View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

The article on the last paqe describes methods of transferring funds under the Federal Reserve System.

MONTHLY REVIEW
O

f

C

r e
In

B y

th e

F ed eral

d

i t

th e

a n d

B

S e c o n d

R e se rv e

u s i n e s s

F e d e r a l

A g en t,

C

R e s e r v e

F ed era l

o

n

d

i t i o

n

s

D is tr ic t

R e se rv e

B an k ,

N ew

Y ork

New York, June 1,1921
A letter was sent recently to all who receive the Review (excluding bank officers and directors and those who receive it through
a member bank) asking whether they wished us to continue sending the Review. It is assumed that those who received the letter
but did not reply, do not care to receive the Review and their names will be taken from the mailing list before the next issue.
We acknowledge with appreciation the many comments and suggestions for the improvement of the Review received from
readers in replying to the letter.

C r e d it

C o n d itio n s

H E continued improvement of credit conditions in
the past month was manifested in an easing of
the rates for prime paper. The extent of this
easing is shown in the accompanying diagram for three
of the principal classes of paper.
In the first week of M ay commercial paper became
firmly established on a 7 per cent, level, where the rate has
remained. The rate for prime bankers acceptances had
previously reached 5% per cent., and Treasury certifi­
cates were quoted at a slightly lower yield basis. During
the month acceptances and certificates have reacted
slightly, but they remain at lower rates than before the
easing occurred.

T

Call money is now available for the London bill market in
the neighborhood of 5 per cent, as compared with an
average of about
per cent, during February, March
and April.
Lower commercial money rates have been reflected both
in this country and in Europe by a lowering of the dis­
count rates of central banks. The changes reported re­
cently in foreign central bank rates are as follows:
Bank
Calcutta.....................
Swiss Bank.................
London ......................
Stockholm..................
Copenhagen...............
Brussels......................

Date of Change Present Rate
March
April
April
May
May
May

3
6
28
4
5
19

6
ea
&A
63^
5

Former Rate
7
5
7
7
7
5K

COMMERCIAL , f APER
’V

—

\

f

V

BINKERS ACCEPTANCES
%

In the United States six of the Federal Reserve Banks
reduced their discount rates on commercial paper within
the past few weeks as follows:

CERTI FIGATE3 OFIND; ■BT.EDNES5

Bank
New York..................
Atlanta.......................
Chicago......................
Minneapolis...............
Dallas.........................
JAN. FEB. MAR. APR. MAY JUNE JULY AUG. SEPT. OCT. NOV, DEC,' JAN. FEB. MAR. APR. MAY JUNE
19 £ 0

Prevailing Rates in New York City for Prime 4 to 6 Months Commercial
Paper, Prime 60 to 90 Day Bankers Acceptances, and Longer Term 1921
Maturities of Certificates of Indebtedness

A similar easing of rates took place in European coun­
tries. Bank bills in London have shown a gradual decline
since the first of March and are now quoted around 5 %
as compared with an average of about 6 ^ during January.




Date of Change Present Rate
April
May
May
May
May
May

15
5
6
7
10
16

6
e'A
6
6H
VA
m

Former Rate
7
7
7
7
7
7

The other six banks had not raised their discount rates
on commercial paper above 6 per cent. As a result of re­
cent changes eight of the twelve Reserve Banks are now
discounting commercial paper at 6 per cent., and four,
New York, Chicago, Minneapolis, and Dallas, at
per
cent.
As liquidation has gone forward there has been a de­
crease in the demand for funds on the part of prime
borrowers which has been reflected in the growing scarcity

£

MONTHLY REVIEW

of such paper in the open markets. The volume of
commercial paper outstanding, as shown in a diagram
later in this issue of the Review, is smaller than it has
been for many months.
The reduction of bank loans which has been going for­
ward since the first of the year has continued steadily
during the past four weeks. M em ber banks which have
been borrowers at the Federal Reserve Banks have gen­
erally utilized surplus funds to reduce or extinguish such
borrowings. The twelve N ew Y ork C ity banks which
were the largest borrowers early in January have reduced
their loans at the Reserve Bank more than 50 per cent.
The following table shows the changes that have taken
place both in this district and in the country as a whole.

Amount
May 18

Loans of Reporting Banks
All districts...................
New York City............
Earning Assets F. R. Banks
All districts...................
New York.....................
Note circulation F. R. Banks
All districts...................
New York.....................

U n ite d

Decline
from
April 22

The accompanying diagram shows the deposits of eleven
large savings banks in N ew Y ork C ity and ten large sav­
ings banks in the district outside o f N ew Y ork City, which
report their deposits to this bank on the tenth o f each
month. The figures are expressed as percentages of the
average deposits in 1918. M a y reports show a slight
increase in savings deposits in N ew Y ork C ity, but a
slight decrease in centers outside of N ew Y ork City.
PERCENT.

Amount

Per Cent.

10.6
18.1

2,314
657

177
76

1,108
546

32.4
45.4

2,767
719

90
37

638
168

18.7
18.9

in F o r e ig n

C o u n t r ie s

This bank has recently received from banks and private
banking houses in this city reports of their shipments of
United States paper currency to foreign countries, and
their receipts of such currency from foreign countries.
The information was requested with the thought that it
would provide some basis for an estimate of the amount
of United States currency in circulation in foreign coun­
tries, and be of interest likewise in connection with recent
tendencies in Federal Reserve note circulation. The fol­
lowing tabulation of replies, covering the period January 1
to April 80, indicates a substantial balance of imports over
exports. The heavier imports of United States currency,
which is equivalent to gold, probably reflect the same con­
ditions that are causing gold imports. The record of ex­
ports, on the other hand, is probably much reduced by
the impossibility of knowing the amount of currency car­
ried out of the country b y travelers, or remitted b y indi­
viduals through the mails.
Country

Imports

Europe............................................
Mexico and South America..........
Cuba and West Indies..................
Canada...........................................
Asia...................................
Africa..............................................
Australia.......................................
Country not reported...................

$35,121,251
1,773,062
12,257,779
2,318,662
687,239
86,766
3,690
3,405,192

$105,168
1,355,000
9,684,500
20,000

Total.....................

$55,653,641

$11,176,668




S a v in g s B a n k D e p o s its

Decline from High

Millions of Dollars
15,449
180
1,835
4,921
120
1,089

S ta te s C u rre n cy

The exports reported above were shipments made di­
rectly b y the banks of this district. In additipn, this bank
transferred $22,500,082 to the Federal Reserve Bank of
Atlanta for shipment to Cuba in the form of notes for the
account of New Y ork City banks.

Exports

12,000

Deposits of 11 Savings Banks in New York City and 10 Savings Banks
in the Second District Outside New York City, in Percentages of
Average Deposits in 1918
B ill M a r k e t

During the past four weeks the rate on prime 90-day
bills fluctuated between 5 ^ and 5 % . Dealers found it
difficult to maintain sales at the lower figure, and the period
closed with 5% as the ruling rate. In the first week in
M ay when the 5^4 r^te was maintained sales b y prin­
cipal dealers were larger than in any previous week for
nearly three months. Total sales for the month, however,
were approximately equal to the monthly average for the
first quarter.
About one-third o f the bills coming into the market
during the past four weeks were drawn for the purpose
of furnishing dollar exchange. Another third was com ­
posed of bills covering packers’ products, grain, and sugar,
in about equal amounts. In the second week o f M a y the
aggregate of cotton bills increased somewhat, though
these were still in smaller volume than other bills.

FEDERAL RESERVE AGENT AT NEW YORK

On M ay 16 the Federal Reserve Bank of New Y ork an­
nounced that in accordance with Regulation B, Series of
1921, of the Federal Reserve Board, bills of maturity up
to six months, issued in import and export transactions,
might be offered to the Federal Reserve Banks for pur­
chase. Heretofore three months has been the maximum
maturity of acceptance eligible for purchase.
The considerations which led the Board to make eligible
bills of longer maturity are stated b y Governor Harding
as follows: 64(1) The desire to widen the acceptance market
b y meeting the wants of savings banks and similar pur­
chasers of bankers acceptances who are now deterred
from investing in acceptances of longer than three months’
maturity, because of the lack of authority o f Federal R e ­
serve Banks to purchase longer maturities up to six months;
(2) to provide more ample facilities for financing import
and export trade with countries where either normal con­
ditions or present abnormal conditions indicate the de­
sirability of rendering assistance b y making acceptances
of maturities not exceeding six months eligible for pur­
chase b y Federal Reserve Banks.”
T he minimum buying rate of this bank has remained
unchanged at 5% to 6 per cent, for indorsed prime bills
ranging up to 90 days’ maturity.

Lower rates did not stimulate any appreciable increase
in offerings, and dealers had much difficulty in securing
prime paper. Partly because of the shortage of high-grade
paper the volume of sales during the four weeks was small.
The cumulative effect of reduced sales is shown b y the
preceding diagram. The volume of commercial paper of
11 principal dealers outstanding on April 30 was less than
at any other time since this bank has been tabulating the
figures.
S to ck

Early in M a y the ruling rate for prime names in the
commercial paper market declined from 7^2 to 7 per cent.,
and 7 per cent, continued through the first three weeks of
M ay as the prevailing rate. Buyers continued to show a
willingness to buy exceptionally desirable paper below
the prevailing market level. Some dealers reported a con­
siderable volume of sales at 6 % per cent., and occasional
transactions in exceptional paper at 6 ^ and 6 ;^ per cent.
Double name paper was sold as low as 6 per cent. On the
other hand much slow moving paper continued to sell at
7}/£ per cent., and in some cases buyers demanded even
higher rates.
MILLIONS
OF DOLLARS




M oney

R a te s

M arket

Bond trading was somewhat more active late in April
and early in M ay, but there was no important change
in the general price level. Railway bonds showed much
irregularity, first declining under the influence of heavy
new financing and later recovering sharply upon the suc­
cessful placing of the new issues and the rise in railway
stocks. Practically all corporation bond groups reacted
with the stock market.
Foreign government loans rose sharply as a result of the
reparations settlement, and a number of issues, including
Japanese and M exican bonds, and some of the new 8 per
cent, issues, sold at new high levels for the year. Dis­
agreements in Europe over Silesia subsequently caused a
partial loss o f gains made in this group. Mexican issues
were rather sharply lower at the close of the period.
Total bond sales during April, excluding Liberty bonds,
were $94,500,000, which was only slightly larger than the
comparatively low totals of recent months.
U n ite d

Commercial Paper Outstanding— Eleven Dealers

M arket

Call loans were made at 6 j^ to 7 per cent, during the
four weeks ended M a y 20, indicating a slightly firmer
money market than during the preceding period, when
rates on several days fell to 6 per cent, or below. In­
creased demand for collateral loans, resulting from the
brief April rally in the stock market, and unusually heavy
offerings of new securities, were factors which tended to
keep rates at the higher levels.
Tim e loans were on a slightly easier basis. Rates at
the close of the period ruled at 6 ^ to 6 % per cent., com ­
pared with 6 ^ to 7 per cent, a month ago. Business done,
however, continued small.
B ond

C o m m e r c ia l P a p e r

3

S t a t e s S e c u r it ie s

Liberty bonds, like corporation issues, made little
apparent response to somewhat lower money rates.
Except for a temporary dip in prices late in April and
moderate declines again just before M ay 20, the 4 ^ per
cent, issues m oved along a fairly even level. The taxexempt 3^29s declined sharply to a new low point of 88.04.
The total sales of Government war issues on the New
Y ork Stock Exchange during April were $1C8,500,000,
slightly larger than the M arch total but 49 per cent,
less than the amount sold in April last year.
Total subscriptions to the M a y 16 offering of Treasury
certificates of nine months’ maturity at 5 ]/2 per cent, were
more than double the amount offered. Allotments totaled
$256,000,000, of which $100,000,000, or 39 per cent.,
was allotted to this district. Outstanding issues of cer­
tificates continued in active demand on a somewhat lower
yield basis until just before M ay 20, when there was a
slight rise.

4

N ew

MONTHLY REVIEW

F in a n c in g

During the past month new securities were offered in
large volume and met with excellent demand. A joint
offering of $230,000,000 convertible 6 ^ per cent, bonds
b y two important trunk line railroads was the largest
single piece of corporation financing ever attempted in this
country.
The issue was moderately over-subscribed
within a comparatively short period. Following this
issue a number of large industrial issues were brought out.
A good demand for foreign bonds was indicated b y the
quick sale of $25,000,000 twenty-year non-callable 8 per
cent, bonds of the United States of Brazil, offered on a
basis to yield 8J^ per cent.
The minimum yield basis for new offerings of the best
grade was about one-half of one per cent, under the high­
est level. On the other hand, the majority of the con­
cerns which were obliged to secure new funds continued to
pay high rates. Recent foreign offerings have not allowed
the borrower the privilege of redemption in advance of
maturity, as has been customary heretofore.
The total of April domestic capital issues was $391,000,000, the largest for one month since April of last year,
when new issues reached the record total of $472,000,000.
Railway notes and bonds were the greater part of the
total, and stock issues were much in the minority. A
large percentage of the foregoing issues was used to pay off
maturing obligations.
S to ck M a r k e t

In the latter part of April stock prices made their first
substantial advance since early in January. Industrial
shares rose 5 to 10 points above the level which had been
fairly consistently held for three months. Railroad issues
which had been declining since the first of the year made
an even sharper recovery. The advance was gener­
ally ascribed to somewhat easier money conditions and to
a more optimistic estimation of business developments.
In M ay, simultaneously with a reappearance of pricecutting in some industries, industrial stocks lost the greater
part of their advance. Railroad stocks also declined,
though less abruptly than industrial shares.
The higher prices were accompanied b y the most active
trading of the year, and on several days sales exceeded a
million shares. W ith the reaction in the market, trading
slackened materially. For the whole month of April,
sales were 15,500,000 shares, slightly less than the March
total.

While German acceptance of the Allied ultimatum was
an important factor in the advance of rates on London,
Paris, and R om e other influences were the improvement
in credit conditions both here and abroad, continuation
of the heavy gold movement toward the United States,
and the gradual narrowing o f the trade balances against
the European countries. Buying of European exchange for
speculative purposes was also much heavier during the
past month than for some months past, particularly in the
case of German marks which advanced in close corre­
spondence with the rates on Allied countries, gaining
19 points or practically 13 per cent, in the month.
The quotation for bar silver has remained practically
unchanged i£ the last four weeks and rates of exchange
on the Far-Eastern centers have fluctuated within narrow
limits. Argentine exchange declined to a new low early
in M ay and other South-American rates, particularly
exchange on Peru, Chile, and Brazil, continued to show
weakness at times.
The following table shows the closing quotations for
principal exchanges on M ay 21, the change from last
month, and the percentage depreciation from par.

France...................................
Italy.......................................
Spain......................................
Switzerland............................
Sweden (Stockholm).............
Argentina...............................
China (Hongkong)................
China (Shanghai)..................
Japan (Yokohama)...............
Bar Silver in N. Y ................

Change
from
April 23

$3.9663
.0877
.0557
.1347
.0170
.1803
.2360
.3586
.0876
.3127
.4913
.6488
.4825
.8950
.5863

+ .0313
+ .0144
+ .0072
-.0 0 3 7
+ .0019
+ .0072
.0
+ .0102
+ .0130
-.0 0 2 7
-.0 1 2 5
-.0 1 0 0
.0
+ .0050
-.0 2 0 0

Per Cent.
Depreciation
from Par
18.5
54.6
71.1
30.2
92.9
6.6
11.9
10.8
54.6
26.3
*
*
3.2
10.5

*Silver Exchange Basis.
G o ld

Im p o rts

The following table shows in thousands of dollars the
amounts of gold received from different countries each
month since January 1:
Country

F o r e ig n

May 21
Last

Country

Jan.

Feb.

$4,695
17,765

$13,584
9,323

188
2,354
394
1,014
7,225

539
7,500
224
5,008
6,701

March

April

Total

Exchange

Throughout the latter part of April and the first ten
days of M ay sterling, francs, and lire advanced steadily,
discounting the effect of the acceptance b y Germany
of the Allied reparations terms. When the announce­
ment was made on M ay 11 that the Reichstag had voted
to accede to the Allied demands all three of these rates
advanced sharply to new high prices for 1921. Sterling
at $ 4 .0 0 ^ was higher than at any other time since April 5,
1920, while francs at $.0881 were at the highest price
since January, 1920, having gained 20 per cent, in four
weeks. Lire advanced to $.0572, making a gain of over
17 per cent, in three weeks and of approximately 60 per
cent, since January 1.




England........................
Sweden.........................
China & Hongkong. . . .
Netherlands.................
British India................
All other.......................

Total..................... $33,635

$41,241 $16,231
24,075 14,342
4,679 24,859
19,825
158
2,653
3,980
939 11,052
2,059
3,677
6,187 13,842

$75,751
65,505
29,538
20,710
16,487
12,609
11,758
33,955

$42,879 $101,658 $88,141 $266,313

Shipments amounting to $14,000,000 from England in
April consisted for the most part of gold from South
African mines. A considerable portion of the $65,500,000

FEDERAL RESERVE AGENT AT N EW YORK

received from England since January 1 has been gold
shipped from India to New York by way of London.
Gold continued in M ay to come into this port in large
volume.
F o r e ig n T r a d e

Foreign demand for American products has shown no
general revival, but some markets are more active, and
there has been a gradual expansion in the list of com­
modities in demand.
Japan, which was the first country to curtail its pur­
chases here, now appears to lead in renewed buying. Steel
exporters have taken fairly large Japanese orders for some
steel products, notably black sheets, and shippers of
machinery report Japan their best market. The Japanese
have also increased their purchases of raw cotton and
copper during the past month.
There were reports of further sales of cotton goods to
the Far East and Near East.
One exporter reported sales
during the past four weeks of approximately 50,000 bales
of grey sheetings to the Levant, Red Sea ports, India, and
China. Raw cotton exports continued to dwindle, falling
nearly 12 per cent, in April to 340,000 bales. This m 50
per cent, less than in April of last year.
American wheat continued in good demand in foreign
markets, particularly for prompt shipments, as the Brit­
ish coal strike has interfered with exports from Argen­
tina to Europe. The prolongation of the British strike has
caused only a moderate increase in export buying of coal.
Shippers of meats report that orders recently have
amounted to the largest aggregate in many weeks. D e ­
mand for copper showed a marked increase with Germany
and Japan the chief buyers.

5

Demand from South America has remained quiescent.
There is still a large volume of credit outstanding on goods
invoiced at the high prices, but exporters report that col­
lection of overdue accounts is proceeding more satisfac­
torily. A cablegram, dated M a y 16, to the Department
of Commerce reports the declaration of a partial mora­
torium in Peru, but according to a later press cable, the
decree does not affect the collection of foreign drafts.
April exports, as reported by the Department of Com­
merce, totaled $340,000,000, 12 per cent, less than March
figures. Imports showed a further slight gain to
$255,000,000.
The W ar Finance Corporation has just published an
announcement outlining specifically the requirements of
the Corporation in connection with advances to Ameri­
can exporters, banks, bankers, and trust companies, for the
purpose of assisting in the exportation of domestic products.
The Federal Reserve Bank of New York has available
copies of these regulations, which it will supply to in­
quirers upon application.
W h o l e s a l e P r ic e s S in c e 1 7 9 0

The diagram at the bottom of this page compares the
course of wholesale prices in the United States and England
during the past century and a quarter. It indicates that
in the fundamental economic factor of price changes the
history of the two countries has been closely parallel.
The only periods in which prices moved differently in the
two countries were those when a depreciated paper stand­
ard of currency replaced the gold standard. If prices
were shown on a gold basis all major differences would be
eliminated and prices would show astonishingly slight
fluctuations over the major part of the entire period.

P E R C E N T.

300

T----------- \
U N IT E ! > S T A T I :s —
E N G L A S ID ------1
1
1
r
Ij

250

200

4

/

if
il
il
il
il

i / 1
.< i \\ ■..

i n
il
il
il

/
i
I
A /
l\f

150

.... / Y
i
/

if
if
il

hVjL
A

!
------- H
— *>■

A*

/
7

100

50

\\
NAP0LE0 MIC WARS- WAR OF 11>12
SPECIE FAYMENT 5U5PENDI :d

,4

/
x'

ENGLA l\ID 1 7 9 7 ' *0 1821
U .S .
1814-" •0 1818

1810

162.0

1630

1840

1850

N

if
if
if
ll

\

If
II

\\ .
C IV IL V\(AH
vded
O *
SPECI : PAYMEf4 7 SU5PEJ
IN U .S .

18 6 a TO u 179

1860

1870

18 80

1890

P

WDRIO
WAR

1900

1910

Wholesale Commodity Prices in the United States and England Expressed as Percentages of Figures for 1913




I
* .......

19E0

6

MONTHLY REVIEW

Figures for other countries going back over so long a
period are not at present available. Indices for French
and German prices from about the middle of the twentieth
century run so closely with British and United States
indices that on a diagram they are at times scarcely dis­
tinguishable. The evidence clearly points to common
causes affecting prices in all countries.
The index for prices in the United States is a combina­
tion of indices published in the quarterly of the American
Statistical Association b y Alvin H . Hansen for the years
from 1801 to 1840, and b y Carl H. Juergens from 1825
to 1863 ; an index published b y Roland P. Falkner in
the Report of the Senate Committee on Finance (1893)
for the years 1840 to 1891; and the current index of the
United States Bureau of Labor Statistics. A diagram
showing the index from 1825 to 1920 was published in
the Review of December 31, 1920, and a closely similar
compilation of figures for the years from 1810 to 1920
was published b y Ralph G. Hurlin in the Annalist for
April 11, 1921.
The figures for British prices are made up from an index
prepared b y W . Stanley Jevons for the years 1782 to
1817, and the Sauerbeck-Statist index for the rest of the
period. The fact that index numbers compiled b y differ­
ent methods from varying numbers of commodities show
such close correspondence is evidence of the stability and
accuracy of price index numbers as well as of the intimate
relation between price changes in the two countries.

It is equally clear that in many countries there has as
yet been no approximation of adjustment between the
prices of different groups of commodities. This is illus­
trated b y a comparison of the tw o diagrams on this page
which show on the right wholesale com m odity prices in
four countries and on the left, plotted on the same scale,
the retail prices of food in the same four countries. Figures
for the retail price of food are particularly significant
because they are closely indicative of the cost o f living.
In the right-hand diagram the position of Italy and France
is reversed. H igh wholesale prices in Italy were in large
degree the result o f a shortage of coal and raw materials.
In Professor Bacchi’s index number the prices of textiles
and minerals and metals have risen to levels m any times
1913 prices, while the advance in foodstuffs was much
more moderate. In France, on the other hand, foodstuffs
are as far above 1913 prices as any group.
The retail price of food in Great Britain is higher com ­
pared with 1913 prices than is the general level of whole­
sale prices. In the United States the opposite condi­
tion exists, although in the past month the tw o indices
compared have come within two points of each other.
PER CENT.

PERCENT.

Retail Price of Food in Four Countries Expressed as Percentages of
Figures for July, 1914

W o r ld

C o m m o d ity

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

P r ic e s
D o m e stic

Wholesale prices in this country, England, and France
continued downward in April at much the same rate as in
March. As further reports for M arch and April are
received from other countries there is increasing evidence
that the rate of decline of world prices is slackening. The
entire list for M arch shows moderate declines and April
figures thus far received are closely similar. The available
figures are shown in the table on the next page.




C o m m o d ity

P r ic e s

The index number of wholesale prices compiled b y the
United States Department of Labor declined during April
from 162 to 154, or 4.9 per cent. This compares with a
decline of 3 per cent, during March, but is smaller than
the decline in any other previous month since last Sep­
tember. The index numbers for past months since the
high point was reached last M ay, together with the per-

FEDERAL RESERVE AGENT AT NEW YORK

centages of decline each month, are shown in the follow­
ing table:
Index Number
(1913 Average
= 100 Per Cent.)

Month

PERCENT.

400 r

clo thing /

•**

300
May, 1920........................
June, 1920.........................
July, 1920.........................
August, 1920....................
September, 1920...............
October, 1920...................
November, 1920...............
December, 1920...............
January, 1921...................
February, 1921.................
March, 1921.....................
April, 1921........................

\> -

f

Per Cent. Decline
from Preceding
Month

f

f

l

x

\ HOUSE
FURNISHINGS

\

J
/
'''' \ I \
/ / '' \ \

1.1
2.6

1i
H

4.6
3.2
7.0

\

\

\S ''J [ '

8.0
8.7
6.3
5.6
3.0
4.9

f y

W
• \

o

/

\

\ BUILDING

i

\ \
\ \

/

r
\

FARM
\ \
PRODUCTS \ \F00D

✓
__—

\
1913 AVERAGE

The April movements of prices of the different groups
of commodities making up the index number range from
a decline of 0.4 per cent, to a decline of 8 per cent., and
there is no evidence in these more recent changes point­
ing toward stabilization at a common level. The wide
variation between the different groups is shown in the
diagram on this page, which traces the prices of five of the
more important groups since 1917. The spread between
the prices of the highest group and the prices of the
lowest group is greater than at any other time since last
December.
Variations between the price levels of different groups
of commodities may be ascribed to a number of factors,
including the proportion of the price which represents
wages, the proportion which represents transportation

-1917

1919

Wholesale Prices of Certain Groups of Commodities in the United States
Expressed as Percentages of the Average Figures for 1913

charges, the extent to which the demand for commodities
is dependent on a foreign market, and the rapidity with
which stocks manufactured at higher costs have been
turned over. House furnishings, for example, reflect
labor costs fri high degree, and have a much slower turn-

I n d i c e s o f W h o l e s a l e P r ic e s
Base of 1913 = 100 per cent, unless otherwise noted

Per Cent. Change During
Country

United States:
12 basic commodities* .............................
Department of Labor...............................
Dun’s ........................................................
Bradstreet’s ...............................................
Great Britain:
Economist.................................................
Statist ....................................................
25 basic commodities1 .............................
France..........................................................
Italy7 ............................................................
Japan ............................................................
Canada..........................................................
Sweden2 .........................................................
Australia3......................................................
Calcutta4 ......................................................
Norway..........................................................
Germany5......................................................
Netherlands...................................................
Denmark6......................................................

Latest
Quotation
March

April

Date of
High

114
154
138
117

(May 23)
(Apr. av.)
(May 1)
(May 1)

-1 2 .8
- 5.6
- 2.1
- 4.1

—5.5
-3 .0
-4 .1
-4 .1

—3.1
-4 .9
-4 .4
-4 .9

53
43
37
48

May 17, 1920
May
1920
May 1, 1920
Feb. 1, 1920

183
199
175
344
604
190
187
229
181
183
278
130
201
270

(May
(May
(May
(May
(Apr.
(Apr.
(Apr.
(Apr.
(Mar.
(Apr.
(Apr.
(May
(Mar.
(Apr.

-

-1 .5
-3 .2
-8 .2
-4 .7
-1 .6
-2 .1 s
-2 .6
-5 .2
-5 .7
+ 5 .2
-0 .9
-0 .8

-3 .3
-4 .2
-0 .2
-4 .4

41
36
49
41
10
41
29
38
23
16
36
16s
50
33

Apr. 1,
May 1,
Mar. 12,
May 1,
Dec. 1,
Mar.
May 15,
Dec. 15,
Aug.
Feb. 1,
Oct. 1,
May 1,
Av.
Nov. 1,

1)
1)
23)
1)
I)8
av.)
15)
15)
av.)
1)
1)
1)
1)
1)

1Compiled by this bank. 2July 1, 1913 to June 30, 1914 = 100.
6July, 1912 to June, 1914 = 100, 7Bacchi’s new index,
8Revised,




February

Per Cent.
Decline
from High

7.9
7.2
7.6
7.2
4.5
3.0
4.0
6.4
2.0
2.2
9.1
3.7
5.8
3.4

j

3July, 1914 = 100.

-0 .5
-3 .6
-3 .4

-3 .6
4 End of July, 1914 = 100,

1920
1920
1920
1920
1920
1920
1920
1920
1920
1920
1920
1920
1918
1920

5Jan. 1,1920 = 100.

8

MONTHLY REVIEW

over than many other articles.
Building material prices
are considerably affected b y high transportation charges.
Farm products are influenced b y reduced demand from
European countries.
The following table gives the most recent figures for the
prices of all groups of commodities entering into the D e ­
partment of Labor index number.

Commodity Group

Maximum
Level

April
Level

Per Cent.
Decline
from
Maximum

Per Cent.
Decline
from
March

Farm products. . . .
Metals...................
Food, etc...............
Chemicals, etc. . . .
Cloths and clothing
Fuel and lighting..
Building materials.
House furnishings..
Miscellaneous........

246
195
287
222
356
284
341
371
247

115
138
141
168
186
199
203
274
154

53.3
29.2
50.9
24.3
47.8
29.9
40.5
26.1
37.7

8.0
0.7
6.0
1.8
3.1
3.9
2.4
0.4
7.8

All commodities.

272

154

43.4

4.9

In the first three weeks of M ay the index of 12 basic
commodities com puted b y this bank has shown a distinct
upward tendency. The figure for each week has shown
an advance, and the latest index number is 4 per cent,
higher than that for M ay 2. This index is not a measure
of general price level but shows the price movement of
12 major basic commodities which tend to react quickly
to changing economic conditions. The 12 commodities
included are copper ^corn, cotton, hides, hogs, lead, lumber,
petroleum, pig iron, rubber, sugar and wheat.
C o s t o f L iv in g

For the second month there has been practically no
change in the cost of living index for the United States
compiled b y the National Industrial Conference Board.
The index number for M ay 1 is 1 per cent, lower than
April 1, at a point 66 per cent, above the pre-war level.
The only change of importance during April was a decline
of 2.6 per cent, in the retail price of food. The following
table shows the M a y 1 level of the different items of the
index expressed as percentages of 1914 figures, together
with the decline from high and the decline in April.

Items

May 1
Level

Per Cent.
Decline
from High

Per Cent.
Decline
During April

Food.....................
Shelter..................
Clothing...............
Fuel and light. . . .
Sundries................
All items..........

152
171
168
178
185
166

30.6
0.0
41.7
11.0
3.7
19.0

2.6
0.0
0.6
0.6
0.0
1.1

A cost of living index computed by the Massachusetts
Commission on the necessities of life is in close agreement
with that prepared b y the National Industrial Conference
Board. The April index number of the Massachusetts
Commission is 61 per cent, above the 1914 level and 1 per
cent, lower than the M arch figure.




Wages
The process of readjusting wages, reviewed in detail
b y this bank last month, continued with added impetus
throughout M ay. The United States Railw ay Labor
Board announced its decision to order a reduction of
wages of all classes o f railway employees, holding that
“ prevailing conditions justify to some extent, yet to be
determined, a revision downward.” The amount o f this
reduction will be made known on June 1 and the revised
scale will becom e effective on July 1. The decision will
eventually affect 2,000,000 employees.
The United States Steel Corporation announced and
put into effect during the month a reduction of 20 per
cent, in the rates of pay of all of its employees, numbering
approximately 160,000 men. This followed similar re­
ductions b y independent steel companies.
This bank’s survey during April indicated that more than
half of the firms in this district had reduced wages. The
available evidence now appears to show that about threequarters of the workers in this district are affected b y
reductions already made or announced.
In this district the largest manufacturer of shoes re­
duced wages 20 per cent, during the month. Numerous
other plants in various industries announced reductions
varying from 10 to 20 per cent. Farmers in this district
report that they are employing help at m onthly wages
20 to 30 per cent, below those which prevailed a year ago.
The principal groups of workers not yet affected in
large measure are those in the building trades, in the print­
ing and publishing industry, employees of public utility
companies and, in less degree, clothing workers. In the
building trades in N ew Y ork C ity the wage agreement
between employers and unions does not expire until
December 31 and the only change in rates of pay has
been for excavators, whose wages were reduced from
$6 to $4.80 a day. In several up-State cities efforts to
reduce wages in the building trades led to controversies
which have not yet been adjusted. In the printing and
publishing industry, there has been no effort to reduce
wages although the workers have attempted to reduce the
working week from 48 to 44 hours. Public utility com ­
panies have made no announcement o f reductions. Wages
of clothing workers in Rochester were readjusted b y the
substitution of the piece-work system for weekly wage
rates which prevailed last year.
The accompanying diagram shows the trend of average
weekly earnings and employment of factory employees
in New Y ork State and the United States as a whole
during the past six years. Figures for N ew Y ork State
are furnished b y the New Y ork State Industrial Com ­
mission from returns b y about 1,600 industrial establish­
ments employing about 550,000 workers and those for
the country as a whole are compiled from reports of the
United States Department of Labor covering about
1,600,000 workers.
The movement of the curves for the State and for the
country in general is similar. Wages in N ew Y ork State
rose somewhat less than in the country as a whole and in
turn have fallen somewhat less rapidly. The average
weekly wage in N ew Y ork State during April was $26.20,
compared with $26.97 in March, a decline of 2.9 per cent.
The average is now 9 per cent, below the average of last
October, the highest yet recorded.

FEDERAL RESERVE AGENT AT N EW YORK

9

PfftCeNT

Month

Arrivals

Departures

Net Increase

Average, 1910 to 1914
January, 1921............
February, 1921..........
March, 1921...............
April, 1921.................

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

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

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

NEW ' row
STA TE

E A R NING S

w

197

E M P :O Y M I N T

5 ^

During the first three weeks of M ay the rate of immi­
gration was about the same as during April.
V o lu m e o f P r o d u c tio n

Average Weekly Earnings of Workers and Number of{Workers Employed
in Industrial Establishments in New York State and in the United
States Expressed as Precentages of Figures for October, 1915

Available figures for the current production of certain
of the country’s basic commodities show increases in a
number of directions, but no consistent general improve­
ment. The table below shows the production each month
of 1921 expressed as percentages of the average of 1919
and 1920 figures for corresponding months.

E m p lo y m e n t!

Although changes in the number of persons employed
in this district during the past month have been small,
there has probably been a slight decrease. This has been
the result, however, of labor disputes rather than of
reductions in the forces of industrial concerns. The New
York State Bureau of Labor estimates that of about
500,000 idle in N ew Y ork State, 150,000 are unemployed
as a result of labor troubles.
Those out on strike because of wage disputes include
the marine workers at the port of New Y ork and traction
and building workers in up-State centers. In the printing
and publishing industry in up-State cities there is some
idleness because of a controversy as to hours.
Aside from labor disputes, there has been a reduction
in the number employed in iron and steel plants, and in
miscellaneous metal and machinery factories during M ay.
Reports from railroads centering in this district which
employed 330,000 workers a year ago indicate that they
are now employing only 254,000, a decrease of about 23
per cent. On the other hand there was a continued in­
crease in the number employed in textile, clothing and
shoe factories, automobile plants, and the building
trades.
In the factories of the State, the Industrial Commission
reports that during the month of April there was a loss
of 2 per cent, in the number of employees. This loss was
sufficient to cancel the small gains recorded in February
and M arch and the number employed in factories is
now only 1 per cent, greater than in January, when un­
employment was most pronounced.

Commodity
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.

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

Jan.

Feb.

Mar.

April

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

137
85
92
83
66
63
73
41
82
99
79 f

122
75
115
87
49
53
117
47
95
96
91f

118
80
121
78
46
50
87
48*
100
100
96f

^Compared with April, 1920 figure only.
fEstimated on the basis of idle machinery reports.
W o o le n

G oods

Few orders for woolen goods were placed during M ay
as clothing manufacturers had already contracted for
the greater part o f their fall needs. Purchases made
during February and M arch, however, were reflected in
increased manufacturing activity and a greater consump­
tion of raw wool. The Bureau of Markets, Department
of Agriculture, reports wool consumption, in pounds, as
follows:
Month

1920

1921

January............... ..................
February.................................
March.....................................
April........................................

72.721.000
63.738.000
67.709.000
66.935.000

*26,300,000
*31,449,000
*40,828,000
*46,441,000

Im m ig r a tio n

The number of immigrants arriving at the port of New
York during April was slightly in excess of the number
arriving during March. The number of aliens departing
was likewise larger and the net increase through immigra­
tion at this port was nearly the same, as shown b y the
following table.




*Estimated by this bank on the basis of idle machinery reports.

Preliminary reports indicate increased manufacture
during M ay as many mills resumed full time operations.
Deliveries to clothiers of cloth for sample suits have been
made, but deliveries in quantity are still delayed because
of the long period during the winter when mills were idle.

10

MONTHLY REVIEW

S ilk s

V o lu m e

There has been a somewhat less active demand for silk
goods during the past month, due in part to unfavorable
weather and in part to the fact that garment manufacturers
had completed their spring buying. The falling off in
demand was not unexpected and caused no curtailment of
production.
The table that follows shows the changes
reported in the industry in this district during the past
few months.

The light line in the accompanying diagram shows the
volume of building in this district each month since Jan­
uary, 1913, with allowances made for changes in the cost
of construction.
The heavy curved line is a moving
average, drawn to show the general trend, aside from the
more erratic monthly fluctuations. The volume of build­
ing is shown for each month as a percentage of the aver­
age monthly figures for the year 1913.

Month

Per Cent, of
Operations
to Maximum
Capacity

Bales in
' New York
Warehouses at
End of Month

Bales
Imported

November, 1920.......
December, 1920........
January, 1921..........
Februarv, 1921.........
March, 1921.............
April, 1921...............
May, 1921...............

13
21
25
87
49
CO
62

48,357
44,563
31,859
27,923
16,380
20,038

9,285
6,341
9,499
14,361
14,043
35,880

C o tto n

of

B u ild in g

PER CENT

G oods

Merchants are placing orders for f?dl requirements of
cotton goods with greater confidence than in several
months past.
Large purchases of print cloths and
sheetings for delivery within the next sixty days have been
important factors in reducing accumulated stocks carried
by the mills.
The demand for muslins and dress ginghams has also
been good. The largest producers of muslins announced
that their production had been sold for three months
in advance and that this output would be double that of
any previous three months’ period. Large manufacturers
of ginghams have sold their entire production for several
months to come. A better demand for cotton underwear
and cotton hosiery is also reported.
B u s i n e s s F a ilu r e s

In April there was a slight increase in the number of
commercial failures in the United States but it was coupled
with a notable decline in the amount of liabilities reported.
During the first three weeks of M ay the number of
failures averaged practically the same as in April.
The following figures are taken from D un’s reports for
this district and for the entire country.
Number of Failures

Liabilities

Month

Second
Federal
Reserve
District

Entire
United
States

Second
Federal
Reserve
District

Entire
United
States

January........
February.......
March..........
April.............

390
222
248
229

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

$9,808,623
26,836,505
30,830,852
10,471,232

$52,136,631
60,852,449
67,408,909
38,567,769




Volume of Building in New York and Northern New Jersey Expressed
as Percentages of Average Figures for 1913 Light Line Shows Figures
for Each Month. Heavy Line is Average Showing General Trend
Figures for the diagram have been obtained b y dividing
the dollar figures reported b y the F. W . D odge Company
for contracts awarded, b y a monthly index number for
building costs maintained by this bank. The resulting
figures show the amount of construction which took place
substantially as it would appear if we could measure it
by cubic feet or some other measure which is independent
of price changes.
The diagram shows the long decline in building opera­
tions from the fall of 1919 accom panying rising costs of
construction and uncertain business conditions. The
point representing the April figure for volume of building
is somewhat lower than the figure for April last year, but
compares not unfavorably with points reached in the
spring of previous years.
Contract awards in April in New Y ork and Northern
New Jersey as reported b y the F. W . D odge Com pany
amounted to $51,000,000 as compared with $30,000,000 in
March. Of the April awards 55 per cent, were for
residences.

11

FEDERAL RESERVE AG EN T AT NEW YORK
--------------------------------------------------------j ~

R e ta il T r a d e

The dollar value of retail sales during April was less
than one-half of one per cent, below that of April, 1920,
according to reports submitted to this bank b y 42 de­
partment stores. Sales of stores located in New Y ork
City and Brooklyn were 2.8 per cent, below those of last
year, but elsewhere in this district they were 5.8 per cent,
greater.
The number of transactions increased 15.6 per cent., in­
dicating that the volume of merchandise sold continues to
be much larger than last year. The average amount of
each sale, as compiled from reports of about 4,200,000
sales submitted b y the stores that keep such records, fell
from $3.68 in April, 1920 to $3.24 in April, 1921, a decline
of 12 per cent. This decline is probably considerably less
than the average decline in price of the articles sold.

Women’s suits................
Men’s suits.....................
Women’s millinery.........
Women’s hosiery (cotton)
Women’s hosiery (silk)..
Silks and satins..............
Cotton dress goods........
Woolen dress goods.......

34
30
32
27
33
48
43
36

43
38
36
41
48
36
24
16

Shoes (women’s )..............
Shoes (men’s )...................
Shoes (children’s).............
Women’s furs....................
Domestic rugs...................
China and glassware. . . .

The unweighted average of the declines shown b y all
articles is 37 per cent. The National Industrial Confer­
ence Board estimates the decline in the retail price of
clothing between M ay, 1920 and M ay, 1921 at 41 per cent.

The dollar value of sales b y apparel departments con­
tinues to surpass those of last year in spite of the reduc­
tions in price, but sales of house furnishings are falling
somewhat behind. Merchants attribute this latter tendency
to* the limited construction of new houses and apartments
in this district.
Stocks held b y department stores increased 4 per cent,
between April 1 and M ay 1, because of the receipt of the
usual shipments of merchandise at this season of the
year. Retailers continue to buy cautiously, but are
placing fairly large orders for their fall requirements,
especially in those lines in which they believe prices are
becoming more nearly settled.
One of the large stores in this district has furnished this
bank figures for the selling price this month, and in M ay,
1920, of 117 typical articles selected at random through­
out the store. The average percentages of decline shown
b y different major classifications are as follows:

Sales and Selling Value of Stocks on Hand of 33 Department Stores
Expressed as Percentages of Average Sales for 1919

B u s in e s s o f D e p a r t m e n t

S to re s

Month of April, 1921

Number of firms reporting....................................................................
. .
................................................
Per cent, change in net sales during April, 1921 compared with net sales during April, 1920................................
Per cent, change in number of transactions during April, 1921 compared with number of transactions during
April, 1920 (19 stores reporting)..........................................................................................................................................
Per cent, change in net sales from January 1 to April 30, 1921 compared with net sales during corresponding
period in 1920................................................................................
.......................................
Per cent, change in stocks at close of April, 1921 compared with stocks at close of April, 1920...........................
Per cent, change in stocks at close of April, 1921 compared with stocks at close of March, 1921.........................
Percentage of average stocks at close of January, February, March and April, 1921 to net sales during those
Percentage of outstanding orders at close of April, 1921 to total purchases during calendar year 1920................




New York Elsewhere
City and in Second
Brooklyn
District

Entire
Second
District •

42
0.5

14
2.8

28
+ 5.8

-

+16.9

+10.1

+ 15.8

- 3.8
- 2 2 .0
+ 5.1

+ 2.2
-2 0 .7
+ 1.1

- 2.1
-2 1 .6
+ 4.0

322.3
6.7

394.4
5.8

342.5
6.5

-

T r a n s fe r r in g

Funds

U nder

th e

N L Y a few years ago a man in Chicago having a bill
to pay in N ew Y ork would usually buy “ New Y ork
exchange,” in just the same way as a New Y ork
merchant buys London exchange in the course o f overseas
trade. Dom estic exchange was sub j ect to many o f the rules
that govern the foreign exchanges; it fluctuated, was bought
and sold, and registered the ebb and flow of business cur­
rents. Often, as in the foreign exchanges, the shipment
of gold or currency was required in order to settle balances
between different parts of the country. These shipments
were expensive, troublesome, and subject to the hazards
of transportation. There was a normal seasonal m ove­
ment toward the west in the autumn, when the crops were
being m oved, and a flow back to New Y ork in the winter
when goods were being paid for and investments made.
All of this was expensive, not only because o f the cost of
shipment and insurance but because of the unproductivity
of funds while in transit.

O

Under the Federal Reserve system shipments of gold and
currency for the purpose of settling balances have been
almost wholly eliminated. While writers still describe
movements and transfers of funds quite as if shipments
were being made, they refer to transfers accomplished in­
stantly and at par over the wires of the Federal Reserve
system. This method has established complete fluidity
of funds in the United States; there are no longer the
former barriers preventing funds from flowing freely
wherever the demands of commerce, industry, and agri­
culture dictate. Physical shipments are now practically
restricted to the supplying of hand-to-hand currency
for use as till money to member banks b y their Reserve
Banks and to the return to the Reserve Banks of such
currency as is not needed b y the business of the country.
The medium through which balances are settled under
the Federal Reserve system is the gold settlement fund,
consisting at present of about $450,000,000. It is lodged
with the Treasurer of the United States, and constitutes

a part of the gold reserves of the twelve Federal Reserve
Banks. The portion of the fund which each Reserve Bank
Owns changes each business day, and those changes are
recorded on the books of the Federal Reserve Board. The
volume of settlements of all kinds made through the fund
averages nearly $300,000,000 a day, and in the course of the
year amounts to an immense sum. The following table
shows settlements of the Federal Reserve Bank of New
Y ork through the fund each year since it was first operated.
1920..........................................................
1919..........................................................
1918..........................................................
1917..........................................................
1916..........................................................
1915..........................................................

$48,841,000,000
41,933,000,000
32,936,000,000
17,119,000,000
2,335,000,000
556,000,000

The changes in the proportionate ownership of the fund
arise from the transactions between the various reserve
districts which are cleared through the Reserve Banks,
one large element in these transactions being the col­
lection and clearance of immense volumes of checks
representing the daily turnover of commerce and industry.




F ed era l

R eserve

S y ste m

The business and agricultural interests of the country
derive a great advantage from these prom pt settlements.
Suppose a merchant in N ew Y ork deposits in his bank a
check for $50,000 drawn upon a bank in San Francisco.
Formerly the check would travel to San Francisco, where
on arrival it would be charged to the account o f the man
who drew it, and his bank would mail the N ew Y ork bank
a New Y ork check in payment. The $50,000 would not
be available to the merchant at his New Y ork bank until
the check arrived, at least ten, and probably twelve days
after the merchant deposited the original check. N ow
the time is cut at least in half, because the old method of
remitting b y mail across the continent has been eliminated.
T he mail remittance is unnecessary because the San
Francisco bank upon which the check is drawn makes
payment at the San Francisco Reserve Bank. The same day
the funds are transferred through the gold settlement
fund to the New Y ork Reserve Bank which in turn
settles immediately with the bank that had presented
the check for collection.
The gold settlement fund and the private wire system
connecting the Reserve Banks permit also another new
and important service to the commerce of the country.
This service, which is free, provides for the immediate
transfer o f funds b y telegraph at par. Assume that the
$50,000 payment due from the man in San Francisco to
the merchant in N ew Y ork had to be made instantly, and
could not wait for a check to be transmitted through the
mail. His bank would charge his account, and at the
same time instruct the San Francisco Reserve Bank to
telegraph the New Y ork Reserve Bank, asking it to place
$50,000 to the credit of the N ew Y ork merchant in his
own bank. The San Francisco member bank is charged
$50,000 on the books of the Reserve Bank, and $50,000 in
the gold settlement fund passes from the ownership of the
San Francisco to the N ew Y ork Reserve Bank. Thus the
transaction is completed. Usually such transfers are for
large sums; to make a large number of small trans­
fers, which might equally well have been made b y check,
would clog unduly the private wire system of the Reserve
Banks and hamper the efficiency of the service.
The number of wire transfers has been increasing rapidly.
A t the beginning o f 1920 the number of such transfers
made by the N ew Y ork Reserve Bank averaged 363 a
day; at the end of the year the average was 712 a day.
The growth of its use is shown in the following table,
which includes transfers made for the United States
Treasury.

1920.........................
1919.........................
1918.........................
1917.........................
1916.........................

Number

Amount

147,302
82,321
39,099
10,302
2,971

$17,022,000,000
18,245,000,000
19,384,000,000
6,768,000,000
485,000,000