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MONTHLY REVIEW of Credit and Business Conditions S e c o n d F e d e r a l Money Market in June Accom panying further gold exports and earmarking, higher money rates, and some liquidation in the stock market, there has been a decrease during the past month in the volume of bank credit in use. This decrease has been confined altogether to the banks in New Y ork City and to one type of credit, loans on securities. The changes in the figures fo r the reporting member banks since the highest point on May 2 have been as fo llo w s : (In millions of dollars) May 2 May 29 June 27 Change May 2June 27 Reporting Banks— New York City. . . .Loans on Stocks and Bonds............ All other loans................................... Investments....................................... Total Loans and Investments... . 2,746 2,856 1,949 7,551 2,696 2,815 1,987 7,497 2,466 2,829 2,043 7,338 — 280 — 27 -f- 94 — 213 Total Deposits.................................. 6,892 6,715 6,554 — 338 May 2 May 29 June 20 Change May 2June 20 Reporting Banks— U. S. outside New York C ity................. Loans on Stocks and Bonds............. All other loans................................... Investments....................................... Total Loans and Investments. . . . 4,104 6,245 4,688 15,037 4,193 6,190 4,696 15,079 4,192 6,252 4,646 15,090 + 88 + 7 — 42 + 53 Total Deposits................................... 14,075 13,953 13,954 — 121 The figures fo r the New Y ork City banks are shown in graphic form in the diagram below. MILLIONS o/DOLLARS Y o rk C it y R e p o rt in g M e m b e r B a n k s , L o a n s a n d In v e s t m e n t s , D e p o s it s , a n d B o r r o w in g s fro m th e F e d e r a l R e s e r v e B a n k , J a n u a r y to J u n e 1 9 2 8 . D is t r ic t Federal Reserve Bank, New York Federal Reserve Agent N ew R e s e r v e July 1, 1928 The more rapid decline in deposits than in loans and investments is largely accounted fo r by the conversion o f foreign bank balances in New Y ork into gold for export or fo r earmarking at the Reserve Bank. The net loss of gold since the beginning of 1928 is now about 280 million dollars. The consequent decline in deposits has been accompanied by some reduction in reserve require ments, but as the entire amount o f gold exports repre sented a loss o f reserve funds, dollar for dollar, New Y ork banks have been forced to replace a considerable part of the loss by an increase in their borrowings at the Reserve Bank, which is also shown in the diagram below. The retirement o f bank credit during M ay was offset by a com paratively new type o f credit expansion which has taken place without a corresponding increase in bank deposits or reserves. This credit expansion, re quiring no reserves, takes the form of loans to brokers on stock exchange collateral largely by individuals and corporations other than banks. Brokers loans o f this sort placed by New Y ork City banks for their customers, and reported as loans “ fo r account of others,” have increased more than 350 million dollars since May 2, and 800 million since January 4. The credit made available in this way thus more than offset the decline in bank credit during May. These loans apparently represent the lending to brokers o f idle deposits o f individuals and corporations, and the consequent conversion of in active deposits into very active accounts. A ccom panying MILLIONS o f HOLLARS Loans t o B r o k e r s a n d D e a l e r s in S e c u r i t i e s P l a c e d b y N e w Y o r k C i t y R e p o r t i n g M e m b e r B a n k s , J a n u a r y to J u n e 1 9 2 8 . MONTHLY REVIEW, JULY 1, 1923 50 this tendency in recent weeks the ratio of checks debited to individual accounts relative to the amount of deposits in New Y ork City banks— in other words the velocity or rate of turnover of deposits,— has been higher than ever before. The changes in recent weeks in the three form s of loans to brokers and dealers, reported by New Y ork City banks, are shown in the right-hand diagram on the pre ceding page. The diagram shows that increases in “ all oth er” loans during May more than offset declines in loans placed for domestic bank account. Between June 6 and June 20, however, total brokers loans have declined nearly 300 million dollars, due wholly to declines in loans fo r bank account. It is interesting that this decline is greater than the decline o f loans on stocks and bonds of reporting member banks, which only dropped 133 million in these two weeks. The probable explanation is that about half of the decrease in brokers loans represented not real liquidation, but a transfer of borrow ing accounts from brokerage houses to banks. Transfers of this sort took place during the spring of 1926. A further decline o f 110 million in brokers loans took place during the week ended June 27. Interest rates moved generally higher during June. Call loan rates, after advancing tem porarily to 7 per cent early in June, eased to 5*4 and 6 per cent until after the first few days of the June tax period, when income tax collections and preparations fo r mid-year statements and settlements caused an advance to 6V2 and later to 7 % and 8 per cent. Rates on 90 day security loans advanced further to the highest level since Septem ber 1921, and open market rates on commercial paper advanced to the highest level since March 1924. Interest rates charged by leading New Y ork banks on unsecured customers ’ loans, which ordinarily show only minor fluctuations, have recently shown the sharp est increase in several years. A s the accom panying dia gram shows, the average rate charged by reporting banks advanced in June to the highest level since the early part of 1924. A s on previous occasions, however, changes in these rates have been smaller and less rapid than the rates for loans on stock exchange collateral. Money rates near the end of June are compared in the follow ing table with those of a month previous and a Money Rates at New York Call money.................................. Time money-90 day................... Prime commercial paper............ Bills-90 day unindorsed............. Customers’ rates on commercial loans......................................... Treasury certificates and notes Maturing December 15......... Maturing March 15............... Federal Reserve Bank of New York rediscount rate.............. Federal Reserve Bank of New York buying rate for 90 day bills.......................................... June 28, 1927 May 28, 1928 *4 *6 45 A 35 A ~3% 5H 4 y 2- 4 H 4 -4 H June 28, 1928 *ey2 5Vs-6 4M-5 4Vs t4.47 t4 .53 t4.S4 3.12 3.24 3.89 3 .SO 3.96 4.06 4 4M 4M 3M 4 4 ♦Prevailing rate for preceding wTeek tAverage rate of leading banks at middle of month T r e a s u r y T a x P e r io d O p e r a t io n s The principal transactions of the June 15 tax period included the redemption of 400 million of Treasury 3 ^ T O R a t e s o n C o m m e r c ia l L o a n s to C u s t o m e r s C h a r g e d b y L e a d in g N e w Y o r k C it y B a n k s C o m p a re d w it h O p e n M a r k e t R a t e s on 9 0 -d a y S e c u r it y L o a n s . per cent certificates; the sale o f refunding issues, includ ing approxim ately 216 million of six months 4 per cent certificates and 212 million o f nine months 3 % per cent certificates; the second quarterly payment o f taxes on 1927 incom e; and the purchase fo r retirement of Liberty third 4 % ’s at 100 2/32. A s usual, a large part o f the maturing issue was pre sented fo r redemption in New Y ork, and although about 135 million were exchanged fo r the new series, cash redemptions together with interest payments in this district exceeded tax and other collections on June 15 by nearly 90 million dollars. Due to the heavy indebted ness o f New Y ork City banks, this amount was readily absorbed by the repayment of borrowings at the Reserve Bank, and the call money market eased only slightly. The Treasury issued the usual special certificate o f in debtedness to the Reserve Bank to cover its overdraft, which was paid off within a few days out of the p ro ceeds of tax collections, and a deposit balance was built up, with which the Treasury purchased on June 20 about 75 million of Liberty thirds. B il l M a r k e t B uying o f bills, chiefly for foreign account, continued large during the first half of June, and exceeded sub stantially the supply of new bills offered to the market. There was a decline in the foreign demand fo r bills during the second half of June, however, and dealers * portfolios began to mount. In order to attract new buying, the dealers on June 20 advanced their rates on the 60 and 90 day maturities by % per ce n t; ninety day unindorsed bills rose to 4 % per cent from the 4 per cent level which had prevailed since early in June. C o m m e r c ia l P a p e r M a r k e t The principal development in the commercial paper market during June was a further gradual firming in rates. Prim e names were being sold toward the end of June at a range o f 4% -5 per cent, or *4 per cent higher than a month ago, and the highest level since March 1924. The demand fo r paper by the banks was FEDERAL RESERVE AGENT AT NEW YORK rather small, a number of institutions indicating that they were reluctant to increase their investments in view of their large indebtedness to the Reserve Banks. Dealers were called upon to furnish only limited amounts of funds to open market borrowers, however, and consequently offering lists remained of moderate size. Tw enty-four dealers reported at the end o f May that they had outstanding $541,000,000 of commercial paper, an amount 5 per cent smaller than a month earlier, and 7 per cent smaller than on M ay 31, 1927. 51 4610 Gold Movement D uring the month of June there was an additional loss o f gold through net exports and earmarkings of $52,000,000. This brought the total loss of gold since the beginning of 1928 to $280,000,000, and since August 1927 to over $500,000,000. A s a consequence the total gold stock o f the United States has been reduced about 10 per cent, from over $4,600,000,000, the highest point, reached in A p ril 1927, to about $4,100,000,000. The accom panying diagram is an attempt to vizualize the recent loss of gold in relation to the gain in gold which took place between the end of 1920 and mid-1927. It indicates that the gold loss during the past year has been between one-third and one-fourth as large as the total increase of the previous seven years, most o f which occurred between 1920 and 1924. This leaves the gold stock of this country about $1,200,000,000 larger than at the end of 1920 just before the heavy im port movement began. In considering the effects of gold exports upon the credit structure it may be noted that the total increase in gold stock since the end of 1920 was used in two ways : first to repay member bank indebtedness at the Federal Reserve Banks, and second to supply the basis fo r a large expansion in member bank credit, which has in creased member bank reserve requirements by 600 mil lion dollars since 1920. As has been apparent in recent weeks the export of gold involves ordinarily either a liquidation of credit, which reduces bank requirements fo r reserves or else the calling into use of additional amounts o f Federal Reserve credit. Since the current gold export movement began last year there has been an increase rather than a decrease in bank credit and hence in member bank reserve requirements, and hence a larger use of Federal Reserve credit has been required. The amount of Federal Reserve credit in use is now about 400 million dollars larger than a year ago. A reduction in currency in circulation has also supplemented reserves by about 100 m illion dollars. The effect on the money market of this additional use of Reserve funds depends largely upon whether they are drawn into use through borrow ing by member banks or by Federal Reserve pur chases of acceptances or securities. In recent months the increases in Federal Reserve credit required because of gold exports have been in the form of member bank borrowing. The principal gold movements during June were the export o f $54,000,000 of gold previously earmarked to F ran ce; shipments of $10,000,000 to Great Britain, $4,000,000 to Italy, $3,000,000 to Poland, and $1,000,000 to the A rgentine; and the import of $18,600,000 from 1 9 2 ,1 1927 1926 G o ld S t o c k o f th e U n it e d S t a t e s , S h o w in g th e T o t a l I n c r e a s e , L a r g e ly t h r o u g h Im p o r t s , fro m 1 9 2 0 to th e H ig h P o in t o f 1 92 7, an d th e S u b se q u e n t L o s s th ro u g h E x p o rts an d E a r m a r k in g s . ( I n m illio n s o f d o lla r s ; J u l y 1, 1 9 2 8 e s t im a t e d ) . Canada. D uring the month there was a net reduction o f $2,000,000 in gold held under earmark, as $57,000,000 was released and shipped, while $55,000,000 additional gold was earmarked. Net exports and changes in the amount o f gold held under earmark during the past ten months are summar ized below. Gain or Loss of Gold through Exports and Earmarkings (In millions of dollars) Month 1927 September........................................... October............................................... 1928 February............................................. May..................................................... June..................................................... Total, 10 months............................ Net Exports Through Earmarkings — 11 — 9 — 53 — 68 — 9 — 25 — 40 — 8 — — — — — — — — — — 14 11 95 91 82 54* + 6 + 3 + 36 + 46 — 26 + 2* — 8 — 8 — 59 — 45 — 108 — 52* —488* — 15* — 503* Total 20 34 93 76 * Preliminary Stabilization of the Franc Legal stabilization o f the French currency on a gold basis became effective on June 25, after the French Parliament had passed by a large m ajority the bill sub mitted by Premier Poincare fixing the value o f the franc at 65% milligrammes o f gold, 9/10ths fine. The gold parity between the franc and the dollar is thereby fixed at 3.9179 cents per franc or 25.5239 francs to the dollar, which is at a rate approximately equiva lent to that at which the French currency has in fact been stabilized fo r the past year and one-half, as the accompanying diagram shows. France has for the present a form of gold bullion standard which may become the traditional gold standard without further legislation. The Bank of France is given the option o f paying its notes either in gold coin or in gold bullion o f a certain minimum quantity, fixed fo r the present by the Bank at 215,000 francs. The fixed limit on the issuance o f Bank o f France notes has been re- MONTHLY REVIEW, JULY 1, 1928 52 w l .1 1925 C o u rse of th e i l I 1 92 6 ___ !__ I---- 1---------1---- 1—1927 192S F r e n c h F r a n c a t N e w Y o r k s in c e t h e N e w ly E s t a b lis h e d G o ld P a r . 1924, S h o w in g moved and the bank is now required by law to keep a minimum gold reserve of 35 per cent of its notes and its sight deposits. It is noteworthy that the French Government did not require any foreign loan nor did the Bank of France obtain a central bank credit such as was secured by central banks o f other countries in connection with their stabilization programs. The French stabilization marks an important step in the return of the w orld to currency stability in terms o f gold, and is particularly significant for w orld finance and trade because w orld money markets have been much affected in recent months by large movements o f funds associated with French financial reconstruction. The French return to gold payments brings close to completion the monetary stabilization of Europe. The follow ing chronology indicates the progress of the re turn to the gold or gold exchange standard by principal European and other countries for which dates can be given. 1920 January 1922 September November 1923 July 1924 April June October 1925 January April July — Salvador — Lithuania — Latvia — Colombia — Sweden Hungary — Germany — Austria — Australia — Dutch East Indies — England — Netherlands — South Africa — Chile 1926 January July October December 1927 January April August October December 1928 January April May June Finland Canada Belgium Brazil Denmark Czechoslovakia India Argentina Poland Italy Estonia Norway Greece France The first statement of the Bank of France under the stabilization plan indicates that the total gold reserve is nearly 29 billion francs or $1,134,000,000, which is slightly larger in value than the total amounts of gold which the old statement showed under the three cate gories, gold in hand, gold available abroad, and gold abroad not available. It gives the Bank o f France a gold reserve equivalent to 49 per cent against its note circulation and over 40 per cent against notes and sight deposit liabilities. The statement further indicates that the bank has foreign balances, both at sight and in the form o f negotiable bills, totaling 26 billion francs, or over one billion dollars, not including nearly 10 billion francs o f foreign exchange loaned. I f gold and amounts available at sight abroad and in bills abroad, excluding foreign exchange loaned, are placed against notes and sight deposits, the percentage of cover is 77.5. A further interesting feature of the statement is that advances to the state, which form erly constituted a con siderable percentage o f the assets of the bank, have been largely wiped out by the application to this purpose of the profit from revaluation o f the gold reserves, except for a small loan to the government without interest. The bank also holds negotiable bonds o f the Caisse d A.mortissement and is thus in possession o f a portfolio of negotiable securities. Discount Rates Abroad There were three changes in June in the discount rates o f foreign central banks, a seasonal reduction in the rate o f the Im perial Bank of India from 7 to 6 per ce n t; a reduction in the discount rate o f the Bank of Italy from 6 to 5^/2 per cent, follow ing two previous reductions this yea r; and of the National Bank of Belgium from 4^/2 to 4 per cent. Country June 30, 1927 Belgium.................................................................... England.................................................................... France...................................................................... Germany.................................................................. Italy......................................................................... Netherlands............................................................. Norway.................................................................... Switzerland.............................................................. India........................................................................ 5 5 6 7 3H 4V2 3M 5 5.84 June 30, 1928 4 4K 3 lA 7 5M 4M 5K 3M 6 5.48 Foreign Exchange F oreign exchange rates at New Y ork tended to decline somewhat in June, probably due in part to seasonal con ditions and in part to the com paratively high level of money rates in New Y ork. Sterling and the continental exchanges in nearly all cases were slightly lower at the end o f June than at the end o f May, but remained con siderably higher than a year ago. The Canadian dollar was subject to a further dis count in June, and a gold movement to New Y ork began. The South Am erican rates also weakened perceptibly, and the gold exports to Argentina ceased. Far Eastern rates also declined, especially Chinese rates. The follow ing table shows foreign exchange rates near the end o f June, compared with a month previous and a year ago. Country Belgium....................................... England....................................... France......................................... Germany...................................... Italy............................................. Netherlands................................. Norway........................................ Switzerland................................. Canada........................................ Argentina..................................... Brazil........................................... India............................................ Japan........................................... Hong Kong, dollar..................... Shanghai, tael............................. Cable rates June 30, 1927 May 31, 1928 June 28, 1928 .1389 4.8553 .0391 .2369 .0552 .4005 .2585 .1925 .9985 .9650 .1178 .3616 .4711 .4904 .6259 .1396 4.8837 .0394 .2394 .0527 .4037 .2680 .1927 .9982 .9715 .1203 .3660 .4665 .5100 .6704 .1396 4.8762 .0393 .2390 .0526 .4029 .2676 .1928 .9975 .9674 .1193 .3633 .4648 .5034 .6598 FEDERAL RESERVE AGENT AT NEW YORK F o r e ig n T r a d e The foreign merchandise trade o f the United States showed a considerable increase in May, contrary to the usual seasonal tendency, and was larger than a year ago. Exports, valued at $423,000,000, showed an increase o f $30,000,000 over last year and were larger than in May of any year since 1920, when com modity prices were at the highest level of recent years. Imports, valued at $355,000,000, were also somewhat larger than in A p ril and were the largest fo r May o f any year since 1923. Shipments abroad of raw cotton increased about 22 per cent in volume from the previous month, but re mained somewhat smaller than a year a go; the value was considerably greater than in either A p ril o f this year or May o f last year. Total grain exports were $11,000,000 smaller in value than a year ago. The quantity o f raw silk im ported during May was 45 per cent above the com paratively small volume o f A p ril and was somewhat larger than in M ay 1927. Quantity receipts of crude rubber, on the other hand, showed a decline as compared either with the previous month or a year ago. Security Markets Follow ing the rapid advance of the previous three months, stock prices declined in June to approxim ately the levels of early March. The daily turnover on the New Y ork Stock Exchange diminished sharply, from a high record of 5,200,000 shares on June 12 to between 1,000,000 and 2,000,000 shares during the latter part o f the month. The extent of the fall in prices is indicated by a reduction of about 18 points or something less than 10 per cent in representative averages of industrial stocks, and by a decline of about 10 points or about 7 per cent in railroad shares. Later in the month, there 53 was some recovery from these levels and current quota tions fo r industrial stocks are about 25 per cent higher than a year ago, while average prices o f the rails are only slightly higher. Corporation bond price averages showed another loss o f a point during June, and are now 2 % points below the highest levels o f the year. E ver since the first o f the year the trend of bond prices has been downward in response to gradually firming money conditions, and in the last two months, when money rates advanced more rapidly, there was a correspondingly rapid decline in bond prices, as the accom panying diagram indicates. United States Government obligations again declined but the net losses fo r the month were much smaller than in May. Foreign bonds continued to decline, and about one-half o f the active issues sold at new low prices fo r the year. New Financing A s a result o f difficulty in distributing new issues, the creation of new securities during June proceeded at a much slower rate than in the previous fou r months. The volume o f foreign offerings was better maintained than that o f domestic issues. The principal foreign issues were a $70,000,000 loan o f the Tokyo E lectric Light Company, Ltd., yielding 6.80 per cent, a $50,000,000 A bitibi Pow er and Paper Co., Ltd. o f Canada issue, to yield 5.40 per cent, and a $25,000,000 Consolidated A gricultural Loan o f German Provincial and Communal Banks, priced to yield 6.70 per cent, and in addition there were numerous other smaller issues, about one-half of which were of German origin. Domestic corporate offerings were considerably smaller than in the preceding m on th ; the only sizeable domestic issue was one of $26,000,000 o f Federal Land Bank bonds. Employment and Wages E O N U PR IC E5 P r ic e s o f 4 0 C o r p o r a t io n B o n d s ( D o w - J o n e s A v e r a g e ) a n d o n 9 0 - d a y T im e M o n e y , J a n u a r y to J u n e 1 9 2 8 . FA TE R a te s Factory employment in New Y ork State showed a further seasonal decline o f about 1 per cent in May, but fo r the country as a whole, there was practically no change; in both New Y ork State and the entire country, employment remained below the levels o f last year. In New Y ork State, employment in the metals and machinery group showed an increase fo r the second successive month, in contrast to the usual seasonal de cline. This was due largely to further increases in the iron and steel, the brass, copper, and aluminum, and the railroad equipment industries. Em ploym ent in other industries generally was unchanged or showed small declines, after seasonal allowance. The State Em ploym ent Service reports that, while factory employment continues below a year ago, out-ofdoor activities, such as building, farm, and road work, have shown a further expansion in June, and are fu r nishing more employment than last year. The ratio of orders fo r workers to applications fo r employment at New Y ork State employment offices in the third week of June exceeded the corresponding figure o f the pre ceding year fo r the first time since A p ril 1927. 54 MONTHLY REVIEW, JULY 1, 1928 A n indication o f improvement in general employment conditions since the first of the year is afforded also by the rate of voluntary labor turnover computed by the Metropolitan L ife Insurance Company. This ban k ’s index series based on these figures, in which adjustment is made fo r seasonal variations, declined during the past winter to the lowest level in recent years, but in recent months has shown a moderate increase. Ordinarily an increase in voluntary labor turnover reflects increased opportunities fo r employment. Production Productive activity in general remained in May at about the same level as in February, March, and A pril, but there continued to be a considerable amount of irregularity between industries. Average daily produc tion of steel ingots showed a decline of more than the usual seasonal proportions, and there were smaller de creases in the daily rates o f production o f passenger automobiles and petroleum. On the other hand, the output o f motor trucks reached the highest level since September 1925, and increases were shown in the p ro duction of coal, and in daily mill consumption of both cotton and silk. This ban k ’s indexes, in which allowance is made for the usual seasonal variations, and fo r year-to-year growth, are shown below. (Computed trend of past years = 100 per cent) 1927 May Mar. 114 110 108 125 88 128 119 85 109 96 99 107 92 102 107 125 102 98 104 109 95 89 86 140 110 87 100 101 96 100 93 114 109 106 107 100 107 114 89 110 83 98 107 83 103 98 99r 92 94 105 113 113 106 96 99 111 108 85 106 112 83 105 92 95 116 98 103 107 95 118 121 93 128 94 106 83 95 134 158 103 88 97 76 91 104r 105 101 116 132 87 66 91 102 80 87 131 141 107 77 95 111 88 105 101 87 109 118 87 Producers' Goods Pig iron...................................................... Steel ingots................................................ Cotton consumption................................. Cotton movement..................................... Woolen mill activity*............................... Silk consumption*.................................... Petroleum.................................................. Bituminous coal........................................ Coke........................................................... Lumber...................................................... Copper, U. S. mines................................. Lead........................................................... Z in c .......................................................... Tin deliveries............................................. Leather, sole.............................................. Cement....................................................... Paper, total............................................... Wood pulp............................................... Consumers* Goods Hogs slaughtered...................................... Cattle slaughtered.................................... Sheep slaughtered..................................... Calves slaughtered................................... Farm produce shipped............................. Wheat receipts.......................................... Corn receipts............................................. Wheat flour............................................... Sugar meltings, U. S. ports..................... Gasoline..................................................... Anthracite coal......................................... Newsprint.................................................. Printing activity....................................... Tobacco products..................................... Boots and shoes........................................ Tires........................................................... Automobile, passenger............................. Automobile, truck..................................... * Seasonal variation not allowed for 1928 p Preliminary Apr. May 110 113 97 86 p 115 106p 82 109 95p 101 93 92 87 111 125 112p 99p 100 101 109 82 103 152 148 109 67 ii4 96 98p 125 98 r Revised Building Construction contracts awarded during May in the 37 states East of the Rockies from which reports are received by the F. W . Dodge Corporation reached a larger total than ever before, 4 per cent above the pre vious record volume o f A pril, and 21 per cent higher than a year ago. Total contracts awarded between the first o f January and the end o f May likewise were the heaviest ever reported,— 9 per cent larger than in the corresponding period o f 1927, and 7 per cent larger than in 1926. The volume o f building in the New Y ork and Northern New Jersey district in May was much larger than a year ago, and the total fo r the first five months o f the year was 12 per cent above that o f 1927. The largest increases, however, have been in the New England and Central W estern districts. A substantial increase in residential building has been chiefly responsible fo r the larger totals o f this year, both fo r the month o f May and for the completed five months, and as a result there has been a considerable increase in the amount o f new floor space represented by contracts. The increase in public works and utilities projects, which last year was the principal factor in the maintenance o f a large volume o f contracts, during the first five months of this year continued to be substantial, but in dollar value was only about one-third as large as that shown by residential building. D uring the first three weeks o f June, the amount of building contracts awarded continued large, and the increase over last year was nearly as large as in May. Indexes of Business Activity A verage daily freight car loadings increased more than usual in M a y; merchandise and miscellaneous loadings were larger than in the corresponding month o f the previous year for the first time since A p ril 1927, but loadings o f bulk freight continued smaller. Foreign trade increased in May, contrary to the usual seasonal tendency; there were irregular changes in this bank’s indexes of domestic retail trade. (Computed trend of past years =100 per cent) 1927 1928 May Mar. Apr. 107 104 103 110 87 99 103 92 97 104 86 98 104 95 87 98 89 93 105 96 105p 107p 84 94 106 100 100 106 102 98 102 100 97 111 95 97 103 98 100 106 97 96 102 98 110 110 95 110 129 107 159 112 162 111 167 108 111 116r 117 Shares sold on N. Y. Stock Exchange.. . Postal receipts........................................... Electric power........................................... Employment in the United States.......... Business failures....................................... Building contracts, 36 States.................. New corporations formed in N. Y. State Real estate transfers................................. 131 179 92 108 99 105 123 113 91 162 281 90 104 95 115 125 115 92 164 306 87 104 96 102 133 110 89 169 307 92 General price level.................................... Composite index of wages....................... 170 222 174 223 175 221 177 222 May Primary Distribution Car loadings, merchandise and misc....... Car loadings, other................................... Panama Canal traffic............................... Wholesale trade........................................ Distribution to'Consumer Department store sales, 2nd Dist........... Chain grocery sales.................................. Other chain store sales............................. Mail order sales........................................ Life insurance paid for............................. General Business Activity Bank debits, outside of N. Y. City........ Bank debits, New York City.................. Velocity of bank deposits, outside of New York City..................................... Velocity of bank deposits, New York p Preliminary. r Revised. 96 113 144 118 82 FEDERAL RESERVE AGENT AT NEW YORK 55 Crops A s a result of the late spring, crop development this year has been retarded. W inter wheat did not have the usual snow p rotection ; so that a substantial acreage was winter killed, and the indicated yield on the first of June (as reported by the U nited States Department of A griculture) was 7 per cent under the harvest o f 1927. In Ohio, Indiana, and Illinois, the crop is expected to be only one-third that o f a year ago, and o f the sixteen largest producing states, gains were indicated fo r only five, with Kansas the only state to show a substantial increase. The condition o f spring wheat, oats, rye, hay, and pastures was reported as below that of a year a g o ; barley and fru it are the only crops fo r which increases were indicated. Since the first o f June, rains have im proved materi ally the condition of wheat and most of the other crops, but have retarded the development of cotton, which is reported to be in need of warm and dry weather. Department Store Sales Sales of leading department stores in this district in May showed the largest increase over last year that has been reported so far this year. Part of the increase was due to the fact that there were 26 business days in May this year, as compared with 25 last year, but even after allowance for this, the figures indicate more active trade than in A pril. The southern and eastern sections of the district reported the largest gains, while the northern and western sections reported either com paratively small increases or decreases. A pparel stores sales showed a large increase over May 1927. The rate of stock turnover in department stores showed a moderate increase over last year in May, and the average fo r the first five months of the year is slightly above that of the corresponding period a year ago. The rate o f collections on charge accounts was slightly lower than last year, after allowance fo r the extra day this year. Percentage Change May 1928 compared with May 1927 Net Sales 1.1 New York...................................................... Buffalo........................................................... Rochester....................................................... Syracuse........................................................ Newark.......................................................... Bridgeport..................................................... Elsewhere...................................................... Northern New York State....................... Central New York State......................... Southern New York State....................... Hudson River Valley District................. Capital District......................................... Westchester District................................. + 7.6 — 1.1 + 4.0 + 1.7 + 9.1 + 6.4 + 6.0 + 1.4 — 8.7 + 4.1 + 7.8 +12.4 +12.4 — — + — — — — All department stores................................... + 6.8 — 0.9 +18.8 +19.7 + 4.8 Apparel stores............................................... Mail order houses......................................... 0.3 0.9 3.2 0.7 1.7 2.5 51.3 44.6 40.1 52.6 55.9 41.9 46’.9 45‘.9 3 i ’. 3 34.9 48.0 48.5 49.6 51.3 Wholesale Trade F ollow ing decreases in each o f the two months pre ceding, wholesale trade in this district in M ay was slightly larger than a year ago, due partly to one more business day than in M ay o f last year. Commission house sales o f cotton goods and sales o f m en ’s clothing showed fairly substantial increases follow ing declines in March and A pril, shoe sales were closer to those o f last year than in any month since January, and drug and stationery sales showed the largest increases so far this year. Hardware, paper, and silk goods sales also showed moderate increases over a year ago, and grocery sales continued close to those of last year. Orders re ported by the Machine Tool Builders Association con tinued to be much larger than a year ago. In the wom en’s clothing and diamond trades, however, sales remained smaller than last year. Stocks o f cotton goods and shoes held by wholesale dealers at the end o f May were considerably smaller than a year ago, but silk stocks reported by the Silk A ssocia tion were substantially larger. Stocks o f drugs, jew elry and diamonds, and hardware also were larger than a year ago. Percentage Change May 1928 compared with April 1928 Net Sales Groceries.............. Men’s clothing............ Women’s dresses......... Women’s coats and suits Cotton goods—Jobbers Cotton goods — Com mission ............ Silk goods..................... Shoes................ Drugs................... Hardware............. Machine tools**.......... Stationery.............. Paper.................. Diamonds............. Jewelry............. + 6.3 —24.2 + 12.2 —63.8 + 3.2 Stock end of month — 6.4 — 2.5 + 30.4 + 3.2 + + 11.9 — — 18.6 __ — 6.7 — — 7.5 +10.9 + 3.0 — 5 4 }— +18.9 J Weighted Average. . . . — 6.2 May sales and stocks in the principal departments are compared with those o f a year ago in the follow ing table. —29.6 + 8.0 + 0.4 — 1.2 — 24.0 + 0.7 + 4.4 — 3.2 — 13.4 — 7.4 + 0. 1 + 1.4 — 7.4 + 0.4 — 7.5 — 1.2 — 6.3 — 17.9 — 7.7 Linens and handkerchiefs............... Men’s and boys’ wear..................... Silks and velvets.............................. Woolen goods................................... Miscellaneous................................... Commodity 1928 +25.4 +24.0 +21.9 + 12.8 +11.5 +10.7 + 10.6 + 10.4 + 10.2 + 8.2 + 7.6 + 7.2 + 5.7 + 5.4 + 4.6 + 0.4 — 4.3 — 7.7 — 0.9 Musical instruments and radio. . . . Per cent of Charge Accounts Outstanding April 30, Collected in May 1927 Stock on Hand Percentage Change May 31, 1928 compared with May 31, 1927 Books and stationery...................... Women’s ready-to-wear accessories Luggage and other leather goods... Home furnishings............................ Toys and sporting goods................ Silverware and jewelry................... Men’s furnishings............................ Cotton goods................................... Women’s and Misses’ ready-to-wear Toilet articles and drugs................. Locality Stock on hand end of month Net Sales Percentage Change May 1928 compared with May 1927 Percentage Change May 1928 compared with May 1927 Net Sales — 1.8 + 8.9 —20.9 — 8.0 — 3.4 Stock end of month Per cent of Accounts Outstanding April 30, Collected in May 1927 1928 + 0.7 71.9 33.8 75.4 35.4 — 15* i 3i .2 3il9 + 8.4 4.2* + 3.8 +15^0* 48‘.2 1 . 8 — 0.9 — 1 1 . 6 42.0 75 + 29.8 + 12.8 52.7 + 5.7 6> + 3.2 49.4 +61.4 + 9.7 6i '.0 + 5.2 65.3 ) — 12.4 2.4 — 0.6 } + 7.1 24.9 ) + 2.8 50.2 * Quantity not value. Reported by the Silk Association of America. • Reported by the National Machine Tool Builders’ Association. 49‘.2 45 9 56! 2 49.9 1 } 6i'.3 Di . *7 25.1 52.3 56 MONTHLY REVIEW, JULY 1, 1928 Business C onditions in the United States (Summarized by the Federal Reserve Board) NDUSTRIAL production continued during May in about the same volume as in the three preceding months. Wholesale and retail trade increased in May and the general level of commodity prices showed a further advance. Security loans of member banks, which were in record volume in May, declined considerably during the first three weeks in June. Conditions in the money market remained firm. I P r o d u c t io n 1924 1925 1926 In d e x N u m b e r o f P r o d u c t io n a n d M in e r a ls , A d ju s t e d fo r t io n s . (1 9 2 3 -2 5 a v e ra g e = 1927 1926 of M a n u fa ctu re s S easo n al V a ria 100 p er cen t) f PER CENT. Production of manufactures was slightly smaller in May than in April, when allowance is made for usual seasonal variations, while the output of minerals increased somewhat. Production of steel declined in May from the high level attained in April but was in about the same volume as a year ago. Since the first of June buying of steel products has been light and there have been further decreases in production. Daily average production of automobiles was in about the same volume in May as in April and preliminary reports for the first three weeks in June indicate that factory operations were maintained at practically the same level. Activity of textile mills was somewhat larger in May and there were also increases in the slaughter of livestock and in the production of building materials, nonferrous metals, and coal, while the pro duction of petroleum declined. The value of building contracts awarded during May, as reported by the F. W. Dodge Corporation for 37 states East of the Rocky Mountains, was larger than in any previous month, and awards during the first half of June exceeded those for the corresponding period of last year. Indicated production of winter wheat, as reported by the Depart ment of Agriculture on the basis of June 1 condition, amounted to 512,000,000 bushels, 40,000,000 bushels less than the harvested production of 1927. T ra d e F e d e ra l R e se rv e B o a r d ’s In d e x e s o f B u ild in g C o n t r a c ts A w a rd e d , b a sed on R e p o rts o f th e F . W . D o d g e C o r p o r a t io n . (1 9 2 3 -2 5 a vera g e rr 100 p er ce n t) PEftcmx j\ t/XRMPWEUCl'3 h j 109.8 ri V u / i rON-AGRICULTL7RAL ^ \ comouiTiE.5 ^ 1924 P r ic e s of tu ra l 192 5 1926 ^ .1927 956 1928 F a r m P r o d u c t s a n d o f N o n - A g r ic u lC o m m o d it i e s . (1 9 2 6 a v e ra g e = 100 p er ce n t) Distribution of merchandise, both at wholesale and at retail, was in larger volume in May than in April. Making allowances for customary seasonal influences, sales in all lines of wholesale trade showed increases, although in most lines they continued in smaller volume than a year ago. Department store sales were larger than in April, and at about the same level as a year ago, while sales of chain stores and mail order houses showed increases both over last month and over last year. Volume of freight-car loadings increased further during May, but con tinued smaller than during the corresponding month of either of the two previous years. Loadings of miscellaneous commodities, however, which represent largely manufactured products, were larger in May of this year than in that month of any previous year. P r ic e s The general level of wholesale commodity prices, as indicated by the Bureau of Labor Statistics index, increased in May by over one per cent to 98.6 per cent of the 1926 average, the highest figure recorded for any month since October 1926. There were increases in most of the principal groups of commodities but the largest advances in May as in April occurred in farm products and foods. Contrary to the general trend, prices of pig iron, hides, raw silk, fertilizer materials, and rubber showed declines during the month. Since the middle of May there have been decreases in prices of grains, hogs, sheep, pig iron, and hides, while prices of raw wool, nonferrous metals, lumber, and rubber have advanced. mUOWe/DOLLARS B a n k Cr e d it Loans and investments of member banks in leading cities on June 20 showed a decline from the high point which was reached on May 16. Loans on securities, which had increased by more than $1,000,000,000 since May 1927 declined $200,000,000, while all other loans, including loans for commercial and agricultural purposes, increased somewhat. There was a small increase in total investments. During the four weeks ended June 20 there were withdrawals of nearly $75,000,000 from the country’s stock of gold, and the volume of Reserve Bank credit outstanding increased somewhat, notwithstanding a decline in member bank reserve requirements. Member bank borrowing at the Reserve Banks continued to increase and early in June exceeded $1,000,000,000 for the first time in more than six years. Acceptance holdings of the Reserve Banks declined considerably, while there was little change in their holdings of U. S. securities. R e se rv e Bank C r e d it: M o n th ly A v e ra g e s of D a ily F ig u r e s fo r 12 F e d e r a l R e s e r v e B a n k s . ( L a t e s t f ig u r e s a r e a v e r a g e s o f f ir s t 2 2 d a y s in J u n e ) . After the middle of May firmer conditions in the money market were reflected in advances in the open market rates to the highest level since the early part of 1924.
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