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MONTHLY

REVIEW

Of Credit and Business Conditions
I n

By

th e

Federal

th e

S e c o n d

Reserve

F e d e r a l

Agent,

R e s e r v e

Federal

D is tr ic t

Reserve

Bank,

New

York

New York, June 1 , 1922

Credit Conditions
E V IV A L in many lines of business, which has be­
come increasingly well-defined in recent months,
is not yet reflected in an increased demand for
bank loans for commercial purposes. On the contrary,
the volume of commercial loans in New York City banks
still has a tendency to decline, though at a moderate
rate, and the demands of member banks upon the Fed­
eral Reserve Banks are at a minimum.

R

These small requirements for commercial credit are en­
tirely in accord with experience during previous periods
of recovery from business inactivity. The situation in
respect of bank credit is precisely the reverse of the con­
ditions which prevailed during the latter half of 1920.
Then, business men in protecting themselves during the
early stages of business reaction, borrowed not only for
current needs but were obliged in many cases to grant
extensions of loans owing to them by their customers,
and to ask for extensions of loans owing by them to their
banks. In consequence bank loans throughout the coun­
try did not reach maximum until about nine months
after the tide of business activity had turned.
Now, on the other hand, reviving business has made
possible the further liquidation of slow loans, thereby
tending to reduce the volume of commercial credit out­
standing. Moreover, many business concerns, through
the period of inaction, have accumulated readily avail­
able funds which have remained on deposit in the banks
or have been invested in the most liquid form of credit
instruments, such as bankers acceptances and Treasury
certificates of indebtedness. Such investments, because
of their very liquid character, will enable business con­
cerns immediately to obtain cash for use as their needs
expand, and so postpone the time when borrowing be­
comes necessary. It is true also that at present the rate
of turnover of deposits in New York City banks is more
rapid than a year ago, and instead of showing a sea­
sonal decline since January 1, as occurred in each of the
three preceding years, it has shown a considerable in­
crease. Thus it appears that bank deposits are carrying
an increasing load of business without requiring an
added volume of loans.
Just as the maximum demand for commercial credit
came some months after business activity had started to
decline, so a limited demand for commercial credit now




prevails some months after business conditions have
started to improve. The diagram on this page which com­
pares business activity with the volume of commercial
loans, illustrates these relationships. The measure taken
to show business activity is the volume of debits to indi
vidual account— that is, the total amount of checks
drawn on the accounts of individual depositors— reported
by 141 clearing house centers throughout the United
States. In the line showing business activity the effect of
the seasons is plainly marked; in the spring of each year
the tendency of the line is downward and in the autumn
upward, and the incidental dips and rises occur at very
nearly the same relative periods of each year. The high
point since 1919 was reached in the early part of 1920,%
and if allowance is made for the effect of the seasons, it*
will be seen that there was a decline until the late sum­
mer of 1921. Since then the tendency has been upward.
Contrasted with the line for business activity is a line
showing the commercial loans of about 800 member
banks in principal cities representing about 45 per cent.
CHECKS DRAWN
BILLI0M5

LOANS
B1LU0N5
15

J — -----------— --------- —

MMERCIAL

LOANS

>
\
\ /\
-V -/ \

M

A
^

\ J

\

f\
/

V

\
\i / A - ' X \

/

/ " '

JK CHECKS DRAWN

1920
The Course of Commercial Loans of Reporting Banks in the
United States Compared with Changes in the Volume of Checks
Drawn on Banks in Clearing House Centers

2

M ONTHLY

R E V IE W

of the total banking resources of the country. This line
reached its maximum in the early autumn of 1920 and
then declined consistently until the latter part of 1921,
since when the rate of decline has been somewhat smaller.

Bill Market

A s an indication of present tendencies in commercial
borrowing, it will be of interest to note that the amount
of commercial paper outstanding, as shown by reports
made to this bank by principal dealers, has been increas­
ing since last December and is now over $100,000,000
above the amount outstanding at that time. A diagram
illustrating these figures is given on this page of the
R e v ie w .
The increase reflects to some extent the usual
tendency in periods of easier money for commercial con­
cerns to borrow in the open market rather than to take
advantage of lines of credit at the banks, and also the
tendency on the part of some such concerns to borrow in
the open market for the purpose of paying bank loans.
In New York City, the course taken in recent months
by the commercial loans of member banks, has been in
general the same as that in the country as a whole. Since
the high point of $4,154,000,000 reached on October 8,
1920, these loans have declined to $2,734,000,000 on May
17, 1922. In sharp contrast with them is the increase
in the volume of loans on stocks and bonds. Since last
September the increase has been $412,000,000, reaching
a point on M ay 17 of $1,452,000,000. This large rise is
owing not only to the activity of the stock and bond
markets, but to the large volume of new securities which
have been issued in recent months. The loans are higher
now than at any time since the active period of Stock
Exchange trading in the autumn of 1919.

mained at that figure throughout the month in spite of
slightly firmer conditions in other money markets. Bills
sold somewhat more slowly than during previous months
this year, due to the coincidence of low bill rates with
firmer Stock Exchange call money rates, and to the con­
tinued better yield offered by Treasury certificates.

Savings Bank Deposits
Withdrawals exceeded new deposits between A pril 10
and May 10 in twenty-five of the thirty reporting sav­
ings banks in the Second Federal Reserve District. The
decrease in deposits is normal for this period of the year
and probably reflects spring and Easter buying.
C E N T . ___________________________________________________________________________________________

Offering rates for bankers bills declined an additional

Ys of 1 per cent, early in May to 3 y8 per cent, and re­

A s a result of generally firmer money conditions in the
first week of May many short bills and bills approaching
maturity were offered by commercial banks and dealers ’
portfolios increased substantially. This increase in hold­
ings combined with slack demand led to a temporary ad­
vance in bid rates by % to 3 % per cent., which soon re­
verted to 3 % .
Bills drawn to finance the export of cotton were most
numerous of new offerings with those drawn against
sugar imports next in importance.

Commercial Paper
Competition among dealers for the limited amount of
paper available resulted in late April and early May
in the offering of a considerable volume of high grade
paper at 4 per cent., and some sales were made both in
New York City and in the outside market. A t this rate,
however, there was little demand, and later in M ay prac­
tically no business was done below 4 ^ per cent., the pre­
vailing rate.
In New York City, the demand for paper, while in
moderate volume, was sporadic, as there were seldom
more than a few of the larger buyers in the market at
the same time. W ith rates on customers7 loans at banks
prevailingly 5 per cent., and with tax exempt Govern­
ment notes and municipal short term securities available
on a 4y2 per cent, or slightly higher basis, after allowing
for tax exemptions, many buyers showed reluctance to
buy commercial paper in volume. In the interior, the
prevailing rate was % of one Per cent, higher than in
New York City and on the Pacific Coast.
MILLIONS Of
DOLLARS

1*^137

NELW YORK

C IT Y

^
i—

r

^'‘ x - * ____ ,

^

^ ^ & U T 5 I0 I
rNEW YORK Cl' rY

1913 AVERAGE

1916

1919

192,0

192.1

\QZZ

Deposits of 15 Savings Banks in New York City and 15 Savings
Banks in the Second District Outside New York City. (Average
Deposits in 1918=100 per cent.)




Commercial Paper Outstanding— Twenty-nine Dealers

FEDERAL

RESERVE

Notwithstanding more active business conditions in
many lines, dealers report no appreciable general in­
crease in the demand for money and attribute the in­
crease in the volume of commercial paper outstanding
largely to sales of commercial paper for the purpose of
liquidating bank loans. The accompanying diagram, car­
ries through April the record of outstanding paper of
dealers who report regularly to this bank. In part, the
increase shown by the A p ril total was due to consolida­
tion with a reporting dealer of two firms which hereto­
fore were not reporting to this bank.

Stock Market Money Rates
Except for a period early in May, money was offered
on the Stock Exchange in heavy volume during the thirty
days ended May 20, and rates showed no reflection of the
growing demand from borrowers. For a time after the
first of the month, call loans averaged 4 to 4 % per cent.,
apparently influenced on the one hand by the usual May
1 payments, and heavy new financing, and on the other
hand by a temporary interruption of the movement of
funds towards New York. B y the third week, however,
the rate was again 3
per cent., as in the latter part of
April, and on May 19 touched 3 per cent, for a few loans
for the first time since March 17.
Time money likewise became firmer for a time after
May 1, and rates for the longer maturities rose by ^4 to
4 x/2 per cent. However, accompanying the later decline
in call loan rates, heavy time money offerings caused
rates for the nearer maturities to fall below 4 per cent,
for the first time since 1917, and established a new range
at 3% to 4*4 per cent., according to maturities.

Stock Market
In late April and early May, the stock market passed
through a period of hesitation, following the rapid
advance of preceding months. Prices lost temporarily
their forward impetus, and there was a diminution in
the volume of trading. Selling pressure resulted, how­
ever, in no general price reaction, and in the third
week of May pronounced ease in money was accom­
panied by a resumption of heavy trading at rising
prices.
Representative stock price averages reached
again new high levels for the year.
A pril trading involved 30,000,000 shares, the largest
volume since October 1919. On no full trading day dur­
ing the month did transactions fall below a million shares,
and on April 17 they exceeded 2,000,000 shares. A fter
a temporary recession early in M ay the daily rate of trad­
ing has again nearly equaled the April average.

Stock Clearing Operations
On two occasions in the past, attention has been called
in the R e v i e w to the extent by which the operations of
the Stock Clearing Corporation have reduced the volume
of bank clearings and certifications arising out of Stock
Exchange transactions. A s previously explained, these
savings have been accomplished partly by a perfected
method of settling balances of cleared securities, and
partly by a plan for the clearance of loan transactions
between lenders and borrowers.




AGENT

AT

NEW

3

YORK

The following figures supplied to this bank by the Stock
Clearing Corporation for April, when stock trading was
exceptionally heavy, show the reduction effected in the
volume of checks and certifications required for settling
stock exchange transactions. The table shows for April,
exclusive of the 28th and 29th, transactions for which
were cleared May 1, the total amount of checks and cer­
tifications that would have been required under the old
system, compared with the actual figures.
Former
Method
Certifications required.
No. checks required...

Present
Method

Reduction

$1,214,966,840 $304,614,980 $910,351,860
92,054
96,711
4,657

The clearing of security balances has been in progress
since April 1920, and the clearing of loans since March
1921.

Bond Market
Heavy as was the volume of bond trading in March,
the trading in A pril was even larger. Transactions in
bonds other than United States Government securities
on the New York Stock Exchange in April amounted to
$287,000,000, the largest ever reported and more than
three times as large as in. April 1921.
Transactions
in corporation and foreign issues exceeded transactions
in Liberty bonds.
In the first part of May, slightly firmer money condi­
tions, irregularity in stocks, and some congestion of new
issues caused trading to diminish somewhat, and like­
wise checked temporarily the rise in prices. A represen­
tative average of high grade corporation issues reacted
about half a point from the hig;h levels previously
reached, and issues of more speculative character showed
sharper declines. However, accompanying the higher
stock prices and lower money rates of the third week,
prices steadied and again showed a forward tendency,
and trading became more active.
Foreign issues, which had advanced rapidly since the
first of the year, were subjected with corporation bonds
to some profit taking, probably due in the case of some
issues largely to developments at the Genoa financial
conference. Practically all issues showed losses of a
point or more. Among European issues French bonds
reacted most sharply and generally showed declines of
about 3 points from the April high mark.

United States Government Securities
After four active Liberty issues reached par or slightly
above about the middle of April, prices settled back to
an average of approximately a quarter of a point under
par, and trading became less active. During the first
three weeks of May, prices varied at the extreme not
more than 50 points and the range was generally within
still narrower limits. Victory notes shared in moderate
declines from the highest levels.
April transactions in Liberty and Victory issues on
the New York Stock Exchange amounted to $183,000,000,
considerably less than in previous active periods, but
there was also heavy trading outside of the Stock E x ­

4

M ONTHLY

change. In May, trading both on the Exchange and in
the outside market became quieter.
Outstanding issues of Treasury certificates and notes
were also in quieter demand during May, and offering
rates rose slightly above the lowest levels reached in
April. In the third week, an easier tendency was again
apparent, particularly in the issues maturing June 15,
which fell to a 2.88 per cent, yield. The six-months
3/^2 per cent, issue, which was offered last April at the
lowest rate since 1917, continued to be quoted at a slight
premium.

New Financing
Offerings of new securities during most of April were
exceptionally heavy, exceeding $658,000,000. Domestic
corporation issues, amounting to over $309,000,000, were
the leading group in point of volume, but other groups
were likewise unusually active. Foreign issues, totaling
over $210,000,000, were larger even than the March total,
while domestic State, county, and municipal offerings, at
$139,000,000, were next to the largest ever reported for
a single month.
Activity continued undiminished through the first
week of May, but thereafter slackened perceptibly in con­
junction with a moderate reaction in outstanding bonds
and other evidences that the flow of new issues had been

R E V IE W

somewhat too rapid for complete absorption. That no
serious congestion had occurred, however, was indicated
by a quickened demand for issues in the third week of
the month.
A feature of the market recently has been the reap­
pearance in volume of large scale corporation financing.
Between April 1 and May 20, six corporation issues were
sold for sums of $20,000,000 or over. A further notable
offering of early May was $75,000,000 Federal Land
Bank 10-20 year 4 % s at par, compared with a yield of
4.70 to 5 per cent, on a similar issue sold in February.
Not only was this entire amount quickly sold, but an
additional $42,000,000 was taken and disposed of by the
distributing syndicate.
Foreign financing decreased in May, and totaled about
$25,000,000 during the first three weeks. The largest
offering was £2,000,000 United States of Brazil Corfee
Security Loan, part of a £9,000,000 issue sold jointly in
New York and London.
The accompanying diagram brings into comparison by
four months ’ periods the volume of foreign securities sold
in the New York and London markets since the begin­
ning of 1921. The figures for the New York market were
compiled by this bank, while those for London were com­
piled by the London Joint City & Midland Bank, Ltd.,
and have been converted into dollars at current monthly
averages of exchange rates.

Gold Movement
52,4

Gold imports during April amounted to $12,244,000,
the smallest monthly figure since February 1920 when
$4,473,000 was received. Imports for the first four
months of 1922 totaled $101,004,000, compared with
$244,195,000 for the same period of 1921.
Exports of gold were $1,579,000, of which $777,000 was
shipped to British India. The sources of imports are
shown in the following table.
(000 omitted)
Monthly
Average
1921

First
Quarter
1922
$18,799
28,035
5,294
2,676
9,951
10,310
4,802
8,893

$1,855
1,588
1,955

All Other..........................

$16,841
5,530
3,071
1,168
15,891
453
128
14,524

1,945
3,740

$20,654
29,623
7,249
2,676
11,112
10,310
6,747
12,633

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

$57,606

$88,760

$12,244

$101,004

Country

Sweden.............................
Australia..........................

April
1922

l ’ ieii

Total
1922

Foreign Exchange

JAN.™
APR.

MAY to
AUG.

SEPT.to
DEC.

------------------- 1 9 E 1 -------------------------

JAN.™
APR.
19££

Volume of Foreign Financing in the United States and in the
United Kingdom, in Millions of Dollars (Pounds converted at
Current Rates of Exchange).




The major European exchanges, with the exception of
sterling, declined slightly during the past month. Ster­
ling maintained its strength and advanced four cents to
$4.45, a new high quotation since July 1919. In sympa­
thy with the strength in sterling and more directly as a
result of the recent sale of Canadian bonds in this
market Canadian exchange advanced to within 1 per
cent, of par value.

FEDERAL RESERVE

Heavy purchases of bar silver for Chinese and Indian
account caused an advance of five cents an ounce in the
price of foreign bar silver and exchange rates on India
and China made further gains. Chinese demand for sil­
ver was reported to be due to purchases by banks to
replenish silver holdings depleted by withdrawals on
account of the civil war. The foreign trade figures of
India showed a favorable balance in March for the first
time in practically a year and recent importations of
silver have reflected this favorable balance.
The following table shows the changes of the month
in the principal exchanges.

Country

May 20
Last

England...........................
France.............................
Italy.................................
Germany.........................
Belgium...........................
Holland...........................
Switzerland.....................
Spain...............................
Sweden (Stockholm). . .
Argentina.......................
Brazil...............................
Japan (Yokohama). . . .
China (Hong Kong). . .
China (Shanghai)..........
India...............................
Canada...........................
Bar Silver in New York

4.4475
.0906
.0511
.0033
.0830
.3876
.1904
.1585
.2570
.3607
.1368
.4740
.5938
.8138
.2919
.9913
.7325

Change
from
April 20

Per Cent.
Depreciation
from Par

+ .0375

-.0 0 2 1
- .0 0 2 5

-.0 0 0 1
- .0 0 2 6
+ .0094
-.0 0 3 9
+ .0032
- .0 0 2 8
+ .0079
+ .0013
-.0 0 0 5
+ .0300
+ .0575
+ .0131
+ .0138
+ .0525

53.1
73.5
98.6
57.0
3.6
1.3
17.9
4.1
15.0
57.8
4.9
40.0
0 .9

* Silver Exchange Basis.

Gold Reserves and Exchange Rates
While there are a great many influences which deter­
mine the rates of exchange between different countries,
one of the fundamental factors is the extent to which
paper currency is supported by gold reserves. The ac­
companying diagram has been drawn to show for the
countries for which figures are available, the ratio of the
gold reserves held by central banks to the currency in
circulation, and the rates of exchange of the currency of
those countries in New York. The figures shown are for
RATIO OF GOLD TO NOTES

JAPAN
I SWITZERLAND
INETHERLANDS
SPAIN
DENMARK
SWEDEN
U. KINGDOM
NORWAY
FRANCE
ITALY
B
a BELGIUM
FINLAND
PORTUGAL * j
i GERMANY s

m)

Ratio of Gold Reserves of Central Banks to Paper Currency in
Circulation compared with the Relation of Exchange Rates to
Par Value (March 1922)




AGENT

AT

NEW

YORK

March, since that is the latest date for which compar­
able figures are available for all of the countries.
It is clear that there is a close correspondence between
the ratio of gold reserves to note circulation and ex­
change rates. The correspondence is particularly no­
ticeable in countries where the gold reserve has fallen
below 35 per cent, of the face value of paper currency.
The figures shown for the ratio of gold to notes are sub­
ject to the qualification that no account has been taken
of variation in deposit liabilities, against which gold re­
serves may in part be held.

Foreign Trade
A s far as can be judged from reports of individual
manufacturers and exporters in this district, the ten­
dency towards a gradual increase and broadening in
the foreign demand for American products continued
during May. This was particularly true of demand
from South America and Australia. In the Far East,
on the other hand, buying was somewhat less active,
especially in Japan, where prices have recently been
somewhat unstable.
The situation in several leading export commodities
may be summarized as follow s:
Foreign steel demand is quieter, due to decreased buy­
ing by China and Japan, where business heretofore has
been active. Lessened activity in these quarters is partly
offset by larger demand from Mexico and South Amer­
ica, particularly Argentina, Brazil, and Chile.
Automobile exports have been increasing rapidly.
Manufacturers of several of the less expensive well
known makes report demands beyond capacity to fill.
England is an active market, and other countries of E u ­
rope and South America are buying more generally than
a few months ago.
Copper has continued to sell actively abroad, with the
Orient, Germany, and France as leading purchasers.
Cotton goods are in good demand in South America.
The Levant, however, is a quiet market, due to Greek
financial difficulties, and China and the Philippines have
bought only sparingly.
Demand for raw cotton became more active in Europe,
but buying in Japan was slow. A pril cotton exports
were 598,000 bales, an increase of 137,000 bales com­
pared with the March total, and the largest total since
December.
Foodstuffs exports were generally smaller in A pril
than in March. W heat exports, at 4,855,000 bushels,
were the smallest since April 1920. In the past ten
months, wheat exports were 23 per cent, less than in the
corresponding period of last year. Corn, rice, flour,
oats, lard, meats, and condensed milk were also shipped
in smaller volume in April.
The total value of all exports from the United States
during April, according to the preliminary statement
of the Department of Commerce, was $11,000,000 less
than in March. Exclusive of the total for March, how­
ever, exports were the largest since last October.
Accompanying the small decrease in exports was a
larger decrease in the value of imports. In consequence,
the excess of exports rose to $104,000,000, the largest

M ONTHLY R E V IE W

6

since October. Factors in the lower import total were
smaller arrivals of sugar, rubber, and petroleum. Silk
and coffee imports were larger.
The following table shows by months the totals of ex­
ports and imports and the excess of exports since
January.

Month

Exports

January........................... $279,000,000
251,000,000
February.........................
330.000.000
M arch..............................
321.000.000
April.................................
T o ta l............................... $1,181,000,000

Imports

PER CENT,
-700---------

Excess
Exports

$217,000,000 $62,000,000
35.000.000
216,000,000
74.000.000
256.000.000
217.000.000 104,000,000
$906,000,000 $275,000,000

World Wholesale Prices
W ith each succeeding month, the downward movement
in the general level of world wholesale prices has be­
come less definite, and during April further declines in
some countries were accompanied by a number of gains
in others. In the United States, Great Britain, France,
Canada, and Sweden, price indices were unchanged or
showed advances. In Japan, Italy, and Norway, the
downward tendency continued, and there were renewed
recessions in Denmark and Peru.
W ith the exception of Germany, where prices again
advanced, though at a somewhat slower pace than in
preceding months, the changes in either direction in most
countries were of moderate character. The following
table shows the recent changes from month to month in
price indices of the various countries.

0

1915

1916

1917

1916

1919

19E0

192.1

192E

Wholesale Commodity Prices in Four Countries (Average Prices
in 1913=100 per cent.)

Domestic Wholesale Prices
In the United States, prices tended upward during
A pril and May. The average of prices for the whole
month of April, however, was nearly identical with the
average for March according to the Department of Labor

(Base 1913 = 100 unless otherwise noted)
P er C ent . C hange D uring
Country

Latest Quotation
February

United States:
20 basic commodities1----Department of Labor___
D im s ..................................
Bradstreet’ s .......................
Great Britain:
Econom ist..........................
Statist.................................
20 basic commodities1___
France.....................................
Ita ly ........................... ............
Japan......................................
Canada...................................
Sweden2..................................
Australia3...............................
Calcutta4 ...............................
Norway5 .................................
Germany6...............................
Denmark7...............................
Holland...................................
Peru........................................

March

April
+ 0 .2
0
+ 1.2
+ 1.5

138
152
139
127

(M ay 20)
(April av.)
(M ay
1)
(M ay
1)

+ 2 .5
+ 2 .0
+ 2 .9
+ 1.5

+
-

159
158
134
314
527
197
166
165
146
182
236
6429
177
162
187

(M ay
1)
(M ay
1)
(M ay 20)
(M av
1)
(M ay
1)
(April av.)
(April 15)
(April 15)
(March av.)
(April
1)
(M ay
1)
(M ay
1)
(M av
1)
(April
1)
(April 15)

+
+
-

+ 0.9
+ 0 .8
+ 0 .3
+ 0.3r
- 5 .2
— 1.6r
- 1.7
- 1.2
- 0 .7
+ 1.7
- 5.1
+ 2 0 .7
- 2 .2
0
- 0 .5

0 .6
0 .2
0 .2
2.3
2.5
1.1
0 .8
2 .4
0
+ 0 .6
- 2 .7
+ 2 3 .6
+ 2 .8
+ 0 .6
4- 0 .5

0.7
0 .7
2.1
0 .6

+
v +
+
-

0 .3
1.1
0 .2
2 .0
1.2
1.5
0
+ 0 .6
- 1.7
+ 1 1 .4
- 0 .6
-

1.6

Per Cent.
Decline
From High

53
44
36
44

July
M ay
M ay
Feb.

49
49
61
47
23
39
37
56
38
17
45
0
56
59
25

April 1,1920
M ay 1,1920
M ay 21,1920
M ay 1,1920
Dec. 1, 1920
March 1920
M ay 15, 1920
Dec. 15, 1918
Aug.
1920
Feb. 1, 1920
Oct. 1,1920
M ay 1, 1922
Nov. 1, 1920
Year
1918
April
1920

Computed by this bank.
2July 1, 1913— June 30, 1914 = 100.
3July 1914 = 100.
4End of July 1914 = 100.
31, 1913— June 30, 1914 = 100.
6Middle of 1914 = 100.
7July 1912— June 1914 = 100.
r-Revised




Date of High

1920
1920
1, 1920
1. 1920

5December

FEDERAL

RESERVE

index. The detailed movements in the various groups
are given in the following table.
(1913 average = 100)

AGENT

AT

NEW

7

YORK

and is based on the cost of erection at different periods of
a representative hotel building constructed by them some
years ago.
PERCENT.

Commodity Group

March
1922

April
1922

Per Cent.
Change

L

1

COST
CONSTRUiCTION

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

128
114
138
159
182
183
202
213
153

127
117
137
160
181
187
201
211
152

All Groups......................................

152

152

-0 .8
+ 2 .6
-0 .7
-1-0.6
-0 .5
+ 2 .2
-0 .5
—0 .9
-0 .7
0

Higher averages for the fuel and lighting and metal
groups are partly explained by advances in coal and iron
and steel, due to the coal strike. A feature of May
prices was a rapid rise in cotton, which reached 21.65
cents a pound in the New York market, the highest price
since November 1920.

Cost of Living
A fractional advance in the cost of clothing was the
only change between March 15 and A pril 15 in the cost
of living index for a wage earner’s family, computed by
the National Industrial Conference Board. The weighted
average for all items of the cost of living is now 154.8,
when figures for July 1914 are taken as a base of 100
per cent.
The index number for the retail price of food issued
by the United States Bureau of Labor Statistics shows
no change in April as compared with March. Decreases
in the price of dairy products and vegetables were offset
by increases in the price of meat. Food costs for the
country are 36 per cent, higher than in 1914.

Apartment Rents and Construction Costs
The following diagram brings up to date a study of
apartment rents and building costs made by this bank
and first presented in the March 1 issue of the R e v i e w .
A continued upward trend in rentals of apartments of
the cheaper type but a definite recession in the somewhat
more expensive apartments is shown for the period Jan­
uary to May 1922. A s a result the curves for rents of the
two types of apartments have tended to come together.
The erection of new apartments at present costs for con­
struction has done more to relieve pressure for moderate
priced apartments than for the least expensive. The in­
dices of rents are based upon reports from eighteen rep­
resentative apartment house owners and operators.
The index of building costs has shown a slight upward
trend since February after sixteen months of practically
unchecked decline. Heavy new construction here this
year has practically exhausted stocks of many building
materials and caused an advance in the prices of certain
basic building supplies such as brick, structural steel, ce­
ment, and lumber. The index of costs used in the dia­
gram was computed by the George A . Fuller Company




— /

RZHT
..
ARARXMENT B..«

'
RENT
kPARTMENT X

......

1917

1914 LEVEL
1916

1919

19E0

X9Z\

19Z2

Rents of Apartments in New York City compared with changes
in the Cost of Building Construction. Apartment A is the Typical
Apartment renting for less than $15 per room in 1920. Apartment
B is the Typical Apartment renting for between $15 and $30 per
room in 1920.

Employment and Wages
Both the New York and the United States Depart­
ments of Labor report minor declines between March
and April in the number of workers employed in rep­
resentative industrial establishments, due mainly to
seasonal reductions in the working forces in a number
of industries, including clothing, shoes, certain branches
of the textile industry and some food products; and to
labor disputes in cotton, silk, and paper mills.
These reports do not include the building trades, agri­
culture, commerce, trade and transportation, in all of
which there have recently been increases in the number
of employees. In the building trades in many localities
there is a shortage of skilled artisans because of the large
amount of new construction now under way. Similarly
an increase in the number employed on farms has fol­
lowed the more favorable outlook due to somewhat higher
prices commanded by farm products.
Reports from employment agencies indicate that re­
cently there has been a decrease in the number applying
for work, and a corresponding increase in the number
of positions available. The number of help wanted ad­
vertisements in the daily papers has shown a substan­
tial increase recently.
There have been no important changes in wage rates
during the past month. Coal and textile strikes con­
tinue. In New York City no new agreement has been
made between the building trades employers and workers
and the old scale of wages is being continued temporarily.
Average weekly earnings in New York State factories,
as reported by the State Department of Labor, were

8

M ONTHLY

$24.15 in April, 42 cents less than in March, due to part
time work rather than to declines in the rates of pay.
Average weekly earnings in this State are now 8 per
cent, below those of April 1921 and 90 per cent, higher
than in 1914.

Production in Basic Industries
The marked increases in February and March in the
rate of production in basic industries were not generally
continued in April, due in considerable measure to
strikes in several industries.
The output of iron and steel was increased slightly
in spite of the coal strike. Bookings of forward busi­
ness by the United States Steel Corporation amounted
on April 30 to 5,097,000 tons, an increase of 603,000 tons
over the March 31 figures.
Conditions in the fuel industry are little changed.
Production of anthracite coal is confined to washings.
Production of bituminous coal by non-union and other
labor is maintaining a level of 4,200,000 tons per week,
as compared with a total output, union and non-union,
of 11,500,000 tons immediately prior to the inception of
the strike. Demand is somewhat stronger and the index
of spot prices at the mine for the week ended May 13
stands at 261 as compared with 171 for the final week
of March. The market, however, is not yet sufficiently
active to call forth capacity production from the mines
in operation. Draft upon coal in storage, the amount
of which on A pril 1 was estimated at 63,000,000 tons,
continues in the neighborhood of 4,000,000 tons per week.
Production of beehive coke which has been declining
is showing a slight increase. Reports indicate a current
daily output of 16,000 tons, as compared with 32,000
tons at the close of March. Total production, beehive
and by-product, for the month of A pril was, however,
only 100,000 tons less than for the month of March.
The output of Portland cement was distinctly larger
than in March, reflecting an unusually large demand
for building construction.
The following table shows monthly production as per­
centages of estimated normal production. In the calcu­
lation of the normals, allowance has been made both for
year to year growth and for seasonal variation.
(Normal monthly production = 100)
1921
Nov. Dec.
Anthracite coal m ined.............
82
74
Bituminous coal m ined...........
67
59
Pig iron production..................
39
45
Steel ingot production.............
53
48
Copper production (m ine)___
19
15
74
76
Tin deliveries.............................
Crude petroleum production... 102 112
Portland cement production.. 102
98
Wheat flour production..........
74
78
Meat slaughtered.....................
77
83
Sugar m eltin gs,...................... 125 144
W ool consumption*.................
94
99
Cotton consumption { .............. 121 113
Lumber production..................
73
89
W ood pulp production............
92
83
Tobacco consumption.............
90
78
Paper (total) production*. . . .
93
88
* Seasonal variation not allowed for.
f Preliminary.
t Revised.
Commodity




Jan.
78
64
44
50
22
85
108
97
85
89
140
91
111
78
85
80
86

1922
Feb. Mar.
99 105
82
89
46
53
58
71
33
46
58 103

H it l l l f

82
105
98
129
92
115
83
90
77
85

104
114
112
142
91
128
93
100
83
100

Apr.

54
73
100

iii
95

i24
80
95
75

R E V IE W

Wholesale Trade
The weighted index of wholesale trade in this district,
maintained by this bank, was 1 per cent, lower last month
than in April 1921. A pril sales show a distinct gain over
March sales, which were 8 per cent, smaller than in March
1921, and over the February figures, which were 13 per
cent, below those of February 1921. There was, however,
considerable variation between the changes shown by dif­
ferent businesses, due partly to the lack of uniformity in
price readjustments.
The following diagram compares A pril sales with those
of April 1921. The width of the bars varies with the
total values of the products handled in the different
lines as reported in the United States Census of Manu­
factures.
APRIL 1%1 SALES

100*

CLOTHING

DIAMONDS
DRUGS

GROCERIES

HARDWARE
JEWELRY
STATIONERY
SHOES

DRY GOODS
MACHINE TOOLS'

Sales of Wholesale Concerns in the Second District in April 1922,
compared with their Sales in April 1921. Width of Bars indicates
Relative Amount of Goods Sold

Sales by manufacturers and wholesalers of both m en’s
and women’s clothing compared most favorably with
sales last year, reflecting heavy sales by department and
apparel stores. W ith the exception of machine tools, the
chief decrease from last year is shown by dry goods
houses, in coincidence with reports by department store
heads that their April sales of piece goods, notions, and
patterns were smaller than a year ago.
Sales by wholesale diamond dealers, which, in previ­
ous years, have proved a sensitive barometer of general
purchasing power, advanced sharply, and were 33 per
cent, above those of last April.
The following table shows the fluctuations in sales dur­
ing the past four years. Sales during April 1921, are
taken as 100 and sales during April of other years are
expressed in percentages of this base.

9

FE D E R A L RESER VE AGENT AT NEW YORK

D ollar V alue

Clothing..................
Diamonds...............
Drugs......................
Groceries................
Hardware...............
Jewelry...................
Stationery..............
Shoes.......................
D ry G oods.............
Machine T ools. . . .
Weighted Average.

of

Sales

Number
of
Dealers April
Reporting 1919

April
1920

April
1921

April
1922

Mar.
1922*

107
709
103
133
113
208
90
176
86
258
124

145
399
105
149
138
247
135
193
134
293
155

100
100
100
100
100
100
100
100
100
100
100

135
133
105
94
93
85
84
83
71
63
99

87
104
111
100
98
87
87
83
86
60
92

17
7
6
42
11
5
6
9
6
4
113

* Expressed as percentages of sales in March 1921.

Department Store Business
Sales by department stores in this district during the
past month were the largest for any April for which
figures are available. They were 2.3 per cent, larger
than in April last year, and 1.6 per cent larger than in
April 1920.
These heavy sales are largely accounted for by the
lateness of Easter, which resulted in the postponement
until April of spring purchases usually made in March.
April sales were nearly 9 per cent, larger than those
of March, whereas the normal seasonal increase between
the two months is less than one per cent.
The number of individual transactions during A pril
was 7 per cent, larger than in A pril 1921. The average
amount of each transaction declined 5.4 per cent, from
$2.95 in April 1921, to $2.79 in April 1922.
Sales of both men’s and women’s ready-to-wear cloth­
ing were substantially larger than last year. Stores that
sell apparel exclusively reported an increase of more
than 8 per cent, in total sales. On the other hand mer­
chants report that sales of cotton, woolen and silk piece
goods, and notions and patterns were somewhat below
those of last year. This shift in sales appears to indi­
cate that many women who made their own clothing
during the period of highest prices of ready-made
clothing are now purchasing finished garments more
freely. Sales of house furnishings, especially furniture
and rugs, are considerably larger than those of last year.
New York stores showed the largest increase in sales
during April, and this was sufficient to offset decreases
reported by stores in other cities. Detailed figures are
shown in the table that follows.
Dollar Value of
Sales

All Dept. Stores..
New Y o r k .. . .
Buffalo.............
Newark............
Rochester.........
Syracuse...........
Bridgeport. . . .
Elsewhere........
Apparel Stores...
Mail Ord. Houses




Stock on hand (Selling
Price)
M ay May M ay May

1,
1,
Apr. Apr. Apr. Apr.
1,
1919 1920 1921 1922 1919 1920 1921 1922
77 124 100 104
87 101 100 102
77 125 100 104
90 105 100 104
82 113 100 100
75
91 100
90
78
99 100
96
80 142 100 102
93
89 100
75
98
77 132 100
85
122 100
99 100
93
81
86
95
112 100 100
83 120 100
99
92 100
79
98
85 112 100 106
64 112 100 113
93 100 108
91
119 137 100 100

Stocks held on May 1 by the reporting stores, at the
selling price, amounted to $110,171,000, an increase of
nearly 4 per cent, over those held on the same date last
year. W hen price changes are taken into consideration
it is evident that the physical volume of merchandise
carried by the stores is considerably larger than that held
last spring. The ratio of stock to sales, however, re­
mains lower than in 1920. In that year the amount of
stocks carried by the department stores was, on the
average, equivalent to four times the monthly sales, or
to put it another way, stock turned over at the rate of
three times a year. In 1921, on the other hand, the
amount of stock carried averaged only 3
times the
value of monthly sales, or the stock turned over at the
rate of 3.6 times a year. The difference between these
figures means a saving of more than 15 per cent, in the
amount of capital required for a given volume of sales.
Recent changes in the direction of larger stocks have not
yet substantially changed the 1921 rate of stock turn­
over.
PER CENT
.150
1
1
DEPARTMEN T
STORES

125

100

75

t\ ! W v
i v
1919
AVER/ iOE

r
A

\
\

r

N IAIL,ORIDER'
H<3U5IES

v,
V

V

f 117

A

/\

!\
\
k !
Vi

V

V

t / A\
V
\ /

f
t

,7 7

50

Z5

0
1919

19£0

1921

19 ZZ

Sales of Representative Department Stores in the Second District
and of Three Mail Order Houses doing a Country Wide Business.
Figures adjusted to eliminate Seasonal Fluctuations.
(Average
Sales in 1919=100 per cent.)

Chain Store Sales
The largest increase in sales of chain stores in April
was made by the five and ten cent stores, sales of which
were 21 per cent, larger than a year ago and the largest
ever made in April. The average sales per store in­
creased 16 per cent.
Sales by chain grocery stores were 20 per cent, larger
than last year, due largely to an increase in the number
of stores owned by the reporting systems. Average sales
per store showed a decline of 0.3 per cent. Detailed
figures are shown in the table on page 10. The column
showing change in sales per store is to be interpreted
in connection with the fact that the new stores estab­
lished tend to be smaller in size than old stores and
hence tend to pull down average sales per store.

10

M ONTHLY

Number of
Stores
Type of
Store
Apr.
1921

Apr.
1922

Ten Cent
G rocery.
S h o e .. . .
Apparel.
Cigar. . .
Drug. . . .

1,598
5,749
199
368
2,196
250

1,660
6,935
373
2,253
253

Total. .

10,360

11,676

202

Per cent.
Change
in Sales
per Store
Apr. 1921
to
Apr. Apr. Apr. Apr.
1919 1920 1921 1922 Apr. 1922
Dollar Value of
Sales

100
100
100
100
100
100

121
120
111

+ 1 6 .1
- 0.3
+ 9 .5

108
92
97

+ 6.6

84

99
140
96
77
92
94

79

110

100

114

84
83
74
60

68

-

9 .9
4 .6

+ 1.0

R E V IE W

and pairs of shoes sold coincided in December, January
and February, and less noticeably in July, of prac­
tically every year is a reflection of special sales at low
prices in those months.
The seasonal demand is marked and consistently reg­
ular from year to year. The spring months— March,
April and May— and the late fall and early winter
months— October, November and December— are the
most active months of the year, while sales are smallest
in mid-summer and mid-winter.
The following table shows the fluctuations in dollar
sales and in the number of pairs sold since January
1919. It also shows the average price per pair. Average
monthly sales during 1919 were taken as 100 per cent,
and sales during each month are expressed as percent­
ages of this base.

Chain Shoe Stores
Reports of the number of pairs of shoes sold each
month, which this bank has received from four corpora­
tions operating 202 chain shoe stores throughout the
United States make it possible for the first time to check
against the figures for the dollar value of sales which
have been presented currently, figures showing the
physical volume of goods sold. The figures are illus­
trated in the accompanying diagram.
The diagram shows in the first place that sales in
April 1922, were larger than for any previous April,
both in dollar value and number of pairs sold. It also
shows that in general there has been less deviation be­
tween the lines representing dollar value of sales and
the pairs sold than might have been expected, and the
dollar value of sales has been a fairly good index of the
volume of sales except at three periods: the spring and
fall of 1920 and the spring of 1921. A t these periods
the prices of shoes were so far above the 1919 level that
the dollar value was considerably above the line show­
ing the number of pairs sold. The total decrease in
average price per pair from A pril and October 1920,
when the highest points were reached, to April 1922,
was about 22 per cent. The way in which dollar sales

Number of
Stores
Operated

Average
Price
per Pair

Dollar
Sales

Sales
(in pairs)

66
57
74
106
102
91
87
104
109
131
131
142

73
62
80
113
108
97
90
98
96
113
116
152

$3.19
3.27
3.27
3.30
3.32
3.32
3.40
3.77
4.02
4.10
3.98
3.31

89
75
125
137
151
130
122
92

89
74
100
98
118
109
112
79

3.53
3.61
4.41
4.92
4.52
4.23
3.83
4.13

1919
February.................
March......................
April.........................

iii

June.........................
July..........................
August.....................
September...............
N ovem ber...............
December................
1920
January...................
February.................
M arch................
April.........................
June.........................
July..........................
August.....................

i35

( C o nt in u ed on n e a t p a g e )

PERCENT.

2.00

150

A

dOLLARS

1
100
PAIRS

50

1919

1 9 2 ,0

1921

1922

Sales (in Dollar Value and in Number of Pairs sold) of Four Corporations Operating 202 Chain Shoe Stores (Average Sales in 1919
=100 per cent.)




11

FE D E R A L RE SER VE AGENT AT NEW YORK

Number of
Stores
Operated

Dollar
Sales

112

September
O ctober...
November
December.

145
139
161

Sales
(in pairs)

82
103
118
156

Average
Price
per Pair

4.81
4.95
4.17
3.64

ings. Contracts for these types constituted 32 per cent,
of total awards in April as compared with 7 per cent.
in January.
The following diagram, based on the F . W . Dodge
Company reports for New York and Northern New
Jersey, shows by types the contract awards for the first
four months of 1922, compared with the monthly aver­
age in 1921.
116

1921
January. .
February.
March___
April........
M a y .........
June.........
July..........
August. ..
September
October. .
November
Decem ber.
1922
January. .
February.
M arch___
April........

86
199

83
148
143
140
131

102

202

78
80

122
117

122
120
100
86

87
104
138

95
126

121

121

155

164

78
79
103
159

79
84

100
145

3.88
3.65
4.30
4.32
4.03
3.87
3.63
3.59
3.87
3.87
3.56
3.36
3.50
3.34
3.64
3.88

A L L OTHER.
EDUCATIONAL
PUBLIC WORKS

BUSINESS

R E S ID E N T IA L

Railway Freight Traffic
Freight car loadings declined sharply in the first week
of April at the beginning of the coal strike, and there­
after increased slightly from week to week. The increase
was due partly to the ore movement on the Great Lakes
and partly to increasing production of coal by non-union
mines, but the most notable gain was in shipments of
merchandise and miscellaneous freight.

AVERAGE

1921

JAN.

FEB.

MAR.

APR.

1 9 2 2

Value of Contracts Awarded for Building Construction in the
Second Federal Reserve District
(Millions of Dollars)

Business Failures

The rate of

movement of merchandise and miscellaneous freight was
larger than at any time since October 1921 and has in­
creased steadily during the past five months.

Volume of Building
More new building construction was started in April

The number of business failures reported during April
in the United States was about 12 per cent, under the
March total, a normal seasonal decrease. This bank’s
index of failures for April which makes allowance for
seasonal changes was slightly lower than for March al­
though still considerably above normal. Weekly reports
for May indicate a continued reduction in the number
of failures.
Average liabilities involved in failures
have been about the same as in the early months of the
year.

than in any previous month for which reports are avail­
able. April building contract awards in New York State
and Northern New Jersey were 30 per cent, larger than

Crop Conditions

those of September 1921 and March 1922, the previous
maximum months.

In the twenty-seven northeastern

States April awards were 20 per cent, larger than in
March, and 11 per cent, larger than in July 1919, the
previous high month.
April awards for residential and business construction
in the New York district, though larger than in previous
months, were a much smaller proportion of total awards
than for some months past, due to a rapid increase in
the construction of public works and educational build-




The May 1 report of the United States Bureau of
Markets and Crop Estimates for the country’s principal
crops indicated that substantially larger acreages of
practically all crops would be planted than in 1921.
Recent advances in the prices of many farm products
have been a factor in increasing the acreage. Large
crops of fruit are indicated except in a few States where
there has been some damage from frost.
Crops of
grapes, cherries, plums, and peaches in the fruit grow­
ing sections of New York State were seriously damaged
by frosts late in April.

C u rren cy

T

D e fe c ts

B e fo r e

H E following is taken from an address delivered
by W . P. G. Harding, Governor of the Federal
Reserve Board, before the Southern Wholesale

D ry Goods Association at Birmingham, Alabama, on
May 10, 1922.

The subject of the address was “ Credit,

Currency and Business. ’ ’
T h e R e c u rre n t D em and fo r

“ S o ft M o n e y ”

There has always existed in this country some latent
sentiment in favor of a paper currency based not upon
gold but upon the faith and credit of the Government.
This sentiment in favor of fiat money, that is, paper cur­
rency issued by the Government as such but not based
on coin or bullion and containing no promise to pay in
coin, has always become more intensified in the periods
of reaction and depression which have followed those of
extreme activity and prosperity.

Before the panic of

1873 there was much agitation for paper money. Later
on, however, the soft money advocates were divided; some
favored a repeal of the Resumption Act and the issue of
more Treasury notes, or greenbacks, while others clam­
ored for the free and unlimited coinage of silver dollars.
The greenback idea was defeated, but in 1878 the com­
pulsory coinage of a limited amount of silver dollars be­
gan and continued until shortly after the panic of 1893.
Following that panic, soft money advocates united
substantially in favor of the free and unlimited coinage
of silver at the ratio of 16 to 1, although there was some
sentiment in favor of state bank notes in addition.

In

due time the economic forces of the country asserted
themselves, and there was gradual and continued im­
provement in commerce and industry. In the course of
a few years the free silver doctrine ceased to be an issue.
W h a t L ed to t h e

1907 P

a n ic

It was realized, however, even during the good times
which preceded the panic of 1907, that there were grave
defects in the banking and currency system of the coun­
try. There were more than 25,000 banks in the United
States, each standing virtually alone. In accordance with
the requirements of law and in order to be able to pay
their depositors, all banks kept certain amounts of gold
and currency on hand and most of them maintained
credit balances with other banks in the larger cities, these
balances being in most cases part of their required re­
serves. In ordinary circumstances, the funds on deposit
with the city banks could be withdrawn in currency by
the country banks whenever they desired, but when busi­
ness and credit conditions were disturbed, and a spirit of
mistrust and suspicion pervaded the country, many banks
would seek to increase the amount of actual cash on hand
in order to reassure depositors who might otherwise wish
to withdraw their money.
It was in those times that the large city banks were
least able to supply the currency, for the available sup­
ply was limited and there was no quick way of increasing




th e

F ed eral

R eserv e

A c t

it. A large part of the circulating medium in those days
consisted of national bank notes which were secured by
Government bonds. Under the law no national bank
notes could be issued by any bank in an amount in ex­
cess of its own capital stock and as many national banks
had already issued their maximum quota in order to real­
ize the small profit obtainable thereby, while others found
it impracticable to acquire the bonds which were neces­
sary to secure additional circulation, it was impossible to
increase the supply of national bank notes rapidly or to
any great extent.
D efenses W eakest W h e n D ang er W as G reatest

Our inflexible currency system had much to do with
the money panic of 1907. Fearing trouble, many of the
25,000 banks sought, each for its own protection, to with­
draw such currency as it could from other banks and pay
out as little as possible to depositors. Emergency meas­
ures could not be resorted to in advance of actual panic,
for they would, in themselves, have produced a panic, and
while steps were taken finally to conserve the cash re­
sources of the banks they came too late to prevent trouble
and the existing banking machinery fell apart into thou­
sands of separate units. Each bank was obliged to rely
largely upon its own cash resources, because, however
willing, other banks felt that they could not surrender
much of their own cash, for by doing so they might im­
pair their ability to meet the possible demands of their
own customers. Thus each bank, in seeking to protect
itself, weakened the banking structure as a whole. The
defenses were weakest when the danger was greatest.
The panic of 1907 convinced the country that some­
thing must be done to prevent similar occurrences in the
future. In the following year Congress created a Mone­
tary Commission which after a long and thorough study
of the banking systems of the world submitted an elabor­
ate report, and a draft of a new banking and currency
bill. During the year 1912 a committee of the House of
Representatives investigated banking methods in this
country and in its report pointed out the fundamental
defects in the system then existing. Early in the year
1913 Congress took up the matter of banking reform in
earnest and the Federal Reserve Act was put upon the
statute books before the close of that year.
No M

oney

P a n ic

S in c e F e d e r a l R e s e r v e A c t P a s s e d

There has been no money panic in this country since
the Federal Reserve A ct became a law. This statement,
in itself, has no particular significance, for less than nine
years have elapsed since the passage of the Act, and there
have frequently been periods of more than nine years
when the banks of the country have been able at all times
to supply the currency demanded of them. But when we
consider the events which have taken place during the
past nine years and what has been accomplished and
prevented by reason of the operation of the Federal Re­
serve system, the conclusion is inescapable that the enact­
ment of the Federal Reserve law was a most conspicuous
example of valuable constructive legislation.