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MONTHLY REVIEW
Of Credit and Business Conditions
In the Second Federal Reserve District

By

the

Federal

Reserve

Agent,
New York

Federal

, July

Credit Conditions
URING and immediately after the war the power
of the Reserve Banks to manufacture credit was
utilized freely. Now their ability to take in the
slack which is developing in the country’s volume of credit
is being tested. Lower prices, lessened business activity
and the influx of gold from abroad in unprecedented sums,
have reduced demands upon member banks for credit,
and they in turn have found it advantageous to reduce
their indebtedness at the Reserve Banks.
In previous years, there was no power in reserve for
the creation of credit, and vice versa, there was no power
whereby surplus credit could be retired and extinguished.
The country’s credit machinery was rigid and there was
very little facility for expanding or contracting it. When the
demand for credit exceeded the supply, additional credit
in one direction was usually to be obtained only by re­
ducing it in another. When credit became excessive, the
tendency, as business grew slack and prices fell, was for

D

Reserve

Bank,

Ne w

York

1, 1921

currency and funds to return to New York and other
credit centers, and as the banks sought to utilize their
rapidly increasing deposits, interest rates fell abruptly.
This often had the effect of stimulating speculation rather
than healthy business activity. Under the new system,
credit, as soon as it becomes excessive, is retired by the
Reserve Banks, which created it; interest rates fall in a
more orderly way, and the movement of credit more
nearly approximates the movement of goods and prices.
Thus the Reserve Banks through their capacity for taking
in the slack in credit as it develops, act also as stabilizers
of interest rates.
The diagram printed on this page compares interest
rates at the close of the Civil War with those prevailing
during the past two years and a half. After the Civil
War interest rates rose and fell with violent and rapid
fluctuations, and on the average maintained extraordinarily
high levels for eight years. While in considerable degree
this erratic movement of money rates reflected disorgan­
ization in finance and credit which is not present to-day,
it nevertheless records the successive shocks to the financial
machine the construction of which was relatively rigid
and unyielding.
The facts in the present situation which indicate the
extent to which in recent months credit has been released
from emergency employment and subsequently retired,
may be summarized as follows:
Wholesale prices (Department of Labor index) have de­
clined from the high point of May, 1920......................... 44 per cent.
Loans of 817 reporting member banks have declined from
the high point of October 15, 1920................................. 11 per cent.
Loans of all Federal Reserve Banks have declined from
the high point of October 15, 1920................................. 39 per cent.
Federal Reserve notes in circulation throughout the
country have declined from the high point of December
23, 1920............................................................................... 22 per cent.
Amount of checks drawn on bank deposits, reflecting
changes in prices and changes in the volume of business,
have declined from the high point of November, 1919. . 29 per cent.

Interest Rate on Prime Commercial Paper After the Civil War and
After the World War




Within the last month there have been further mani­
festations of easier credit conditions. The prevailing
rate on commercial paper declined at the end of June
from 7 to 6*^ per cent., the rate on prime unindorsed
90-day bills was
per cent., against 5% a month
ago, and Stock Exchange call money was also lower.
In part these declines were due to the large Government
transactions centering on the quarterly tax day, when

2

MONTHLY REVIEW

this bank redeemed $175,000,000 of Treasury certificates
whereas the taxes paid in this district amounted to some
$90,000,000 less.

PER CENT.

Taking the country as a whole, the loans of the Reserve
Banks have declined in the last month $180,000,000,
whereas the loans of member banks moved irregularly.
The course since 1918 of the movement of loans, and
deposits of Reserve and member banks, as well as of
Federal Reserve notes, is shown on the diagrams printed
below. The loans of the New York Reserve Bank
declined $166,000,000 from May 25 to June 22, but the
loans of New York City member banks remained prac­
tically stationary. In some of the other reserve districts
the volume of credit continues to diminish, while in others
it is increasing. This indicates that the volume of credit
is moving in accordance with actual and seasonal agri­
cultural, commercial, and industrial requirements, and
that increasing reserves are not due to credit pressure
by the banks.
On June 16 the Federal Reserve Bank of New York
reduced its rate for discounts and advances on commercial
and agricultural paper from 6J^ to 6 per cent., thereby
bringing the discount rate of the bank on all classes of
eligible paper to 6 per cent. On June 23 the Bank of
England took similar action, also reducing its rate from
6 ^ to 6 per cent.

Deposits of 11 Savings Banks in New York City and 10 Savings Banks
in the Second District Outside New York City, Expressed as Percentages
of Average Deposits in 1918

Bill Market
Rates in the New York market for prime unindorsed
90-day bills increased in late May in common with other
money rates, reaching 5% per cent. By the middle of
June the rate fell gradually to 5% , and the demand
quicldy reduced the dealers’ portfolios, causing a shortage
of prime bills. Subsequently rates on 90-day bills fell
to 5)4- Per cent., and shorter maturities were slightly
lower.

Earning Assets, Note Circulation
and Reserve Deposits, All Federal
Reserve Banks

Loans and Deposits of Reporting Member Banks, All
Districts

Savings Bank Deposits
Reports on June 10 of savings bank deposits in this
district indicate a continuation of the movement of the
past few months. Deposits in New York City increased
while deposits of banks in ten cities of the district outside
of New York show a falling off. The largest decreases
are in up-State industrial centers in which unemployment
has been severe for several months. The changes are
shown in the following diagram:




A survey of the bill market recently made by the Amer­
ican Acceptance Council places the volume of bills out­
standing in the United States on April 1, 1921, at $664,000,000 as compared with $799,000,000 on April 1, 1920,
a reduction of 18 per cent. A comparable figure for 4 to
6 months commercial paper tabulated by this bank from
the reports of 11 dealers, shows a reduction of 28 per cent,
during the same period. In New York City the shrinkage
in the volume of bills held was less than 1 per cent., while
outside this city it amounted to 41 per cent. A factor
in the maintenance of the volume of bills here was the
large amount of import bills received as well as the great
increase in bills drawn to create dollar exchange.
During the past month the volume of bills drawn to
create dollar exchange has decreased each week. New bills
coming into the New York market include those covering
the importation of silk from the Far East, and bills
drawn under several large sugar import credits recently
established.
The minimum buying rates of the Federal Reserve
Bank of New York have remained unchanged at 5% to
6 per cent, for indorsed prime bills ranging up to 90 days’
maturity.

FEDERAL RESERVE AGENT AT NEW YORK

Commercial Paper
At the end of June the prevailing rate on commercial
paper fell to 6^ 2 per cent, from the 7 per cent, rate which
has ruled since early in May. Exceptional names con­
tinue to be sold at 6 3^ and occasionally 6 per cent. There
have been fewer offerings of slow-moving paper at rates
above the ruling rate.

at 3J^2 to 5 per cent. Time loans moved correspondingly,
but within narrower limits, and the amount of business
done continued to be small.
In the following diagram comparison is made between
the renewal rate on Stock Exchange call money and the
rate on 90-day bankers acceptances, since January 1 .

The volume of sales has continued small. Within New
York City, however, purchases by banks which have
been practically confined to a few of the up-town in­
stitutions, were extended to a few of the larger down­
town banks for their own account. In the smaller cities
within a comparatively narrow radius of New York City
sales have been moderately good but elsewhere they have
been scattered. There has been some falling off in sales
to Middle Western and New England customers, and
practically no demand from the Pacific coast. Dealers
report that paper of most well-known names can be ob­
tained readily, but sales have not warranted any increase
in dealers’ purchases.
The volume of commercial paper outstanding through
eleven principal dealers on M ay 31 was about 2 per cent,
below the total for these same dealers a month previous,
the smallest outstanding reported since this bank has been
tabulating the figures.
M ILLIONS
OF DOLLARS

Call Loan Renewal Rate and Prevailing Rate on Prime 90-Day Bankers
Acceptances at New York

Bond Market

Stock Market Money Rates
A slightly higher rate for Stock Exchange call money
which prevailed in late May and early June, when the
rate rose to 73^ Per cent., was followed by a decline around
the quarterly tax date, as has become usual. At that
time the Federal Reserve Bank redeemed Treasury cer­
tificates of indebtedness in excess of the taxes paid in this
district, advancing funds to the Treasury during the period
when tax checks were in process of collection and pending
the transfer of tax receipts from other districts. The rate
on the Stock Exchange declined to 5}^ and later to 5 per
cent., and call money was available outside the market




During the first three weeks of June corporate securities
continued the decline which began early in May. Both
industrial and railroad bonds lost most of the ground that
was gained in the early weeks of this year and late in
June average prices were but little above those prevailing
at the close of December.
The unsatisfactory state of the steel industry, inactivity
in the automobile trade and the suspension of dividends,
further declines in the prices of crude oil and sugar, and
the lack of demand for rubber and copper products were
factors contributing to this decline.
Foreign government bonds held fairly steady during
June in spite of the weakness of foreign exchange rates.
Mexican securities, after advancing on receipt of favorable
news from Mexico, reacted toward the close of June.
Total bond sales, excluding Liberty bonds, were about
$115,340,000 during May, compared with $94,500,000
during April and $68,527,000 in May, 1920. Sales during
the first three weeks of June were somewhat larger than
those during the weeks immediately preceding.

United States Securities
A combined offering of three-year 5% per cent. United
States Treasury notes and one-year 5}/l per cent. United
States Treasury certificates, dated and bearing interest

4

MONTHLY REVIEW

from June 15, was considerably oversubscribed. The
note issues were the first of a new series of longer-term
obligations which will be offered by the United States
Government as a part of the program to refund the early
maturing debt. Subscriptions were about evenly divided
between notes and certificates of indebtedness. The dis­
tribution of the issues is shown in the following table.
Total
Subscriptions
Received

Treasury
Notes
Allotted

Treasury
Certificates
Allotted

Total
Subscriptions
Allotted

Second Dist... $394,353,500 $157,225,200 $137,155,500 $294,380,700
All Districts. . 788,007,000 311,191,600 314,184,000 625,375,600

Open market sales of certificates of indebtedness
during the first three weeks of June were at a higher rate
than in any previous month. There was also an active
demand in the open market for the short-term notes after
they had been issued.
On the New York Stock Exchange the 3 ^ per cent.
Liberty bonds declined rather sharply during the latter
part of May and early in June, but most of the losses were
recovered. Fluctuations in quotations of other Liberty
bonds were narrow and irregular during June. Victory
notes were somewhat higher.
The total sales of Government war issues on the New
York Stock Exchange during May were $127,800,000,
compared with $138,500,000 in April and with $300,000,000 in May, 1920.

New Financing
New security issues have been restricted during June
owing to the need of absorbing the large volume of new
financing placed in this market during April and in lesser
degree during May. The sale of a number of large issues
in quick succession resulted in a degree of saturation in the
investment market similar to that which prevailed during
March.
Subscription books were opened late in May to a new
loan of $100,000,000 to the French Government and the
major portion of the issue was quickly taken but applica­
tions for the remainder came in slowly.
A number of new municipal and State issues have been
offered, of which the largest was $31,800,000 New York
State 5 per cent, bonds maturing serially up to 1971, and
yielding from 4.70 to 5.25 per cent. This is the highest
yield basis for such issues in more than twenty years.
Domestic capital issues in May totaled about $178,000,000, slightly less than half the volume of April financing,
but $40,000,000 more than the total for March. More
than 68 per cent, of the May financing was by industrial
concerns as compared with only 39 per cent, in April
when railroad issues predominated.




Stock Market
The decline in stock prices which developed early in
May, was continued during June. On June 20, the aver­
age price of twenty representative railroad shares fell to
$65.52, nearly two points under the low average estab­
lished last December and the lowest since the summer of
1898. The average price of twenty representative indus­
trial stocks declined to $64.90, also two points under the
low average established last December and the lowest
since the early months of 1915. Losses were general
among nearly all of the more active shares and ranged
from five to twenty points.
Total sales during the month of May were about
$17,000,000, compared with $15,000,000 during April.
During the first three weeks of June trading was more
active than during May.

Gold Movement
The table below shows the amount of gold imported
from various countries during the first five months this
year, according to the lastest revised figures. Total
exports of gold and the excess of imports are also shown.
(In thousands)
Jan.

Feb.

Mar.

Apr.

May

England...................... $17,765 $ 9,323 $24,075 $13,771 $18,807 $
France........................
4,695 13,584 26,956 10,895 9,726
Sweden.......................
4,679 24,801 7,846
' 188
538 19,827
158
140
China and Hong Kong 2,354 7,500 2,654 3,980 2,370
1,014 5,008 2,059 3,214 4,305
British India..............
394
Netherlands................
224
939 11,052 2,657
All other.....................
7,225 6,702 6,184 13,792 12,409

Total
83,741
65,856
37,326
20,851
18,858
15,600
15,266
46,312

Total Imports........ $33,635 $42,879 $87,373 $81,663 $58,260 $303,810
Total Exports........

2,725

1,036

710

384

1,062

5,917

Excess Imports. . . . $30,910 $41,843 $86,663 $81,279 $57,198 $297,893

In the first ten days of June gold imports totaled
$20,570,000, of which $7,623,000 came from England,
$5,854,000 from Sweden, and $3,434,000 from France.
The amount of exports was negligible.
May and June imports bring the total stock of mone­
tary gold in the United States to $3,196,000,000, the
highest point ever reached. The previous maximum
was $3,122,000,000 reached on M ay 1, 1917. Present
holdings are approximately one-third of the world’s stock
of monetary gold.

Foreign Exchange
The demand for dollars in connection with the German
reparations payment early in June was accompanied by
a precipitate decline in sterling, which on M ay 17 had
reached a point slightly above $4.00 to the pound. Coin­

FEDERAL RESERVE AGENT AT NEW YORK

ciding with this special requirement was a lessening in
the volume of British exports on account of the coal
strike, and hence a smaller amount of credits available
to British merchants in this and other countries. These
two factors, one increasing the demand for dollars and the
other causing some contraction in the supply, served to
increase the cost of the American dollar in terms of the
British pound. By June 9 sterling fell to $3,683^, the
lowest quotation at New York since January 10. Conti­
nental rates moved in general correspondence with sterling.
It is reported that the decline in the exchanges of
Allied countries has caused the Reparations Commission
and the financial authorities of the respective nations to
consider the possible revision of the plan under which
Germany shall make future payments.
Successful flotation of the Brazilian loan in May and
rumors that a loan to Argentina was in prospect were
reflected in temporary strength in the rates on these two
countries late in May, but subsequently further losses
were sustained in both rates. In the third week of June
Argentine exchange was so unsettled that trading in
futures was practically at a standstill and it was difficult
to negotiate commercial merchandise drafts.
The following table shows the closing quotations for
principal exchanges on June 18, the change from last
month, and per cent, depreciation from par.

Country

England.................................
France....................................
Italy.......................................
Spain......................................
Germany................................
Switzerland............................
Sweden (Stockholm).............
Holland..................................
Belgium..................................
Argentina...............................
China (Hong Kong).............
China (Shanghai)..................
Japan (Yokohama)...............
Bar Silver in N. Y ................

June 18
Last

Change
from
May 21
-.2 0 1 3
-.0 0 5 6
- .0049
-.0 0 1 7
-.0 0 2 4
-.0 1 0 0
-.0 1 2 0
-.0 2 5 6
-.0 0 7 3
-.0 0 7 8
-.0 0 7 5
-j-.OlOO
-.0 0 3 7
- .0056
+ .0037

Sales to Argentina and Brazil of staples such as food­
stuffs, kerosene, small manufactured goods, and some
types of cotton goods are reported. American exporters
have recently begun the organization of a liquidating
company to take over stocks of American goods refused
heretofore by South American purchasers as a result
of depressed business conditions, decline in prices and
weakness in exchange rates. One export house which
has been liquidating its own rejected shipments in South
America reports recent sales of goods at very satisfactory
prices.
Shortly after the middle of June shipments of coal to
the United Kingdom from Atlantic ports materially in­
creased. Orders had been delayed until recently in ex­
pectation of a settlement of the British coal strike.
The demand for steel products in the Far East, an im­
portant factor in the May export steel market, fell off
during June, although there were still occasional inquiries.
The demand from South American countries was limited
practically to small government orders for rails and bridge
materials.
May exports were reported by the Department of
Commerce at $330,000,000 as compared with $340,000,000
in April. Imports were valued at $208,000,000 in May,
a reduction of 8 per cent, from the April figure.
PER CENT.

700,------------------------ ------------ ------------ r-----------------------------------

Per Cent.
Depreciation
from Par

$3.7950
.0821
.0508
.1330
.0146
.1703
.2240
.3330
.0803
.3049
.4838
.6588
.4788
.8894
.5900

5

22.0
57.5
73.7
31.1
93.9
11.8
16.4
17.2
58.4
28.2
*
*
4.0
11.1

*Silver Exchange Basis.

Foreign Trade
Unsettlement in the foreign exchanges is reported to
have affected adversely the demand for American goods
in certain foreign markets. There were, however, some
important exceptions.
Purchases of cotton by China and Japan have further
increased, and shipments to Shanghai rose materially
during the first three weeks of June. Sales of cotton to
Poland in substantial amounts are also reported. Much
cotton continues to be shipped to German and Baltic
ports on consignment. Total raw cotton exports from
the United States were nearly 50 per cent, greater in May
than in April. May shipments were 477,000 bales as
compared with 320,000 in April and 365,000 in May, 1920.




1915

1916

I9J7

1918

1919

\9ZO

1921

Wholesale Commodity Prices in Four Countries Expressed as Percentages
of Average Prices in 1913

World Commodity Prices
In the United States, England, and Japan the slowing
down in the rate of decline of commodity prices which
was recorded in April was even more marked in May. In
France, Italy, Sweden, and Germany, countries in which

6

MONTHLY REVIEW

liquidation has been much less rapid and less complete,
the price declines in M ay were greater than in April.
The price indices of these countries appear in the table
at the foot of this page, and the most reliable indices
of the general level of prices in four principal countries are
plotted in the diagram on page 5. For the United
States the Department of Labor index is used and for
England the Statist index.
A change in the prices of major basic commodities is
largely responsible for the slackened decline of prices
in the United States and England. The movement of
the prices of these basic commodities is illustrated by the
accompanying diagram which showT indices for the prices
s
of twelve basic commodities in the United States and
twenty-five basic commodities in England which are
computed each week by this bank.
The two indices run very closely parallel demon­
strating the close relationship between commodity mar­
kets in the two countries. In the past twelve months
these indices for basic commodities have tended to move in
advance of those indices which contain prices of larger
numbers of commodities and which represent more
closely the general price levels. They have also tended
to be more sensitive to current changes.
Since March these basic commodity indices have
leveled off and in May there was a distinct upward move­
ment. In the early weeks of June there has been, how­
ever, a considerable drop and the indices are now at the
lowest point since the decline began. The British index
is now 67 per cent, above the 1913 level and that for the
United States only 6 per cent, above.

PER CENT,
4 0 q , ----------

° i W ....

JULY

~ Sm .

19 ao

NOVI

JAN

MAR.

MAY

1921

JULY

Wholesale Prices of 12 Basic Commodities in the United States and 25
Basic Commodities in England Expressed as Percentages of Average
Prices in 1913

age wholesale prices of 326 commodities, declined during
May from 154 to 151, or 1.9 per cent., as compared with a
decline from 162 to 154, or 4.9 per cent., during April.
The latest decline is the smallest which has taken place
since June, 1920, when prices first started to fall.

Domestic Commodity Prices
The monthly index number of wholesale prices compiled
by the United States Department of Labor, from the aver-

Indices of Wholesale Prices
Base of 1913 = 100 per cent, unless otherwise noted
Per Cent. Change During
March

Country

United States:
12 basic commodities*. *............
Department of Labor...................
Dun’s ..............................................
Bradstreet’s ....................................
Great Britain:
Economist......................................
Statist.............................................
25 basic commodities*..................
France.................................................
Italy....................................................
Japan..................................................
Canada...............................................
Sweden f ..............................................
Australia J...........................................
N orway...............................................
( Germany § ..........................................
Denmark jj..........................................
* Computed by this bank.
r. Revised,




April

May

Per Cent.
Decline
from High

(June 18)
(May av.)
(June 1)
(June 1)

—5.5
-3 .0
-4 .1
-4 .1

—3.1
—4.9
-4 .4
-4 .9

-f2 .4
—1.9
-0 .4
-1 .9

56
44
37
49

(June
(June
(June
(June
(June
(May
(May
(May
(Apr.
(May
(June
(May

-1 .5
-3 .2
-8 .2
-4 .7
-1 .6

-3 .3
-4 .2
-0 .2
—3. 5r
-3 .2
- 0 .5
-3 .6
-3 .4
—5.5
-2 .1
0
-4 .8

-0 .3
—4.5
+ 1.3
—5.4
-6 .3
+ 0 .5
-2 5
—4.8

41
39
52
44
18
41
31
41
28
37
18
36

Latest Quotation

106
151
137
115
182
191
167
328
547
191
183
218
171
273
1407
257

1)
1)
18)
1)
1)
av.)
15)
15)
av.)
1)
1)
1)

-2 .1

-2 .6
-5 .2
-5 .7
-0 .9
—0.8
-3 .6

fJuly 1, 1913, to June 30, 1911 = 100.

|July, 1914 = 100.

-1 .5

§ Middle of 1914 = 100.

Date of High

M ay 17 1920

May
May
Feb.

1920
1, 1920
1, 1920

Apr.

1, 1920

M av 1. 1920
Mar. 12. 1920

May
Dec.

1, 1920
1, 1920

Mar.
1920
M av 15. 1920

Dec. 15, 1918
1920
Aug.
Oct. 1, 1920
1, 1920
May
Nov. 1, 1920

||July, 1912-June, 1914 = 100.

FEDERAL RESERVE AGENT AT NEW YORK

The movement of prices of different groups of commodi­
ties making up the Department of Labor index number is
shown in the following table.

Commodity Group

Farm Products.............
Metals...........................
Food, etc.......................
Chemicals, etc..............
Cloths and Clothing. . .
Fuel and Lighting........
Building Materials.......
House Furnishings.......
Miscellaneous...............
A ll..................................

Maximum
Level

May
Level

246
195
287
222
356
284
341
371
247
272'

117
138
133
1G
G
181
194
202
262
151
151

Per Cent.
Decline
from
Maximum
52.4
29.2
53.7
25.2
49.2
31.7
40.8
29.4
38.9
44.5

Per Cent.
Change
from
April
+ 1.7
.0
-5 .7
-1 .2
-2 .7
-2 .5
-0 .5
-4 .4
-1 .9
-1 .9

The June 15 quotations for the prices of a number of
principal basic commodities expressed as percentages of
the 1913 average prices and the changes in the past three
months are given in the following table. The quotations
are for standard specifications and are secured from trade
journals or associations. While some of the changes
showr in the table reflect day to day shifts, the general
n
monthly movement is indicated by the relative numbers
of increases and decreases: in the month ended April
15 there were 4 increases; in the month ended May 14
there were 10; and in the latest reported month there
were 6. Important factors in recent movements have
been varying reports as to crop conditions and the swings
of the speculative market.

Commodity

Foods
Flour..........................
Wheat........................
Sugar— R efined.......
Steers.........................
Corn. . . .....................,
Hogs..........................
Coffee........................
Textiles
Worsted Serge..........
Silk— R a w ................
Wool— R a w .............
Cotton Print Cloths..
Cotton—Raw ...........
Minerals
Coal— Bituminous. ..
Pig Iron.....................
Copper.......................
Building Materials
Brick..........................
Cement......................
Steel—Structural. . . .
Miscellaneous
Paper—Newsprint...
Tobacco.....................
Gasoline....................
Petroleum.................
Hides.........................
Rubber......................




Price
June 15
(1913 =
100)

Per Cent, of Change
Mar. 15
Apr. 15
May 14
to Apr. 15 to May 14 to June 15

202
142
134
99
98
97
59

- 7
—24
- 4
-1 4
-1 4
-1 8
0

+ 7
+ 19
-1 8
+ 3
+ 10
+ ^
- 2

+
+
+

214
159
147
123
95

.+
+

0
5
3
6
6

0
-1 0
0
0
+ 2

0
+ 4
- 6
0
— 3

151
143
84

0
- 8
+ 6

- 8
- 4
+ 2

- 8
— 5
0

278
177
147

- 5
- 6
+ 5

-1 1
0
+ 5

-

262
196
146
106
76
19

-

0
+ 8
0
-1 4
+ 26
0

0
+ 2
- 6
-3 3
+ 17
-2 3

7
1
0
0
-1 0
-1 3

10
6
9
4
1
7
13

0
3
0

7

PER. CENT

N* W Y O R K /
C ITY /

U

t/

X
sV

/

/ /UNITEI )

\

\

STATi *S

/ s

» til

'

's jf ..............
JULY 1914 L -V
C

1917

1918

1919

1920

1 9 2 l'~

The Cost of Living in New York City (Reported by the Department of
Labor), and in the United States (Reported by the National Industrial
Conference Board), Expressed as Percentages of Figures for July, 1914

Cost of Living
The index number of the National Industrial Con­
ference Board for the cost of living of a wage-earner’s
family in the United States shows a decline of 2 per cent,
during May, a slightly larger decrease than in March or
April. The decline is due altogether to a 4.6 per cent,
drop in food prices and a 3.6 per cent, drop in clothing
prices. Other groups remain unchanged.
The United States Department of Labor has just
announced cost of living figures for the month of May
for 27 principal cities. The figures in general tend to be
somewhat higher than those computed by the National
Industrial Conference Board for the entire country.
This is indicated by the diagram at the top of this page.
The following table gives the latest figures reported for
important centers by the Department of Labor, together
with figures for the country as a whole reported by the
Conference Board. Cities are listed in order by the
increase which May figures show above the 1914 base.
Information for cities in this district is printed in bold­
faced type.

May, 1921

Per Cent.
Declinc
from Peak

Detroit.........................................................
Jacksonville, Fla...................................
Cleveland.....................................................
New York City.................. .....................
Buffalo, N. Y...............................................
Seattle..........................................................
Philadelphia.................................................
Houston.......................................................
Chicago........................................................
Baltimore.....................................................
Washington, D. C .. . ..................................
Portland, Ore...............................................

193.3
185.8
184.7
181.7
180.3
180.2
179.8
179.7
178.4
177.4
167.1
162.2

18.1
14.2
14.8
17.1
18.6
14.4
15.8
15.3
16.9
17.2
17.0
19.1

United States...............................................

161.9

20.8

Location

8

MONTHLY RP:VIEW

In general it may be said that industrial cities tend to
show greater increases in the cost of living than those
which are agricultural centers. An average of the May
index numbers for seven industrial cities was 16 per cent,
higher than that for seven cities in agricultural districts
east of the Rockies. Food ranks first in importance
among the various items in the budget and in every
case was from 15 to 20 per cent, higher in the industrial
cities. Housing costs increased in both groups, but the
increase in the industrial centers since December, 1920,
was about 7 per cent, while it was about 2j^ per cent,
in the agricultural centers.
Figures for New York City and the United States for
individual items of the cost of living are given in the
following table, taking figures for 1914 as a base of 100
per cent.

May, 1921

Per Cent.
Decline from High

Items
United
States
F ood..............................
Shelter...........................
Clothing........................
Fuel and Light.............
House Furnishings---- Miscellaneous................
Total......................

New
York
City

United
States

New
York
City

33.8
0.0
43.8
11.0

185

142.5
142.2
259.5
195.9
256.5
217.6

3.6

30.6
0.0
24.0
0.0
15.9
0.0

161.9

181.7

20.8

17.1

145
171
162
178

Wages
Further readjustments of wages took place during the
past month. In practically all of the major groups of
industries in this district reductions either have been
effected already or have been announced to become
operative at a later date.
Several public utility companies, one of the last groups
of large employers to revise wages, announced reductions
during the month. Receivers for the Brooklyn Rapid
Transit Company will revise the rates of pay, the amount
of the reductions to be determined by the decline in the
cost of living. The Interborough Rapid Transit Company
has an agreement with its employees that does not expire
until December 31, but the men have consented to enter
into negotiations that may lead to a reduction at an
earlier date. Reductions in up-State centers resulted in
some labor troubles, but have been carried through. In
northern New Jersey the agreement between the carmen
and the Public Service Railway Company expires on
August 1, and negotiations are now under way to deter­
mine what reductions may be made. Other public service
corporations in New Jersey have already made reductions.
The printing and publishing industry was one of the
last to feel the effects of changed industrial conditions
and one of the last to revise wages. In New York City
reductions of 10 to 15 per cent, in the pay of about twothirds of the employees have already been made. The
working agreement with the compositors’ union, com­
prising about 25 per cent, of the workers, has not termi­




nated. In up-State centers labor troubles resulted from
efforts of the unions to install the 44-hour week, but for
the most part these have been adjusted and reductions
made.
The building trades are an exception in the general
readjustment. Efforts to reduce wages outside of New
York City have resulted in labor troubles which have not
yet been settled. In New York City the agreements
between employers and the various unions do not expire
until the end of the year and except in the case of unorgan­
ized workers no reductions have been put into effect. Some
of the unions, however, have expressed a desire to consider
revisions before the expiratidn of the agreement in the
belief that lower wages will stimulate building and thus
provide employment for many workmen who are now idle.
The average factory wage in New York State during
May, as reported by the State Industrial Commission, was
$25.86, a reduction of 1.3 per cent, from the previous
month and of 10.6 per cent, from the highest point,
reached last October. The average wage is now 104 per
cent, higher than in 1914.
Average weekly earnings in 13 selected industries
throughout the United States in May as reported by the
United States Department of Labor were 22 per cent,
below the high point of last October. Total wage pay­
ments to employees in 13 selected industries throughout
the country have declined 39 per cent, since May, 1920.

Employment
Reports received by this bank indicate that during the
past month there has been a gradual, but nevertheless a
steady decline in the number of persons employed in this
district. The New York State Industrial Commission
found that between April and May there was a decline of
2 per cent, in the number employed in the factories of the
State. In May the number of factory workers was 27
per cent, below the number employed in March, 1920.
Reductions in employment took place in the iron and
steel industries, in electrical and other machinery plants
and in automobile plants, because of the lack of new
orders. Railroads made additional reductions in the
number of their employees.
In the textile industry there was no important change
during June. The woolen mills increased their forces
slightly, but this gain was offset by a small decrease in
the number employed in silk mills and in some factories
that make cotton products. The number employed in the
men’s clothing industry in New York City was increased
materially through the settlement of the strike which had
been in progress for six months, but the number employed
by factories making women’s apparel suffered the usual
seasonal decrease.

Immigration
Early in June a bill was signed by the President limiting
the number of alien immigrants of any nationality to be
admitted each year to the United States to 3 per cent, of
the number of foreign-born residents of such nationality
according to the census of 1910. The number that may

9

FEDERAL RESERVE AGENT AT NEW YORK

be admitted in the year from July 1, 1921, to June 30,
1922, is compared in the following diagram with the aver­
age number of immigrants admitted in the years 1910 to
1914. Figures for Russia in the second column include
an estimate for those territories which formerly were a
part of Russia. Admissions direct from Russia are de­
pendent on the resumption of diplomatic relations.

loom hour reports for the industry in this district. The
following diagram shows the changes which have taken
place in the three major branches of the textile industry
since the first of the year.
r>E CENT.
R
100

! ......
.

i

80
ALL OTHER

‘N

60 X .

7

N;X, C O T T O N /

*

R 'o lA
LS
WOOL

40

k

ITALY

SCANDIKAViA
GERM ANY

UNITED K lN O W M jg jjyg

AV 1910-14
.

I

<
‘3

*VjA.

*

&

X

Y

ft

£0

_____
1 3 2 . I

V

V
*i

J g j

1921-22

Immigrants to be Admitted to the United States from July 1, 1921, to
June 80, 1922, Compared with the Average Number Admitted Each
Year from 1910 to 1914 (Figures in Thousands)

The number of immigrants en route to the United States
at the time the bill was passed was so great that June
admissions could not be kept within the monthly quota
of 27,000 allowed by the new law without sending a
great many back to Europe. A number in excess of the
quota therefore have been admitted conditionally.
In anticipation of legislation the number of arrivals
during May was the largest since last September and
October, while the number of departures showed a decrease
as shown by the table that follows.

NOV.

DEC.

JA N .

FEB.

APR.

MAR.

MAY

Per Cent, of Maximum Capacity at Which the Cotton, Wool, and Silk
Industries Were Operating Each Month

Current figures for the production of other basic com­
modities continue to show no consistent general move­
ment. The figures for May show about as many decreases
as increases compared with the April figures. The
table below shows the production each month of 1921
expressed as a percentage of the average figure for corre­
sponding months in 1919 and 1920.
Commodity

Month

Arrivals

Departures

Monthly Aver., 1910 to 1914.
January, 1921........................
February, 1921.....................
March, 1921..........................
April, 1921.............................
May, 1921.............................

63,316
56,465
34,595
43,114
46,101
68,428

18,082
37,442
22,404
22,140
25,181
20,558

45,234
19,023
12,191
20,974
20,920
47,870

Jan.

Feb.

Mar.

Apr.

May

Anthracite coal mined....................
Bituminous coal mined..................
Cement production.........................
Cotton consumption.......................
Pig iron production........................
Steel ingot production...................
Sugar meltings.................................
Tin deliveries................................
Wheat flour milled..................
Meat slaughtered............................
Wool consumption..........................

103
88
88
64
77
73
56
54
76
84
46 f

137
85
92
83
66
63
73
11
82
99
79f

122
75
115
87
49
53
117
47
95
96
911

118
80
121
78
46
50
87
48*
100
100
961

100
86
112
85
48
53
79
35*
89
93
104 f

Net Increase

Volume of Production
The most consistent general increase in volume of
production is found in the textile industry. The per­
centage of maximum capacity at which machinery in the
wool, cotton, and silk industries was operating each
month since November of last year is shown in the fol­
lowing diagram. For wool, Government figurers on active
machinery for the country as a whole are used; for cotton,
Government reports on cotton consumption; and for silk,




* Compared with 1920, corresponding month,
f Estimated on basis of active machinery reports.

Stocks on Hand
Index figures for stocks in the United States, of cotton,
coffee, petroleum, paper, tin, and wool were larger in
May than in January, and stocks of silk, grain, and sugar

10

MONTHLY REVIEW

were smaller. The table below shows stocks each month
of 1921 expressed as percentages of the averages of the
corresponding months in 1919 and 1920.
Jan. 1
1 Cotton.................................
2 Silk* (N. Y. Warehouses)..
3 W ool....................................
4 Coffee..................................
5 Grain (8 seaboard centers).
6 Sugar...................................
7 Oil (held by pipe lines). . . .
8 Tin*.....................................
9 Paper (at mills).................

Feb. 1 Mar. 1 Apr. 1 May 1

111
89
185
128
117
581
107
83
118

116
47

119
43

138
108
167
102
68
125

166
108
111
107
95
122

125
45

121
31
176
141
90
116
112
122
130

136
61
188
116
91

V o lu m e o f B u ild in g
Building contract awards in New York and Northern
New Jersey in May represented a volume of actual con­
struction probably as great as in any month of M ay in
recent years. This is shown in the following diagram
of the volume of building which allows for price changes.
Residential building has increased during the past five
months not only in actual volume but also in the pro­
portion it bears to all new construction.
P RCN
F ET

*Compared with 1920 only.

Business Failures
Commercial failures in the United States during May
were about 9 per cent, less in number than in April, but
the May liabilities were greater than in April because of a
single large failure, that of a fur brokerage house in St.
Louis. During the first three weeks of June the number of
failures reported was practically the same as the weekly
average in April and May.
The following figures are taken from Dun’s reports for
this district and for the entire country.
Number of Failures
Month

January.........
February........
March............
April...............
M ay...............

Liabilities

Second
Federal
Reserve
District

Entire
United
States

Second
Federal
Reserve
District

Entire
United
States

390
222
248
229
222

1,895
1,641
1,336
1,487
1,356

$9,808,623
26,836,505
30,836,852
10,471,232
11,172,495

$52,136,631
60,852,449
67,403,909
38,567,769
57,066,471

Iron and Steel
The steel industry has been operating at less than 25
per cent, of capacity during the latter part of June as
compared with about 30 per cent, in May. The actual
monthly production is now lower than at any previous
time since 1908. The United States Steel Corporation
still had unfilled orders at the end of May for about
5,500,000 tons and its mills are operating at a somewhat
higher rate than the mills of the independent companies.
For several months consumption of steel has been in
excess of the rate of production and stocks on hand have
been greatly reduced throughout the country. New
orders have been placed only for minimum necessary
domestic requirements while American bidders for foreign
iron and steel orders have in many cases been underbid
by European producers. There has recently been some
shading of price quotations by the independent companies
on small orders for wire products, sheets, chain, and castiron pipe but no general lowering of prices.




Volume of Building in New York" and Northern New Jersey Expressed
as Percentages of Average Figures for 1913. Light Line Shows Figures
for Each Month. Heavy Line is Average Showing General Trend

Crop Conditions
The June 1 forecast of the Department of Agriculture
placed the 1921 production of spring wheat more than
20 per cent, in excess of the 1920 harvest and the produc­
tion of both spring and winter wheat more than 5 per
cent, larger than in 1920. It placed the yield of hay 10
per cent, larger than in 1920, but the yield of oats about
8 per cent, less than that of last year. No preliminary es­
timate for corn has been made although in this district
it was reported in the latter part of June to be making
excellent growth. The grain crops in the Second Federal
Reserve District are in general about 2 or 3 per cent, above
the average condition of these crops in June of the past
ten years but they have recently suffered considerable
damage from lack of moisture.
Recent estimates of the fruit crops indicate a greater
damage by the frosts of April and May than had at first
been thought. The apple crop of New York State, which
last year was nearly one quarter of the total crop of the
United States, is now estimated at less than 35 per cent,
as large as in 1920. The prospects for peaches and pears
are somewhat better but the yield of each will be only
60 to 80 per cent, as large as last year. Other fruit crops
have also been greatly damaged in both New York Slate
and New Jersey.

11

FEDERAL RESERVE AGENT AT NEW YORK
PER CENT

Railway Traffic

£00

Railway freight traffic, as indicated by the weekly
totals of freight car loadings, has slowly increased during
the second quarter of the year but remains considerably
below the 1920 shipments for the corresponding period.
Car loadings each week are now 15 or 20 per cent, greater
than they were two months ago, largely as the result of a
50 per cent, increase in the movement of coal. Shipments
of practically every other classification have been increas­
ing during recent weeks. An increase in loadings is normal
for this time of year.
Preliminary reports from railroads centering in New
York City indicate a further slight gain in June as a
result of further increases in the weekly output of both
anthracite and bituminous coal.

150

100

50

Retail Trade
The dollar value of retail sales by 45 firms, operating
58 representative stores in this district, showed a fall of
10 per cent, during May, 1921, as compared with sales
during May, 1920. However, the number of transactions
was about 10 per cent, greater and when price changes are
taken into consideration it is clear that the volume of
merchandise distributed over the counters continues to be
larger this year than last. The amount of the average
sale declined from $3.56 in May, 1920 to $3.11 in May,
1921, a reduction of about 13 per cent.
Sales by department stores in New York and Brooklyn
showed a larger fall than stores elsewhere in this district as
indicated by the detailed statement at the foot of this page.
Sales by stores that sell apparel exclusively and by the
apparel sections of department stores show a small increase
in sales during May as compared with last year. De­
mand for cotton and silk cloth, notions, and patterns is
larger this year than last, indicating that more women
are making their own clothes. Sales of housefurnishing
goods are below those of last year.
Early in June sales continued slightly below those of
last year, but toward the latter part of the month more
active buying accompanied the first hot weather of the
summer and the beginning of the vacation period.

0
Sales of 36 Department Stores in the Second District and 3 Leading
Mail Order Houses Doing a Country-Wide Business, Expressed as
Percentages of Average Sales in 1919

The value of stocks on May 31 was about 17 per cent,
below stocks of the same date last year, due principally
to the price decline rather than to smaller physical
inventories.
Merchants are placing orders for fall with greater con­
fidence and have contracted for their normal requirements
in those primary markets in which they believe price
adjustments have been nearly completed.
The diagram on this page shows the fluctuations in
department-store -sales in this district as compared with
sales of three important mail-order houses operating
throughout the country. The larger percentage of
decrease in mail-order sales is attributable largely to the
diminished purchasing power in rural communities,
because of the lowered prices of farm products. Figures
upon which the diagram is based are reported to this
bank each month in actual dollar values.

Sales and Stocks of Department and Apparel Stores
Month of May, 1921
(45 Firms Beporting)

Per cent, change in net sales during May, 1921, corajmred with net sales during May, 1920.............
Per cent, change in number of transactions during
May, 1921, compared with number of transac­
tions during May, 1920.........................................
Per cent, change in net sales from January 1 to May
31, 1921, compared with net sales during cor­
responding period in 1920......................................
Per cent, change in stocks at close of May, 1921,
compared with stocks at close of May, 1920. . . .
Per cent, change in stocks at close of May, 1921,
compared with stocks at close of April, 1 9 21 ....
Percentage of average stocks at close of January,
February, March, April, and May, 1921, to net
sales during those months.....................................
Percentage of outstanding orders at close of May,
1921, to total purchases during calendar year, 1920




New York
and
Brooklyn

Buffalo

- 1 3 .7

+ 0.4

-

+ 12.4

+ 13.5

+ 1.6

-

8.2

+ 5.1

-

2.5

+ 9.1

- 1 6 .7

-1 0 .4

- 2 5 .8

-

1.9

+ 0.3

+ 0.2

325.3

352.6

340.4

392.4

5.8

5.5

4.5

5.3

Newark

9.2

Elsewhere
in Second
District

Apparel
Stores

Entire
Second
District

9.9

+ 2.7

- 1 0 .0

+ 8.2

+ 8.6

+ 10.4

+ 5.2

-

4.6

+ 6.2

-

- 2 9 .2

- 1 3 .6

- 1 0 .0

- 1 7 .3

- 1 7 .3

-

-

+

-

-

Rochester

— 2 2

6.0

Syracuse

-

3.9

2.1
446.5

-

1.6

7.7

4.3

2.1

482.2

197.7

326.5

7.1

9.5

6.2

Collecting Checks Under the Federal Reserve System
R O ADLY speaking, the Federal Reserve Act of
1913 attempted to do for the check currency of
the country what the National Bank Act of 1863-4
and supplementary legislation did for the bank note
currency of the country, namely, to make it circulate at
par. While, of course. Congress did not attempt to
insure the goodness of individual checks as it did the
goodness of National bank notes, it eliminated a serious
obstacle in the way of the direct and economical settle­
ment of business transactions. This was a matter of in­
creasing importance because in the fifty years which
had elasped since the passage of the National Bank
Act more and more of the country’s financial settlements
were being made by check, and hand-to-hand currency
was being more and more restricted to minor payments.
Just as in 1863 the notes of most country banks cir­
culated at less than face value, so in 1913 the checks of
most country banks and some city banks were paid at
less than face value. These deductions, known as
exchange charges, were explained on the theory that
sometimes currency might have to be shipped in re­
mitting for checks presented for collection.
Besides being an element of expense to business,
exchange charges were the direct cause for the develop­
ment of an indirect method of collecting checks. These
exchange charges varied in amount in different localities,
and banks having checks to collect on points where
exchange charges were high, sent them to banks in other
towns where checks were received at par or at a low
rate of exchange; these banks sent them on to other
banks until at last they were presented for collection at
the banks upon which they were drawn. Thus exchange
charges operated like mountains in the path of a river,
forcing it to take a loundabout course, instead of a
straight route to the sea.
Obviously, the time taken in collecting checks was
unnecessarily extended, which meant that the period
during which funds were unproductive was unnecessarily
protracted. The loss of interest involved, and the ex­
change charges deducted, amounted to a considerable
annual tax upon business, paid sometimes in money, and
sometimes by maintaining balances large enough to take
care of the loss.
The Federal Reserve Act seeks to eliminate exchange
on checks presented by the Federal Reserve Banks. This
permitted direct collections. All member banks may if
they wish send checks on other member banks, or on
most non-member banks, to the Reserve Bank for collec­
tion, receiving credit for them according to a published
time schedule. The Reserve Bank generally sends such
checks as are drawn upon banks in its district to those
banks individually, and sends to other Reserve Banks for
collection the checks drawn upon banks in other districts.
The process of settlement upon the books of the
Reserve Bank is simple. A bank, upon receiving from
the Reserve Bank a letter containing checks presented
for collection, remits in currency or by check upon its
balance at the Reserve Bank, or upon a suitable cor­
respondent bank.
Last month in the R e v i e w the system by which balances
are transferred between Reserve Banks over private
telegraph wires was described in detail. That system is
essential to the smooth working of check collections
between banks in different reserve districts, and was

B




established primarily for its furtherance. A bank in
Oakland, for instance, remits to the San Francisco Reserve
Bank for checks which paid debts in New York just as
it remits for checks which paid debts in Sacramento.
But in order for the New York Reserve Bank to settle with
its member, the San Francisco Reserve Bank transfers
each day over the telegraph amounts representing checks
which the New York Reserve Bank sent to it for
collection.
On the whole, the new system cuts about in half the
time required for collecting the country’s checks.
Furthermore, checks on over 90 per cent, of all banks
in the country are now payable at full value. Taken
together, these two changes have resulted in a great
saving to the business, industrial and agricultural inter­
ests of the country. It is true that time and distance,
which are the warrant for collection charges now made
by the banks, as distinguished from the so-called exchange
charges, have not been eliminated, but with the reduction
of the time element, collection charges have been much
reduced. Formerly New York Clearing House banks
charged one-quarter of one per cent, for collecting checks
drawn upon Pacific Coast banks. This charge, which a
customer paid for the immediate use of the money re­
presented in a check, and therefore an interest charge
covering the time required to collect it, has now been
reduced to one-tenth of one per cent., and collection
charges on othor points have fallen accordingly.
A very large proportion of all the checks circulating in
the country is handled by the Federal Reserve Banks.
In 1920 the twelve Reserve Banks handled for collection
447,000,000 checks at a value of $157,000,000,000. The
rapid growth of the system is indicated by the figures in
the following table, which show the average monthly
volume of checks handled by the New York Reserve Bank.

Date

1915.........................................
1916.........................................
1917.........................................
1918.........................................
1919.........................................
1920.........................................
1921*.......................................

Average Number
of Items Handled
per Month
180,316
570,114
1,617,348
2,945,800
6,205,326
7,253,035
7,993,226

Average
Amount
per Month
$191,000,000
430,000,000
1.675.000.000
1 3.548.000.000
| 4,712,000,000
i
4.610.000.000
3.424.000.000

*January to May.

To carry on this work requires a force in the transit
department of the New York Reserve Bank of about
400 persons, who handle on the average about 275,000
checks a day, and on some days many more. The work
goes on day and night, with three shifts of employees.
Checks are received from the banks through a special
station of the Post Office established in the Reserve Bank,
and are then sorted, recorded, and sent on to their desti­
nations, either other Reserve Banks, local clearing-houses,
or individual banks, as the case may be. In spite of the
great volume of deck s handled, differences seldom amount
to more than a few cents on a day’s transactions.
With the establishment and operation of this collection
system one of the major purposes of the Federal Reserve
Act is fulfilled.