (Scale inverted to show price m ovem e n t) overnm ent e c u r it ie s MONTHLY REVIEW, JANUARY 1, 1942 4 will matureonthedays of heaviest incometaxcollec tions in March, 1942, and onredemption serve as a partial offset totheexpectedheavydrainonbankre servescausedbythetaxcollections. It isexpectedthat theTreasurywill allowatotal of about $600,000,000of Treasurybillstomatureat theMarchtaxperiod, with out replacement. In continuance of its tax savings planinaugurated lastAugust, theTreasuryonJanuary1, 1942, isplacing onsale another issue of Treasury Tax Savings Notes, Series AandB, datedJanuary1, 1942, andmaturing January 1, 1944. The newnotes will be acceptable, duringandafterthethirdcalendarmonthfrommonth of purchase, at par andaccruedinterest in payment of Federal incomeandexcessprofitstaxes. Unlikethe earlier series, they may be presented in payment of Federal estate and gift taxes as well. The notes of bothnewseriesareavailableinthesamedenominations as heretofore with the exception of the addition to Series A of $500 and $1,000 denominations. Defense Savings stamps aretobeacceptedat their face value inlieuof cashas payment for these notes. In other respects, the Treasury Tax Savings note issues, dated January 1, 1942, are similar to the notes of the Tax SeriesdatedAugust1, 1941; theSeriesAissueprovides areturnof 1.92percent perannumandtheSeriesB issueareturnof 0.48 per cent whenusedinpayment of any of the above mentioned taxes. The Series A notesaredesignedespeciallyforthesmallertaxpayers, andthf amount that maybeusedinpayment of taxes withinayearislimited. S e c u r ity M a rk ets Incontrast tothesharpriseinstocks whenwar in EuropebeganinSeptember, 1939, shareprices receded whentheUnitedStatesenteredthewarearlyinDecem ber, althoughtheextent of thedeclinewaslessthanin May-June of 1940, whenlarge scale liquidation, con nected with German successes in the LowCountries, forcedafarmoreabruptdeclineinthemarket. Stand ard’s90stockpriceindexdropped7%percentbetween December 6and9. After aweakrecoveryinseveral of the interveningsessions, theindexonDecember 17 PER C E N T resumed its three month downtrend and reached on December23thelowestpointsinceMarch, 1935. Stock prices recoveredsharplyinthelast twosessionsof the year, buttheindexonDecember31wasstill4%percent belowthelevelprevailingattheendofNovember. Aside fromtheeffectsof warnews, taxsellingisreportedto havedepressedquotations andincreasedthevolumeof transactions ontheNewYork StockExchange during themonth. TradingduringDecemberwastheheaviest sinceMay, 1940. Prices of domestic corporationbonds declinedsome what inDecember. Onthe 10ththe average priceof prime corporate bonds, those rated Aaa by Moody’s Investors Service, was 2 points belowthe recordlevel maintained virtually throughout November and for several sessions early in December. A level % of a point lower (andanewlowfortheyear) wasreached onDecember 27. Mediumgrade corporate bonds, as measuredbyMoody’sindexof Baabonds, byDecember 9hadfallen2%pointsbelowtherecordhighof early Novemberand2pointsbelowthelevel of November29. Late inDecember therewas aslight recovery. Prices of municipal bonds dropped more sharply than cor porate bonds during the early part of December. As aresult, the average yieldfor prime municipal bonds roseto2.38 per cent onDecember 10, almost one-half percenthigherthanthenear-recordlowlevelofNovem ber26, but latertherewas someeasingintheaverage yield. Security dealings inGerman, Italian, andJapanese issuesweresuspendedindefinitelybytheNewYorkStock ExchangeandtheNewYorkCurbExchangeonDecem ber11. Similaractionwastakenwithregardtosecurities ofseveralofthesmallerAxispowerslaterinthemonth. N ew F in a n c in g DuringDecember, thevolumeof corporateandmuni cipalfinancingdeclinedto$166,000,000, thesmallesttotal sinceSeptember, 1939, thefirst monthof thewar. Al thoughunsettled conditions in the securities markets, arisingfromtheentranceof theUnitedStatesintothe war, affectedthepricingof newissues, onlyonemajor flotationscheduledfor the monthwas deferred. Cor poratefinancingamountedto$101,000,000, alsothelow estlevelsinceSeptember,1939,ofwhich$57,000,000repre sentedfunds tobeemployedfor newcapital purposes. Preliminarycalculationsindicatethatcorporatefinanc ing during the last quarter of 1941 averaged about $144,000,000amonth, thelowest sincethefirst quarter of 1939. Of thisamount, about $83,000,000represented issues for new capital purposes. For the calendar year as a whole, corporate financing averaged about $213,000,000 amonth, of whichnewmoneyaccounted for $85,000,000. Corresponding figures for 1940 were $230,000,000 and$61,000,000, respectively. More than four fifths of theyear-to-year increase innewcapital financing was accounted for by railroads and public utilitycompanies. F o r e ig n E x c h a n g e s Movement o f Stock Prices (Standard and Poor's 90 stock index; 19 26= 100 per cent) TheentranceoftheUnitedStatesintothewarresulted inafurthercurtailment insuchforeignexchangetrad 5 FEDERAL RESERVE BANK OF NEW YORK ingas hadbeeninevidence intheNewYorkmarket duringrecent months. Immediatelyafter theoutbreak of hostilities therewas necessarilyareluctance onthe partofbankstomakecommitmentseveninthoseneutral European currencies covered by general licenses; in addition, delaysincablecommunications, duetocensor ship, impeded dealings inLatin American currencies. Thislatterobstacletotrading, however, wassoonlargely removed as the market became adjusted to wartime conditions. DuringthefirstweekofDecember, priortothesudden attackbytheJapaneseupontheUnitedStates, trading intheNewYorkmarkethadbeengenerallyuneventful, except for somedecline inthefree rates for boththe ArgentinepesoandtheVenezuelanbolivar. Theopen ingof hostilitiesonDecember7andthecelebrationof a religious holiday inmost Latin Americancountries onthefollowingdaybrought tradingintheNewYork market to avirtual standstill onDecember 8. Imme diatelyfollowingthereopeningof LatinAmericanmar kets, most of the Latin American exchanges showed markedappreciationinterms of the dollar. Thefree ratefortheArgentinepesonotonlyrecoveredalltheloss sustainedinthefirstweekofDecember, butrosefurther toanewhighof$0.2405onDecember12. Subsequently, however, there was arather sizable reactionandthis exchangeclosedthemonthat$0.2345, toshowanetloss of45pointsforthemonthasawhole. Thefreeratefor theVenezuelanbolivarrosesteadilyto$0.2725onDecem ber18, andalthoughlaterreactingto$0.2650, it never thelessremainedwell abovethe$0.2580level prevailing attheendofNovember. Afterholdingat$0.5275until December12, thenoncontrolledratefortheUruguayan pesoroseonthatdayto$0.5310,atwhichlevelithassince heldfirm. OnDecember9, theCubanpesoroseslightly toparwiththedollarforthefirst timeinanumberof years, andbytheendofthemonththeCubanpesowas actuallyat aslight premium. The onlymarkedweakness inthe principal foreign exchange rates during December occurredin the un official Canadiandollar, thediscount onwhichwidened steadilyto14%percentbyDecember30, thelargestin about nine months. This weakness appears to have reflectedbothanunseasonal slack in tourist demand because of the war andsome year-end liquidationof AmericanheldCanadiansecuritiesandbalances. Some recoverywasshown,however, onDecember31, whenthe discountnarrowedto14percent. At timesduringthe monththeunofficial rateforsterlingrosetotheyear’s highof $4.04, butattheendofDecemberwasquotedat $4.0334. cars was reducedto 154,000 units—61 per cent below productioninDecember, 1940—andJanuaryoutput to 102,000 units, a figure about 75 per cent belowthe number of assemblies inJanuary, 1940. Furthermore, restrictions were imposed onproduction and sales of rubber goods for nonessential purposes and tin was placed under complete Government control. Systems of priorities andallocations, affectingavarietyof com modities, were tightened with the general purpose of assuring supplies for industries manufacturing arma mentsoressential civiliangoods. Data nowavailable for December indicate further progressinarmamentproductionandcontinuedcurtail mentofoutputinotherindustriesusingscarcematerials. Owingtothepressureof thepresent emergency, many steel millscontinuedtooperateonChristmasDay, con trary to the usual custominthe industry. Mill sales of cottongray goods, especially for forward delivery, appear tohavebeenlimitedtosomeextent bythere luctance of manufacturers to make commitments in viewof large anticipatedGovernment orders for mili tarypurposes, but cottonmill activitywas reportedto havecontinuedat peaklevels. Incompletefiguresindi cate that railroad loadings of merchandise and mis cellaneousfreight declinedlessthanusual inDecember, but that the movement of bulk freight fell off to a somewhatgreaterextentthaninmostotheryears. Elec tricpowerproduction,atthepeakoftheyearasisusual inDecember, appearstohaveincreasedmorethansea sonallyoverNovember. P r o d u c t io n T rade in N ovem ber PER CENT P R O D U C E R S *Dyj D U R A B L E G O O P r o d u c tio n a n d T r a d e Americanindustry quicklyfelt the effect of theen tranceof this countryintothewar. Shortlyafter the outbreakof hostilitiestheDirectorGeneral of theOffice of ProductionManagement announcedthat operations inthefivemajorlinesof warproduction—planes, ships, tanks, gnns, andammunition—wouldbesteppedupto twenty-fourhoursadayandsevendaysaweek. Moving to conserve materials for war use, the O.P.M. acted promptlytorestrictfurthertheproductionofpassenger carsandlighttrucks. TheDecemberquotaforpassenger and DuringNovemberthisbank’smonthlyindexof pro ductionandtraderosethreepoints to111 per cent of estimatedlongtermtrend. This figure compares with 92inJuly, 1940, at thestart of the defenseprogram, andwith86inAugust, 1939, just priortotheoutbreak of the Europeanwar. Eachof themajor segments of the index—production, primary distribution, and dis tributiontoconsumer—advancedduringNovember. Inthecaseof production, divergent tendencies were againshownbetweentheoutput of producers’ durable goods andproductionof consumers’ durable goods, as the accompanyingchart indicates. Continuedgains in 0 \ U M E R S *S \ /S //duc o ry. r aw biS L E G O O D ' J .... 1 .. 1 1939 1 . .j. ,_.i 1,,,. ...I. 1.... L.._ 1940 1941 Indexes o f Production o f P roducers' D urable Goods and C onsum ers’ D urable Goods (Fed eral R eserve B ank o f N ew Y o r k indexes, expressed as percentages o f long term trends, and ad ju sted for seasonal variation) MONTHLY REVIEW, JANUARY 1, 1942 6 the war industries accounted largely for the further advanceintheindexofproductionofproducers’ durable goods, whichhas mountedsteadilysincethespringof 1940, while consumers’ durable goodslines were again adversely affectedby limitations uponoutput andby material shortages. Production of nondurable goods, inboththe producers’ and consumers’ categories, in creasedsomewhat inNovember. Considering seasonal factors, retail trade recovered markedly in November, following the sharp recession that hadcharacterizedthe two precedingmonths, but failed to regain the highlevel prevailing in August. Salesof departmentstores, mailorderhouses, andchain store systems, ona seasonally adjusted basis, showed definite gains between October andNovember. Retail salesof passengercarsareestimatedtohaverunhigher thaninthepreviousmonthbut substantiallybelowthe level of ayearago. Followingtheseasonalpeakreached inOctober, railwayfreight trafficdeclinedconsiderably lessthanusual inNovember andas aresult theindex ofprimarydistributionrosethreepoints. 1941 1940 Private constructionandnondefensepublicbuilding continuedto showevidences of contractioninNovem ber. For thefirst time sinceMarch, 1940 awards for private residential building dropped belowthe year earlier level, and private contracts for nonresidential buildingpurposes continuedanirregular declinefrom thepeakof lastMay. FromAugust toNovember the volume of contracts awardedfordefensepurposesinthe37States dropped markedly. Thisdecline, however, appearstobeofatem porarycharacter, asprogramsformilitaryconstruction, defenseplant expansion, anddefensehousinghavebeen steppedupsharplyasaresultofwardevelopments. The Officeof ProductionManagement nowestimatesthat in 1942total expendituresfor constructionwill begreater thantherecordvolumeof $11,000,000,000expectedfor 1941, andthatthecomingyear’soutlaywillberestricted exclusivelytothoseprojectswhichareconsideredessen tial toNational defenseorpublichealthandsafety. In October, theO.P.M.hadestimatedthatalthoughexpendi turesfordefenseconstructionwouldbeincreasedin1942, thetotal volume of expenditures wouldfall belowthe 1941figure. N Y S N N J IntheNewYorkandNorthernNewJerseyarea, the dailyrateof constructioncontract awardsalsodeclined duringNovember, but, owingprimarily toanincrease inthevolumeof Government contractsfordefensepur poses, remainedabovethefigures for August andSep tember. Althoughawardsfordefenseconstructionhave not beensoimportant inthis district asinsomeother parts of the country, the volume of such contracts awardedherehas expandedsharplyinrecent months. In this region the defense construction programhas beenprimarilyconcentratedontheexpansionof manu facturingfacilities, includingshipyards, ratherthanon suchprojects as air bases, power generatingfacilities, andtraining camps. InNovemberGovernmentcontracts fordefenseplantsaccountedfor40percentof all con tracts awardedinNewYorkState andNorthernNew Jersey. Residential buildingawards, whichhadbeenrunning at arelativelyhighrateearlier in1941, continuedthe declineof theprecedingtwomonths anddroppedtoa level roughly40percentbelowtheaverageforNovem ber, 1940. Awardsforpublicworksandutilitiesdeclined sharplyandwereoffaboutonefifthfromtheyearearlier level. ew (100 Indexes of Production and Trade* = estim ated long te rm trend) Index of P roduction and T ra d e ................. Producers’ goods— t o ta l.......................... Producers’ durable goods................... Producers’ nondurable goods............. N o v. Sept. 99 101 105 104 105 98 O ct. N o v. 109 108p lllp 115 116p 118p 126 135 118 128p 138 p 118p 140p 120 p 103 103p 95 p 105p 103p 92p 107p 123 109 125p lllp 126p 112 p lO lp 105p lOOp 104p 110 101 96 D urable goods— to t a l .............................. Nondurable goods— t o ta l....................... 91 101 100 103 D is trib u tio n to consum er............................ Miscellaneous services................................. 92 100 93 100 102 Cost o f Living, Bureau of L ab o r Statistics (100 == 1935-39 a vera g e )........................... 100 108 109 Wage Rates (100 = 1926 average).................................. 115 125r 126p Velocity of Demand Deposits* (100 = 1919-25 average) N ew Y o rk C it y .............................................. Outside N ew Y o rk C it y .............................. 29 61 27 59 30 59 Consumers’ nondurable goods........... 103 102 p 94p 130p 31 66 p P re lim ina ry. r Revised. * A d justed fo r seasonal v a ria tio n . The indexes of p rod u ctio n and trade have been re cen tly revised, in some cases back to January, 1935, and in other cases back to January, 1940. T a b ulations of the revised indexes are available upon request. ork tate an d or th ern ew ersey B u ild in g E m p lo y m e n t a n d P a y r o lls Therewasafurtherdeclineinthedailyrateof con structioncontract awards during November according tothemonthlyreport of theF. W. DodgeCorporation coveringconstructionactivityin37EasternStates. Since August, whencontractswereawardedinthelargestvol umeonrecord, thedailyrateof awards has fallenoff aboutonethird. Amongthefactorscontributingtothis declinearetheinfluenceof normal seasonal movements, andtheeffect of theSupplyPriorities andAllocations Boardorder (issuedinOctober) restrictingtheuseof critical materialstothoseprojects whicharenecessary toNational defenseor tothehealthandsafetyof the people. Intheabsenceoffurthersubstantialadditionstowork ingforces of defenseindustries, seasonal reductions in nondefenselinescausedslightdecreasesinbothemploy ment andpayrolls inNewYorkState factories during November. While firearms andmachineryplants con tinuedtohiremoremen, airplanefactories, shipyards, and steel mills actually showed small net losses in employment. All branchesoftheapparel grouplaidoff workersduringNovemberasisusualatthistimeofyear; thelargest employment decreases occurredat women’s clothing andmillinery concerns and fur goods firms. Seasonal influencesalsocausedlayoffs at canneriesand concerns manufacturing constructionmaterials. How- FEDERAL RESERVE BANK OF NEW YORK PERCENT A I R C R A F T v '’^ u S / SHIP> B U IL D 1 N G X ^ ^ *MACHINE T O O L S ^ ^ g y E LECTRICAL APPARATUS ..........J - ........ 1 I 1 t ......... 1 . , 1 ... .1 1939 1940 1941 Indexes o f M a n -H o u rs o f E m p lo ym en t in Certain Industries Im por tant in the W a r E ffort ( 1 9 3 5 - 3 9 a v e ra g e = 1 0 0 per c e n t; data derived from B ureau o f Labor Statistics figures w ith N o v e m ber estim ated— ratio scale used to show rates o f grow th ) ever, workingforcesasawholewere25percentgreater thaninthecorrespondingmonthof 1940andwagepay mentswere49percentlarger. AccordingtotheStateDepartmentofLabor, theonly industrialdistrictsintheStatetoshownetgainsinboth employment and payrolls during November were the UticaandAlbany-Schenectady-Troyareas wheregains atplantswithdefenseordershelpedoffsetlossesatother firms. Net decreasesinNewYorkCitywerecausedby seasonaldeclinesintheapparelandconstructionmaterial industries, whilelayoffs at metal plants intheBuffalo areaweremainlyresponsiblefor employment andpay roll reductions there. However, all of the industrial districts reported considerable gains over November, 1940 andevenlarger increases over the prewar level. The largest employment gains have occurredinareas stimulatedbytheNational defenseprogram. Plants in whichaccelerateddefenseproductionhas causedlarge increasesinworkingforcesincludeelectrical machinery andrailroadequipmentfirmsintheAlbany-SchenectadyTroyarea,firearmsplantsintheUticaarea,andaircraft factoriesandsteelmillsintheBuffaloarea. Thesmallest gainsoccurredintheBinghamton-Endicott-JohnsonCity area,inwhichconsumers’ nondurablegoodsarethechief manufactures. IntheUnitedStatesasawhole, asinNewYorkState, both working forces and payrolls in manufacturing industries declined somewhat during November. Sea sonalfactorscauseddecreasedemploymentinmanynon defense industries, althoughinanumber of instances losses were smaller thanusual at this time of year. Material shortages and curtailed output by manufac turers of consumers’ durable goods suchas passenger carsalsocontributedtothedecreaseinworkingforces. However, most industries producing defense materials continuedto employ more workers during November; shipyards andaircraft factories, asusual, reportedthe largest gains. The accompanying diagramshows the growth, measuredbyman-hours of production, of four of theleadingdefenseindustries duringthelast three years. Not onlyhaveworkingforcesintheseindustries beengreatlyenlargedbut theaveragenumberof work inghours per employee has beenincreased. Sincethe outbreakofwar, andmoreespeciallysincethebeginning of theNational defenseprogram,man-hoursof employ 7 ment inthese industries have risenconsistently. For instance, the aircraft industryhas arecordof having expandedactivity (measuredinman-hours) for26con secutivemonths, andman-hours inthis industry have increasedsevenfoldsincethe outbreakof war inSep tember, 1939. Presumablythesedefenseindustrieswill nowbeexpandedevenfurther tomeet war needs, al thoughthey face a growing scarcity of skilled labor andineachcasetheaverageworkweekisalreadysub stantially inexcess of the 40 hour level. According to Bureau of Labor Statistics estimates, thenumberof personsengagedincivil nonagricultural pursuitsdeclined80,000duringNovemberto40,700,000. Thedecreasewas largelycausedbyseasonal layoffs at factories andmines, andintransportationandpublic utilityactivities, althoughthesewerepartiallyoffset by increasesinworkingforcesatwholesaleandretailtrade establishments and a contraseasonal gainin construc tionemployment. ComparedwithNovember, 1940, non agriculturalworkingforceswereapproximately3,200,000 greater. Militaryandnaval forces (not includedinthe aboveestimates) rose60,000furtherinNovembertoa total of 2,070,000, anincreaseof 1,250,000 over ayear previous. C o m m o d ity P r ic e s Immediatelyfollowingtheoutbreakofhostilitieswith JapanonDecember 7, prices inmanyof thewholesale commoditymarketsrosesharply, butlatershowedsome decline andwere relatively steady inthe secondhalf of themonth. AlthoughtheBureauof LaborStatistics dailyindexof 28basiccommoditiesreachedapeakfor thewarperiodonDecember 12 at 160percent of the August, 1939 base, the net advance for December as awholeamountedtoonlyabout2y2 percent. Reflecting in some measure the price ceiling regulations which havebeenput inforce, aswell asthe extensivemove mentsinunregulatedpriceswhichhadoccurredduring the precedingyear, the entrance of theUnited States intothewarhadlessseriousinitial effectsondomestic commoditymarkets thanthe beginning of the war in Europe in 1939. The accompanying chart shows the current positionof prices of rawmaterials andmanuPER CEN T M ovem e n t o f P rices o f R aw M aterials and M an u factu red P roducts ( 1 9 2 6 = 1 0 0 per c e n t; B ureau o f L a bor S ta tistic s m on th ly indexes— D ecem ber estim ated from w eek ly indexes) 8 MONTHLY REVIEW, JANUARY 1, 1942 factoredproducts, asmeasuredbytheBureauof Labor weekendedDecember27, owinginlargeparttothefact Statistics comprehensive monthly indexes. These two that there was one more pre-Christmas shopping day indexesbythesummerof 1940hadlostmorethanhalf inthe 1941 week, morethanoffset the reductionthat of their advances duringthe first months of thewar, occurred in the weekwar was declared, while small but inthe ensuingrise—particularly markedbetween gains were reported for the first andthirdweeks of February andSeptember of 1941—they have reached themonth. Thedailyrateof salesinDecembershowed thehighestlevelsinmorethanelevenyears. Theindex averylargeincreaseovertheNovemberlevel inkeeping of rawmaterial priceshasreachedapointabout40per withtheusual seasonaltendency. cent above the prewar (August, 1939) level andthe Total November sales of the reporting department index of manufacturedproducts has advanced20 per storesinthisDistrictwereabout6percenthigherthan in November, 1940, and after allowing for one less cent duringthesameperiod. While price increases were fairly general during shoppingdayinNovember, 1941thanintheyearprevi December, themostpronouncedgainsoccurredindomes ous, averagedaily sales increasedby about 8percent tic agricultural products; theBureauof Labor Statis overNovember, 1940, andadvancedconsiderablymore ticsdailypriceindexof 7commoditiesinthisgrouprose thanusual overtheOctoberlevel. Substantial year-to6Y2 p er cent duringthemonth, toalevel 71 percent year gains continuedtobereportedduringNovember abovethat of August, 1939. Prices of importedgoods, for sales of home furnishings, while large reductions andalsoof industrial rawmaterials, overwhichmaxi werereportedinsalesof furs, mechanical refrigerators, mumquotationshavebeenestablished, showedrelatively andwinesandliquors. slight net advances inDecember—about 2per cent on Retail stocks of merchandiseonhandinthedepart ment storesat theendof Novembercontinuedsubstan theaverage. Official agencies duringDecember tookanumber of tiallyhigherthanayearprevious, althoughtheadvance steps toprevent strongupwardprice tendencies from overthepreviousmonth(October) wassomewhatsmaller developingasaresult of theturnof eventsinthewar. thanusually occurs. Returns fromalimitednumber TheCommodityExchangeAdministrationearlyinthe of department stores inthis District indicatethat out monthaskedcommodityexchangestokeepthedailyprice standingordersformerchandisepurchasedbythestores, fluctuations of futures trading in several important but not yet delivered, wereapproximately40 per cent products withinspecifiedranges. The Office of Price higherthanat theendof November, 1940, thesmallest Administration movedto stabilize prices of imported year-to-yeargaininninemonths. foods, andplacedceilingquotations onmany domestic fatsandoilssomewhatbelowtheprevailingpricelevels. Numerous other maximumquotations were announced, includingthoseforcigarettes, coffee, refinedsugar, raw wool, wool floor coverings, all grades of leather, new automobile tires andtubes, reclaimed rubber, second handcottonandburlapbags, rags, andresoldironand steel products. Manufacturers of beehive coke andof awidevariety of consumers’ durable goods were also requestednot toraise prices above the current levels. Percentage changes from ;a year ago Department stores Stock on hand end of month Net sales November, 1941 Jan. through Nov., 1941 November, 1941 + 2 + 5 + 4 + 17 +22 +10 +10 +12 + 8 +23 +33 +20 + 5 +2 1 +23 +35 +17 +20 +25 +14 +10 +14 +13 +21 +27 +12 +13 +18 +14 +23 +28 +22 +11 +23 +25 +34 +20 +25 +17 +15 +31 +32 +31 +31 +37 +26 + 6 +13 +32 + +10 +34 New York City........................................... Northern New Jersey................................ Newark..................................................... Westchester and Fairfield Counties.. . . Lower Hudson River Valley................... Poughkeepsie.......................................... United States Bureau of Labor Statistics Weekly Indexes of Wholesale Commodity Prices Percentage changes, Decem Index ber 27, 1941 compared with December 27, 1941 (1926 = 100) Nov. 29, 1941 Aug. 26, 1939 Farm products............................................ Foods............................................................. Textile products......... ............................... Hides and leather products..................... Chemicals and allied products. . . . . . . . Building materials..................................... Housefurnishing goods.............................. Metals and metal products..................... Fuel and lighting materials.................... Miscellaneous.............................................. 95.5 9 1.2 9 1.5 115.6 91.7 108.1 102.3 103.4 79.0 87.4 + 4 .8 + 2 .2 + 1 .0 + 0 .2 + 2 .2 + 0 .7 + 0 .4 + 0 .1 — 0 .5 + 0 .3 + 5 6 .3 + 3 6 .7 + 3 5 .8 + 2 4 .8 + 2 3 .6 + 2 0 .5 + 1 7 .6 + 1 0 .6 + 7 .9 + 1 9 .6 All commodities............ .................... 9 3.8 + 1 .6 + 2 5 .4 Raw materials.................................... Semimanufactured articles...................... Manufactured products............................ 9 2.5 90.2 95.2 + 2 .5 + 0 .7 + 1 .4 + 3 9 .7 + 2 1 .2 + 2 0 .1 D e p a r tm e n t S to r e T r a d e DuringDecember, averagedailysales of thereport ingdepartment storesinthisDistrict areestimatedto haveincreasedbyabout6percentoverDecember, 1940. Anunusuallylargeyear-to-yeargaininsalesduringthe Southern New York State....................... Western New York State......................... Niagara Falls.......................................... Apparel stores.................................... 1 +4i +4i +47 +39 +32 +32 +34 +24 +3 1 Indexes of Department Store Sales and Stocks, Second Federal Reserve District (1923-25 average = 100) 1941 1940 Nov. Sept. Oct. Nov. Sales (average daily), unadjusted................ Sales (average daily), seasonally adjusted.. 120 101 125 120 112 98 130 109 Stocks, unadjusted.. . ...................................... Stocks, seasonally adjusted............................. lOlr 85r 113 109 128 113 132 111 r Revised. M O NTHLY R E V IE W of Credit and Business Conditions Federal Reserve Bank of New York The Quickest, Surest Way You Can Help Win This War B u y Defense Bonds Sales o f U n ited States Savings B on d s Followingthe Japanese attackonPearl Harbor andthe entrance of theUnitedStates intoa stateof war, therewasanimmediateandsharpincrease inthevolume of sales of Defense Savings Bonds. Thechangefroma‘‘defense’’ stateof publicmindtoawarpsychologyactuatedheavypur chasesof SavingsBonds; infact, solargewasthedemandforSavingsBondsthatsuppliesofunissued bondswere, insomecases, exhausted. PendingthetimewhentheBureauofEngravingandPrinting isabletopreparebondsataratesufficienttoovertakethecurrent rateof sales, andadequatestocks of bondscanbeplacedinthehandsof issuingagents by the Federal Reserve Banks, the issuing agentshavebeenrequestedtoreceivesubscriptions andpayments for Savings Bonds andto issue temporaryreceiptsthereforif theyareunabletomake immediate deliveries. Regrettable as is the inconveniencetothepubliccausedbythetemporaryshortageinthesupplyof bonds, thesituation hasitsbrighter, moresignificantside, inthatitdenotesagratifyingpatrioticeffort onthepart of the publictodoasmuchaspossibletoassistintheprosecutionof thewartoasuccessful end. Sales of SavingsBondsinlargevolumewill domuchtoaidinthefinancingofthewaronasoundbasis. FortheperiodDecember1to29inclusive, salesofSeriesEDefenseSavingsBondsintheSecond Federal ReserveDistrict byqualifiedissuingagencies, i. e., commercial andsavings banks, building andloanassociations, andcredit unions, andbythe Federal Reserve Bankof NewYork, but not includingthepost offices, totaled$57,500,000—at issue price—amuchlarger amount thanfor any othermonthsincetheDefenseSavingsBondswent onsaleMay1, 1941. Onadailyaveragebasis, salesof thebondswere$2,396,000inthisperiodof December, as comparedwithadailyaverageof $762,000forthemonthofNovember—amorethanthreefoldincrease; andfortheperiodsinceDecem ber7theincreaseovertheprewarratewasevenlarger. Thedailyaveragenumberofbondsissuedin Decemberreached26,934, as comparedwith8,471 inNovember. Large increases occurredinsales of all denominations, especiallythe$50 and$500denominations. Someofthepurchasesof Defense SavingsBondsinDecemberprobablyweremadeforuseasChristmasgiftsorinthepaymentofyearendbonuses, but it is tobehopedthat therecent acceleratedrate of total sales will be increased further as moreandmorepeople subscribetopayroll deductionplans forthepurchaseof Defense Savings Bonds, make initial outright purchases ofbonds, orincreasetheamountsof theirprevious purchases. Inadditiontothesalesof SeriesEDefenseSavingsBonds, atotal of approximately$41,400,000 of SeriesFandGSavingsBondswassoldintheSecondFederalReserveDistrictinthefirsttwentyninedaysof December, ascomparedwith$36,068,000forthemonthofNovember. Salesoftheseseries areusuallyheavyduringtheclosingdays of amonth, sothat thetotal forthemonthof December asawholeshouldbeappreciablygreater thanfor thefirst twenty-ninedays. Receipts fromthe sale of all issues of UnitedStates Savings Bonds enteredinthe Treasury DailyStatement forthefirsttwenty-sevendaysofDecember, amountedto$432,000,000, whichfigure undoubtedly underestimates the actual rate at whichsales arebeingmade, sincethereissomelag betweenthetimeasaleismadeandthefundsarereflectedintheTreasuryDailyStatement. How ever, someindicationof thelargeincreaseinsalesof SavingsBondsinthecountryasawholesince thenationwent towaris affordedbycomparisonof this figurewithsimilar Treasuryreceipts for thewholemonthof November, whichamountedto$238,000,000. It isclearthatDecembersaleswere byfarthelargestforanymonthsincethebondswentonsaleonMay1. Variousplansforincreasingtheparticipationof thepublicintheDefenseSavingsprogramare beingdevelopedbytheStateandlocalDefenseSavingsCommittees. Mostimportantarethosedesigned topromotetheestablishmentof payroll deductionplanswhichinvolveregularsavingstobeinvested inSavingsBonds. Indications continuetobereceivedattheFederalReserveBankofNewYorkthat increasingnumbers of industrial andcommercial concerns, banks, andothertypes of businesses are settinguppayrolldeductionplans, fortheconvenienceoftheiremployeesinaccumulatingfundsforthe purchaseofDefenseSavingsBonds. Informationconcerningpayroll deductionplansmaybeobtained fromtheNewYorkStateCommitteefortheSaleof DefenseBondsandStamps, 1270SixthAvenue, NewYork, NewYork. MONTHLY REVIEW, JANUARY 1, 1942 Business Conditions in the United States Index of P h ysical V o lu m e o f Industrial P ro duction, A d ju ste d for Seasonal Variation ( 1 9 3 5 -1 9 3 9 a v e r a g e s 100 per cent) U. S. B ureau of Labor S tatistics Indexes of W h o le sa le Prices, B ased on 12 F oodstuffs and 16 Industrial M aterials (A u g u s t, 1 9 3 9 = 100 per cen t) M EM BtPBANh /v ^ RESERVEBALANCES/* J 1NEYIN fy9 M O _____ CIRCULATION 1939 Vi i y '" 1 1940 M em ber B ank R eserves and Related Item s M oney Rates in New Y ork City (Summarized by the Board of Governors o f the Federal Reserve System) I N DUSTRIAL activity was maintained at a high rate in November and the first half of December and distribution of commodities continued in large volume. Our entry into the war was reflected in a sharp advance in the prices o f some commodities, some decline in security prices, and further curtailment of nonmilitary production. P roduction Volume of industrial output was sustained in November at the high rate of the previous two months, although a decline is usual at this season. The B oard’s adjusted index advanced from 163 to 167 per cent o f the 1935-39 average. In industries engaged in production of armament and munitions activity continued to increase and in most other lines volume of output was maintained or declined less than seasonally. Output o f materials, such as steel and nonferrous metals, was maintained at about capacity. In the automobile industry activity increased, reflecting larger out put o f both military and civilian products, and at lumber mills and furniture factories activity declined less than seasonally. A t cotton and rayon textile mills activity rose to new record levels, and at woolen mills the high production rate of other recent months was maintained. Less than seasonal declines in output were indicated for shoes and manufactured food products. Crude petroleum production increased further in November. Bituminous coal production declined somewhat owing to temporary shutdowns at some mines during November, and anthracite production was curtailed as a result o f unusually warm weather in some areas and the existence o f considerable stocks of coal accumulated in earlier months. Iron ore shipments continued in large volume until the shipping season closed early in December; during 1941 about 80 million tons of ore were brought down the Lakes as compared with the previous record of 65 million tons in 1929. Stocks of ore at lower Lake ports on November 30 amounted to about a seven months’ supply at the current consumption rate o f around 6.5 million tons a month. Following a declaration o f war by this country in early December further steps were taken to curtail output o f nondefense goods using critical materials. Output quotas for passenger cars and household appliances were greatly reduced and cessa tion o f output o f some other products was ordered as o f the end of January. Also, the production and sale o f new automobile tires and tubes for civilian use were halted temporarily, pending establishment of a system for controllng their distribution. Value o f construction contracts awarded in November declined sharply from the high level o f other recent months, according to figures of the F. W. Dodge Corpora tion. Awards for privately financed construction decreased more than seasonally and contracts for publicly financed projects also declined following a continued large vol ume o f awards since last spring. Total awards in November were about a fifth larger than a year ago, while for the first ten months of the year they were three-fifths larger. D istribution Volume of retail trade increased in November following some decline in the previ ous month. Department store sales, as measured by the B oard’s seasonally adjusted index, advanced to 115 per cent o f the 1923-25 average as compared with 105 in October and 116 in September. Larger sales in November were also reported by variety stores. Sales of automobiles increased somewhat, according to trade reports, but, as in other recent months, new car sales were smaller than output and dealers’ stocks rose further. In the second week o f December sales at department stores rose less than season ally, particularly in the coastal regions. Freight traffic on the railroads continued in large volume in November and the first half of December. Grain shipments increased considerably and loadings o f mis cellaneous merchandise, which includes most manufactured products, were maintained at the high level reached several months earlier. Coal loadings declined somewhat, owing in part to temporary shutdowns at some mines. Shipments o f most other classes o f freight decreased less than is usual at this season. Commodity P rices Following the entry of the United States into the war, prices o f grains, livestock, and foods rose sharply. Prices o f most industrial materials traded in the organized markets, being limited by Federal regulation, showed little change. Additional meas ures to prevent advances in wholesale prices were soon announced for wool and shellac and for such imported foods as cocoa, coffee, pepper, and fats and oils. Retail food prices, as measured by the Bureau o f Labor Statistics index, increased iy 2 per cent further from the middle of October to the middle o f November to a level 18 per cent above a year ago. Indications are that retail prices of both foods and other commodities continued to rise in December. B ank Credit Total loans and investments at banks in leading cities continued to advance dur ing November and the first two weeks o f December, owing mostly to increased hold ings of Government securities at banks outside New York City. Commercial loans, after showing little net change in November, again increased sharply in the first two weeks of December. Excess reserves increased through most o f the period as a result of Treasury expenditures from Reserve Bank balances, but declined sharply on December 15 when these balances were replenished in connection with the issue of 1.6 billion dollars o f new Government securities. Money in circulation has continued to show a marked increase. Y ields on U nited States Government Securities The yield on 2 ^ per cent United States Government bonds o f 1967-72, which reached a record low level o f 2.32 per cent on November 5, advanced somewhat in November and, after the entry o f the United States into the war, rose to 2.50 per cent. Yields on short term Government securities increased further. The yield on Treasury notes of December, 1945 advanced to 0.93 per cent on December 17, compared with 0.62 per cent on September 15, and the rate on three month bills rose to 0.295 per cent.
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