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MONTHLY REVIEW o f C r e d it a n d S e c o n d Federal Eeserve Agent B u s in e s s F e d e r a l Federal Eeserve Bank, New York M o n e y M a r k e t in J u n e The rapid inflow o f gold to the United States which re sulted from weakness of the European gold currencies in M ay and early June carried the monetary gold stock o f the United States to a new high level above $9,100,000,000 at the end of June. A s the accom panying diagram shows, the gold stock of this country has in creased more than $2,000,000,000, or about 30 per cent, since the revaluation o f gold in terms of dollars at the end of January 1934. The present dollar value of the gold stock is more than double the average amount for the ten years preceding devaluation, and, even on the basis of physical quantity, the gold holdings o f this country are now substantially larger than in any pre vious year. Gold shipments to this country ceased before the middle o f June, follow ing a strengthening o f the gold currencies after some of the political uncertainties in gold bloc countries had been settled, but arrivals o f pre vious shipments continued until the latter part o f the month. The recent flow of gold to this country was the prin cipal factor in a further substantial increase in member bank reserves during the past month, which carried the total volume of such reserves to a new high level above $5,000,000,000, an amount nearly double the pres ent reserve requirements o f all member banks and more than double the average volume of member bank reserves during the period from 1927 to 1929, when credit expan sion reached its maximum. A s most o f the proceeds o f the gold inflow was deposited in New Y ork City banks, the expansion o f member bank reserves occurred in the first instance in New York, but due to continued sales o f a substantial part of new Government security offer ings in the New Y ork market and the transfer of much o f the proceeds to other parts of the country, the dis tribution o f the additional reserves proceeded rapidly. Government operations during the June tax period had little effect on the position of member banks fo r the country as a whole, as income tax collections and with drawals of funds from Government depositaries were offset by redemptions of F irst Liberty Loan bonds that had not been exchanged for new Government securities, and by interest payments on the National debt. In New Y ork City excess reserves reached a new high level at $974,000,000 in the course of the month, and during most of June were above $900,000,000. F o r the month as a whole, the excess reserves o f the large New R e s e r v e C o n d itio n s D is t r ic t July 1, 1935 Y ork City banks were equal to about 90 per cent of their reserve requirements, but even this large per centage is less than that fo r the country as a whole. Furthermore, the excess reserves o f the New Y ork banks are counterbalanced by liabilities to banks in other parts o f the country, as these banks have placed surplus funds on deposit with their New~ Y ork City correspondents in addition to increasing their accounts with their respec tive Federal Reserve Banks. In some cases where the smaller banks appear to have practically no excess re serves in the Federal Reserve Banks it is found on investigation that their balances with city correspond ents are fa r above normal and constitute in effect very large excess reserves in proportion to their reserve re quirements. A recent review o f the reserve position of individual member banks in the Second Federal Reserve District indicates that the large surplus o f bank funds is widely distributed. In general the smaller banks in this district have even larger proportions o f surplus funds than the large city banks. Reserve requirements o f member banks have also been expanding rapidly in recent months, accom panying the growth o f deposits, and have in fact absorbed a con siderable amount o f the additional member bank re serves. The increase in requirements o f all member banks during the past month is estimated at about $55,000,000, and during the past year at nearly $450,000,000. Monetary Gold Stock of the United States 50 MONTHLY REVIEW, JULY 1, 1935 Net demand deposits in weekly reporting member banks showed a further increase of nearly $400,000,000 during the fou r weeks ended June 19, and were nearly $3,000,000,000, or about 25 per cent, higher than a year ago. A bou t $100,000,000 of this increase repre sented a shift from time to demand deposit accounts, largely in New Y ork City, follow ing the discontinuance of interest payments on time deposits o f less than six months maturity by the Clearing House banks. The remainder appears to have been due partly to deposits of the proceeds o f gold imports, and partly to a net increase in the loans and investments o f the reporting banks. Member B a n k Credit The increase in total loans and investments o f the reporting member banks during the fou r weeks ended June 19 amounted to approximately $140,000,000. The increase was about equally divided between the large New Y ork City banks and other reporting banks throughout the country. In the New Y ork City banks, holdings o f Government securities increased $115,000,000 during the period, and Government guaranteed securi ties increased $59,000,000, but there were reductions o f $36,000,000 in holdings of other securities, about $20,000,000 in security loans, and $45,000,000 in other loans. In other reporting member banks throughout the country, the principal expansion was in Government guaranteed securities, which increased $64,000,000 dur ing the four-week period, but it appears probable that this increase was due largely to exchanges o f Home Owners’ Loan Corporation bonds o f an old series fo r a new series o f the bonds of the Corporation which are fu lly guaranteed by the Government, and that the real increase was in other types of securities. M oney R ates A s the follow ing table shows, open market money rates in New Y ork remained practically unchanged dur ing June, except fo r a further slight decline in yields on Government securities. M oney Rates at New York June 29, 1934 M ay 31, 1935 June 28, 1935 Stock Exchange call loans....................... Stock Exchange 90 day loans................. Prime commercial paper— 4 to 6 months Bills— 90 day unindorsed......................... Customers’ rates on commercial loans.. (Average rate of leading banks at middle of month) Treasury securities: Maturing December (y ield )................ Maturing February 15, 1937 (y ield ). Average yield on Treasury notes (1-5 years)............................................... Average yield on Treasury bonds (more than 5 years to earliest call date) Average rate on latest Treasury bill sales 133 day issue.......................................... Federal Reserve Bank of New Y ork re discount ra te .......................................... Federal Reserve Bank of New York buying rate for 90 day indorsed b ills. . *X X *X 2.13 1.83 1.79 N o yield N o yield 0 .2 5 N o yield 0 .09 1 * M -1 U-l X-X X X X % X 1.08 0 .58 JO. 53 2.79 2 .4 8 f2 .4 4 0 .1 0 0.0 7 0 .14 0 .1 2 IX IX IX X X X * Nominal J Average raised 0.11 by substituting issue due June 15, 1940, for issue due June 15, 1936 f|Average raised 0 .0 6 b y exclusion of 3 % per cent issue of 1943-40 G overnment S ecurities D uring June, prices of outstanding United States Government securities again moved within narrow limits, but on occasions the average yield, both on Treasury notes and on Treasury bonds, touched new low levels. The average yields on weekly sales of Treasury bills also showed a declining tendency in June, the June 26 issue o f 133-day bills being placed at 0.07 per cent, as compared with 0.10 per cent on the May 29 issue, and the June 26 issue o f 273-day bills being sold at 0.12 per cent, as compared with 0.14 per cent on the last May issue. In all, $200,000,000 of 133-day bills and $200,000,000 of 273-day bills were put out to replace $300,000,000 o f 182-day bills which matured during the month and to raise $ 1 0 0 ,000,000 o f new funds. Beginning on June 15, F irst Liberty Loan bonds which had been called fo r redemption on that date, and which had not been exchanged fo r the new 2 % per cent Treas u ry bonds in response to the May Treasury offering, were presented to the Reserve Banks and Treasury fo r payment, and by June 27 a total o f $172,000,000 out of the approxim ately $325,000,000 outstanding had been retired out o f balances in the general fun d o f the Treas ury. On June 10 the Treasury offered an issue of 5 year 1 y2 per cent notes only in exchange fo r notes maturing June 15 and August 1, and o f the $771,000,000 o f the issues outstanding, $738,000,000 were exchanged fo r the new notes. Two weeks later the Treasury an nounced a second offering o f an additional $ 10 0 ,000,000 o f 3 per cent bonds o f the issue o f 1946-1948 to be sold through competitive bids. On these bonds, paym ent for which is to be made July 1, bids received totaled $461,000,000 and $112,669,000 o f bonds were allotted at an average price o f 103 18/32, which gives a yield o f 2.62 per cent to earliest call date. This compares with aggregate tenders o f $270,000,000 on the first $100,000,000 o f bonds sold in the same manner in May, on which the average price was 103 4 /32 , yielding 2.67 per cent. Under a May offering by the Treasury on behalf of the Home Owners’ Loan Corporation to exchange 4 per cent Home Owners’ Loan Corporation bonds called for redemption July 1 fo r a new issue o f 1 % per cent bonds fu lly guaranteed by the Government, $245,000,000 of the $325,000,000 outstanding 4 per cent bonds were exchanged, leaving $80,000,000 to be retired on J uly 1. A t the time o f the offering, it was announced that cash sales o f the 1 y2 per cent bonds would be made in an amount sufficient to provide fo r the redemption o f 4 per cent bonds that were not exchanged, and accord ingly sales o f $80,000,000 o f the i y 2 per cent bonds were made at market prices by the Treasury through the Federal Reserve Bank o f New Y ork without public announcement in order to provide the necessary funds. B ills and C ommercial P aper The volume o f transactions in the bill market con tinued small during Jun e; portfolios o f the dealers re mained at minimum amounts and open market rates were unchanged. A further decline of $38,000,000 oc curred during M ay in the amount o f bills outstanding, and the total o f $375,000,000 at the end of the month was the smallest since the Am erican Acceptance Council started com piling the figures eleven years ago. The de cline fo r the past month occurred principally through 51 FEDERAL RESERVE AGENT AT NEW YORK a further drop o f $ 2 0 ,000,000 in domestic warehouse credits and a decrease of $14,000,000 in export bills. A ccepting banks at the end of May continued to hold 95 per cent of all bills outstanding. Dealers in commercial paper continued during June to be unable to acquire adequate quantities o f prime notes with which to fill the insistent bank demand fo r this type of investment. Resales o f the limited amount of new drawings secured were again made chiefly at % per cent. Dealers had $173,000,000 of paper out standing at the end of May, the same amount as at the end o f A pril, but 22 per cent more than a year N e w F i n a n c in g The largest offering of new securities during June was a refunding issue of $239,000,000 of 3 per cent Con solidated Federal Farm Loan 10-20 year bonds, the p ro ceeds of which, together with cash on hand, will be used to retire $269,000,000 of bonds of the individual Land Banks called fo r payment July 1, 1935. The new bonds were sold at a price of 98% , offering a yield of about 3.10 per cent. The refunding operation results in a substantial saving of interest charges to the Land Banks. In addition to this issue, there continued to be about the usual number of State and municipal issues, although in the absence of any very sizable offering the total was not large. In the corporate field, the issues actually offered for public subscription were dn about the same sizable volume as in the preceding three months. Most of the proceeds are to be used for refunding purposes. The $29,500,000 issue of Commonwealth Edison Company 30 year bonds, which was sold at a price to yield 3.86 per cent, and the $30,000,000 Pacific Gas and Electric Company 29 year issue, sold at a price to yield 3.77 per cent, were entirely fo r the refunding of earlier issues. The $25,000,000 Am erican R olling M ill Company 10 year debenture issue, yielding 4.25 per cent, was also largely refunding, although $5,000,000 is to be used fo r new plant construction and $1,700,000 as addition to working capital. A large additional amount o f new corporate offerings is in immediate prospect, ju d gin g from registrations with the Securities and Exchange Commission. The applications for registration now before the Securities and Exchange Commission include the follow ing important issues: Duquesne Light Company fo r $70,000,000, Pure Oil Company fo r $56,000,000, Bethlehem Steel Corporation fo r $55,000,000, Edison Electric Il luminating Company of Boston for $53,000,000, A rm our and Company of Delaware for $48,000,000, Cleveland Electric Illum inating Company fo r $40,000,000, South ern California Edison Company for $35,000,000, and several issues of between $15,000,000 and $30,000,000. These issues are all largely fo r refunding purposes. In addition, a number of other large corporations have an nounced plans to retire outstanding bond issues in the near future, most o f these redemptions to be provided for by the sale of refunding issues, although some part may tem porarily be provided fo r through bank loans or out o f working capital. S e c u r it y M a r k e t s Follow ing a recession during the closing days of May, the advance in stock prices which began around the middle o f March was resumed during June, and the general average o f share prices by the 2 2 nd of the month reached a new high since A p ril 1934. The ad vance in the first part o f the month was chiefly in indus trial stocks, but subsequently public utility and railroad shares participated in the rise. In percentage, the June rise in utility shares somewhat exceeded that shown by either industrials or rails, but industrial stocks reached the highest level since A p ril 1934 and were close to the highest levels o f the past three years, while utility and railroad shares remained fa r below the levels attained on the recovery in the summer o f 1933, as the accom panying diagram shows. A s compared with March 1935 lows, however, a somewhat larger absolute increase and a much larger percentage rise has occurred in utility shares than in the industrials. The percentage advance in railroad stocks has been about the same as in industrial shares. D uring the last few days o f June, prices turned somewhat reactionary, as was the case during the closing days o f May. Throughout the month the activity o f the market was somewhat less than in May, the largest d a y ’s turnover being 1,630,000 shares, and the average volume 1,015,000 shares daily, as com pared with a May average o f 1,290,000 shares. The corporation bond market also showed an advancing tendency during June. Medium and lower grade bonds, especially railroad issues, registered the largest advances, coincident with the rise in the stock market. On the average, issues of Baa grade o f all types combined rose about 3 points during the month and exceeded the prices reached last January by about 1 % points, reach ing the highest point since September 1930. Baa rail road and industrial bonds despite their advances did not reach as high a point as was reached earlier this year, but public utility bonds rose to new highs fo r recent years. Highest grade corporation bonds, those o f Aaa rating, rose about % o f a point in June, thereby re gaining most o f the ground lost since last M a rch ; utility issues showed the largest advances, follow ed by the rails and industrials. Representative foreign bonds showed P R IC E IN D E X . - 4 .................................... i u A 1 N D U S T R IA L S 100 75 \ j h f: / / \ \ M i 50 X A J V V H ' / ' V H A w \ / V u. J a P U B L IC \U T IL IT IE S A \ . J V \ / * IL R 0 A D 3 V l'- W V 25 - .i ... .i - . ..i ........ ... _ . F f 1 — 1---------- 1— 1935 .1........ Movements of Stock Prices (Standard Statistics Company indexes) 52 MONTHLY REVIEW, JULY 1, 1935 mixed movements during June, the better grade issues advancing while the more speculative ones declined. G o ld M o v e m e n t The inflow of gold from Europe which began around the m iddle of M ay continued until the last week in June with a total of $338,000,000 received in this period. Of the June imports from Europe, $204,700,000 came from France, $21,700,000 from Holland, and $900,000 from England. In addition $8,400,000 was received from Canada and $400,000 from China. A p a rt from these imports, $1,100,000 of gold was re leased from earmark fo r foreign account, and newly mined domestic gold and scrap gold continued to be received at the mints and assay offices in moderate amounts. Consequently there was a total gain during June of $255,000,000 to the monetary gold stock o f this country. ures taken by the Minister of Finance and the Bank of Brazil providing fo r more rigorous enforcement of restrictions on dealings executed at the free rate, the quotation recovered somewhat. Closing Cable Rates at New York Exchange on June 30, 1934 M ay 31, 1935 June 28, 1935 $ .2335 .2256 5.0450 .06595 .3861 .6778 .0856 .2536 .1366 .2603 .3250 $ .1713 .2 2 0 1 4.9350 .06593 .4045 .6742 .0822 .2479 .1366 .2544 .3229 $ .1695 .2207 4.9400 .06640 .4048 .6836 .0831 .2484 .1376 .2546 .3285 1.0 1 0 0 .3363 .0850 .8000 1.0006 .3289 .0857 .8000 .9994 .3293 .0857 .8000 .2990 .3800 .3431 .2908 .3747 .4213 .2909 .3737 .3950 F o r e ig n E x c h a n g e s Cessation of the pronounced weakness in the French franc which had been apparent in the previous month was the principal development in the foreign exchange market during June. In the first week of the month the franc showed erratic fluctuations, ranging between $0.0658% and $0.0663. Rate movements coincided close ly with alternations of the political outlook in France, while efforts were being made to form a Government follow ing the resignation of the Flandin m inistry on May 31. W ith the form ation o f the Laval cabinet on June 7, the period o f wide fluctuations in the franc rate was brought to an end, and during the remainder o f the month the fra n c remained somewhat above the gold shipping point from Paris to New Y ork, touching a high o f $0.06640 on June 28. Although the discount on fo r w ard francs was considerably reduced from the peak level established towards the end o f May, the spread between spot and future quotations continued to be unusually wide, amounting to over 3 per cent fo r three month contracts. Follow ing the defeat on June 2 o f a proposal sub mitted to popular referendum entailing an extensive change in Swiss economic and financial policy, the Swiss franc rose considerably, recovering in the Paris market to a level well above the nominal gold shipping point from Zurich fo r the first time since March. The guilder also became stronger in the early part o f June, but the belga reversed the upw ard movement of the previous month, reaching a low o f $0.1690% on June 18, as com pared with $0.1713 at the end of May. A m ong the European currencies subject to official restrictions, the lira and the peseta advanced along with the gold bloc exchanges, while the reichsmark showed little net change. The pound sterling, after rather wide variations in the first week of June, remained approximately stable thereafter, ranging between $4.92% and $4.95% . The Shanghai dollar receded moderately, accom panying a decline in the price o f silver. The free rate fo r the Argentine peso continued to show an upw ard tendency, but the Brazilian milreis declined further to a low of $0.0529 fo r free exchange on June 18. F ollow ing meas C en tra l B a n k R a t e C h a n ges Follow ing a rise from 2 % to 6 per cent in the latter part of May, the discount rate of the Bank o f France was lowered to 5 per cent, effective June 21. A s of the 27th, the Netherlands Bank rate was reduced from 5 to 4 per cent. The discount rate of the Bank of Java was advanced from 3 % to 4 % per cent on June 3, but effective on July 1, the rate was reduced to 4 per cent. P r o d u c t io n Available statistical data fo r June, after allowance fo r seasonal changes, indicate no marked change from the preceding month in the general level of industrial p ro duction. Continuance o f the contraction in steel m ill output, which began in March, brought the operating ratio during the last week o f the month to 38 per cent o f capacity. This compares with 4 3 % per cent fo r May and 5 1% per cent fo r February, the high point of the year. Cotton m anufacturing operations also were re duced somewhat, but curtailment in this industry, as well as in the steel industry, has occurred in most recent years between May and June. Autom obile production, which usually declines substantially in June, was re ported to have been maintained close to the M ay level, and bituminous coal output expanded sharply in the first two weeks o f the month. There was considerable diversity o f movement in the activity o f the various industries during May, and the net effect on the Federal Reserve B o a rd ’s seasonally adjusted index o f industrial production was to produce a decline o f 1 point to 85 per cent o f the 1923-25 aver age. Operations were increased substantially in the bituminous coal industry, where inventories were ac cumulated in anticipation o f a possible strike, and in the woolen, newsprint, and lead industries. Orders for machine tools rose further in M ay to the highest point since 1930, and the seasonally adjusted index also rose to the highest point since that time with the exception o f a temporary peak caused by heavy foreign orders at the end o f 1933. On the other hand, automobile assem- FEDERAL RESERVE AGENT AT NEW YORK blies were considerably below the A p ril level, appar ently due in part to the unusually early start on the 1935 production schedules and in part to labor difficul ties, and output o f food products, after seasonal adjust ment, decreased. Although the general index of industrial production now stands 28 per cent below the average level of 1929, a review of the status of various industries indicates that some of them have continued to grow during the depression. In these, the depression has operated only to retard rates o f growth, rather than to cause net de clines fo r the past five years. In this group are found especially newer industries, and a few o f the older in dustries which through technical progress have opened (Adjusted for seasonal variations and usual year to year growth) 1934 Metals Pig iro n ........................................................... L e a d ................................................................. 1935 M ay Mar. April M ay 56 69 56 57 51 59 46 63 49 54 47 64 47 53 52 63 44 74 72 10 0 64 94 48 p 73 p 64p 83 72 p 82 p 68 p Automobiles Passenger cars............................................... M otor trucks................................................. Fuels 74 95 58 69 65 72 82 r 85 61 76 117r 78r 75r 109 64 91 103r 105 59 73 104r 73r 116p 56 p 76 p 104 p 78 85 95 82 79 82 104 83 76 75 87 p 82 75 85 71 Bituminous coal............................................ Anthracite co a l............................................. Petroleum, crude.......................................... Petroleum products...................................... Electric p ow er............................................... 66 68 63 72p Textiles and Leather Products Cotton consumption r .................................. W ool mill a ctiv ity ........................................ Silk mill a ctiv ity .......................................... Rayon deliveries*......................................... Shoes r ............................................................. 7 2p Foods and Tobacco Products Meat packing................................................ Wheat flour.................................................... Refined sugar deliveries.............................. Tobacco products......................................... 110 86 95 81 Miscellaneous Cement r ......................................................... Newsprint paper........................................... Machine tools ................................................ p Preliminary r Revised PER C E N T 48r 57 77 39 41r 63 43r 68 67 52 48 * For quarter ending PER C E N T 66 45r 74 p 60 53 new markets. F ou r instances of such industries— elec tric refrigerators, rayon, Diesel engines, and radio broadcasting— are shown in the accom panying diagram. In the case o f electric refrigerators, rayon, and radio broadcasting there has been a definite upward tendency throughout the period, while in the case of Diesel engines rapid development has occurred only in the last two years. E m p l o y m e n t a n d P a y r o lls Employm ent and payrolls in representative factories in New Y ork State declined from the middle of A pril to the middle o f May. The reduction in working forces, however, was not much in excess of the usual seasonal recession, so that the adjusted index declined only slightly, follow ing the advances of the preceding five months. In the case o f payrolls, however, the recession was distinctly more than seasonal, and the adjusted index declined by more than 1 per cent, thereby can celing a large part o f the advance o f the preceding month. Curtailment o f activities in the clothing and textile industries, which accounted fo r most of the de cline in employment during May, was offset in part by further gains in the number of workers at plants p ro ducing building construction materials. Factory employment in the United States also declined by somewhat more than the usual seasonal proportions from the middle o f A p ril to the middle o f May, owing in part to strikes in the automobile and lumber indus tries. F actory payrolls, which ordinarily show a slight increase from A p ril to May, dropped considerably, and the seasonally adjusted index was reduced by about 3 per cent, reversing in part the advance which started in September 1934. Declines in factory employment and payrolls from A p ril to May were especially pro nounced in the non-durable goods industries such as textiles and shoes. In the durable goods industries, de creased employment in the automobile and lumber in dustries was largely offset by increases in the number of workers at plants producing machine tools and such building construction materials as cement, brick and tile, and stone products. PER C E N T PER CENT 200 200 t ... -- / 150 150 100 100 50 50 DISl S E L ENCiBUSIER 1929 1930 1931 1932 1933 1934 / RAI)IO BRC ,,i)ADC L ....1 ASTIING 1929 1930 1931 1932 1933 1934 Indexes o f Electric R efrigerator Sales, Rayon Shipments, Diesel Engine Production, and Cost o f Radio Broadcasting Facilities (1929 100 per cent) 54 MONTHLY REVIEW, JULY 1, 1935 In contrast to the decline in employment in manu facturing establishments from A p ril to May, the non m anufacturing group o f industries in general showed an increase in employment. The gain was especially marked in the building construction industry, where additions to working forces were more than sufficient to offset decreased employment in the retail and whole sale trades. C o m m o d i t y P r ic e s The general level o f wholesale commodity prices moved slightly lower during June, and the Bureau o f Labor Statistics index on June 22 stood at 79.3 per cent of average 1926 prices, compared with the recent high of 80.3 per cent. A s is shown in the accom panying dia gram, this downward movement reflected chiefly declines in farm products and foods, both of which groups, after showing a rather consistent advance between November and A pril, declined in June to a point about 4 per cent below the A p ril peak. Nonagricultural commodities in the aggregate have tended slightly higher recently, as advances in the hides and leather, textiles, metals and metal products, fuel and lighting materials, and building materials groups have been only slightly offset by a decline in chemicals and drugs. A m ajor factor in the decline in agricultural com modities has been im proved crop prospects which have affected especially the price of wheat. D uring the first half o f June the cash quotation o f the No. 1 Northern grade at Minneapolis receded further touching 95 cents on June 17, which is the lowest quotation since last July. Crop conditions at the beginning of June indicated the possibility of a total wheat crop in excess of domestic requirements for the coming year. The winter wheat crop was estimated in the June 1 crop report o f the Department of A griculture at 441,494,000 bushels, which although still 29 per cent below the average harvest during the 1928-1932 period is well above last y e a r’s short crop of 405,034,000 bushels. W hile spring wheat prospects are still highly uncertain, the crop is estimated at 230,000,000 bushels. The condition of the oat, barley, rye, and hay crops on June 1 was around the ten-year PER CENT Indexes of W h o lesa le Prices of F arm P roducts, Foods, and O ther C om m odities (B u reau o f Labor S ta tistic s d a ta ; 1 9 2 6 average = 1 0 0 per cen t) average fo r 1923-32, in contrast to the poor condition a year ago caused by the drought. In the case of corn, however, weather conditions have so fa r been u nfavor able, and the price o f corn showed little change in June. Near the end o f June reports of damage to the spring wheat crop, due to rust, resulted in a sharp u p turn in wheat prices. The average price of hogs, after reaching in May a new high since October 1930, showed a net decline of 51 cents to $9.29 a hundredweight during June, and the average price o f steers declined $1.20 further to $10.63 a hundredweight, the lowest since last January. H og prices, however, remained nearly double those of a year ago, and cattle prices also were considerably higher than in June 1934. The spot price of cotton showed a net advance o f 85 points to 12.15 cents a pound, thus canceling the loss shown in the preceding month. A further advance in wool prices occurred during June. In the metals group, the price o f copper was reduced 1 cent to 8 cents a pound on June 27, after having held for about a year at 9 cents, the price established under the N .R.A. code regulations. Spot silver at New Y ork moved 4 % cents lower during the month to 69% cents a fine ounce, as compared with the high of 81 cents on A p ril 26, and 55 cents at the beginning of the year. Lead also receded 20 points to 4.05 cents a pound. Other basic metal prices remained at much the same levels as prevailed at the end o f May. Building A further increase in residential building activity was indicated by the F . W . Dodge data for May and the first half o f June. In both of these periods advances occurred, whereas usually A p ril marks the seasonal peak o f con tract awards fo r residential construction. The total fo r May was 80 per cent larger than a year ago and the figure fo r the first half of June wTas more than 90 per cent above the corresponding period o f last year. E rec tion o f dwellings fo r owner occupancy accounted for the largest part of the May increase, but there was a substantial increase in apartment house construction, and considerable increases occurred in other types o f residential contracts. Reflecting the increases in residential contracts and also some recent rise in non-residential contracts, the figures fo r construction under private ownership during the last two months have been at the highest levels in the period fo r which the data are available— since the beginning o f 1932— as is indicated in the accom panying diagram. Meanwhile the value o f public construction has been smaller than private construction and has also been less than in the corresponding period o f last year, pending the awarding o f additional contracts under the new work relief program . In the first half o f June, pub lic construction showed a slight upturn from the previ ous m onth’s level. Total May contracts for building and engineering work were about 2 per cent larger than in A p ril and about 6 per cent smaller than a year ago. Residential construction in May accounted fo r about 35 per cent o f the total, as compared with less than 20 per cent of all construction a year ago. 55 FEDERAL RESERVE AGENT AT NEW YORK a substantial reduction in the quantity o f coffee imported from Brazil thus fa r in 1935, which has tended to re strict the value o f total im ports from that country. Values for First Four Months of 1935 (In Millions of Dollars) Country United K ingdom ............. Daily Average Value of Contracts for Publicly and Privately Financed Building Awarded in 37 States (Based on F. W . Dodge Cor poration data; latest data are for first half of June) Exports from Im ports into Exports from Imports into the United the United the United the United States States States States 44.6 79.8 47.0 19.5 British M alaya*............... 113.7 100.3 64.3 30.8 24.2 21.7 19.2 17.4 17.3 17.1 16.9 16.5 15.8 15.7 15.2 1.4 A ll Countries.................... 6 8 8 .2 Philippine Isla n d s.......... Union of South Africa . . Netherlands...................... Percentage Change From Corresponding Period of 1934 — 6 + 11 + 2 $ + 7 + 16 + 17 — 35 — 20 — 61 +42 — 28 +29 — 8 — 4 +35 + 10 — 9 — 2 + 85 +16 +39 +34 — 17 + 9 19.6 11.5 3 3.7 5 1.2 +21 — 22 +68 +21 +23 +35 + 3 +63 667.3 — 2 +16 1 1 .6 25.3 37.1 19.9 3 .9 11.5 36.1 1 .1 In New Y ork State and Northern New Jersey, resi dential building contracts for M ay were slightly larger than in A pril, and totaled 130 per cent more than a year ago; fo r the first five months of this year an in crease o f about 75 per cent over a year ago is indicated. Total contracts for May and fo r the first five months of this year, however, were smaller than a year ago, due to reductions in non-residential building and public works and utility projects. F or May the only inform ation available to date con cerning foreign merchandise trade of the United States relates to a few im portant commodities. A slight re duction from a year ago continued in the total volume o f raw cotton exports, and there was a relatively large decrease in receipts o f crude rubber, but the quantity of coffee imported showed a substantial increase. F o r e ig n T r a d e I n d e x e s o f B u s in e s s A c t i v i t y Data on the foreign merchandise trade of this country indicate that for the first fou r months o f this year total exports were 2 per cent smaller than a year ago, while imports were 16 per cent larger. The accom panying table, arranged by countries in order o f their im port ance in the export trade of the United States, indicates considerable irregularity in the comparisons with a year ago fo r exports to and imports from the various countries. F or exports, the changes ranged from a reduction of 61 per cent from a year ago in exports to Germany to an increase o f 42 per cent in shipments to Cuba. Im ports from Cuba also showed the largest relative in crease, amounting to 85 per cent. The greatest reduction in imports occurred in those from France, with a 20 per cent decline, and our exports to France showed an even larger relative decrease in dollar value. In fact, exports to all o f the European countries listed, except Italy, were less in value than in the correspond ing period o f 1934. A tendency was apparent in the trade of the United States with most countries toward a narrowing of the margin of our exports over imports or toward an in crease in this cou n try’s unfavorable trade balance with certain countries. Exceptions to this general tendency occurred in the cases of Italy, the Philippine Islands, the Union of South A frica, and Brazil. Receipts of sugar in the United States were chiefly from the Philippine Islands early in 1934, while in the first four months of 1935 over half came from Cuba, resulting in a sizable reduction in total imports from the Philippines and a large increase in imports from Cuba. There has been D uring the first three weeks of June, the railroad movement of bulk freight advanced by somewhat more than the average seasonal proportions owing to a sharp increase in coal shipments, and merchandise and miscel laneous freight car loadings were virtually unchanged from the May level. A n unseasonal decline appears to have occurred, however, in department store sales in the M etropolitan area of New Y ork in the first half o f the month. A further moderate recession in general business ac tivity and the distribution of goods appears to have occurred during May. A m ong the important indicators *Included to show large imports of rubber to United States. PER C E N T D ollar V alu e of D epartm en t Store Sales in the U nited S tates, A d ju sted for Seasonal Variation (Federal R eserve B oard index; 1 9 2 3 -2 5 average 1 0 0 per cen t) MONTHLY REVIEW, JULY 1, 1935 56 o f business and trade which registered declines after allowance fo r the usual seasonal changes were merchan dise and miscellaneous freight car loadings, new pas senger automobile registrations, and sales o f mail order houses and chain stores. Little change other than sea sonal occurred, however, in the railroad movement of bulk freight, the volume of check transactions outside New Y ork City, and new life insurance sales. The seasonally adjusted index o f department store sales fo r the entire country rose slightly in May follow ing the sharp decline in A p r il ; aside from irregular fluctuations, however, this index has been at virtually the same level throughout the past year, as the preceding diagram indicates. A n increase in May was shown also in the seasonally adjusted index o f advertising, and the num ber of business failures was smaller than in the preced ing month. Net 1935 M ay Mar. 60 60 49 65 94 61 65 51 75 89 60 58 47p 68 p 77 58 59 75 74 77 72 60 85 97 63 69 71 72p 69 60 77 74 64 55p April M ay P rim a ry Distribution Car loadings, merchandise and m isc., Car loadings, oth er................................ E xp orts..................................................... Im ports..................................................... Wholesale tra d e .................................... . D istribution to Consum er Department store sales, U. S........ Department store sales, 2nd Dist. Chain grocery sales......................... Other chain store sales................... Mail order house sales.................... Advertising................... .••••;......... New passenger car registrations. . Gasoline consumption..................... 68 82 72 63 44 74 68 68 60 79 79 61 62p 70 65 47 65 48 42 r Revised 64 p 72 69 68 65 51 65 84 42 23r 57 46 56 84 37 48 53 83 45 41 54 82 p 43 22r 20 r 55 54 20p 141 185 141r 142 185 141r 136 183 136 General price level * ............. Composite index of wages *.. Cost of living * ...................... . p Preliminary 62 47 55 142 p 185p 141 * 1913 average=100 D e p a r tm e n t S to re T r a d e F or the first half of June, sales of the reporting de partment stores in the Metropolitan area of New Y ork were 0.3 per cent above those of the corresponding period a year ago, but did not show the usual seasonal advance over May. In the month of May, total sales of the reporting de partment stores in this district were 3 per cent below last year, which, however, was a smaller decrease than that reported for the months of March and A p ril com bined. Sales of the New Y ork City stores showed a smaller decline in May than the average fo r March and A pril, while larger decreases were reported by the Rochester, Buffalo, Northern New Jersey, Northern New Y ork State, Southern New Y ork State, and Westchester and Stam ford stores. The H udson R iver V alley and Capital District department stores showed sales below the level o f a year ago, follow ing decreases both in A p ril and in March. On the other hand, reporting stores in New Y o r k ...................................... B uffalo............................................ Rochester....................................... Syracuse......................................... Northern New Jersey................. B ridgeport..................................... Elsewhere...................................... Northern New York State. .. Southern New York S tate. .. Hudson River Valley District Capital D istrict....................... Westchester and Stamford. . . — 2 .9 — 1.8 — 3 .0 + 0.8 — 4 .0 + 3.1 — 9 .1 — 11.4 Per cent of accounts outstanding April 30 collected in M ay Stock on hand end of month 1934 1935 — 3 .2 — 8 .6 — 6 .7 — 5 .9 — 4 .9 + 4 .2 — 1 2 .6 50.1 46.3 43.9 34.9 4 2.3 35.2 3 1.4 50.4 4 8 .4 46.6 38.6 43.7 3 9.8 35.3 — 6.6 — 11.7 — 6.6 —14.1 All department stores........ 3 .1 Apparel stores...................... 3.1 4 7.3 4 .1 4 8.9 W h o le s a le T r a d e General B usin ess A ctivity Bank debits, outside New York C it y .. . . Bank debits, New York C it y .............. Velocity of demand deposits, outside New York C it y ..................................... Velocity of demand deposits, New York C it y .............................................................. New life insurance sales.............................. Factory employment, United States........ Business failures........................................... Building contracts r ..................................... New corporations formed, N. Y . State.. . Percentage change M ay 1935 compared with M ay 1934 Locality (Adjusted for seasonal variations, for usual year to year growth, and where necessary for price changes) 1934 Syracuse and Bridgeport reported advances in sales from a year ago, compared with a slight decline fo r the average o f March and A pril. Sales of the leading ap parel stores in this district were 3 per cent below a year ago, or about the same as the average decline for the previous two months. Department store stocks o f merchandise on hand, at retail valuation, continued to show reductions from last y e a r’s level, which in some departments were quite sub stantial, but apparel store stocks remained slightly larger than a year Total May sales o f the reporting wholesale firms in this district were about 1 per cent ahead of last year, follow ing a more substantial increase in the previous month. Sales of the drug, shoe, paper, m en ’s clothing, and jew elry concerns registered small advances over the level o f a year ago, but in no case was the gain as large as was shown in A pril. The grocery and diamond firms reported sales slightly below a year ago, follow ing ad vances in the previous month, and hardware concerns had a slightly larger reduction in sales than in A pril. Sales o f the cotton goods and stationery concerns, how ever, showed smaller reductions from a year ago than in A pril. Percentage change M ay 1935 compared with M ay 1934 Comm odity Stock end of month Net sales Groceries....................... M en’s clothing............. Cotton good s............... Silk go o d s..................... Shoes.............................. Drugs............................. H ardware...................... Stationery. : ................. P aper............................. D iam onds..................... Jewelry.......................... Weighted average — 0 .3 + 4 .6 — 12.4 + + — — + — + 4 .8 4 .3 2 .7 2 .1 2 .1 0 .6 1.4 Per cent of accounts outstanding April 30 collected in M ay 1934 1935 + 5 .3 9 9.5 33.1 39.6 63.6 9 4.0 38.4 3 9.7 67.1 — 7 .6 + 3 .9 29'.3 4 7.4 51.3 5 0.4 29 ‘.4 4 7.3 55.7 49.9 + 1 7 .8 — 2 .1 27.4 [ 2 1.8 5 9.0 5 8.7 * * Quantity figures reported by the National Federation of Textiles, Incorporated, not yet available. FEDERAL RESERVE BANK OF NEW YORK MONTHLY REVIEW, JULY 1, 1935 B u s in e s s C o n d it io n s in t h e U n i t e d S t a t e s (Summarized by the Federal Reserve Board) HERE was a further slight decline in industrial production in May and factory employment and payrolls also showed a decrease. Activity in resi dential construction continued to be above the level of a year ago. T P r o d u c t io n Index Number of Production o f Manufactures and Minerals Combined, Adjusted for Seasonal Variation (1923-25 average = 100 per cent) Index o f Factory Employment with Adjustm ent for Seasonal Variation (1923-25 average = 100 per cent) 500 400 and E m ploym ent Volume of industrial production, as measured by the Board’s seasonally adjusted index, declined from 86 per cent of the 1923-25 average in April to 85 per cent in May, which was the fourth consecutive month of gradual decline from the recent high level of 90 in January. At steel mills output declined some what in May and the first three weeks of June, as is usual at this season. In the automobile industry, where output this spring has been at a level substan tially higher than in other recent years, production showed a marked decline in May, reflecting in part the effects of a strike. At cotton mills there was little change in activity, while at woolen mills production increased further, contrary to seasonal tendency. Production of shoes declined seasonally. Output of coal, which has fluctuated widely in recent months, reflecting partly developments in the labor situation, showed a marked increase during May and the early part of June. Factory employment and payrolls declined between the middle of April and the middle of May. Decreases in employment were reported for the automobile, radio, lumber, clothing, cotton, silk, and shoe industries, while at woolen mills employment increased and in many other lines little change was reported. Value of construction contracts awarded, as reported by the F. W. Dodge Corporation, was about the same in May as in April. Residential work con tinued in excess of a year ago, while the volume of contracts for public projects was smaller than in the corresponding month of 1934. Department of Agriculture estimates based on June 1 reports indicate that conditions for wheat, oats, barley, rye, hay, and pastures were at the ten year average for 1923-32, in contrast with conditions a year ago, which were unusually poor as a consequence of a prolonged drought. The winter wheat crop this year is estimated to be somewhat larger than last year and, with a considerable increase indicated for spring wheat, present conditions, according to the Depart ment of Agriculture, suggest a total crop of about 670,000,000 bushels as com pared with 496,000,000 bushels last season and a ten year average of 828,000,000 bushels. Domestic stocks of wheat have been materially reduced this season. D is t r ib u t io n A 300 v ^A tot *L ^ V A L L 01 200 s v\ 1 RESIDE s lT IA t> 11 i i Total volume of freight car loadings increased in May by about the usual seasonal amount. Coal shipments showed a marked increase, while loadings of miscellaneous freight declined. Department store sales, as measured by the Board’s seasonally adjusted index, increased from 73 per cent of the 1923-25 average in April to 76 per cent in May and were at approximately the same level as a year ago. Co m m o d it y P sJ/ u 1929 1930 1931 1932 1933 1934 1935 Value of Construction Contracts Awarded (Three month m oving averages o f F. W . Dodge Corporation data for 37 Eastern States, adjusted for seasonal variation) PERCENT r ic e s The general level of wholesale prices, which was 80.3 per cent of the 1926 average at the end of April and also in the week ended May 25, had declined to 79.8 per cent by the week ended June 15, according to the index of the Bureau of Labor Statistics. Grain prices decreased considerably during May and the first half of June. Cotton prices, after a sharp decline at the end of May and a subsequent increase, also were lower in the middle of June than at the begin ning of May. Prices of commodities other than farm products and foods as a group advanced slightly during this period. B a n k Cr e d it Group Price Indexes of the Bureau of Labor Statistics (1926 average = 100 per cent) During the five weeks ended June 19 reserve balances of member banks increased by $175,000,000 as a result of gold imports, offset in part by an in crease in Treasury cash and deposits with the Reserve Banks. Excess reserves of member banks on June 12 were above $2,500,000,000 for the first time, but declined somewhat in the following week. At reporting member banks in leading cities there was an increase of $540,000,000 in net demand deposits in the four weeks ended June 12, due in part to gold imports. Time deposits declined by $150,000,000, of which $70,000,000 represented a decline at New York City banks consequent upon a ruling of the New York Clearing House in May prohibiting the payment of interest on new time deposits maturing in less than six months. Total loans and investments of reporting banks showed no important changes. Short term open market interest rates continued at low levels in May and the first half of June.
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