The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
MONTHLY REVIEW of Credit and Business Conditions S e c o n d Federal Reserve Agent F e d e r a l R e s e r v e D is t r ic t Federal Reserve Bank, New York July 1,1926 P r o d u c t io n Reports by the Department o f A griculture indicate that the composite condition o f crops on June 1 was 8 per cent below the average condition on that date fo r the past ten years, and somewhat lower than the aver age condition a year ago. On the basis o f the June 1 condition the estimated yield o f winter wheat was 543.000.000 bushels as com pared with an estimate o f 549.000.000 bushels made a month earlier and a final yield o f 398,000,000 bushels in 1925. A ctivity in most lines of industry was smaller in May than in A pril. The reduction was reflected in a de creased volume of output as well as in a decline in the number of factory workers and in total wage payments. The largest declines occurred in the textile, leather and shoes, and iron and steel industries. Production o f automobiles continued large in May. In the lumber, cement, brick, and glass industries activity was main tained and there were seasonal increases in the output of certain food products. The volume of building con tracts awarded declined further in M ay but continued larger than in May of last year. Figures for the first three weeks of June indicate further decreases and the volume of contracts awarded was smaller in that period than in the corresponding weeks o f 1925. Recent de clines in contracts as compared with last year have been particularly large in middle western and south eastern districts. W ith more favorable weather in May than in the preceding month the volume o f wholesale and retail trade increased and was larger than in May o f last year. Department store sales exceeded those o f earlier months o f this year, and total sales fo r the first five months were larger than fo r the corresponding period o f any preced ing year. Merchandise stocks carried by wholesale firms were slightly smaller at the end o f May than a month earlier. Stocks o f groceries, hardware, and drugs were larger than a year ago, but those of meats, dry goods, and shoes were smaller. Stocks at department stores declined more than usual in May and were only slightly larger at the end o f the month than a year ago. R ail road freight shipments increased, and in May and in the first two weeks o f June were above those of the same weeks o f previous years. Shipments of miscellane ous commodities were especially large. B u s in e s s C o n d it io n s in t h e U n it e d S ta te s RO D U C TIO N in basic industries and factory employment declined further in May, while whole sale prices advanced slightly fo r the first time in seven months. The volume of trade at wholesale and at retail increased partly as the result of more favor able weather conditions. P TERCENT Index of United States Bureau of Labor Statistics. (19 1 3= 1 00 ; base adopted by Bureau). Latest figure, May. T rade PERCENT Indexes of Factory Employment and Factory Payrolls in Manu facturing Industries (1919 averages 100 Per Cent). Latest Figures, May. 2 MONTHLY REVIEW, JULY 1, 1926 1922 Monthly Averages of Weekly Figures for Member Bank» in 101 Leading Cities. Latest Figures are Averages for Three Weekly Report Dates in June. P rices The general level o f wholesale com modity prices, ac cording to the index of the Bureau of Labor Statistics, rose slightly in May fo r the first time since last August. P rice advances were shown both fo r agricultural and non-agricultural commodities. A m ong the principal ad vances were those in the prices o f gasoline, livestock, and meat, while prices of grains and cotton declined. In the first three weeks o f June prices o f grains, live stock, silk, and nonferrous metals advanced, while those o f sugar, cotton, cotton goods, and p ig iron declined. B a n k C redit Growth in loans on securities and commercial loans carried total loans and investments o f reporting mem ber banks in leading cities in the middle o f June to a new high point above the total reached at the close o f last year. The large reduction in the volume o f loans on securities by New Y ork City banks since the beginning o f the year has been more than offset in the total o f loans and investments o f all reporting banks by increases in commercial loans and in investments o f banks both in New Y ork City and outside. A t the Reserve Banks changes in the volume o f credit outstanding during the month ending June 23 reflected chiefly the financial operations o f the United States Treasury around the middle o f June. The tem porary abundance o f funds caused by the redemption o f ma turing United States obligations on June 15 caused a sharp decline in borrowings of member banks, par ticularly in New Y ork City. A s checks in paym ent o f income taxes were cleared and collected, however, bor rowings at the Reserve Banks rose to their previous level. Money rates in general showed little change during the month. Rates on call and time loans were slightly lower around the middle o f June, but in the third week were higher than in the latter part of May. Rates on acceptances and on commercial paper remained prac tical! y unchanged. 1923 1.924 1925 1926 Weekly Money Rates in New York Market. Commercial Paper Rate on 4 to 6 Months Paper and Acceptance Rate on 90 Day Paper. M on e y M a rk et The principal developments o f the past month in the money market centered about Treasury transactions in connection with the June 15 quarter day. Throughout the country these transactions included the redem ption o f 333 million dollars o f Treasury certificates maturing on that date, the payment o f 80 million dollars o f interest, the receipt by the Treasury of about 80 million dollars o f interest and principal payments on debts o f foreign governments, and the receipt o f about 440 m illion dol lars o f income and profits taxes. Thus in the aggregate the Treasury paid out about 400 m illion dollars and received about 500 million dollars. W ith the receipts thus more than 100 million dollars in excess of expendi tures, the Treasury fou n d it unnecessary to sell a new issue o f certificates or notes, and foun d itself in posses sion o f a balance in the Reserve Banks which could be partly em ployed in retirement o f outstanding securities. The result o f these operations in the New Y ork market was to put funds into the market on June 15 when the Treasury was redeeming maturing issues and paying interest, and to withdraw funds from the market in suc ceeding days, as income tax checks were collected. These tendencies were accentuated by a commercial movement o f funds toward this center from other districts on June 15 and 16 and transfers away from this center in succeeding days. A s has become usual, however, these tendencies, which would under other circumstances make fo r great ease in the money market on the 15th and 16th o f June and severe firmness later on, were largely offset by changes in the amount o f Reserve Bank funds employed in the market. The table at the foot o f the next page shows the gains and losses to the money market fo r the tax period and indicates the way Treasury and commercial transactions were offset early in the period by the retirement o f Reserve Bank credit, and thereafter by the employment of additional amounts of Reserve Bank credit. The effects of these different transactions on the money market may perhaps best be illustrated by the move 3 FEDERAL RESERVE AGENT A T NEW Y O R K -1 5 0 . 11 ■ JZ ■___ .______ ___ ___ ___ ___ ______________ 13 14 15 16 , 17 18 19 20 JUNE 1926 Z\ Z2, Z3 £4 2$ Reserve Position of Leading New York City Banks Compared with Closing Call Loan Rate. Money Rates at New York June 29 May 28 June 29 1925 1926 1926 S co co co cococo co & eo Time Money—90 day............................. ..................... Prime Commercial Paper............................................. Bills—90 day unendorsed............................................. Treasury Certificates and Notes 5- 7 months........................................................... 8-10 months................................ . Federal Reserve Bank of New York-Rediscount Rate Federal Reserve Bank of New York-Buying Rate for 90 day Bills............................................................ Tt^T^oo $ i ment o f reserves o f New Y ork City banks and the move ment o f call rates, which are shown from day to day in the accom panying diagram. Just prior to the tax date these banks allowed their reserves to run off; then on June 15, when the Treasury paid into the market 154 million dollars, average reserves were increased sharply, and the follow ing day call money dropped to 3 % per cent. A s a result o f losses to reserves in succeeding days through income tax collections, member banks were forced to increase their use of Reserve Bank credit in order to meet their reserve requirements at the end o f the week, and call money advanced to 4 per cent. Con tinued tax collections and outgoing transfers caused a renewed deficit in member bank reserves at the begin ning of the follow ing week, and call money advanced to 4 ^ and 4 % per cent. The consequences of this large movement of funds were practically limited to this m od erate change in rates. The money market during this period was not materi ally affected by reason o f the T reasu ry’s putting out COrf^£tti£ + 50 no new issue o f securities. The issue of securities by the Treasury does not as a rule have any effect upon the money market because these securities are not paid fo r to any extent by cash, but rather by deposit credits, which the Treasury receives on the books o f member banks. The Treasury then draws upon these deposits as it has need to spend the money. The fact that the Treasury did not sell any new issue on June 15 did not in any way affect the money market, except as it reduced the supply o f available Treasury certificates and affected the balance o f supply and demand in that particular market. Money rates during the greater part o f June were fairly steady, despite the heavy shifting o f funds in cident to Treasury operations around the June 15 tax period, and showed little change from rates prevailing in May. Tow ard the close o f the month the usual stif fening o f rates accompanied preparations fo r heavy in terest and dividend disbursements on July 1, mid-year statements, and holiday currency requirements. The follow ing table shows money rates in New Y ork on June 29 com pared with those on M ay 28 and one year ago. C O COCOCO 7?AT£ ♦Prevailing rate for preceding week B il l M a r k e t Follow ing the advance o f % per cent in rates on 90day bills late in May, bills moved more freely and a substantial liquidation occurred in dealers’ portfolios. As the demand fo r bills was in excess o f offerings to the market, offering rates on 90-day bills soon reverted to their form er level o f S1/^ per cent. A t this level, Gains and Losses to New York Money Market (In millions of dollars) June 1926 12 Gains to Market Treasury transactions (mostly certificates redeemed, interest paid, and securities purchased)................................................................................................................... 14 2 Commercial transactions (mostly transfers)—net gain............................................... Reserve Bank transactions (mostly acceptances and securities bought and net increases in loans to New York City Banks)........................................................... 15 16 5 154 12 4 59 24 25 4 Total gains................................................................................................... 2 34 217 36 Losses to Market Treasury transactions (mostly income taxes collected).............................................. 4 5 15 81 Commercial transactions (mostly transfers)—net loss............................................... 1 17 4 18 19 4 2 26 61 30 65 2 20 18 27 26 21 12 22 23 24 12 22 27 1 2 45 31 5 3 57 70 28 5 12 4 3 3 19 15 2 18 Reserve Bank transactions (mostly acceptances and securities matured or sold and net decreases in loans to New York City Banks)........................................... 17 52 53 23 11 5 13 10 31 31 5 Total losses................................................................................................... 22 57 68 104 58 49 44 29 34 34 25 Net gain for day.............................................................................................................. Net loss for day............................................................................................................... Cumulative gain or loss.................................................................................................. 20 —20 23 —43 68 28 + 10 16 28 36 42 + 26 — 16 + 12 + 48 6 + 42 20 + 22 149 + i0 6 * + 38 4 MONTHLY REVIEW, JULY 1, 1926 however, the market was quiet, with the supply con siderably greater than the demand, except fo r a few days around June 15, when bills were in active demand due to tem porarily easier money conditions. Later in the month, as money was firmer and the distribution of bills continued limited, dealers again advanced their offering rates on 90-day bills to 3 % per cent. C o m m ercial P a per M a rk et The amount of commercial paper outstanding through 26 commercial paper dealers at the end o f May was $668,000,000, less than 1 per cent larger than at the end of A p ril and about 14 per cent smaller than in May 1925. In June borrowers continued to make rela tively restricted use of the commercial paper market. Interior institutions remained the chief buyers o f paper, at rates little changed from those of a month ago— 4 per cent fo r most prime names. Gross Debt 1919.......................................................... 1920.......................................................... 1921.......................................................... 1922.......................................................... 1923.......................................................... 1924.......................................................... 1925.......................................................... 1926.......................................................... $25,482,000,000 24.298.000.000 23.976.000.000 22.964.000.000 22.350.000.000 21.251.000.000 20.516.000.000 19.643.000.000* Debt Retired During Fiscal Year $ 1,184,000,000 322.000.000 1,012,000,000 614.000.000 1,099,000,000 735.000.000 873.000.000* * = Estimated BILLIONSofDOLLARS R e d u c t i o n in t h e N a t i o n a l D e b t On the June 15 tax day, fo r the first time since the war, the Treasury redeemed its maturing obligations without selling a new issue. A s a result, the outstand ing National debt was reduced by $333,000,000, the amount of the maturing certificates. This procedure was made possible by a budget surplus fo r the year ended June 30, 1926, of close to $400,000,000, chiefly due to larger tax receipts than were antici pated. W ith the downward revision of income tax rates applicable to 1925 income it had been expected that the combined return from income and profits taxes would be slightly smaller than a year ago, whereas the return for the first half of 1926 actually proved to be nearly $150,000,000 larger than in the first half of 1925, ap parently as the result o f the highly prosperous condition of industry and trade in this country last year. Cus toms and miscellaneous tax receipts have also been larger during this fiscal year than in the previous year. Tax collections from various sources in recent years have been as follow s: (In millions of dollars) Year Ended June 30 Customs 1920................................. 1921................................ 1922................................ 1923................................ 1924................................ 1925................................ 1926*.............................. 324 308 358 562 545 549 575 *=Estimated special taxes Income and Miscellaneous Profits Taxes Taxesf 3,957 3,228 2,087 1,691 1,842 1,762 1,975 1,442 1,352 1,121 936 953 828 859 Total 5,723 4,888 3,566 3,189 3,340 3,139 3,409 Total Debt of the United States Government, 1917 to 1926. G o ld M o v e m e n t Gold imports in small amounts from various coun tries during May totaled less than $3,000,000. E xports were slightly over $9,000,000, o f which $8,000,000 went to Canada. The M ay export balance of $6,400,000 re duces the net im port of gold during the first five months o f the year to $65,800,000. D uring the corresponding period o f 1925 there was a net outflow amounting to about $148,000,000. D uring the first twenty-nine days of June, the move ment o f gold at the P ort o f New Y ork was almost ex clusively with M exico and Latin America. Im ports of about $4,000,000 were reported, and exports of $2,200,000. The largest items were the receipt o f nearly $3,500,000 from Chile and the shipment o f $1,000,000 to Colombia. In addition to receipts through this Port, shipments of $5,000,000 were received from Mexico. It was recently announced that a fu n d o f 10,000,000 pesos would be established at New Y ork for the stabilization o f Mexican exchange. f=Includes capital stock, estate, sales tobacco, stamp and The application of the budget surplus to debt reduc tion, together with sinking fun d operations, has made possible a total reduction in the National debt during the year of about $873,000,000. As a result, the gross debt was reduced below $20,000,000,000 for the first time since 1918, and is now nearly $7,000,000,000 below the high point reached in the follow ing year. The amount of the gross debt outstanding on June 30 of each of the last eight years, together with the reduction effected during the year, is shown in the follow ing table. S e c u r it y M a r k e t s Stock prices moved upw ard in June and trading again became active. Industrial stock averages recovered about two-thirds o f the February and March decline, and a number o f railroad stocks advanced to new high levels since 1913. Corporation bond averages advanced to new high levels since early in 1917, follow ing the announcement by the Treasury that there would be no refinancing issue on June 15, but later receded slightly accom pany- FEDERAL RESERVE AGENT A T NEW Y O R K ing firmer money conditions. United States Govern ment issues were in demand, the F irst 3 % ’s, Third 4 ^ ’s, and Treasury 3 % ’s advancing to new high prices fo r the year, and most other issues showing increases. The accom panying diagram, based upon computations by the Standard Statistics Corporation, indicates that as a result of the steady advance in bond prices during the past three years, yields on high grade corporation bonds are now only slightly above the pre-war levels. Yields on high grade preferred stocks have followed bond yields closely in recent years, and are now con siderably lower than in 1916. A t the highest level of prices early this year, yields on dividend paying indus trial common stocks averaged only slightly above high grade bond yields, and even during the spring reaction remained below the yields on preferred stocks. Y IE L D PER CENT. J K h 33 COMMC >N 5TOCK 5 H I A 10 ] H\ Gl i GRAD 1 PFb. STOCJ (S w .. "a 6( > HIGH ( rRADE B01> D S 1 r v a 5 Spanish pesetas rose above 16 cents. Other European currencies showed little change. The Canadian dollar continued above par, and in the latter part o f June was close to the gold export point. Brazilian rates advanced to 15.90 cents, the highest quotation since the latter part of 1920, and the A rgen tine peso continued well over 40 cents. F o r e ig n T r a d e A n export balance o f $38,000,000 in May was the first favorable trade balance this year. The change from an im port balance in A p ril to an export balance in May was due, however, to diminished imports rather than increased exports. M ay imports, valued at $318,000,000, were $80,000,000 smaller than in A p ril and $10,000,000 smaller than in M ay 1925. Exports, valued at $356,000,000, were $32,000,000 less than in A p ril and $15,000,000 smaller than a year ago. The sharp decline in imports of merchandise in May was due largely to smaller receipts of rubber and coffee. The quantity o f crude rubber imported during the month was the smallest since last September, and the quantity of coffee was the smallest in a year. E xports of raw cotton, which have been relatively small in recent months, showed a smaller decline in May this year than last and were equal in value to those of a year ago, w'hile the quantity was 27 per cent larger. Grain exports were the largest since last September, but were $10,000,000 below those o f a year ago. E m p lo y m e n t 1916 1917 1918-1919 1920 1921 1922 1923 1924 1925 1926 Average Monthly Yield on Stocks and Bonds at Market Prices, and Current Interest and Dividend Rates, Including Extras (June 1926 estimated). Source— Standard Statistics Corporation. Follow ing the rather small volume of new issues o f fered in May, new financing again became active in June and the total was somewhat larger than for June 1925. The largest single offering during the month was a $60,000,000 issue of Federal Land Bank 4 % per cent bonds, yielding over 4 % per cent. Public utility issues form ed the largest group of new offerings and included several important issues by electric companies through out the country. Foreign offerings were more numerous than in May, but the issues were generally small, ex cept fo r the flotation of $30,000,000 United Steel W orks Corporation of Germany bonds and the m ajor part of $25,000,000 United States of Brazil bonds. The total o f foreign issues in the first half of 1926 was only slightly smaller than in the corresponding period last year. F o r e ig n E x c h a n g e The French franc, after a recovery to 3.28 cents, de clined steadily to the low point of 2.74 cents at the middle of June. The Belgian franc, although fluctuating with the French currency, did not fall below 2.81 cents. The lira also was weak, declining to 3.54 cents. Sterling remained strong, twice rising above par, and the advance in Danish and Norwegian quotations con tinued. F or the first time since February, 1922, A further decline o f 2 per cent in factory employment in New Y ork State from A p ril to May was reported by the State Department o f Labor, and the gain over a year ago was reduced to 1 per cent. F or the country as a whole the May decrease was slightly over 1 per cent. There has been some evidence in June o f a further cur tailment o f factory activity, whereas last year the general level o f factory employment was virtually unchanged from May to June. W orking forces in New Y ork State were reduced in May in all the principal branches o f the textile indus tries,— silk goods, cotton goods, woolens and worsteds, knit goods, and carpets and rugs— and in most of these industries May employment was less than that o f a year ago. Shoe factory employment also was reduced in May and was substantially lower than in M ay 1925. The metal working industries in most cases reported slight reductions in May, but in general were operating at higher levels than a year ago. The iron and steel and railroad equipment industries showed especially large gains over May 1925, but employment in the auto mobile industry fell below last y e a r’s level. Operations in the building materials industries were at substan tially higher levels than a year ago. I n d e x e s o f B u s in e s s A c t i v i t y General business activity appears to have receded slightly in May from the high levels o f previous months o f the year. In banking centers throughout the country, bank debits averaged 5 per cent higher than a year ago, 6 M O N TH LY REVIEW , JULY 1, 1926 com pared with an average increase of 9 per cent in the first fou r months of the year. Postal receipts also were smaller than in A p ril and showTed less than the usual annual increase over last year. Foreign trade showed more than the usual seasonal decline from A p ril to May, but domestic retail trade, as reflected in the indexes of department store, chain store, and mail order sales, compared much more favor ably in May than in A p ril with that o f a year ago. The follow ing table gives this bank’s indexes o f busi ness activity in percentages of the com puted trend, with allowance fo r seasonal variation and, where necessary, fo r price changes. (Computed trend of past years=100 per cent) 1925 1926 May March April May 106 108 94 110 141 83 103 102 87 133 51 109 103 111 94 129 75 92 105 107 89p 106p 121 Car loadings, merchandise and misc....... Exports...................................................... Imports...................................................... Grain exports............................................ Panama Canal traffic............................... The output o f a m ajority o f leading industries showed reductions from A p ril to M ay after allowance fo r the usual seasonal changes. The textile, leather, and shoe in dustries showed especially large reductions. Autom obile production continued to exceed that of previous years, but the increase over last year was smaller in May than in the early months o f the year. May indexes o f production, in which allowance has been made fo r seasonal variations and year-to-year growth, are shown below : 1925 1926 May March April May 101 99 87 99 87 96 132 107 93r 91r 125 105 74 115 114 112 102 106 103 98 109 105 106r 91r 116 110 69 111 117 113 109 107r 126 101 110 101 lOOr 86r 112 111 67 105 118 110 96 103 98 100 113 97 110 86 93 88 96 79 104 130 121 115 97 90 97 132 140 97 116 109 127 93 100 94 110 83 111 137 117 130 100 94 105 131 137 103 116 93 113 92 93 97 105 81 107 139 124 129 99 89 108 130 135 110 118 87 102 83 90 92 98 76 107 Producers' Goods Distribution to Consumer Department store sales, 2nd Dist........... Chain store sales....................................... Mai’ order sales. . ..................................... Life insurance paid for............................. Real estate transfers................................ Magazine advertising............................... Newspaper advertising............................ General Business Activity 98 96 111 114 112 97 95 95 89 110 116 109 99 98 89 92 109 112 107 100 96 99 99 122 106 101 100 96 Bank debits, outside of N. Y. City........ Bank debits, New York City............ .. Bank debits, 2nd Dist. excl. of N. Y. City Velocity of bank deposits, outside of N. Y. City......................................... Velocity of bank deposits, New York City Shares sold on N. Y. Stock Exchange*.. Postal receipts.......................................... Electric power............................. ............. Employment, N. Y. State factories........ Business failures...................................... New corporations formed in N. Y. State Building permits....................................... 110 124 103 113 140 106 115 130 105 111 121 102 100 112 208 99 104 99 108 114 141 105 128 295 101 113 101 111 115 147 105 124 171 101 112 100 121 112 147 103 114 132 96 ‘ 99 105 114 128 General price level................................... 184 186 lo6 185 p=Preliminary B u il d i n g Contracts awarded for building and engineering p r o j ects in 37 states, reported by the F . W . Dodge C orpo ration, continued larger in May than a year ago, but were slightly smaller than in A pril. The principal gain over May 1925 was in the New Y ork and Northern New Jersey district. Contracts fo r commercial buildings were smaller than a year previous fo r the first time this year, while con tracts for public utilities and public works and fo r in dustrial structures were substantially larger than in May 1925. Residential contracts outside of the New Y ork district were slightly smaller than a year ago. Building permits issued in 484 cities throughout the country, as reported to the S. W . Straus Company, con tinued to be slightly smaller than a year ago. Building activity appears to be more strongly maintained in the smaller localities than in the larger cities. Permits issued in cities with 200,000 or more inhabitants at the time o f the last Federal census averaged 10 per cent P r o d u c tio n (Computed trend of past years* 100 per cent) Primary Distribution * = Seasonal variations not allowed for smaller in May than a year previous, and, if New Y ork City be excluded, the reduction was 18 per cent, whereas the total fo r the 484 cities showed a decline o f only 3 % per cent. Pig iron....... .............................................. Steel ingots................................................ Bituminous coal........................................ Copper, U. S. mines................................. Tin deliveries............................................ Zinc............................................................ Petroleum.................................................. Gas and fuel oil........................................ Cotton consumptionr............................... Woolen mill activity*r............................. Cement...................................................... Lumber...................................................... Leather, sole............................................. Silk consumption*.................................... 89r 82r 128 6i 95 Consumers' Goods Cattle slaughtered.................................... Calves slaughtered................................... Sheep slaughtered..................................... Hogs slaughtered..................................... Sugar meltings, U. S. ports..................... Wheat flour............................................... Cigarettes.................................................. Tobacco, manufactured........................... Gasoline..................................................... Tires.......................................................... Newsprint.................................................. Paper, total............................................... Boots and shoes........................................ Anthracite coal......................................... Automobile, all......................................... Automobile, passenger............................. Automobile, truck.................................... i25 93 83p 95 129 136 99 * = Seasonal variation not allowed for p —Preliminary r=Revised W h o le s a le T r a d e Wholesale trade in this district during M ay averaged 6 per cent below last year, a smaller decrease than was reported last month. A lthough sales o f textiles and w om en’s clothing continued below last year, the de creases were not so large as those reported in A pril. The year to year gain in stationery sales was the largest reported in that line so fa r this year, and hardware sales showed an increase fo r the first time since D e cember, as indicated in the diagrams on the follow ing page. On the other hand, machine tool sales were smaller than a year previous fo r the first time in more than a year, and sales o f m en ’s clothing, which were unusually FEDERAL RESERVE AGENT A T NEW Y O R K 'p e r c e n t PER c en t . percent percent PERCENT. PERCENT Monthly Sales of Representative Wholesale Dealers in Second Federal Reserve District. (Averag e Sales in 1919 = 100 per cent). large during the first three months of this year, have since fallen below last y e a r’s level, and in May were the smallest for that month in the past seven years. Cotton job bers’ sales were also the smallest fo r the month o f May in recent years, and sales o f commission mer chants were the smallest fo r any month in nearly three years. Shoe stocks showed the largest decline from the pre vious y e a r’s level since 1924, and decreases were also shown in all other lines except silk and hardware, in which the largest gains in over a year were reported. Collections averaged slightly smaller, compared with last year, than in A pril. Outstanding accounts at the end o f the month continued close to the level o f a year ago. Percentage Change May 1926 from April 1926 D e p a r tm e n t S to re T r a d e Sales of department stores? in this district during May were 6 per cent larger than last year, due partly to the fact that M ay business this year included sales which ordinarily are made earlier in the season but which were deferred this year on account of the cold spring. F or the first time this year, increases over the previous year were reported in all sections o f the district, and in R och ester, Newark, and W estchester the gains were the largest in more than six months. A pparel stores and mail order houses also reported their heaviest increases so fa r this year. Stocks o f merchandise in department stores at the end o f the month were only 3 per cent larger than last year, so that the rate o f turnover showed a slight increase, Percentage Change May 1926 from May 1925 Percentage Change May 1926 from May 1925 Locality Commodity Net Sales Groceries...................... Men’s clothing............. Women’s dresses.......... Women’s coats and suits Cotton goods-Jobbers.. Cotton goods-Commission........................... Silk goods..................... Shoes............................. Drugs............................ Hardware...................... Machine tools.............. Stationery..................... Paper............................ Diamonds..................... Jewelry......................... + 2.6 — 36.8 + H .3 — 72.9 — 2.2 Stock end of month — 7.3 + 3.8 0 + 3.3 * + 0.4 + 1.3 — 12.4 — 24.1 + 4.3 + 0.8 — 2.4 — 1.1 — 3.7 — 12.4 — 2.0 + 47.8 } - 1.5 Weighted Average.. . — 11.5 Net Sales + 3.4 — 16.7 — 25.2 — 15.2 — 9.7 — 4.4 — 10.3 — 13.6 — 2.4 *+ 5 9 .0 + 2.4 —29.1 — 2.2 — 1.1 + 6.4 +11.6 — 17.4 +13.8 +10.8 +20.7 1 o . + 1.3 } - 3.4 — 6.3 *«=Stock at first of month— quantity not value Stock end of month Collec tions Acc’ts Receiv able + 4.1 + 0.1 — 8.5 —26.5 — 5.7 + 5.4 + 6.2 — 0.4 — 27 6 — 11.7 — 6.4 + 5.0 + i.3 __ 6.5 + '4!2 + ' i ’.9 +34! 7 +25! 6 +21.8 + i3 .5 — 1.9 — 0.7 Net Sales Stock on Hand end of month Collec tions* Accounts Receiv able* Syracuse......................................... Newark......................................... Bridgeport..................................... Elsewhere....................................... Northern New York State....... Central New York State.......... Southern New York State....... Hudson River Valley District.. Capital District......................... Westchester District................. + 4.2 + 1.3 +14.0 + 1.1 +14.4 +14.4 + 8.0 + 5.3 + 9.2 + 7.2 +10.7 + 5.3 +17.5 + + + — + + + 2.8 0.2 2.6 2.4 8.0 4.7 4.3 — 10.0 — 3.7 +12.7 — 5.4 + 5.1 +13.4 — 4.4 + 16 .7 — 1.7 + 9.4 + 4! 6 + 5.0 All department stores................... + 5.9 + 3.1 — 5.1 +10.8 Apparel stores............................... Mail order houses......................... + 9.9 +11.7 +21.7 Buffalo........................................... * = Exclusive of instalment accounts but in apparel stores the increase in stocks continued to be much larger than that in sales. Reflecting the slow business of previous months, reg ular collections during May were 5 per cent below those o f last year, but follow ing the increased sales in May, there was a substantial increase in the amount o f out standing accounts at the end of the month. Both instal ment collections and accounts receivable were smaller than last year, due to decreases in New Y ork and Buffalo. Increases were shown in sales of all principal de partments except woolen goods, which have been run ning behind the previous year for many months, and musical instruments and radio, in which special sales were reported in M ay of last year. Net Sales Stock on Hand Percentage Change Percentage Change May 1926 May 31, 1926 from from May 1925 May 31, 1925 Toys and sporting goods........................ Furniture.................................................. Linens and handkerchiefs....................... Men’s furnishings................................... Shoes........................................................ Books and stationery............................ Toilet articles and drugs........................ Women’s ready-to-wear accessories. . . . Silks and velvets..................................... Silverware and jewelry........................... Women’s and Misses’ ready-to-wear. . . Men’s and boys’ wear............................. Luggage and other leather goods.......... Home furnishings.................................... Cotton goods........................................... Woolen goods.......................................... Musical instruments and radio.............. Miscellaneous.......................................... +22.9 +18.5 +15.8 +14.7 +11.9 +11.9 +11.7 +10.5 +10.3 + 9.5 + 9.4 + 9.4 + 9.3 + 8.6 + 6.7 + 2.1 — 32.5 —85.6 — 1.6 + 4.0 +11.4 + 0.8 — 1.7 — 0.2 + 3.9 + 2.9 — 2.0 — 8.0 — 5.1 +10.8 — 9.6 + 9.7 + 6.1 + 4.7 — 2.0 —30.2 — 4.4 — 10.9 Percentage of Total Loans and Investments Year ended June 30: 1919........................................ 1920........................................ 1921........................................ 1922........................................ 1923........................................ Year ended Dec. 31: 1924........................................ 1925........................................ E a r n in g s o f M e m b e r B a n k s A study of the earnings and expenses of member banks in 1925, published in detail in the June Federal Reserve Bulletin, indicates that gross earnings o f mem ber banks in 1925 showed an unusually large increase over the previous year, and exceeded even the high level of the year ended June 30, 1921. Since 1922 gross earnings have been increasing stead ily. Expenses have shown a closely similar rate o f in crease, but a substantial reduction in net losses has resulted in steadily increasing net operating profits, which in 1925 were larger than in any o f the preceding six years. (In millions of dollars) Year ended June 30: 1919................... 1920................... 1921................... 1922................... 1923................... Year ended Dec. 31: 1924................... 1925................... total loans and investments, due to the increasing pro portion of time deposits. W ages and salaries also have increased accom panying the growth in volume o f busi ness, but the ratio to earning assets has shown little change since 1921. The amount of interest paid on borrowed money has greatly diminished since 1921, re flecting the much reduced borrow ing from the Reserve Banks in recent years. Tax payments also declined steadily from 1921 to 1924, but increased slightly in 1925. The proportions of earnings, expenses, losses, and profits to the volume of loans and investments, which may be considered as roughly representative o f the volume of business done by the banks, are shown fo r each year in the follow ing table. This table indicates considerable stability in the ratios o f gross earnings and o f expenses to loans and investments. The ratio o f net profits to loans and investments has im proved greatly since 1922, due to the reduction in losses. Total Loans and Invest ments* Gross Earnings Total Expenses Net Losses Net Profits 21,063 24,821 25,384 23,933 25,783 1291 1636 1830 1669 1684 877 1097 1268 1156 1190 80 129 216 214 149 334 410 346 299 345 27,662 29,917 1786 1918 1281 1367 145 131 361 419 Total Expenses Net Losses Net Profits 6.13 6.59 7.21 6.98 6.53 4.16 4.42 4.99 4.83 4.61 0.38 0.52 0.85 0.89 0.58 1.59 1.65 1.36 1.25 1.34 6.46 6.41 4.63 4.57 0.52 0.44 1.31 1.40 A similar analysis fo r individual Reserve districts shows that over the period as a whole, banks in the agri cultural districts generally had the highest gross earn ings relative to loans and investments, reflecting high interest rates, but that they also had much higher ex penses and losses than the other districts, so that net profits were smaller than in other districts. The average net profit fo r the districts o f Minneapolis, Kansas City, and Dallas, from 1919 to 1925 inclusive, was 0.99 per cent o f total loans and investments, as compared with 1.41 per cent fo r the whole System. Since 1923, how ever, the agricultural districts have shown increasing percentages o f net profits to total loans and investments. The average fo r Minneapolis, Kansas City, and Dallas districts nearly doubled in this period, increasing from 0.45 per cent in the year ended June 30, 1923, to 0.84 per cent in the calendar year 1925. The ratios o f earn ings, expenses, losses, and profits to total loans and investments in different districts fo r the year 1925 are as follow s: Percentage of Total Loans and Investments District Philadelphia.................................. *Averages of amounts from reports of condition during year O f the various items o f expense, interest paid on deposits has shown the largest increase during recent years, not only actually, but relative to the volume of Gross Earnings San Francisco................................ Gross Earnings Total Expenses Net Losses Net Profits 5.97 6.02 6.24 6.65 6.45 7.47 6.30 6.62 6.38 7.28 7.56 6.93 4.25 4.06 4.08 4.83 4.68 5.14 4.66 4.75 5.10 5.58 5.27 5.39 0.54 0.33 0.18 0.35 0.51 0.69 0.36 0.52 0.73 1.02 1.00 0.48 1.18 1.63 1.97 1.47 1.27 1.65 1.28 1.34 0.55 0.68 1.29 1.06
@FedFRASER