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MONTHLY REVIEW o f C r e d i t a n S e c o n d Federal E eserve A g e n t d B u s i n e s s F e d e r a l F ederal E eserve Bank, N ew Y ork M o n e y M a r k e t in M a y Member bank reserves increased further during the first half of May to a level about $300,000,000 above minimum requirements, and thereafter remained at or near that level. The increase in reserves since March has restored more than half of the shrinkage of nearly $500,000,000 which occurred during the latter part of 1931 and the first two months of 1932, accompanying rapid liquidation of member bank credit. The stoppage of the decline in reserves, and the subsequent rapid increase, may be attributed chiefly to Reserve Bank purchases of Government securities, together1 with a return flow of more than $200,000,000 of currency to the banks since early February. These two accessions of funds have enabled member banks to meet all demands on them including gold shipments, and to reduce their indebtedness at the Reserve Banks by $385,000,000 or almost 45 per cent, and also to increase their reserves by about $300,000,000. After this substantial increase in member bank reserves had been accomplished, Reserve Bank purchases of Government securities were reduced somewhat in volume during the latter half of May, but were sufficiently large to offset gold losses and other demands, so that the excess of reserves was maintained. The recent increase has restored member bank reserves to the highest level since last October, when the volume of member bank credit was more than $3,000,000,000 larger than at present. In the process of credit contrac tion or expansion, the release or absorption of member bank reserves is only about one-tenth of the change in the amount of credit outstanding. Thus far no material expansion of credit has been built upon the excess re serves acquired by member banks during the past two months, but the liquidation of credit appears to have been checked. The reporting member banks have increased their holdings of Government securities by about $225,000,000 since early April, and have also increased their holdings of other securities somewhat, but these increases in investments have been slightly more than offset by further reductions in their loans. In New York City the loans and investments of report ing member banks showed a net increase of $163,000,000 between April 13 and May 25, due to a considerable increase in their investments. Their holdings of Govern ment securities were increased $192,000,000, and their investments in other securities $92,000,000 during this period, but their security loans declined $123,000,000, R e s e r v e C o n d i t i o n s D is tr ic t June 1 ,1 9 3 2 and their other loans showed little change. Outside of New York the decline in the loans and investments of reporting member banks continued, but has recently been at a less rapid rate than in previous months. In order to expedite the process of bringing together potential demands for credit and the available supply of funds, a joint committee of bankers and industrialists was appointed in New York on May 19, and similar committees have since been created in other districts. The statement issued concerning the formation of the New York committee was as follows: “ Governor Harrison of the Federal Eeserve Bank of New York has called together a committee composed of bankers and industrialists for the purpose of considering methods of making the large funds now being released by the Federal Eeserve Banks useful affirmatively in developing business. Its purpose also will be generally to cooperate with the Eeconstruction Finance Corporation and other agencies to secure more coordinated and so more effective action on the part of the banking and industrial interests.” A considerable number and variety of projects de signed to promote business recovery are under consider ation by the committee. C urrency and G old M ovements Following a rapid return flow of currency to the banks during February and March, and a somewhat slower return flow in April, the volume of currency outstanding Member Bank Reserve Balances at Federal Reserve Banks MONTHLY REVIEW, JUNE 1, 1932 42 remained at a fairly stable level in May. The weekly figures showed alternate increases and decreases, partly seasonal in character, but the last report of the month, for May 25, showed little change from the figure for the last week in April. A considerable reduction in the monetary gold stock of the United States occurred during May, totaling $216,000,000, the largest gold loss since last October. A major part of the movement reflected a transfer abroad of central bank funds which had been employed in the New York money market, carrying further the tendency for central banks to concentrate their reserves in their own vaults instead of keeping a substantial part in vested in foreign money markets. On May 25 the mone tary gold stock of the United States was $4,207,000,000, which is about the same as the average level in 1928 and 1929, although since the autumn of 1929 the volume of foreign short term funds in the New York money market has been reduced by about two-thirds, and foreign investments in American securities have been substantially reduced. M oney R ates The large supply of funds seeking employment in high grade paper of short maturity was reflected in a further decline in open market money rates during May. Yields on short term United States Government securities de clined to very low figures, and rates on stock exchange time money and commercial paper were reduced further, as indicated in the following table. Money Rates at New York M a y 29, 1931 Apr. 29, 1932 M a y 31, 1932 Stock Exchange call loans........................ Stock Exchange 90 day loans................. Prime commercial paper.......................... Bills— 90 day unindorsed......................... Customers’ rates on commercial loans.. Treasury securities Maturing September 15 (y ie ld )......... M aturing December 15 (yield)........... Federal Reserve Bank of New Y ork re discount r a te ........................................... Federal Reserve Bank of New Y ork buying rate for 90 day indorsed bills * Nom inal IX n x - iH 2-2 % A 7 f 3 .46 .57 .76 2X *2 3 H -3 X ys 2X *1 X 2H-3 v% f 4 .38 f 4 .10 .53 .96 .10 .28 IX 3 3 1 2H 2X + Average rate of leading banks at middle of month B ill M arket The discount market for bankers acceptances was quiet throughout May. Early in the month a falling off in foreign demand for bills caused a slight increase in deal ers ’ portfolios, and the dealers raised their rates by *4 per cent from the low level of % Per cent for 90 day unindorsed bills established in the latter part of April. The higher rates were maintained by the dealers only from May 5 to May 10, however, as their portfolios de clined again within this period and the deposit rates of the New York Clearing House banks were reduced by % per cent effective May 13. Notwithstanding the lack of reinvestment demand for foreign account because of the low yields obtainable, few bills found their way into the discount market, due to the surplus funds which the New York City accepting and discounting banks had available for employment. At the end of April, the group of accepting banks and bankers that report their outstandings to the American Acceptance Council held $455,000,000 of bills, an in crease of $78,000,000 during the month. As the volume of bills outstanding declined $32,000,000 during April to $879,000,000, the proportion of bills held by the accept ing banks rose from 41 to 52 per cent, or nearly as high a ratio as was reached last summer. Practically no bills have been offered to the Reserve Banks recently, and in view of the low level of Federal Reserve holdings of bills for their own account and the decline in foreign corre spondents ’ holdings, it appears likely that the proportion of outstanding bills held by the accepting banks in creased substantially further during May. C ommercial P aper M arket Open market rates for commercial paper declined further during May. The trading range for prime names of 4 to 6 month maturity became 3 to 3*4 per cent early in the month and shortly after mid-May this range was reduced to 2% -3 per cent. In fact, toward the end of the month some 4 to 6 month paper was being sold at 2 % per cent, which was the generally quoted rate for 90 day drawings. In general, the investment demand for paper exceeded the supply of high grade material that the dealers were able to obtain from potential open market borrowers. Throughout the country an active interest in acquiring the highest grade paper was manifest by the banks. During April the volume of commercial paper out standing through dealers reporting to this bank in creased 2 per cent further to $108,000,000 on April 30. This increase followed a small rise in the previous month. Outstandings, however, remained 65 per cent below the figure a year ago. S ecu rity M a r k e ts Stock trading continued in small volume during May, and the trend of prices continued to be downward, so that average prices toward the close of the month were about 24 per cent below the April closing quotations and about 50 per cent below the early March level, which was the highest of the year. No material interruption of the decline in prices occurred during the course of the month except for one day, May 6, on which a sizable advance followed a number of favorably construed developments. As a result of the May decline, the general average of stock prices has been reduced to a lower level than at any time since before the War, and meanwhile the average dividend yield on a list of representative indus trial, railroad, and public utility stocks has risen to above 10 per cent, notwithstanding numerous dividend omis sions and reductions. The accompanying diagram shows the course of stock and bond yields since 1927, and indi cates that the present average yield on common stocks is FEDERAL RESERVE AGENT AT NEW YORK YIELD 43 In addition to the Treasury certificates and notes an nounced late in April and issued May 2, United States Treasury financing during May was limited to three issues of 91 day Treasury bills totaling $212,000,000 which were put out in replacement of a like amount of Treasury bill maturities. A further decline occurred in the rates at which these Treasury bills were sold, and the average cost to the Treasury on the issue dated May 25 was only .29 of one per cent. F oreign E x ch a n g e Average Dividend Yield on 90 Common Stocks and Average Yield on 60 High Grade Domestic Bonds (Standard Statistics Company figures) more than three times the average yield of less than 3 per cent obtainable at the peak of stock prices in 1929. It also shows that the average yield on high grade bonds has advanced to more than 6 % Per cent, as against an average of about 4 % per cent obtainable in other recent years. The prices of bank stocks also underwent large de clines during May, and the Standard Statistics index of the share prices of 20 New York City banking institu tions dropped more than 25 per cent to the lowest level since 1918. Further net declines occurred in bond prices during May. Except for a few days in the first week of the month, the movement of domestic corporation bonds was continuously downward, so that representative averages showed a further drop of about 7 points for the period. Railroad bonds were conspicuously weak, dropping about three times as much as industrial and public utility bonds. Foreign bonds appear to have been somewhat steadier than domestic corporate issues, but prices showed average losses of about 3 points. United States Government bonds exhibited consider able irregularity; there were several periods of decline during the month but these were followed by partial recoveries. For the month as a whole, however, Govern ment bonds lost a large part of the advance made in April. The Liberty Loan issues, which have nearby optional call dates, registered net declines of % point, while the average prices of long term Treasury bonds receded 3 % points for the month. The strength of most European exchanges, which was manifest at the middle of April, was maintained through out May. French francs were quoted at $0.0394% from May 6 to 24, and firmed to $0.0395% the next day, sub sequently declining slightly; guilders reached a high of $0.4063 on May 4, followed by irregular movements to $0.4049 on the 24th and a subsequent firming to $0.4059 on the 28th; Swiss francs gained sharply from $0.1943 on May 2 to $0.1958 on the 4th and maintained about this level for the rest of the month; belgas sold at a peak of $0.1407 at the end of the first week, receded gradually, and then steadied after mid-month at about $0.1403. Sterling remained steady around its April closing of $3.66% until after the middle of May, when a rise car ried it to $3.73 on the 28th, following which the rate declined to $3.69. Reichsmarks gained to $0.2390 on May 14, as against $0.2378 on May 2 ; the higher level was largely maintained until the third week, after which a decline to $0.2365 occurred. The Scandinavians tended to move with sterling, although Norwegian crowns turned downward late in the month. Lire lost slightly while pesetas continued the upward movement begun in April. In the South American list, Argentine pesos main tained a fixed rate, Uruguayans fluctuated between $0.48 and $0.4750, and Brazilian milreis gained steadily from $0.0685 on May 2 to $0.0758 on May 25. Japanese yen weakened after the middle of the month to below $0.32 for the first time, and sold as low as $0.3138. The silver currencies registered a small net gain for the month. The discount on Canadian dollars widened. Closing Cable Rates at New Y ork (In dollars) Exchange on H o lla n d .............................. N e w F in an cin g An extremely limited volume of new security flotations was announced during May, and the total for the month appears to have been the smallest since last October. Virtually all of the May issues represented financing by States, counties, and municipalities, with individual is sues ranging in size from $100,000 to $12,000,000. The only corporate flotation was a small public utility issue. Switzerland....................... B razil.................................. Par of Exchange M a y 29, 1931 Apr. 30, 1932 M a y 31, 1932 $ .1407 .1390 .2680 4.8666 .0392 .2382 .4020 .0526 .2680 .1930 .2680 .1930 $ .1405 1.0000 .9648 .1196 1.0342 .9998 .6932 .0675 .5575 .8938 .5865 .0685 .4800 .8788 .5865 .0760 .4775 .4985 .3650 .4940 .3616 .2888 .3238 .2745 .3075 .3240 .2765 .3100 .1393 .2679 4.8650 .03918 .2375 .4022 .0524 .2679 .0886 .2681 . 1935 $ .1396 .1401 .2010 3.6613 .03941 .2382 .4054 .0517 .1862 .0787 .1840 .1940 $ .1394 .1400 .2025 3.6888 .03949 .2365 .4057 .0514 .1852 .0825 .1905 .1959 44 MONTHLY REVIEW, JUNE 1, 1932 G o ld M o v e m e n t MILLIONS OF DOLLARS The monetary gold stock of the United States was re duced during May by about $216,000,000, as a result of exports of gold to several European countries and of some additional net earmarking of gold for foreign central banks. Exports which totaled $213,500,000 con sisted chiefly of shipments of $59,600,000 to France, $70,500,000 to Holland, $55,100,000 to Switzerland, $19,000,000 to Belgium, $5,900,000 to England, and $3,400,000 to Germany. A sizable part of the gold ex ported during the month represented the shipment of gold released from earmark, but as there were additional amounts set aside the total volume of gold held under earmark for foreign account on May 31 showed a net increase of $22,100,000 for the month. As a partial offset to the losses of gold through exports and earmarkings, there was a total of $14,600,000 of gold imported, of which $4,500,000 came from Canada, $1,000,000 from Peru, $500,000 from Newfoundland, and $800,000 from Mexico through New York; and $3,700,000 from China, $2,400,000 from Japan, and $800,000 from Australia through San Francisco. C en tral B a n k R a te C h anges On May 12 the Bank of England lowered its official discount rate from 3 to 2 % per cent, this being the fifth reduction effected since mid-February of this year. The Bank of Italy lowered its rate from 6 to 5 per cent as of May 2 ; the rate of the Bank of Sweden was reduced from 5 to 4 % per cent on the 17th, the Bank of Norway rate also going from 5 to 4 % per cent on the 20th. Two rate reductions were effected at the National Bank of Bul garia during M ay: on the 17th from 91/2 to 8 y> per cent, and on the 25th from 8 % to 8 per cent. Effective May 30, the National Bank in Copenhagen lowered its rate from 5 to 4 per cent. In addition a rate reduction from 7 to 6 per cent became effective at the Central Reserve Bank of Peru on May 20. A press report states that the Bank of Lithuania, Kaunas, lowered its rate from 7 % to 7 per cent on May 6. F oreign T r a d e During April, this country’s foreign merchandise trade continued the downward course of the past two and a half years. Exports were reduced to $136,000,000 and were smaller than in any month since August 1914, while imports, valued at $127,000,000, totaled less than in any month since February 1915. Decreases in value from a year ago amounted to 37 per cent in the case of exports and to 32 per cent in imports. The year-to-year decline in exports was larger than in March, but the reduction in imports was somewhat smaller. The volume of raw cotton and grain exports continued in April to be substantially above a year ago. Japan reduced its demand for American cotton from the abnor mally large volume of recent months, but exports of cotton to all other countries were nearly 70 per cent larger in quantity than in April 1931. Quantity receipts of crude rubber and coffee declined about 20 per cent World (Ratio scale used to show proportionate changes) from a year ago, but imports of raw silk were in some what larger volume. The accompanying diagram illustrates the course of this country’s export trade during the past three years, according to the destination of the shipments. The generally declining tendency since the latter part of 1929 has been the result both of the continuous decline in world commodity prices and of reductions in the quan tity of goods shipped abroad. Exports to Asia, where Japan as our leading customer has recently made un usually heavy purchases, have shown little reduction since the middle of 1930, so that the percentage loss in value from 1929 to the present time has been consider ably less than for exports to any other continent. The next smallest decrease has been in our exports to Euro pean countries. At the beginning of 1929, Europe took only slightly more in value of the products of the United States than did North and South America combined, but in the first quarter of 1932 European purchases from us were about two-thirds greater than those of the countries of North and South America, which, as raw material producing countries, have been particularly affected by the severe declines in the prices of basic commodities. Exports to Oceania and Africa, never of as great volume, have undergone a large decline, and recently have been only about one-fourth of their 1929 value. Our exports to Africa, Australia, and North and South America are predominantly of finished goods, which in periods of reduced purchasing power can more readily be reduced, while the industrially developed countries of Europe and also Japan require in their imports from us a larger proportion of raw materials, which are more basic and essential. B usiness P rofits With the total volume of production and trade esti mated at 40 to 50 per cent below the level of three years ago, corporation earnings reports for the first quarter of 1932 showed little net profit after all expenses and fixed charges had been met. The total net profits of 293 industrial and mercantile companies for the first quarter were less than one-fifth as large as in the corresponding FEDERAL RESERVE AGENT AT NEW YORK months of 1931, and less than one-tenth as large as in 1930. The only group of companies to report more favorable earnings than last year was the oil group, which showed a small amount of net profits in 1932 against a deficit in the first quarter of 1931. The earnings of food companies were fairly well maintained, but all other groups showed substantial declines itf profits, and a number of groups showed deficits. Telephone and other public utility companies showed smaller earnings than in the three previous years, but the reductions were quite moderate. Railroad companies, like industrial concerns, were considerably affected by the further decline in the volume of production and trade, and the Class I railroads showed net operating income— that is, net income after all current expenses but before interest payments— about 4-0 per cent less than in the first quarter of 1931, and 63 per cent smaller than in the first quarter of 1930. 45 M ILLIONS OF DOLLARS (N et profits in millions of dollars) First Quarter N o. of Cos. 1930 O il............................................................ Food and food products..................... Office equipm ent................................... Chemical................................................. Printing and publishing...................... Tobacco................................................... M ining and smelting (excl. coal, coke, and copper)............................. Electrical equipment............................ Paper........................................................ M otion picture...................................... R e a lty ...................................................... Automobile............................................. Coal and coke........................................ Copper..................................................... Railroad equipment............................. Building supplies.................................. Automobile parts and accessories (excl. tire s)........... ' ........................... M achinery.............................................. Steel......................................................... Miscellaneous........................................ 26 34 6 17 6 6 21.9 39.6 4 .8 18.8 9 .2 1 .6 9 5 9 4 5 17 8 6 9 11 Corporation group 1931 Def. 1932 7 .6 36.3 2 .5 13.5 6 .1 1 .3 2 .6 2 6.8 1.7 8 .1 3 .5 0 .6 8 .3 19.2 3 .3 6 .8 3 .1 5 4.3 1 .6 3 .3 11.3 3 .6 4 .1 8 .1 1 .8 6 .5 1.4 2 8.2 0 .7 0 1 .8 0 Def. Def. D ef. Def. 1 .6 2 .8 0 .5 1.4 0 .2 0 .6 0 .5 0 .8 1 .5 2 .4 26 17 17 55 13.0 8 .7 59.6 31.9 4 .6 1.8 6.1 2 0.3 Def. 2 .5 D ef. 3 .6 D ef. 2 8.6 14.5 To tal 20 groups............................ 293 323.9 137.5 2 5 .0 Telephone (net operating income).. . Other public utilities (net earnings). 101 50 6 7.6 9 0 .7 6 9.3 78.1 58.7 68.7 Total public utilities................... 151 158.3 147.4 127.4 Class I Railroads (net operating incom e)............................................... 167 176.5 107.1 66 0 B u ild in g Although continuing much below the level of a year ago, the total value of building and engineering contracts awarded in the 37 States covered by the F. W . Dodge Corporation report increased from March to April by slightly more than the usual seasonal amount. The some what greater activity in April reflected entirely an in crease in contracts for public works and utilities — chiefly highway work. Residential contracts declined unseasonally, while other non-residential work showed about the usual decrease for April. Changes in the value of the three principal groups of building and engineer ing work undertaken during the past five years are indi cated in the accompanying diagram, which is based on the daily average amount of contracts awarded, with an adjustment in each month’s figures for the ordinary seasonal influences. The daily average awards of con 1928 1929 1930 1931 1932 Average Daily Value of Building Contracts Awarded in 37 States, Adjusted for Seasonal Variation (Based on F. W. Dodge Corporation data) tracts for the first three weeks of May have also been added to the diagram, and indicate that public works and utilities projects showed some further expansion in May, while residential and other non-residential work continued at about the lowest levels in recent years. In the first four months of 1932 the total of construc tion projects of all kinds was only about one-third of the value for the corresponding period of last year. Public works and utilities contracts showed a combined decrease of 72 per cent, residential work was reduced by 65 per cent, and other non-residential contracts, includ ing factory and commercial buildings, were down 57 per cent. Contrary to the general tendency, April contracts in the Metropolitan area of New York were 9 per cent smaller than in March; this unseasonal movement was attributed largely to unsettlement in the building wage situation. The April total of this year was only 20 per cent as large as a year ago, and for the first four months of the year construction contracts have shown a decline of 76 per cent from 1931 in this territory. C o m m o d ity Prices The general level of wholesale commodity prices con tinued to move in a fairly narrow range during May, but the predominant tendency again appears to have been downward. Accordingly, the weekly index of the Bureau of Labor Statistics, which includes the prices of almost 800 commodities, declined 1 point further. A number of the most important commodities, including wheat, MONTHLY REVIEW, JUNE 1, 1932 46 more than seasonally from the April level, but the sea sonally adjusted figures appear to have remained above the low level of March. Department store sales in New York City and vicinity in the first half of May showed a decline of 22 per cent in dollar value from the corre sponding period of a year ago, or about the same reduc tion, as occurred in April. P rice Indexes of R aw M a te ria ls and Finished Products (B u rea u of L abo r S tatistics fig ures) corn, raw sugar, hides, lead, silver, and the fuels, showed no significant price changes for the month as a whole. The discussion of a tariff on rubber imports resulted in a sharp but temporary rise in rubber prices early in the month, but prices subsequently declined to a new low level in the history of the commodity. Silk, copper, and scrap steel likewise were at the lowest prices of record, and hogs, cotton, and wool reached new low levels for the current depression. The price of tin, however, showed a moderate increase; zinc, after declining to the lowest level of record, recovered more than y 2 cent; and the price of steers, following a decline early in the month to a new low level for the current depression, also re covered nearly to the level of the close of April. The accompanying chart compares movements in the prices of raw materials and of finished products, as indi cated by the Bureau of Labor Statistics group indexes. Beginning in 1913 and 1914 at approximately the same relative level, raw material prices advanced more rapidly and further during the war period than did prices of finished goods, and during the depression of 1921 raw materials similarly declined faster and further. In the post-war period, equilibrium was established principally by a recovery in raw material prices. The two groups then fluctuated at about the same relative levels until late in 1929. In the current depression, the drop in raw materials has again been much sharper than the decline in finished goods. Raw material prices have now reached a level materially below the pre-war average, whereas wholesale prices of finished products are still slightly above the pre-war level. A t present, the spread between the two series is about as wide as at any time in the past twenty years. In d exes o f B u siness A c tiv ity The limited data now available for May show no signs of an improvement in general business. Car loadings of merchandise and miscellaneous freight declined mate rially in the first three weeks of May, canceling all of the April advance, and car loadings of bulk freight were reduced further, instead of showing the seasonal upswing which usually begins in May. It is estimated that bank debits in 140 centers outside of New York City declined No consistent change in general business activity during April was shown by this bank’s seasonally adjusted indexes. Increases occurred in sales of depart ment stores, in chain store sales, and in bank debits out side of New York City, and the number of railroad cars loaded with merchandise and miscellaneous freight increased by the customary amount. On the other hand, car loadings of bulk freight were reduced somewhat, due to a marked contraction in shipments of coal, exports of merchandise to foreign countries decreased moderately, and imports failed to show the expected seasonal increase. (Adjusted for seasonal variations, for usual year-to-year growth, and where necessary for price changes) 1931 1932 Apr. Feb. M a r. 80 74 69 72 66 93 62 58 55 65 43 80 58 60 51 65 40 81 58 56 49 p 62 p 42 75 102 96 95 102 78 84 63 80 73 84 76 66 72 37 77 72 75 59 62 73 27 p 82 73 83 Apr. Primary Distribution Car loadings, merchandise and misc........ Car loadings, oth er....................................... Waterways traffic ......................................... Wholesale trade............................................. Distribution to Consumer Departm ent store sales, 2nd D is t............. Chain grocery sales...................................... Other chain store sales................................ M a il order house sales................................. Gasoline consumption.................................. Passenger automobile registrations........... 62 General Business Activity Bank debits, outside of New Y ork C ity.. Bank debits, New Y ork C ity ..................... Velocity of bank deposits, outside of New Y ork C it y ................. ................................. Velocity of bank deposits, New Y ork C ity Shares sold on N . Y . Stock Exchange. . . Life insurance paid for................................. Postal receipts............................................... Electric power................................................ Employment in the United States........... Business failures............................................ Building contracts......................................... New corporations formed in N . Y . State. Real estate transfers.................................... 85 87 66 62 62 60 70 65 90 99 130 93 87 86 80 108 61 89 55 81 70 82 92 73 74 69 114 26 82 50 77 68 72 80 72 73p 68 121 21 78 86 67 71 75 71 66 124 24 83 General price le v e l*...................................... Composite index of wages*........................ Cost of liv in g * ............................................... 155 217 149 136 201 137 137 201 136 134 197 135 p Preliminary *1913 average=100 P rodu ction The gradual increase in activity of the steel industry which was initiated in April continued through the middle of May, contrary to the usual seasonal movement. Activity this year, after declining to 21 per cent of esti mated capacity at the middle of April, subsequently increased to an average level of about 24 per cent in May, whereas in the previous two years, the operating rate declined seasonally in the period, as the accompany ing diagram indicates. The belated seasonal increase in steel mill operations accompanied some further expan sion of automobile production in May. Output of crude petroleum during May was seasonally higher than in FEDERAL RESERVE AGENT AT NEW YORK 47 growth of industry, dropped 3 points further to a level which equals the 1921 low. Sharp curtailment was shown in production of bituminous coal and lead, in mill consumption of raw cotton, and in wool mill activ ity, and smaller declines occurred in output of pig iron and steel ingots. Little change occurred in the adjusted indexes of production of crude petroleum, tobacco prod ucts, and lumber, and of mill consumption of raw silk. On the other hand, automobile production expanded more than usually, wheat flour production did not show any of the seasonal decline, and the adjusted indexes of live stock slaughterings and of shoe production also increased. PERCENT E m p lo y m e n t and W a g e s R atio of Steel M ill O perations to T h eo re tic a l Capacity, 1932 Com pared w ith 1931 and 1930 (Ir o n A ge fig u res ) April, but bituminous coal production decreased con trary to the usual movement, and cotton goods produc tion was curtailed in accordance with the seasonal tendency. For the month of April as a whole, this bank’s indexes of production again show about an even balance between the number of increases and the number of declines from the previous month, but decreases appear to have pre dominated in the more important industries. The com bined production index of the Federal Reserve Board, which is corrected for seasonal variations but not for the (Adjusted for seasonal variations and usual year-to-year growth) 1932 1931 Metals Pig iron Steel ingots . ........................................... ........................................... T in deliveries ...................................... Automobiles Passenger cars............................................... M oto r trucks.................................................. Fuels Bituminous coal............................................ Anthracite coal............................................... Petroleum, crude........................................... Petroleum products...................................... Textiles and Leather Products Cotton consumption.................................... Wool m ill a c tiv ity ......................................... Silk consumption........................................... Leather, sole................................................... Leather, upper............................................... Boots and shoes............................................. Foods and Tobacco Products Live stock slaughtered................................. W heat flour r ................................................. Sugar meltings, U S po rts........................ Tobacco products......................................... Miscellaneous Cem ent............................................................ Tires.................................................................. Lum ber............................................................ Printing a c tiv ity ........................................... Paper, newsprint........................................... Paper other than newsprint...................... Wood p u lp ...................................................... p Preliminary r Revised Apr. Feb. M ar. Apr. 59 59 62 r 50 84 31 35 48r 35 38 28 29 50r 35 41 25 26 40r 34 42 65 79 26 46 23 30 27 42 83 90 72 87 81 65 66 46 74 67 75 77 44r 73 63 60p 91p 43 73 p 82 74 84 89 94 110 74 70 84 74 79 91 74 55 65 60 37 p 67 95p 97 p 100 82r 54 81 90 85 r 55 77 100 88r 52 78 48 56 26 76 83 72 p 45 47 31 72 89 72 v 72 41 99 94r 71 98 87 70 54 85 89 84 78 73 32 81 A further decline in the number of people employed and in wage payments occurred in April. Reporting factories in New York State reduced the number of their workers considerably more than seasonally from March to April to the lowest level in the period for which the figures are available. In the country as a whole, factory employment declined sharply to a new low level for many years, and it is estimated that the number of persons engaged in manufacturing industries, alone, was the lowest since 1908. The American Federation of Labor report on unemployment among its members indi cates that the proportion out of work increased from 22.8 per cent on April 1 to 22.9 per cent on May 1, which is contrary to the seasonal tendency. The supply of farm labor declined slightly more than usually in April, but demand failed to show seasonal expansion. Factory payrolls in New York State for April dropped much more than would be expected on the basis of past experience and reached a new low level for the current depression. For the country as a whole payrolls declined 6 per cent to a level 56 per cent below the 1929 peak. The average weekly remuneration of New York State workers who are now employed decreased 3 per cent to the lowest level since 1919. C rop s The Department of Agriculture estimate of crop con ditions on May 1 places this year’s winter wheat crop at 440,000,000 bushels, which is 44 per cent below the large 1931 crop and 20 per cent below the 1924-1928 average. The acreage sown to winter wheat last autumn was 10 per cent less than in the previous autumn, acreage abandonment has been large, and the lack of moisture has resulted in a poor condition of the crop. The esti mate for all of the principal producing States is well below the harvest of a year ago, and for a majority of these States is under the five year average. In Kansas, which last year produced 240,000,000 bushels, or 30 per cent of the total harvest, this year’s crop is estimated at only 87,000,000 bushels. In other crops, the condition of hay is the lowest in many years, and the condition of early potatoes and of oats in ten reporting Southern States is considerably below the level of a year ago. 48 MONTHLY REVIEW, JUNE 1, 1932 D e p a rtm e n t S tore T ra d e Reporting department stores in this district showed April sales 22 per cent below last year, a slightly larger decline than was reported in March. Reductions in sales of New York City and Rochester stores were about the same as the average for this district, while the sales in Buffalo, Bridgeport, Southern New York State, and the Capital District were about 27 per cent smaller than last year, and even larger declines were reported in Syracuse and Northern New York. On the other hand, somewhat less than the average decrease was shown by the Newark, Hudson River Valley, and Westchester reporting stores. Sales of the leading apparel stores continued considerably lower than a year ago. For the first half of May, department stores in the Metropolitan area of New York reported practically the same decrease in sales from a year ago as in April. Stocks of merchandise on hand at the end of April, at retail valuation, continued to show substantial re ductions from last year. Collections during April con tinued to be slower than in 1931 in all localities except Rochester. Percentage change from a year ago N et sales Locality April Jan. to Apr. Stock on hand end of month Per cent of accounts outstanding March 31 collected in A pril — 19.2 — 19.9 — 2 4.8 — 28.3 — 15.6 — 23.1 — 20.8 A ll department stores............ — 22.1 — 19.2 — 17.9 44.1 4 1.3 Apparel stores.......................... — 27.1 — 25.8 — 22.7 43.9 4 1 .5 Linens and handkerchiefs..................... Silks and velvets..................................... Women’s ready-to-wear accessories.. . M en’s furnishings................................... Furniture................................................... Luggage and other leather goods........ Women’s and Misses’ ready-to-w ear.. Toys and sporting goods....................... M en’s and Boys’ w ear........................... Musical instruments and ra d io ........... Miscellaneous........................................... 4 7.8 4 6.8 4 3.4 29.0 4 1.6 37.0 33.1 44.9 41.9 43.7 2 5.8 39.4 3 4.3 30.8 N et sales M en’s clothing............... Cotton goods................. Silk goods....................... Shoes................................ D iam onds....................... Jew elry............................ — 6 .9 — 37.2 + 9 .3 — 9 .8 * — 35.9 — 24.4 + 1 7 .5 + 2 6 .1 — 16.9 — 13.3 — 12.5 — 9 .9 Stock end of month N et sales — 6 .0 — 12.9 — 39.5 — 27.4 — 2 4 .3 * — 39.6 — 2 9.0 — 26.6 — 60.9 — 32.1 — 34.1 — 55.2 — 4 4 .4 — 4 .0 — 3 .3 * — 10.7 — 2 .4 — 1.3 — *2!8 + 9 .4 Weighted average. . . — 13.1 Stock end of month — 21.3 — 2 1.0 — 0 .3 * — 14.1 + 1 5 .2 — 7 .8 — 3 0.0 — 23.9 — 30.1 Per cent of accounts outstanding M arch 31 collected in A pril 1931 1932 7 9.2 3 3.3 34.0 5 6.2 4 6.8 3 1.6 4 6 .0 8 2.9 29.8 3 4.5 56.1 3 3.7 27.8 4 0 .0 7 6 ‘.3 56.7 } 16.7 6 2 ’.9 53.5 } 15.8 5 1.4 4 9.3 * Q uantity not value. Reported by Silk Association of America * * Reported by the N ational Machine Tool Builders Association C h a in S to re T ra d e N et sales percentage change A pril 1932 compared with A pril 1931 Stock on hand percentage change A pril 30, 1932 compared with A pril 30, 1931 + 0 .3 — 13.3 — 13.6 — 17.8 — 18.6 — 19.1 — 19.7 — 20.7 — 21.1 — 21.2 — 24.5 — 24.8 — 26.0 — 28.6 — 28.7 — 29.6 — 33.0 — 38.9 — 18.4 + 0 .3 — 19.2 — 13.3 — 19.3 — 16.4 — 13.1 — 12.6 — 4 .7 — 16.8 — 26.9 — 18.4 — 11.2 — 19.0 — 18.1 — 26.5 — 7 .3 — 12.4 — 15.1 — 2 1.3 W h o le sa le T ra d e April sales of the reporting wholesale dealers averaged 30 per cent below last year, a larger reduction than has previously been reported to this bank. Sales of station Percentage change April 1932 compared with A pril 1931 Commodity Machine tools**............. — 2 2.0 — 2 6.8 — 23.7 — 32.0 — 18.2 — 27.3 — 23.6 — 33.1 — 27.5 — 16.1 — 27.4 — 18.1 Toilet articles and drugs....................... Cotton goods............................................ Home furnishings.................................... H osiery...................................................... Books and stationery............................. Woolen goods........................................... Silverware and je w e lry .......................... Percentage change A pril 1932 compared with M arch 1932 1932 1931 New Y o r k ......................................... B uffalo............................................... Rochester........................................... Syracuse............................................. N ew ark............................................... B ridgeport......................................... Elsewhere........................................... Northern New Y ork State . . . . Southern New Y ork State........ Hudson R iver Valley D is tric t.. Capital D is trict........................... Westchester D is trict................... — 19.3 — 16.5 — 3 6.5 — 13.4 — 10.2 — 2 0.4 — 15.0 ery, drugs, shoes, paper, and silk goods were reduced by larger percentages than in any other month in the period covered by the reports to this bank. Concerns in the men’s clothing, jewelry, and diamond trades also re ported somewhat larger decreases than in the previous month, but sales of hardware and cotton goods showed a somewhat smaller decline, and machine tool orders, as reported by the National Machine Tool Builders Associa tion, also declined less from a year ago than in March. Merchandise stocks held at the end of April continued to show substantial decreases from a year previous in all reporting lines, except drugs, stocks of which remained larger than a year ago, and silk, the amount of which was little changed. Collections in April continued on the average to be somewhat slower than in 1931. The April sales of the reporting chain store systems were about 11 per cent below 1931, a somewhat larger year-to-year decline than has been reported previously. All groups of chain stores, except candy chains, reported greater reductions in sales than in March, and in the case of the candy group, the increase was the smallest since last November. In the case of the drug and variety stores, the declines were the largest in a number of months, while for the ten cent and shoe chains the de clines were larger than were ever before reported by these types of chains. After allowing for changes in the number of stores operated, the chain organizations gen erally showed even larger declines in sales per store than in total sales, as the number of stores has still continued to increase slightly during the past year. Percentage change A pril 1932 compared with A pril 1931 Type of store D ru g ................................................. T o ta l........................................ Number of stores Total sales Sales per store + 0 .7 + 1.4 + 1.1 — 0 .9 + 3 .3 + 2 0 .9 — 7 .3 — 15.1 — 8 .9 — 35.7 — 6 .8 + 1.7 — 8 .0 — 16.3 — 9 .9 — 35.2 — 9 .8 — 15.9 + — 11.3 — 12.6 1.6 FED ERAL RESERVE BANK OF NEW YORK MONTHLY REVIEW, JUNE 1, 1932 B u s in e s s C o n d itio n s in th e U n ite d S ta te s (Summarized by the Federal Reserve Board) NDUSTRIAL activity and factory employment declined substantially from March to April, although usually little change occurs at this season. Purchases of Government securities by the Federal Reserve Banks have con tinued during April and the first three weeks of May and there has been a considerable growth in the reserves of member banks. I Production and E mployment and Minerals Combined, Adjusted for Seasonal Variation (1923-25 averager=100!per cent) Index Numbers of Building Contracts Based on Three Month Moving Averages of F. W. Dodge Corporation Data for 37 States, Ad justed for Seasonal Variation (1923-25 average — lQO per cent) M ILLIO N S OF DOLLARS Volume of industrial production, as measured by the Board’s seasonally adjusted index, decreased from 67 per cent of the 1923-1925 average in March to 64 per cent in April. Reductions in activity were reported for many leading industries, with sharp declines at cotton and woolen mills and at bituminous coal mines; in the automobile industry output increased from the low level of March by more than the usual seasonal percentage, and in the steel industry, where activity had declined from early February to the middle of April, pro duction increased somewhat between the middle of April and the third week of May. The number of wage earners employed at manufacturing establishments declined further between the middle of March and the middle of April and there was a substantial reduction in factory payrolls. Large decreases in employment were reported for the iron and steel, machinery, and textile industries, while the volume of employment in the food and leather industries showed the usual seasonal changes. Daily average value of building contracts awarded during April and the first half of May, as reported by the F. W. Dodge Corporation, showed a seasonal increase over the first quarter. A substantial increase was reported for public works and public utilities, while residential building continued at the low level of the first quarter, showing none of the usual seasonal expansion. Distribution Freight car loadings of merchandise showed little change in volume from March to April, continuing at the level prevailing since January, although increases are usual during this period. Sales by department stores increased considerably in April. W holesale Prices Wholesale prices of commodities declined from 66 per cent of the 1926 average in March to 65.5 per cent in April, according to the Bureau of Labor Statistics, and in the first three weeks of May further decreases in the prices of many leading commodities were reported. Downward movements in textiles, nonferrous metals, and imported raw materials, as well as in most domestic agricultural products except wheat, were offset in part by increases in the prices of coffee, petroleum, and petroleum products. Bank Credit Reserve Bank Credit (Monthly averages of daily figures for 12 Federal Reserve Banks; latest fig ures are averages of first 23 days of May) B ILLIO NS OP DO LLARS 10 1927 1928 1929 1930 1931 1932 Monthly Averages of Weekly Figures for Reporting Member Banks in Leading Cities (Latest fig* ures are averages of first three weeks of May) Further purchases of U. S. Government securities by the Federal Reserve Banks were made during April and the first three weeks in May, and on May 18 total holdings were $1,466,000,000. The funds placed in the market through these purchases between April 6 and May 18 were used to the extent of $170,000,000 in a further reduction of member bank indebtedness to the Reserve Banks; and to the extent of $122,000,000 in meeting a demand for gold from abroad; at the same time member banks accumulated reserve balances consider ably in excess of legal requirements. During May the demand for currency, which had declined in April, increased somewhat, contrary to usual seasonal movement. Loans and investments of reporting member banks in leading cities, which had declined continuously until the middle of April, showed little net change between April 13 and May 18. The banks> investments increased by nearly $300,000,000, chiefly in New York City, while loans declined by about an equal amount. There was also a growth in net demand deposits, which reflected in part an increase in bankers’ balances deposited in New York City banks. Money rates in the open market continued easy. Rates on commercial paper were reduced about one-half per cent to a range of 2 %-3 per cent for prime names, and the offering rate on 90-day bankers acceptances, which had advanced to 1% per cent in the first week of May, declined on May 11 to the previously prevailing rate of % of one per cent.
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