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MONTHLY REVIEW o f C r e d it a n d B u s in e s s C o n d it io n s S e c o n d Federal Reserve Agent F e d e r a l D is t r ic t Federal Reserve Bank, New York Money Market in June The outstanding development in the financial situation during the past month has been the virtual com pletion of the repatriation o f the funds o f foreign central banks which accumulated in this country a few years ago. The termination of this movement, which is discussed on a subsequent page o f this Review, left the amount o f short term foreign funds in this market substantially less than the amount of Am erican funds employed abroad. A fte r the middle o f June, gold exports from the United States were almost entirely confined to shipments o f gold which had previously been taken out o f the gold stock o f this country by earmarking transactions, and there were small imports of gold from Latin A m erica and F a r East ern countries and Canada, so that the monetary gold stock of the United States rose slightly. The gold losses o f early June were largely offset, in their effect on the position o f member banks, by contin ued purchases o f Government securities by the Reserve Banks, which during the month as a whole amounted to about $230,000,000. Consequently, the member banks were under no pressure as a result o f the gold movement, and continued to hold substantial excess reserves. Towards the end o f the month an additional demand upon the money market rose from currency withdrawals in connection with month end and holiday requirements and with the closing o f a number o f small neighborhood banks in the environs o f Chicago which led to with drawals from a number o f other banks. These events were reflected in the New Y ork money mar ket in withdrawals o f funds by out o f town banks, and in addition there were some sales o f acceptances and securities in the New Y ork market. The result was a heavy drain on the New Y ork banks fo r a few days. The New Y ork money market banks met these demands easily, however, and continued to hold moderate amounts o f excess reserves throughout the period. Open market money rates continued at low levels dur ing June. A s the accom panying diagram indicates, all the im portant open market rates had fallen below the discount rate of the Federal Reserve Bank o f New Y ork by the beginning o f June, and effective June 24 the dis count rate was reduced from 3 to 2 % per cent. This action was follow ed the next day by a reduction in the discount rate of the Federal Reserve Bank o f Chicago to 2 % per cent. The buying rates o f the Federal Re serve Bank o f New Y ork fo r indorsed bankers accep tances, which, in the virtual absence o f offerings o f R e s e r v e July 1,1932 bills in recent months, had beea left above the market rates by the rapid decline in those rates, were reduced to approxim ately the rates being paid by dealers fo r unindorsed bills. This brought the Reserve Bank buying rates within the reach o f dealers and banks, so that when the banks find it advisable they can obtain addi tional funds through the sale o f bills. Money Hates at New York June 30, 1931 May 31, 1932 June 30, 1932 Stock Exchange call loans...................... Stock Exchange 90 day loans................ Prime commercial paper........................ Bills—90 day uninaorsed....................... Customers’ rates on commercial loans.. Treasury securities Maturing September 15 (yield)........ Maturing December 15 (yield).......... Federal Reserve Bank of New York re discount rate....................................... Federal Reserve Bank of New York buying rate for 90 day indorsed bills * Nominal IX IX 2 X f 3 .46 .42 .52 2X *1X 2 %- 3 Vs f 4 .10 2X *IX 2X-2H A 3 f 4 .21 .10 .28 .09 .32 IX 3 2X 1 2X 1 f Average rate of leading banks at middle of month RATE Discount Rate of Federal Reserve Bank o f New York, and Open Market Rates for Acceptances, Commercial Paper, and Stock Exchange Time M oney MONTHLY REVIEW, JULY 1, 1932 50 M em ber B a n k C redit The total loans and investments o f weekly reporting member banks have shown alternate increases and de creases o f substantial amount during the past month, but in general have remained within about the same range as in the two previous months. The loans and investments of New Y ork banks have remained somewhat above the lowest point reached early in A pril, and outside o f New Y ork there was only a small net decline during June. A n im portant factor in the wide fluctuations during the past month has been changes in the ‘ ‘ all other ’ ’ loans due to alternate large loans and repayments o f 4‘ Federal fu n d s ” . These transactions represented tem porary loans o f fun ds by banks with excess reserves to banks in need o f additional reserves. E xcludin g such transactions, the real commercial loans which are included in the “ all oth er” loans appear to have continued to decline gradu ally. Security loans and investments in securities other than Government issues also showed some reduction, but holdings of Government securities showed a further sub stantial increase, due chiefly to subscriptions to the June 15 issues. J une T reasury F in a n c in g O p e r a t io n s On June 15, a total o f $790,000,000 o f new Treasury certificates and notes was allotted, of which $374,000,000 represented an issue of 1 % per cent one year certificates of indebtedness and $416,000,000 a 3 per cent three year Treasury note issue. Subscriptions to the Treasury offering of these issues totaled nearly fou r times the amount of securities offered, and quotations on the new securities soon advanced to a premium. The Treasury tax period operations centering on June 15 passed with no visible effect on the money market, due principally to the fa ct that, of the $325,000,000 of 2 % per cent certificates of indebtedness that came due on the 15th, $248,000,000 were tendered in exchange for the new certificate and note issues. Further more, there were sizable sales o f the new issues for cash, and somewhat more than the usual amoulnt o f the matured Treasury obligations remained outstanding after the 15th. Consequently, payments by the Treasury fo r matured securities, together with interest on the public debt and other ordinary expenditures, did not exceed the receipts fo r the day and the balances which the Treasury had on deposit at the Reserve Banks. The Treasury, therefore, closed its books on June 15th with a small credit balance at the Reserve Banks, whereas ordinarily the Treasury finds it necessary to sell special one day certificates of indebtedness to the Reserve Banks to cover its tem porary excess of expenditures on the quarterly tax date. The proceeds of income tax collec tions in the next few days after June 15th restored the Treasury balances at the Reserve Banks to at least their normal level. Income tax collections fo r the month totaled about $160,000,000, as compared with $192,000,000 at the March collection and $293,000,000 in June o f 1931. The June 15th financing operations o f the Treasury were supplemented by two issues o f Treasury bills which were entirely refunding operations. The June 1 issue o f Treasury bills which was fo r $100,000,000 was floated at an average cost to the Treasury o f 0.32 o f one per cent, and the June 29 issue, also fo r $100,000,000, was priced to yield 0.41 o f one per cent. The offerings o f both o f these Treasury bill issues were considerably oversubscribed. B il l M arket D uring the first week o f June, dealers’ purchases o f bills exceeded their sales, which were affected by the ab sence of foreign bank buying, and portfolios rose to the highest level since March. In the next two weeks, the volume o f bills offered to the discount market by accept ing and discounting banks declined to a small volume, and the portfolios of the dealers consequently were re duced by the excess o f sales fo r this period. In the last week o f the month, however, dealers ’ portfolios rose once again due to sales o f bills by Chicago banks, and concur rent with this increase the bill holdings of the Reserve Banks also advanced somewhat in the week ended June 29, reflecting bills purchased from the dealers under re purchase agreement. This was the only material change in Reserve Bank holdings except fo r a rise around the middle o f the month when a block o f bills was purchased from the bills held fo r foreign account by this bank. Open market rates fo r bills were unchanged until after the reduction in the Federal Reserve Bank o f New Y o r k ’s buying rate fo r bills, which, effective June 24, became one per cent fo r maturities not exceeding 90 days, as compared with the previous rate o f 2 y2 per cent. Most o f the dealers immediately reduced their bid and offered rates by % per cent, and the reduction became general on June 30. The offering rates o f all dealers then became % o f one per cent fo r one to ninety day bills, % o f one per cent fo r fou r month bills, and 1 Ys per cent fo r five and six month maturities. The tendency fo r accepting and discounting banks to withhold new bills from the discount market, which has been noted fo r several months, has resulted in the ac cumulation by the accepting institutions o f about twothirds o f all the bills outstanding. The accom panying diagram indicates that at the close o f May accepting' in stitutions held $510,000,000 of bills, an increase o f $55,000,000 during the month, while the total volume of MILLIONS OF DOLLARS Total Volume of Bankers Acceptances Outstanding1and Amount Held by A ccepting Institutions FEDERAL RESERVE AGENT AT NEW YORK bills outstanding on M ay 31 showed a drop o f $92,000,000 fo r the month to $787,000,000. A s compared with a year ago when the accepting banks held only onethird of the amount outstanding, holdings of the accept ing banks have increased $46,000,000, while the total volume o f acceptances outstanding has been reduced $625,000,000, or 44 per cent. Most o f the decline in the amount o f bills held by investors other than the accept ing institutions represents the withdrawal from the ac ceptance market of foreign banks which converted their funds in this market into gold. Com m e r c ia l P aper M PRICE arket The investment demand fo r prime commercial paper on the part of the banks throughout the country con tinued to exceed the amount o f new drawings o f paper during June. Open market rates showed a downward tendency throughout the m onth; during the first part o f the period the prevailing range fo r best names became established at 2 % - 2 % per cent, as com pared with the 2% -3 per cent level reached around the middle o f May, and subsequently some choice paper moved at 2^/i per cent. A further increase in the amount of open market commercial paper outstanding occurred during May, and outstandings of $ 1 1 1 ,000,000 reported to this bank by dealers on May 31 were one per cent larger than a month earlier. The small increase in May marked the third successive increase in outstandings, which, how ever, remained 64 per cent smaller than a year ago. Security Markets Domestic corporation bond prices showed a consider able rise during the first week o f June, which was attri buted to the successful passage through Congress o f the tax measure and also to the anticipation of the organi zation o f a bond buying pool. On June 3 the form ation of the A m erican Securities Investing Corporation was announced in the follow ing statement: “ A corporation is in process of organization for the purpose of acquiring sound investments in the security markets. F u n ds for investment w ill be made available to the corporation through the sale of its debenture bonds. F o r such bonds initial subscriptions have already been received in the amount of $100,000,000 from New Y o rk banking institutions................. “ Various banking institutions in leading centers out side New Y o rk City have already signified their intention of joining the group which is undertaking to subscribe for the debentures of the corporation. . . . . 1iThe corporation purposes to make its initial purchases in the bond market. Its policy in acquiring investments must m anifestly be based in large measure upon its con fidence in final action by Congress in effectively balancing the budget and thus m anifesting its determination to maintain intact the Government’s credit.” D uring this period, domestic corporate bonds rose about five points, thereby canceling about half o f the decline that occurred in the previous month. This ad vance is shown in the accom panying diagram, which indicates that the most sizable recoveries were in rail road issues which previously had shown the largest declines. A fter attaining these higher levels, corpora tion bonds maintained a fairly stable level until late in the month when a gradual decline occurred. 51 M ovements of Bond Prices (Standard Statistics Company corpo ration bond indexes, and Federal Reserve Bank o f New Y ork average o f 11 United States Government bonds) The diagram also indicates a gradual advance in United States Government bond prices, follow ed by a period o f stability at a fairly high level during the latter part of June. L on g term Treasury bond issues rose about 2 Y2 points on the average during June, and the Liberty Loan issues, which have nearby call dates, showed smaller advances. Foreign bond prices likewise advanced during the first half o f the month, and subsequently showed little change. A price average representative o f the foreign bond list closed the month about 2 % points above the early June low. A fte r reaching new low levels on the opening day o f the month, stock prices held fairly steady throughout June. Representative price averages generally fluctu ated within a range o f about five points, and closed the month at about the opening low levels. Public utility and bank stocks were slightly higher at the end o f the month than at the opening, while the rails and indus trials were slightly lower. The comparative steadiness o f stock prices during June follow ed a persistent down ward movement which had been under way since early in March. Trading activity declined to the smallest volume in many years; on several fu ll trading days, the turnover o f stocks on the New Y ork Stock Exchange was between 400,000 and 600,000 shares, as compared with 5,000,000 and 6,000,000 shares fo r average days in 1929. It is necessary to go back to 1924 in order to find markets as inactive as those on some days of the past month. New Financing A side from United States Government issues, the flotation o f new securities continued at a low ebb in June. The volume o f offerings at around $100,000,000, including refunding issues, was only one-quarter o f the amount put out in June o f last year and about oneseventh o f the June 1930 issues. O f the June total this year, $30,000,000 represented an issue o f Federal Inter mediate Credit Bank debentures fo r three to twelve month periods in replacement o f $33,000,000 o f deben tures which matured on June 15. In addition, there MONTHLY REVIEW, JULY 1, 1932 52 were a number of State and municipal offerings, the largest o f which was a State o f New Jersey $18,000,000 serial bond issue which was sold at yields o f 3.50 to 4.35 per cent according to m aturity. Corporate financ ing, as fo r some months past, was of very limited pro portions, and there continued to be a complete cessation o f foreign security offerings in this market. International Movement of Short Term Funds A n unprecedented outward movement of short term foreign funds from this country during 1931 is indicated in a report recently issued by the Department o f Com merce. This movement, amounting in the net to $765,000,000, was the result o f a withdrawal of $1,275,000,000 o f foreign funds from this market which was offset in part by a reduction o f $510,000,000 in Am erican funds employed abroad. The details o f this flow o f funds are presented in the follow in g table. (In millions of dollars) Dec. 31, 1930 Dec. 31, 1931 D u e to Foreigners Foreign deposits with American banks Acceptance credits and advances and overdrafts from foreigners.. . . . . . . Short term investments of foreigners in: American acceptances................ U.S. Treasury bills and certificates All other short term loans.............. Total............................................. Total............................................ Net Short Term Indebtedness to For eigners on Banking Account.............. — 618 1,640 1,022 51 47 792 86 168 303 39 51 — 489 — 47 — 117 2,737 1,462 — 1,275 294 212 125 279 — 169 67 + 94 323 879 57 310 521 — — — 1,802 1,292 — 510 Gold Movement 935 170 — 765 D uring the first half o f June, the monetary gold stock o f the United States was further reduced by $240,000,000, as a result o f exports o f gold to several E u ro pean countries and o f some additional net earmarking o f gold fo r foreign central banks. A fte r the m iddle o f the month the gold outflow ceased abruptly, due to the fact that the conversion o f foreign central bank balances into gold had largely been completed, and, as the accom panying diagram shows, there was a small net gain of gold in the last two weeks o f the month, amounting to about $11,000,000. The exports o f the second half o f June represented the shipment o f gold which had been previously earmarked and consequently had no effect on the total stock o f m onetary gold in the country. The small increase in the gold stock during that period was due to other releases o f gold from earmark, the proceeds o f which were disbursed in this country, and to several arrivals o f imported gold. F o r the month o f June as a whole, gold exports totaled $225,000,000, consisting chiefly o f shipments o f $108,000,000 to France, $64,000,000 to Switzerland, $26,000,000 to Belgium, $24,500,000 to H olland, and $1,000,000 to England. In addition, there was fo r the month of June a $29,000,000 net increase in the amount o f gold held under earmark fo r foreign account. A s a partial offset to the export and earmarking loss o f gold, a total o f $17,000,000 was im ported, o f which $5,000,000 was received from Canada, $1,000,000 from Uruguay, and D u e from Foreigners American deposits abroad................. Advances and overdrafts to foreigners American short term investments abroad .............................................. Other short term loans....................... Acceptance credits to foreigners........ Change — 4 37 13 358 The decline in foreign short term funds in this mar ket was brought about chiefly by a withdrawal o f de posits amounting to $618,000,000 and a reduction of $489,000,000 in foreign holdings of dollar acceptances. This movement occurred largely during the period im mediately follow in g the suspension of gold payments o f Great B ritain on September 21, and resulted from the policy adopted by a number o f foreign central banks o f converting their foreign assets into gold, as well as from a loss of confidence on the part o f private foreign in vestors in investments outside o f their own countries. The reduction in Am erican funds abroad took place prim arily through a decline of $358,000,000 in the vol ume of dollar acceptances originating under credits granted to foreigners. This decline was indicative in part o f the difficulty encountered by Am erican accept ing institutions in extending credits to foreigners in view of the disturbed financial conditions and the foreign exchange restrictions which existed in a number o f coun tries, but it was associated also with the marked shrink age in the value o f w orld trade. Smaller declines were shown in A m erican deposits and short term investments abroad, while an increase occurred in advances and over drafts granted to foreigners. The repatriation of foreign funds in 1931, together with a smaller outflow in 1930, reduced the amount o f short term foreign funds in this country by more than half— from more than three billion dollars at the end o f 1929 to less than one and one-half billion at the end o f 1931. This huge reduction in the amount of foreign funds in this market was offset only to a small extent by with drawals o f Am erican funds from abroad, yet the U nited States had a net gain through gold movements and ear marking transactions o f about $ 1 0 0 ,000,000 during the two years. In 1931 the $765,000,000 reduction in the net short term indebtedness to foreigners was accompanied by a net gold loss through shipments and earmarking transactions between this and other countries o f only $175,000,000. This indicates that the reductions in fo r eign funds have been absorbed to large extent in meeting payments due the U nited States on the balance o f mer chandise and other transactions and on long term indebt edness to this country. A lthough comparable figures are not available fo r a later date, inform ation that has been reported to this bank has indicated a further rapid outflow during the first six months o f 1932, so that the amount o f foreign funds now on deposit or employed in short term invest ments in this market is believed to represent little more than a reasonable amount o f working balances. The amount o f A m erican short term funds employed abroad has also shown some further decline during the first half o f 1932, but the total, including funds em ployed in central European and other countries which cannot be withdrawn under present circumstances, is now much larger than the amount o f foreign funds re m aining in the United States. 53 FEDERAL RESERVE AGENT AT NEW YORK ally in June, and the Scandinavian exchanges continued to move with sterling. The accom panying diagram indi cates the decline that occurred in the principal conti nental European currencies during June. The drop in these currencies is similar to the movements that occurred in the October-November period of last year, and again in March o f this year. French francs, guilders, and belgas all receded below their estimated gold export points, and in the case o f the Swiss exchange, the gold export point has become a nominal factor. $500,000 from Mexico at New Y o rk ; and $5,200,000 from Japan, $3,800,000 from China, and $630,000 from Australia at San Francisco. In the South Am erican list, Argentine pesos were quoted at the fixed rate o f $0.5865. Brazilian milreis were likewise unchanged at $0.0760 fo r two weeks, but declined slightly in the latter half o f the month. A m ong the F ar Eastern exchanges, Japanese yen, after declin ing slowly from $0.3288 on June 2 to $0.31 on the 16th, lost ground more rapidly, going to $0.2675 on the 28th. The silver currencies were lower fo r the month, Shanghai taels dropping from $0.3113 to $0.2963. Canadian dollars, after a period o f weakness, closed the month without much change. Foreign Exchange Closing Cable Rates at New York (In dollars) D uring the second week o f June the dollar began to gain strength, and on the 16th there was a sharp down ward movement in foreign exchange quotations. Just after the middle of the month sterling fell from $3.66 ^ to $3.61, and remained around that level fo r the rest o f the month. French francs declined abruptly to $0.0392% on the 16th, after selling as high as $0.0395 earlier in the m onth; quotations were somewhat higher later in the month, but the rate remained considerably below the gold export point. Guilders broke nearly 10 points to $0.40341/2 on the 16th, and on the same day Swiss francs dropped 3 points to $0.19471/2. Belgas had previously fallen to $0.1392 by the 15th from $0.1400^ on the first. Reichsmarks moved irregularly, going as high as $0.2380 at the close of the month, or somewhat above the opening quotation. Lire declined gradu DOLLARS DOLLARS Exchange on A ustria ............................... Par of Exchange $ .1407 .1390 .2680 4.8666 .0392 .2382 .4020 .0526 .2680 .1930 .2680 .1930 1.0 000 .9648 .1196 1.0342 .4985 .3650 DOLLARS C ourse o f F oreign E xchan ge Q uotations a t N ew Y o r k June 30, 1931 M ay 31, 1932 June 28, 1932 $ .1405 .1393 .2678 4.8634 .03914 .2374 .4023 .0524 .2678 .0979 .2682 .1938 $ .1394 .1400 .2025 3.6888 .03949 .2365 .4057 .0514 .1852 .0825 .1905 .1959 $ .1397 .1392 .1970 3.6100 .03931 .2376 .4040 .0509 .1784 .0825 .1854 .1950 .9966 .7299 .0770 .5815 .8788 .5865 .0760 .4775 .8750 .5865 .0755 .4775 .4940 .3603 .3238 .3240 .2765 .3100 .2675 .2700 .2963 DOLLARS 54 MONTHLY REVIEW, JULY 1, 1932 C e n tr a l B a n k R a t e C h a n g e s On June 30, the discount rate of the Bank o f England was reduced from 2 % to 2 per cent, the lowest rate fixed at that bank since 1897. On June 3, the State Bank o f Sweden lowered its discount rate from 4 % to 4 per cent, which made the sixth successive reduction from the 8 per cent rate that prevailed between September 28 and October 8 , 1931. On the 8 th, the Bank of Japan rate was reduced from 5.84 to 5.11 per cen t; as lowT a rate has been fixed on only three occasions since January 1914. The H ungarian National Bank lowered its rate on the 27th, effective July 1, from 6 to 5 per cent, this being the lowest rate at that bank since its foundation in 1924. W e have been inform ed that on May 12 the Banco Central del Ecuador reduced its rate to member banks from 10 to 7 per cent and its rate to the public from 1 1 to 1 0 per cent. Foreign Trade This cou n try ’s merchandise exports during May totaled $132,000,000, a figure which showed a slight in crease over the previous month after allowance fo r the usual seasonal tendency. Im ports, however, continued the downward movement of the past three years and the valuation of $ 1 1 2 ,000,000 was smaller than in any month since January 1909. E xports of finished manufactures increased somewhat over the previous month, but again registered the largest decline from a year ago of any of the m ajor export groups, the decline being 42 per cent. Finished manu factures constituted only 47 per cent o f the total value o f exports as com pared with 52 per cent in May 1931 and 57 per cent in 1930. Meanwhile, exports o f crude materials and crude foodstuffs each were down only 18 per cent in value from a year ago. In contrast with the movements in the various categories o f export trade, im ports of crude materials showed the largest relative de cline in value from M ay 1931— nearly 50 per cent. This reduction to considerable extent is accounted fo r by de creases in the prices of crude rubber and raw silk, the two principal items in the group. On the other hand, imports of m anufactured foodstuffs, chiefly sugar, de clined only 1 2 per cent in value from a year ago. The volume of raw cotton shipments abroad during M ay was seasonally smaller than in the previous month, but continued to show a large increase over a year ago. E xports o f grains and grain products were reduced somewhat in quantity and considerably in value from a year ago. The quantity of crude rubber received was about the same as in May 1931, while silk imports were 19 per cent smaller in volume. Production The recession in steel production which began in the last week o f May, or somewhat later than usually, con tinued throughout June, and by the end of the month the Iron Age estimate of operations had been reduced to 15 per cent of capacity. Output of bituminous coal, crude petroleum, and cotton goods declined somewhat in June, but automobile production showed an unseasonal increase and reached the highest point so far this year, reflecting chiefly the enlarged operations o f the F ord Company. Substantial curtailment in activity occurred in many leading industries in May, and the production index o f the Federal Reserve Board, which is adjusted fo r sea sonal variations but not fo r the growth o f industry, de clined 3 points further to a level beneath the 1921 low. The only im portant increases were in output o f pas senger automobiles and in lead production. Larger declines than usual occurred in production o f steel ingots and shoes, and bituminous coal output showed a decrease instead o f the expansion which generally takes place at this time of year. Declines also occurred in output o f pig iron and wheat flour and in m ill consum ption o f raw cotton and raw sill?:, and slaughterings o f live stock did not show all o f the usual seasonal upswing. On the other hand, no important change occurred in production o f motor trucks, crude petroleum, and lumber, and in ac tivity o f wool mills, and about the average seasonal in crease was shown in output of tobacco products. (Adjusted for seasonal variations and usual year-to-year growth) 1931 M ay 1932 Mar. Apr. 25 26 40r 39r 42 22 M ay Metals Tin deliveries................................................. 86 28 29 50r 40r 41 Automobiles Passenger ca rs................................................ M otor trucks.................................................. 65 76 23 30 27 42 36 43 Petroleum, cru d e........................................... Petroleum p rod ucts...................................... 79 77 71 87 82 75 77 44 73 63 60 91 43 75 67 52p 52 p 40 74 p Textiles and Leather Products C otton consum ption..................................... W ool mill a ctiv ity ......................................... Silk consum ption........................................... B oots and shoes............................................. 79 85 92 114 74 55 65 96 60 38 67 97p 55 38 60 87 p 90 85r 55 77 100 88 r 96 78r 56 79 45 47 31 72 89 41 48 32 71 81 56 56 68r 49r Fuels Bituminous coal............................................. Anthracite c o a l.............................................. Foods and Tobacco Products Live stock slaughtered................................ W heat flour r ................................................. Sugar meltings, U. S. p o rts ........................ Tobacco products......................................... 92 89 r 65 100 52 78 24 43r 35 r 48 Miscellaneous Printing a ctiv ity ........................................... Paper, newsprint........................................... p Preliminary 92 80 54 84 88 44 33 79 r Revised Employment and Wages Further substantial decreases occurred during M ay in the number of factory workers employed and in wage payments. F o r the country as a whole, factory em ploym ent was reduced about fou r per cent, or consider ably more than seasonally, and reached a new low level fo r many years. The largest decline in employment occurred at textile mills, but, after seasonal adjustment, practically all o f the m ajor industrial groups contributed to the downward movement. Concurrent with the drop in the number of workers employed, aggregate factory payrolls declined about five per cent. The Am erican FEDERAL RESERVE AGENT AT NEW YORK INDEX Federation of Labor reports an increase in the prop or tion o f its members out o f work from 2 2 .8 per cent on May 1 to 23.6 per cent on June 1 ; it has been estimated by the Federation that the total number o f unem ployed in the country is now in excess of 1 0 ,000,000 persons, which is more than 20 per cent of the number reported by the census of 1930 as usually gainfully employed. Larger reductions in employment and in wage pay ments occurred in New Y ork State than in the country as a whole. The number of workers on the payrolls of representative factories decreased seven per cent during May to a new low level for the period fo r which the statistics are available— since June 1914. Factory pay rolls dropped more than ten per cent, the largest monthly decline on record, and reached the lowest aggregate since A ugust 1915. The average weekly remuneration o f New Y ork State workers who were employed decreased three per cent further to a new low level since 1919. This ban k ’s composite index of wages, which has re cently been revised, is shown in the accom panying chart. The index contains a wide sampling o f wages, including at the present time such diversified groups as factory workers, coal miners, railroad employees, building workers, teachers, farm hands, and those employed by public utility companies and retail establishments. Most o f the indexes reflect average earnings, although wage rates are used fo r some groups. The various components are adjusted, where necessary, fo r their usual seasonal variations. A s the diagram indicates, this composite index of wages has declined more from the high level of 1929 than from 1920 to 1922, and is now: slightly below the lowest point reached in 1921-1922. The most substantial reduc tion since 1929 has been in farm wages, which are now below the pre-war average, and earnings of coal miners have also shown a large decline. On the other hand, earn ings of public utility employees and teachers’ salaries have shown little reduction from the 1929 level. Factory earnings, the most important single group in the index, are the lowest since 1919. 55 Commodity Prices Wholesale com modity prices showed diverse move ments in June, and although the general tendency ap pears to have been slightly downward the decline was smaller than occurred in the previous month. The weekly index o f the Bureau o f Labor Statistics, which is a weighted average o f the prices o f almost 800 commodities, decreased 0.6 o f a point in the first three weeks o f June, follow ed by a recovery o f 0.3 o f a point in the fourth week. The outstanding feature o f the com m odity markets was a sharp advance in live stock prices. A composite average of hog prices rose from the low level o f $3.19 a hundredweight, reached toward the close o f May, to as high as $4.84 at the end o f June, and the price o f steers likewise advanced $1.34 a hundredweight from the May low. There were also sharp recoveries in cotton and in raw sugar, after quotations had reached the lowest levels fo r many years. Little net change fo r the month as a whole was shown in corn and silk, although early in June these commodities reached new low levels fo r many years, as did wheat prices also in the course o f the month. The fuels and most o f the metals were fairly steady in price. On the other hand, crude rubber, hides, and scrap steel declined to the lowest levels on record, and wool dropped to the lowest level fo r many years. The price o f zinc lost a small part o f the sharp recovery of late May, and a decline also occurred in silver. Building The total value o f building and engineering contracts fo r 37 States reported by the F . W . Dodge Corporation increased somewhat further from A p ril to May, although continuing considerably belowTthe level o f a year ago. The increase o f 20 per cent between A p ril and M ay was more than usually occurs, and was a result o f an expansion in contracts fo r public works, chiefly highways, and in other non-residential construction. F or the first five months o f this year, however, total building and engi neering contracts have been 63 per cent less than in the corresponding period o f last year. Residential building and public works and utilities projects have been reduced by two-thirds, and the decrease in other nonresidential building has exceeded one-half. The slight betterment in building contracts reported during A p ril and M ay does not appear to have con tinued during June. Average daily figures fo r the first three weeks o f the month indicate that contracts fo r public works and utilities and fo r other non-residential construction were reduced considerably from the level o f the previous month, whereas ordinarily some increase occurs, and these declines more than offset a less than seasonal decline in residential building activity. Indexes of Business Activity The limited data now available indicate no material change in the general business situation during June. The average number o f cars loaded with merchandise and miscellaneous freigh t in the first three weeks o f the month showed little change from the M ay level, and car loadings o f bulk freight continued to d eclin e; ordinarily there is no consistent variation in car loadings between 56 MONTHLY REVIEW, JULY 1, 1932 M ay and June. The dollar value of sales o f depart ment stores in the M etropolitan area of New Y ork City in the first half of June was 24 per cent below the level o f a year previous, a slightly larger decline than has oc curred in recent months. Bank debits in 140 centers out side o f New Y ork City increased in about the usual pro portions in June, according to an estimate based on figures fo r the first three weeks. This bank’s seasonally adjusted indexes o f business activity fo r May showed further declines. (Adjusted for seasonal variations, for usual year-to-year growth, and where necessary for price changes) 1932 1931 Primary Distribution Car loadings, merchandise and m is c., Car loadings, oth er.............................. . E xp orts................................................... Im ports................................................... W aterways traffic................................. Wholesale tra d e.................................... Distribution to Consumer Department store sales, 2nd D is t.. Chain grocery sales............................ Other chain store sales...................... M ail order house sales...................... A dvertising.......................................... Gasoline consumption. . . . . . . . . . . . Passenger automobile registrations. General Business Activity Bank debits, outside of New Y ork C ity.. Bank debits, New Y ork C it y ..................... V elocity of bank deposits, outside of New Y ork C it y ................................................... Velocity of bank deposits, New York C it y .............................................................. Shares sold on N. Y . Stock E xch an ge. . . Postal receipts................................................ Life insurance paid f o r ................................ Electric p ow er............... ............................... Em ploym ent in the United S tates........... Business failures............................................ Building contracts........................................ New corporations formed in N. Y . State Real estate transfers.............................. . General price level*............. Composite index of wages i Cost of livin g * ...................... p Preliminary r Revised M ay Mar. Apr. M ay 79 71 72 62 90 58 60 51 65 40 81 58 56 49 62 40r 75 56 42 50p 60p 95 95 94 96 77 83 61 77 72 75 59 62 73 27 82 73 83 83 62 67 28p 76 77 78 75 59 86 62 60 70 65 63 57 91 77 86 79 72 72 80 73 67 71 71 75 70 p 55 56 69 73 68 93 117 87 92 85 80 109 61 68 121 21 31p 66 64 132 31 83 132 184r 132 54 78 48 124 24 83 48 153 209r 149 137 190r 136 134 187r 135 86 76 *1913 average= 100 Department Store Trade Total May sales of the reporting department stores in this district were 22.6 per cent less than in 1931. a slightly larger decline than occurred in A pril. New Y ork City and the W estchester stores reported decreases in sales practically the same as the average reduction for the whole district. A lthough substantial decreases from a year ago continued to be reported by department stores in Rochester, Syracuse, and Northern New Y ork State, the declines were the smallest since February, and the reduction reported by the Capital District stores was the smallest since December. In most of the other sections of the district, however, the year to year decline that occurred in May sales was somewhat larger than in A pril. Sales of the reporting apparel stores, although 18.6 per cent smaller than in M ay 1931, showed the smallest year to year decline since December. Stocks o f merchandise on hand at the end o f the month, valued at retail prices, continued to show a substantial reduction from last year. The rate of charge collections during May remained slower than in 1931 in all localities, except Buffalo. Percentage change from a year ago [ Net sales Locality New Y o r k ....................................... B uffalo............................................. Rochester......................................... Syracuse........................................... N ew ark............................................ B ridgeport...................................... Elsewhere........................................ Northern New York State. . . Southern New York S ta te ... . Hudson River Valley District. Capital District......................... Westchester D istrict................ Stock on hand end of* month 1931 1932 4 7 .6 42.9 4 4.8 2 6.8 4 1.2 3 7.6 3 3.4 4 2.9 43.1 4 4 .6 2 3.6 3 8 .0 3 1.8 2 9.8 M ay Jan. to M ay -2 2 .7 -2 7 .1 -1 9 .5 -2 7 .1 -1 9 .9 -2 9 .7 — 19.9 — 2 1.3 — 23.9 — 28.1 — 16.5 — 24.4 —21.1 — 19.7 — 18.5 — 17.2 — 15.3 — 12.5 — 18.0 — 16.1 - 22.0 -2 7 .5 -2 4 .2 -2 4 .4 -1 6 .2 Per cent of accounts outstanding April 30 collected in M ay All department stores.......... - 22.8 - 22.6 -1 9 .9 — 18.2 Apparel stores........................ — 18.6 — 2 4.4 - 2 4 .6 3 9.5 4 4 .3 Wholesale Trade Sales of the reporting wholesale firms in this district averaged 26 per cent smaller in M ay than a year previ ous, a decline slightly less than occurred in A pril. A ll lines o f wholesale trade reported smaller year to year declines in sales in May than in A pril, with the exception of the paper and diamond firms. The decline in shoe sales was materially less than in A pril, and sales of stationery, drugs, cotton goods, silk goods, and m en ’s clothing, all presented a more favorable showing than in A pril. In some o f these lines the reduction in sales was the smallest since February. The volume o f machine tool orders, reported; by the Machine Tool Builders Association, also showed the smallest year to year decline since February. The decline in grocery, hardware, and jew elry sales was not materially different in M ay than in A pril. The value o f merchandise stocks on hand at the end of May continued below the level o f a year previous in all lines except drugs, and in this group the increase was the smallest reported in recent months. The ratio o f collections to accounts outstanding averaged about the same as in May 1931. Percentage change M ay 1932 compared with April 1932 Percentage change M ay 1932 compared with M ay 1931 Com m odity Net Groceries............... M en’s clothing. .. Cotton goods Silk go o d s ............. Shoes..................... D ru gs.................... H ardware............. Machine to o ls * * ., Stationery............. Paper..................... D iam onds............. Jew elry................. W eighted average. . — 4 .0 — 33.4 Stock end of month 4 .0 + 0.6 — 11.9 —22.2 — 7 .7 — 0 .5 — 15.9 — 27.2 * — 0 .4 + 0 .3 — 5 .4 — 8.8 — 8.0 — 18.3 + 1 5 .4 — 5.V — 5 .3 + 1.4 Net — 12.7 — 33.1 — 2 3.4 — 20.5* — 25.4 — 24.5 — 24.2 — 55.4 — 26.1 — 36.3 — 68.3 — 42.5 -2 6 .3 Stock end of month — 20.9 —26‘.5 — 6 .2* —22.8 + 9 .6 — 20.7 Per cent of accounts outstanding April 30 collected in M ay 1931 1932 73.9 2 7.5 3 3.4 45.1 4 2.4 3 5.8 4 6.7 7 8.3 2 6 .2 32.8 6 0.3 35.9 2 3.2 44.1 74 '.7 56.3 6 4 ’.4 4 2 .5 14.4 47.5 4 7.4 — 30.3 —21.0 * Quantity not value. Reported by Silk Association of America ** Reported by the National Machine Tool Builders Association FEDERAL RESERVE BANK OF NEW YORK MONTHLY REVIEW, JULY 1, 1932 Business C onditions in the U nited States (Summarized by the Federal Reserve Board ) O L U M E of production in basic industries and employment at factories decreased further in May, and wholesale prices declined. Foreign with drawals of gold, which had been in large volume in M a y and the first half of June, practically stopped after the middle of the month. V P ro d u c tio n a n d E m p l o y m e n t Index Number o f Production o f Manufactures and Minerals Combined, A djusted for Sea sonal Variation (1923-25 averag e= 100 per cent) Production at mines and factories declined further in May, and the B o a rd ’s seasonally adjusted index of industrial production showed a reduction from 64 per cent of the 1923-1925 average in A p ril to 61 per cent in May. Output of coal was substantially reduced, particularly in the anthracite fields; shipments of iron ore showed less than the usual seasonal increase, production of iron and steel declined, and activity at textile m ills and shoe factories was further curtailed. In the automobile industry output increased considerably. In the first part of June activity in the steel and cotton industries was reported to have declined further, while output of automobiles continued at about the same rate as in the latter part of May. Further reductions in employment and earnings of factory workers ac companied the smaller volume of m anufacturing output in May, particularly in the steel and machinery industries, and in the textile and clothing trades. Employment at automobile plants and in the seasonally active food industries showed an increase. Value of building contracts awarded, according to reports to the F. W. Dodge Corporation, after increasing somewhat in A p ril and May, declined slightly in the first half of June, reflecting chiefly smaller awards for public works and other non-residential building. Index o f Factory Employment with Adjustm ent for Seasonal Variation (1923-25 average = 1 0 0 per cent) PERCENT D is t r ib u t io n Railroad freight traffic decreased further in May, the largest reduction being in shipments of coal and miscellaneous freight. Sales of department stores in leading cities, which had increased substantially during April, were smaller in May. W h o l e s a l e P r ic e s Prices of commodities at wholesale were 1.7 per cent lower in M a y than in April, according to the Bureau of Labor Statistics. There were large de creases in prices of many domestic agricultural products and of hides and textiles. Prices of petroleum products advanced. D u rin g the first three weeks of June, market quotations for a number of non-agricultural commodities were relatively steady, and prices of sugar, meats, and livestock increased. Prices of wheat, after considerable fluctuations, were at unusually low levels at the beginning of the third week in June. W holesale Price Index o f United States Bureau o f Labor Statistics (1926 average= 1 0 0 per cent) MILLIO NS OF DOLLARS ....... K V 2000 TOTAL a / A \ r \ s DISCO UNTS 1000 J i i j* . L f \c i ACCEPT/*NCE5 J HLA u. V t V / V w SECUR % w Reserve Bank Credit (M onthly averages o f daily figures for 12 Federal Reserve Banks; latest figures are averages o f first 20 days of June) B a n k C r e d it W ithdrawals of gold from the United States continued through M a y and the first half of June, and the country’s stock of monetary gold declined by $435,000,000 between M a y 4 and June 15. A fte r that date there was no further decline in the total stock of monetary gold, continued gold exports representing gold previously earmarked by foreign central banks. D u rin g the first part of M a y continued purchases of United States Government securities by the Eeserve Ban ks enabled member banks further to reduce their discounts; in later weeks, however, funds released through these purchases were absorbed by the demand for gold for export, and there was also a decrease in member bank reserve balances. Loans and investments of reporting member banks in leading cities, which had declined sharply earlier in the year, showed wide fluctuations after the middle of May. In the middle of June total loans and investments were larger than a month earlier, the increase in holdings of United States securities being more than sufficient to offset declines in other investments and in loans. Money rates in the open market remained at low levels. Bates on prime commercial paper were reduced to a range of 2 % - 2 % per cent in the second week of June.
@FedFRASER