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M ONTHLY
R E V IE W
of Credit and Business Conditions
S e c o n d
Federal E eserve A gen t
F e d e r a l
Federal E eserve Bank, New York
M o n e y M a r k e t in M a y
The money market has been unusually inactive during
the past month. The supply of funds seeking short
term investment continued to be very large but the out
lets for such funds were even more limited than in the
preceding months.
Early in the month there was the usual outflow of
funds to other districts and some increase in the amount
of currency outstanding, but the excess reserves of the
principal New York City banks at no time declined
below $380,000,000. Before the middle of the month
a heavy inflow of funds from other districts was resumed
and the usual return flow of currency started, and, al
though sales of new Government securities somewhat
exceeded maturities in the New York market and re
sulted in some withdrawal of funds from New York by
the Treasury, the excess reserves of the New York banks
rose again to about the same high level as a month pre
vious— well above $500,000,000.
As the accompanying diagram indicates, deposits in
the large New York City banks by other banks have
increased substantially during the past few months,
notwithstanding the fact that no interest is now being
paid on demand deposits.
These deposits represent
largely the New York balances of banks in other parts
of the country, but include also some funds deposited by
savings banks in New York City. Substantial with
drawals of out of town bank funds occurred immediately
following the mandatory elimination of interest pay
ments on demand deposits at the middle of June last
year, and little change occurred in the New York bal
ances of such banks during the remainder of 1933. The
reaccumulation of bank balances in New York during
the past few months has reflected the growing volume
of idle funds in banks throughout the country.
For the country as a whole, excess reserves in the
last week of May were around $1,675,000,000, or prac
tically the same volume as a month previous. The ac
tual amount of member bank reserve balances reached
a new high level at $3,767,000,000 on May 23, but the
increase over a month previous was offset by a small
increase in member bank reserve requirements, reflect
ing some further increase in their deposits. The present
volume of member bank reserves is more than 40 per
cent above the high point of $2,652,000,000 reached
in 1929.
R e s e r v e
D is tr ic t
June 1, 1934
The main obstacle in the way of credit expansion con
tinues to be the difficulty of bridging the gap between
the huge supply of funds seeking short term invest
ments on one hand, and the demand for long term credit
on the other. Mortgage money continues scarce in most
localities, and the flow of funds into business capital
remains far below the average volume in past years.
Institutions whose liabilities are largely payable on de
mand are reluctant to engage heavily in the supplying
of long term credit, however, especially if means are
not readily available for converting the investments into
liquid funds in case of need. The supply of high grade
bonds, the principal type of long term investment which
is readily marketable, has become limited due to the
virtual cessation of new corporation issues for a number
of months past.
Reflecting this situation, the short term money mar
ket became still easier during the past month, although
nominal money rates remained largely unchanged. The
volume of brokers loans declined somewhat in May, the
amounts of acceptances and open market commercial
paper coming into the market were very small, and
Government security issues were confined to sales of
Treasury bills, almost entirely for refunding purposes.
Yields on short term Treasury securities declined slightly
further, and yields on long term Government bonds
also reached new low levels for recent years.
Net Amounts Due to Other Banks by Weekly Reporting Member
Banks in New York City
MONTHLY REVIEW, JUNE 1, 1934
42
Money Rates at New York
B ill M ar k e t
May 31, 1933 April 30, 1934 May 31, 1934
Stock Exchange call loans.....................
Stock Exchange 90 day loans...............
Prime commercial paper—4 to 6 months
Bills—90 day unindorsed......................
Customers’ rates on commercial loans..
Treasury securities
Maturing September (yield).............
Maturing December (yield)..............
Average rate on latest Treasury bill sales
91 day issue.......................................
182 day issue.......................................
Federal Reserve Bank of New York re
discount rate.......................................
Federal Reserve Bank of New York
buying rate for 90 day indorsed bills
* Nominal
1
1
1
*H -1
2
1
Vs-H
X
*H -1
1
X rH
f 3 .55
f2.33
f2.38
0.16
0.18
No yield
No yield
No yield
No yield
0.32
0.08
0.18
0.06
0.13
2K
IX
IX
2
X
X
f Average rate of leading banks at middle of month
M em ber
B a n k
C r e d it
Demand and time deposits of the principal New York
City banks declined slightly during the four weeks ended
May 23, following the rapid increase of the preceding
four months, and in reporting member banks else
where throughout the country the increase in deposits
in May was considerably less rapid than in the preced
ing months, notwithstanding continued disbursements
by the Government of funds which had previously been
accumulated in Government depositaries through the
sale of new securities. For all reporting member banks
the increase in net demand and time deposits during the
four weeks ended May 23 was only $42,000,000, as com
pared with increases of approximately $500,000,000 in
each of the two preceding months. During this four
week period Government disbursements appear to have
been in the neighborhood of $300,000,000.
The principal factor in the retarded growth of deposits
in May was a reduction of more than $200,000,000 in the
total loans and investments of reporting member banks.
About half of this amount represented a reduction in
holdings of securities other than United States Govern
ment issues, which was due partly to the retirement of
short term State and municipal issues out of the proceeds
of spring tax collections. In addition, there was a further
reduction of more than $100,000,000 in the total loans
of the reporting banks, part of which was in security
loans and part in other loans. This decline carried the
total loans of these banks to a level somewhat below that
of a year ago. A comparison of the loans and invest
ments and deposits of reporting member banks with the
figures for a year ago is given in the following table.
(In millions'of'dollars)
New York City
90 Other Cities
May 24
1933
May 23
1934
May 24
1933
Mav 23
1934
Loans
On securities..............................
All other.....................................
1,663
1,624
1,644
1,548
1,985
3,080
1,824
2,989
Total.......................................
3,287
3,192
5,065
4,813
Investments
U. S. securities...........................
Other securities..........................
2,384
1,115
2,752
1,057
2,579
1,899
3,510
1,933
Total.......................................
3,499
3,809
4,478
5,443
Total loans and investments. . . . .
6,786
7,001
9,543
10,256
Deposits
Net demand...............................
Time...........................................
5,601
685
6,028
674
5,124
3,593
6,299
3,790
Total.......................................
6,286
6,702
8,717
10,089
The discount market for bills remained very quiet
during May despite an active investment demand, as
the supply of new bills coming into dealers’ hands was
of small proportions. The dealers continued the practice
adopted in the first part of April of quoting rates only
on application, but it was indicated that of the small
volume of business transacted most of dealers’ purchases
were at 3/16 per cent and most of their sales were at
Ys per cent.
It appears that, in addition to the tendency of accept
ing banks and bankers to withhold from the market and
keep as investments newly drawn bills coming into their
hands, there has recently been some indication of a shift
in the method of financing from acceptance credits to
direct bank loans, which has tended to restrict the supply
of bills in the market still further, and also to reduce
the total volume of bills outstanding. During April, the
total volume of bills outstanding was reduced $72,000,000 to $613,000,000, due partly to seasonal influences,
and was $84,000,000 less than a year ago. Domestic
warehouse credits declined $40,000,000 during April,
export bills dropped $22,000,000, and bills based on
goods stores in or shipped between foreign countries
declined $10,000,000. The holdings of bills by the accept
ing banks and bankers decreased only $40,000,000 during
April, however, so that the proportion of bills so held
rose further to 87.4 per cent.
C o m m e r c ia l
P aper
M arket
Investment demand for prime commercial paper con
tinued very active during May. Only a small portion
of the demand was satisfied, however, as there continued
to be a scarcity of new paper coming into the market,
reflecting the limited borrowing requirements of indus
trial concerns that are able to use the facilities of the
open market. The average run of prime four to six
month commercial paper sold principally at 1 per cent,
and occasional transactions in choice paper were con
summated at % per cent, when such material became
available; in fact, some business was done at rates as
low as y 2 per cent, but it was indicated that these sales
involved unusually attractive paper of short duration
and were not representative of general market condi
tions.
During April the amount of open market commercial
paper outstanding increased 5 per cent further to $139,000,000. This amount is 118 per cent above the April
1933 total and represents the highest level since Novem
ber 1931, but still is small compared to the volume of
earlier years.
Security M a rk e ts
Prices of the highest grade investment securities
advanced further in May, while quotations for stocks and
lower grade bonds showed a recession for the month, as
the accompanying diagram indicates. Investment demand,
which for some months has been manifest in rising
prices for short term investments with resulting declines
in yields, has recently been reflected also in considerable
advances in prices of high grade corporate, municipal,
and United States Government long term bonds.
In the market for high grade corporate bonds, prices
advanced continuously during May to new highs for
FEDERAL RESERVE AGENT AT NEW YORK
43
PRICE INDEX
Movements of Stock and Bond Prices (Moody’s Investors Service
data for corporate bonds; Standard Statistics Company
data for 90 stocks)
recent years, and in the Government bond market long
term Treasury issues rose about % of a point further,
reducing their average yield to a new low of 2.89 per
cent. Medium grade and speculative corporation bonds,
meanwhile, declined rather steadily during the first
two weeks of May concurrent with a sharp drop in stock
prices, and just before the middle of the month the regu
larly available daily bond averages reached the lowest
levels since the first part of April, while average stock
prices in general touched the lowest point since early
last November. The recession in stock prices in the last
week of April and first two weeks of May amounted to
about 15 per cent. A partial recovery followed in which
prices recovered about one-third of the early May decline,
but after irregular fluctuations subsequently prices held
only a part of this gain to the end of the month. Move
ments in prices of second grade corporation bonds were
similar and toward the close of May the daily price
averages remained around 2 points below their recent
highs.
In the latter part of May, a marked falling off occurred
in the volume of Stock Exchange trading. The stock
turnover for the most part ranged between 500,000 and
900,000 shares daily, the smallest volume in the last
decade, and trading in bonds likewise was less active
than for some time past.
N e w Financing
New security flotations during May were smaller than
in April, but exceeded the volume of a year ago, due
to a few sizable issues by governmental or semi-public
borrowers. The principal issues offered in the past
month were a $32,500,000 short term issue of the Fed
eral Intermediate Credit Banks, of which $20,000,000
represented a refunding operation, and $20,000,000 of
bonds of the Commonwealth of Pennsylvania issued for
the payment of compensation to war veterans.
The
latter issue was sold at a price to yield from about 2.72
to 2.88 per cent, depending upon maturity. In addi
tion, there was a $15,000,000 issue of ten month notes
of the State of New York which were sold at 0.45 per
cent, the lowest rate ever obtained by the State. These
notes were taken in equal portions by three New York
City financial institutions and no reoffering to the public
occurred.
Another item of interest in the new financing of the
past month was the sale of $8,000,000 of 15 year sinking
fund bonds by the Brooklyn-Manhattan Transit Cor
poration. These bonds were sold orally by four banking
houses acting individually, and not as a syndicate, to
large investors within the State. No prospectus was
issued and no use was made of the mails, so that it was
not necessary to prepare and file the information re
quired by the Federal Trade Commission under the
Securities Act of 1933 in connection with publicly offered
security flotations. The New York Central Railroad
Company’s issue of $59,911,000 of 10 year 6 per cent
convertible bonds, which,was first reported in the March
1 issue of this Review, was entirely subscribed for by
stockholders in May, thereby making it unnecessary
for the underwriting syndicate or the Reconstruction
Finance Corporation to take any of the bonds as had
been arranged for in the event of an inadequate re
sponse by stockholders.
United States Treasury financing during May involved
the sale of about $250,000,000 of 91 day Treasury bills
and $200,000,000 of 182 day bills. As maturities totaled
$425,000,000, the new issues provided $25,000,000 of new
money for the Treasury. Rates for the new issues were
slightly below those for similar issues floated in April,
and therefore were at new low levels for this type of
Government obligation. The 91 day issue dated May
23 carried a rate of 0.06 per cent and the 182 day bills
0.13 per cent.
Business Profits
Reports of first quarter earnings of 308 industrial and
mercantile companies which have been published to
date indicate considerable improvement in earnings over
the first quarters of 1933 and 1932, but profits remained
somewhat below the 1931 level. As the following
diagram shows, the rate of profits in the first quarter
of this year after seasonal allowance was somewhat
higher than in the final, quarter of last year, coincident
with a renewed pick-up in production and general busi
ness activity, but was somewhat lower than in the third
quarter of last year which marked the high point for
profits since 1931.
All of the groups of companies listed in the table,
except aviation companies, reported a better showing
than in the first quarter of 1933; with that exception all
groups that had net earnings a year ago had larger net
earnings this year, and all other groups either showed
some net profits in place of deficits, or reduced the
amount of their deficits compared with 1933. Most of
the groups also had better results than in the first three
months of 1932, and some of the groups showed improved
earnings compared with 1931 also. The groups that
showed larger profits than in any of the past three years
included the automobile parts and accessories companies,
clothing and textile concerns, coal and coke and miscel
laneous mining and smelting concerns, companies pro
ducing household and office equipment, and oil com
panies. Of the 308 concerns whose returns are summar
ized in the table, 69 per cent had at least some net profit
in the first quarter of this year, compared with only 37
per cent a year ago, 49 per cent in 1932, and 69 per
cent in 1931.
44
MONTHLY REVIEW, JUNE 1. 1934
PER CENT
1 *r\
125
IOO
75
50
A
25
/
O
-2 5
1928
1929
1930
1931
1 932
1 933
1934
Index o f N e t P rofits o f 1 63 Industrial and M ercantile C orporations
(A v e ra g e for corresponding quarter o f 1 9 2 5 -2 9 = 1 0 0 per cen t)
Net operating income of telephone companies was
moderately larger than in the first quarter of 1933 and
nearly up to the 1932 level, but net earnings of other
public utility companies were virtually unchanged from
the relatively low level of a year ago, despite an increase
in the volume of their business. For the railroads, the
first quarter of this year was distinctly a more profitable
period, with net operating income three times the very
small amount earned in the first quarter of 1933, and
slightly larger than in 1931. The rise of operating
income to the 1931 level means that in the aggregate
fixed charges of Class I railroads are now being fully
earned.
(Net profits in millions of dollars)
Corporation group
No.
of
Cos.
First Quarter
1931
1932
1933
1934
15
30.3
2.0
— 5.4
27.9
33
5
11
20
8
7
6
8
38
6
12
4.4
0.3
1.3
26.3
— 0.4
0.6
— 0.1
7.9
37.2
0.5
1.6
— 3.5
1.1
— 2.3
17.8
— 0.4
— 0.6
— 1.2
2.1
27.3
— 1.2
— 2.3
— 5.0
0.3
— 3.5
11.3
— 0.3
— 1.1
— 2.2
— 2.3
20.1
— 1.0
— 1.9
8.7
— 0.6
— 0.4
24.6
0.8
1.4
— 0.4
2.6
28.0
0.8
0.6
10
6
6
27
6
4
9
20
6
45
4.8
7.0
2.5
— 12.9
1.1
5.3
2.6
6.8
1.3
6.4
2.4
1.7
1.7
— 4.3
0.1
3.0
— 0.8
—29.3
0.6
2.0
2.1
0.9
1.0
—29.0
— 0.1
0.8
— 2.4
— 35.8
0.1
0.1
9.5
3.9
2.8
9.1
0.4
1.4
— 0.8
— 7.7
0.5
5.9
308
134.8
15.9
—53.3
119.0
Telephone (net operating income). . 102
Other public utilities (net earnings) 67
69.3
109.5
50.8
96.8
41.4
81.3
49.1
81.2
169
178.8
147.6
122.7
130.3
Class I Railroads (net operating
income).......................................... 149
106.2
65.4
34.5
112.2
Automobile.......................................
Automobile parts and accessories
(excl. tires)....................................
Aviation............................................
Building supplies..............................
Chemical and drugs.........................
Clothing and textiles.......................
Coal and coke...................................
Copper...............................................
Electrical equipment........................
Food and food products..................
Household equipment......................
Machinery.........................................
Mining and smelting (excl. coal,
coke and copper)..........................
Motion picture and amusement. . . .
Office equipment...............................
Oil......................................................
Paper.................................................
Printing and publishing...................
Railroad equipment.........................
Steel...................................................
Tobacco.............................................
Miscellaneous...................................
Total 22 groups........................
Total public utilities.................
— Deficit
Foreign E xch anges
The strength of the foreign exchanges against the dol
lar which was manifest in the latter part of April was
not evident in May. The principal foreign currencies
fluctuated irregularly during the first ten days of the
month and then held comparatively steady during the
next two weeks at levels below those reached toward the
end of April, and in some instances below the average for
that month. During the final week of May the dollar
made further gains and on the 29th the closing rates for
foreign currencies generally showed a net loss for the
month, with quotations for the gold currencies at a
discount from parity.
After an irregular decline early in the month, the
pound sterling was quoted at a rate of about $5.11 from
May 10 to 21, but declined further to $5.08% at the close
on May 23. During the middle of the month the French
franc hovered in the vicinity of $0.0661, but fell below
this figure on the 25th and closed at $0.065914 on the
29th. Belgas, guilders, and Swiss francs were somewhat
more irregular than the French currency during the
second and third weeks of May, and evinced temporary
signs of strength for a few days after the 20th, but all of
these currencies declined subsequently. The reichsmark
was the most irregular of the major currencies, fluctuat
ing in quick movements between $0.3948 and $0.3965 in
the period ended May 23, after which it weakened
sharply to $0.3915 on the 26th. Lire were weak through
out most of the month at a discount of over 4 % per
cent from parity.
Japanese yen, Argentine pesos, and the Scandinavian
units continued to reflect the influence of sterling, and
the Brazilian milreis showed a somewhat closer affilia
tion with the broad movements of British exchange than
for some months past. The silver currencies, moving
contrary to the general list, gained irregularly in keeping
with changes in the price of silver. Except for a few
days around the middle of the month Canadian dollars
did not vary materially from a rate of about $1.0025,
which was approximately the April average.
Closing Cable Rates at New York
Par of
Exchange
Exchange on
Denmark........................
Holland...........................
$ .2354
.4537
8.2397
.0663
.4033
.6806
.0891
.4537
.3267
.4537
.3267
May 31, 1933 April 30, 1934 May 29, 1934
$ .1650
.1785
3.9888
.04655
.2770
.4750
.0617
.2030
.1014
.2040
.2290
$ .2352
.2296
5.1350
.06635
.3970
.6812
.0855
.2581
.1375
.2648
.3260
$ .2337
.2271
5.0775
.06593
.3910
.6770
.0849
.2555
.1368
.2622
.3250
1.6931
.7187
.2026
1.7511
.8856
.3045
.0763
.5663
1.0031
.3423
.0870
.8000
1.0031
.3385
.0858
.8000
.8440
.6180
.2450
.3005
.2550
.3045
.3880
.3275
.3019
.3823
.3288
G o ld M o v e m e n t
During the month of May imports of gold into the
United States declined considerably as compared with
preceding months since the inward movement began in
February. Purchases of imported gold by the New York
Assay Office during May amounted to $27,300,000 of
which $9,400,000 came from India, $8,400,000 from
Canada, $7,400,000 from England, $1,500,000 from
Mexico, and $400,000 from France. On the Pacific Coast
FEDERAL RESERVE AGENT AT NEW YORK
there were imports of $2,600,000 of gold from China.
Gold held under earmark for foreign account at the
Federal Reserve Bank of New York showed a net reduc
tion of $450,000 during May. Releases totaled $3,000,000,
of which $1,750,000 was exported to England and the
balance was sold to the New York Assay Office; these
releases were largely offset by an earmarking of $2,550,000 of gold which was imported from Colombia. In addi
tion, there were receipts of scrap gold by the mints and
assay offices, which averaged about $1,500,000 a week,
and receipts of newly mined domestic gold which
averaged around $2,000,000 a week.
Foreign T rad e
The total value of this country’s foreign merchandise
trade in April was slightly lower than in March, but
after allowing for seasonal variations and differences
in the number of days, both exports and imports showed
some increase.
Exports, amounting to $179,444,000,
were 71 per cent higher than in April 1933 and imports
at $157,908,000 were 79 per cent larger. These increases
in the value of our foreign trade reflect in considerable
measure advances in the prices of leading commodities
entering into import and export transactions, but to
some extent reflect also an increase in quantities.
The quantities involved in four important items in
the foreign trade of this country are shown in the accom
panying diagram, which indicates the current volume
compared with a year ago and with 1929. Chief among
the exports of finished manufactures are automobile
exports, which have increased considerably since last
November to a level three times the small volume a year
ago. The April figure remained, however, less than half
of the 1929 volume. Among the raw material exports,
the principal item, raw cotton, has been exported this
year in quantities about the same as a year ago or in
1929, but since March there has been a noticeable falling
off in cotton shipments.
Imports of rubber, one of the principal import com
modities, increased markedly in the middle of 1933 and
in recent months have continued to run considerably
ahead of a year ago. Quantity imports of silk in the
first four months of this year have aggregated about the
same as in the corresponding period a year ago, although
April showed some decline.
P rodu ction
During May there was some evidence of an interrup
tion of the recent upward movement of manufacturing
activity. In the steel industry output was further ex
panded during the first half of the month, reaching a
level at least equal to the temporary peak of July 1933,
but subsequently some reduction in operation was re
ported, in keeping with the seasonal tendency of past
years. Despite this recession steel production for the
month as a whole apparently was larger than in April.
On the other hand, the output of automobiles is reported
to have been smaller than in the previous month, and
operations in the cotton and silk textile industries were
reduced. This bank’s weekly index of electric power
production, which is adjusted for seasonal changes,
turned slightly downward in May, following small ad
vances in the previous few months; the short period
movements of this index are influenced largely by fluc
tuations in industrial consumption of electricity, and
therefore tend to reflect changes in general industrial
activity.
In April, a further increase was shown in manufac
turing output in continuation of the upward movement
which had been in progress since the final months of
1933. The principal increases in operations were re
ported in industries such as the automobile industry
where April production, at 361,000 units, reached the
highest level since the spring of 1931, and the steel in
dustry where operations, at 54 per cent of capacity,
were only slightly below the July 1933 peak level and
with that exception were also the highest since the
spring of 1931. In both of these industries the gains
exceeded the estimated seasonal expansion from March
to April. On the basis of indirect evidence provided by
employment data, increases in activity occurred also in
the machinery and railroad equipment industries. Oper
ations in the meatpacking industry were temporarily in
creased during April to take care of heavy shipments of
hogs from drought areas. The production of cement
showed a smaller than seasonal increase, however, and
lumber output declined somewhat.
Quantities of Important Commodities in Export and Import Trade of the United States, 1934 Compared with 1933 and 1929
45
MONTHLY REVIEW, JUNE 1, 1934
46
PER CENT
Notwithstanding the increase in manufacturing ac
tivity, however, the index of basic industrial produc
tion computed by the Federal Reserve Board remained
unchanged in April at 85 per cent of the 1923-25 average,
due to a sharp decline in production of bituminous coal,
which was partly associated with labor disturbances,
and an equally large decline in anthracite production.
(Adjusted for seasonarvariations and usual year to year growth)
1933
1934
April
Feb.
March
April
18
29
39
40
56
41
53
54
59
44
46
56
49
59
48
49
62
47
56
Passenger cars...........................................
Motor trucks.............................................
30
41
50
83
50
83
54p
95p
Fuels
Bituminous coal.........................................
Anthracite coal.........................................
Coke...........................................................
Petroleum, crude......................................
Petroleum products..................................
Electric power............ ..............................
58
50
37
66
66
64
77
110
60
68
65
66
91
112
63
70
65
65p
82
64
78
103
94
82
92
60
91
104
86
90
64
85
103p
85
81p
65
106
116
92
78
95
91
96
85
91
89
82
78
104
87
108p
81
30
49
27
53
67
55
85
33
64
72
51
90
43
45
74
77
Metals
Pig iron......................................................
Steel ingots................................................
Lead...........................................................
Zinc............................................................
Tin deliveries.............................................
Automobiles
Textiles and Leather Products
Cotton consumption.................................
Wool mill activity.....................................
Silk consumption.......................................
Rayon deliveries.......................................
Shoes..........................................................
Foods and Tobacco Products
Livestock slaughtered...............................
Wheat flour...............................................
Sugar deliveries.........................................
Miscellaneous
Cement......................................................
Tires...........................................................
Lumber......................................................
Printing activity.......................................
Newsprint paper.......................................
7Gp
85p
71p
66p
37
p Preliminary
E m p lo y m e n t
A further substantial increase in employment from
March to April is indicated by available data. It is
estimated that over 400,000 workers were returned to
employment in this period, of which about 250,000 found
jobs in private industry, 85,000 were engaged on projects
financed by the Public Works Administration, and
65,000 were enlisted by the Civilian Conservation Corps.
Although the seasonal tendency from March to April
is downward, factory working forces increased 2 per
cent and payrolls rose 4 per cent, according to the in
dexes of the Bureau of Labor Statistics. The larger
proportionate gain in payrolls than in employment was
the result of wage rate advances, particularly in steel
mills and automobile factories. Although increases in
working forces were quite general among the various
manufacturing lines, they were most pronounced in the
industries engaged in the production of durable goods,
such as iron and steel, automobiles, machinery, railroad
equipment, and building materials. Despite the recent
improvement, however, employment in most of these
industries remains far below pre-depression levels.
This is illustrated by the accompanying diagram which
shows indexes of employment in the shoe, clothing, and
building material industries in New York State since
1929. Apart from seasonal fluctuations, the course of
employment in all of these industries was quite con-
(N e w
Y o rk
Sta te D e p a rtm e n t o f L a b o r d ata;
a ve ra ge =
1 0 0 p e r ce n t)
1 9 2 5 -2 7
sistently downward from the early part of 1930 to the
middle of 1932. During the past two years, however,
working forces in the clothing and shoe industries have
been increased markedly; employment in shoe factories
now compares favorably with the 1929 peak level, and
in the clothing industry the number of workers em
ployed is only slightly smaller than in 1929, whereas in
the production of building materials working forces, al
though somewhat above the lowest levels reached in the
depression, are still less than half as large as in 1929,
and about one third as large as the average in the years
1925 to 1927. Moreover, it is likely that a considerable
part of the modest improvement which has occurred in
this industry during the past year reflects demand for
materials in connection with publicly financed construc
tion projects rather than a resumption of private build
ing activity.
Supplementing the increased employment on construc
tion work financed by funds provided by the Public
Works Administration, the number of workers engaged
on privately financed building projects increased con
siderably from March to April, in keeping with the sea
sonal tendency. Moderate gains were reported also in
employment in trade and service industries and on rail
roads. In coal mining working forces declined sharply,
however, owing partly to labor disputes in some of the
bituminous fields.
C o m m o d ity Prices
The prices of several of the principal basic commodi
ties, which had moved within a relatively narrow range
from the beginning of February to the middle of April,
have shown wide fluctuations in recent weeks. The price
of wheat, following an abrupt decline in the latter part
of April, recovered sharply during May, owing at least
in part to reports of serious crop damage brought about
by insufficient rainfall, and the cash price of Number 1
Northern wheat at Minneapolis reached $1.05 a bushel,
the highest quotation since last July. Cotton, after
reaching a four year peak of 1 2 ^ cents a pound early
in March, dropped to 11 cents in the latter part of April,
but recovered about half of this decline during May. The
price of rubbber rose steadily from 11 cents a pound at
the end of March to 1 5 ^ cents early in May, accom
panying the negotiation of an agreement among the
47
FEDERAL RESERVE AGENT AT NEW YORK
principal producing countries to control output and
exports, but a pronounced downward tendency was
evident during the remainder of the month, which can
celed most of the previous gain. Scrap steel prices, which
are regarded as a fairly good barometer of the steel
industry, declined at Pittsburgh from $14.75 a ton early
in March to $12.00 in the latter part of May, the lowest
quotation since the end of 1933. Among the other im
portant basic commodities, declines occurred during May
in several of the non-ferrous metals and in livestock,
wool, and hides, while increases were shown in corn and
the other grains, accompanying the rise in wheat.
Recent wide movements of commodity prices have been
largely confined to a few primary materials, however,
and the general level of wholesale commodity prices, as
measured by the widely inclusive weekly index of the
Bureau of Labor Statistics, remained during May at
about the level of the previous three months. With the
exception of increases in finished steel, building materials,
and automobiles, and some recession in textile products,
the prices of manufactured goods have shown a high
degree of stability for several months.
Indexes of Business A c tiv ity
The level of general business activity appears to have
been fairly stable during April and the first half of May.
This stability is reflected in the accompanying diagram,
which shows the weekly index of merchandise and mis
cellaneous freight traffic computed by this bank. Since
the middle of January railway freight traffic of these
two classifications has shown only slight fluctuations,
after seasonal adjustment, around a level about as high
as at any time since early 1932, but has remained far
below the long term trend indicated by the data for past
years. Retail trade in New York and vicinity during
the first half of May also showed about the usual change
from the April level, which appears to have been some
what higher than in January and February, although
below the relatively high level of March.
Passenger automobile registrations and the volume
of advertising showed little change in April, after
seasonal adjustment, but increases occurred in this
bank’s indexes of the volume of check payments and
foreign trade. The movement of bulk commodities by
PER CENT
Index of Railroad L oadings of M iscellaneous and L e ss than Carload
F reig h t (Federal R eserve B ank o f N ew Y o rk index, ad ju sted for
seasonal variation and long tim e grow th)
rail diminished somewhat, but the decline was wholly
accounted for by a sharp reduction in coal shipments.
(Adjusted for seasonal variations, for usual year to year growth,
and where necessary for price changes)
1934
1933
April
Feb.
March
52
51
42
49
42
85
60
68
55
53
39
96
60
69
55
59
66
96
75
81
60
75
72
50
68
28
70
69
49
76
72
55p
68
42
74
77
49
80
61
59p
70
49p
72
73
47
72
72
60p
55
53
59
49
60
47
66p
56
72
72
72
77
63
64
73
Primary Distribution
Car loadings, merchandise and misc.......
Car loadings, other...................................
Waterways traffic......................................
Wholesale trade........................................
Distribution to Consumer
Department store sales, U. S...................
Department store sales, 2nd Dist............
Chain grocery sales...................................
Other chain store sales.............................
Mail order house sales..............................
Advertising................................................
Gasoline consumption...............................
Passenger automobile registrations.........
General Business Activity
Bank debits, outside New York City... .
Bank debits, New York City. .................
Velocity of demand deposits, outside New
York City..............................................
Velocity of demand deposits, New York
Shares sold on N. Y. Stock Exchange. . .
Life insurance paid for.............................
Employment in the United States..........
Business failures........................................
Building contracts.....................................
New corporations formed in N. Y. StateReal estate transfers.................................
52
125
67
59
85
11
71
58
59
150
68
76
43
28
56
46
54
62
67
79
41
30
56
47
General price level*...................................
Composite index of wages*......................
Cost of living*...........................................
124
170
126
136
180
138
136
181
139
p Preliminary
April
60
60
59p
63p
86
50 p
46
22
60
137p
183p
139
*v1913 average=100
B u ilding
During April the value of contracts awarded for pub
licly financed construction projects, which currently ac
count for the major portion of total contracts awarded,
was 40 per cent smaller than in the previous month.
Privately financed building showed only a moderate
seasonal increase, and this bank’s index of total build
ing contracts declined to 22 per cent of the long term
trend of building in past years, as compared with 30
per cent in March and 54 per cent last December. This
index, which is shown in the following diagram, is
adjusted for estimated changes in building costs and
therefore is designed to measure the physical volume
rather than the dollar value of construction work under
taken. The April level was double the low figure of a
year ago, but remained slightly below the average level
of 1932.
The pronounced rise in construction contracts in the
second half of 1933 reflected principally the placing of
contracts for projects financed by the Public Works
Administration, and the decline since the end of 1933
has been the result of a falling off in such awards. The
total value of contracts awarded in April for privately
financed building was 44 per cent larger than in the
corresponding month of 1933, but building costs have
risen materially during the past year, and the increase
in the actual volume of private construction work was
undoubtedly much smaller than is indicated by the dollar
figures. It appears therefore that apart from the stim
ulus to the construction industry provided by the ap
plication of public funds, there has been little recovery
MONTHLY REVIEW, JUNE 1, 1934
48
PER CENT
Locality
Percentage
change
April 1934
compared with
April 1933
Net
sales
New York...................................
Buffalo........................................
Rochester...................................
Syracuse.....................................
Newark.......................................
Bridgeport..................................
Elsewhere...................................
Northern New York State. ..
Southern New York State. ..
Hudson River Valley District
Capital District.....................
Westchester District..............
Index of Building and En gineerin g C ontracts Aw arded in 3 7 E astern
S tates ( F . W . D odge Corporation data ad ju sted for estim ated
changes in construction co sts, seasonal variation, and long
term grow th )
in building activity from the extremely low levels
reached during 1932 and the first quarter of 1933.
During the first half of May total awards of building
contracts showed a further moderate decline in keeping
with the seasonal tendency. Reductions occurred in
both publicly and privately financed undertakings.
D ep artm en t Store T ra d e
During the first half of May, department store sales
in the Metropolitan area of New York were about 6 %
per cent higher than in the corresponding period a year
ago, and excluding liquor sales from this year’s figures,
the increase amounted to a little over 4 per cent.
For the month of April, total sales of the reporting
department stores in this district were slightly below a
year ago, and excluding liquor sales the decline was 21/2
per cent, following four months in which year to year
advances had been shown. The decrease in sales was
attributable to the fact that Easter buying occurred in
March this year whereas it was done largely in April
last year, and in addition there was one less Saturday
in April this year, but even after allowance for these
factors it appears that retail trade was not quite as
good in April as in March. Moderate advances in sales
were reported by the Bridgeport and Capital District
department stores, and there was practically no change
in sales from a year ago in the New York, Buffalo, and
Hudson River Valley District department stores. With
the exception of Westchester and Northern New York
State, the declines in sales shown by the remaining local
ities were quite moderate. Sales of the leading apparel
stores in this district were practically unchanged from
a year ago.
The average rate of collections in April of accounts
outstanding March 31 again was somewhat higher than
in 1933 for department stores in all localities and in
apparel stores also. Stocks of merchandise on hand,
at retail valuation, continued to show substantial in
creases over a year ago.
+ 0.5
— 0.8
— 1.8
— 7.5
— 3.9
+ 6.7
— 1.5
— 17.2
— 4.9
— 0.4
+ 9.2
— 15.4
Stock
end of
month
Per cent of
accounts
outstanding
March 31
collected in
April
1933
1934
+15.4
+ 4.4
45.0
37.1
40.1
25.8
38.1
28.0
26.2
48.7
41.4
45.2
38.0
40.7
37.1
27.0
+28.8
+13.8
+17.5
+ 5.9
+22.8
All department stores........
— 0.4
+24.4
40.2
Apparel stores....................
0.5
+39.0
39.7
42.7
W h olesale T ra d e
In April, total dollar sales of the reporting wholesale
firms averaged about 28 per cent higher than a year ago,
a somewhat smaller increase than in the three previous
months but a considerably larger one than in the latter
part of 1933. Sales of paper and stationery showed
even larger increases than the unusual advances re
ported for March, but sales of the hardware, grocery,
cotton goods, men’s clothing, diamond, and jewelry firms
were ahead of a year ago by smaller percentages than in
the immediately preceding months. Wholesale drug sales
showed a substantial increase over a year ago, which,
however, was not as large as in March. Shoe concerns
reported only a small increase in sales, following large
advances in the two previous months, and sales of silk
goods, reported in yardage by the National Federation
of Textiles, Incorporated, declined much more from a
year ago than in the three previous months.
The dollar value of stocks held by grocery, hardware,
and drug firms at the end of April continued to be well
above that of a year ago, and the decreases in stocks of
the diamond and jewelry concerns were slightly less than
at the end of March.
Commodity
Percentage
change
April 1934
compared with
April 1933
Net
sales
Stock
end of
month
+18.7* +54.7
Men’s clothing.............................................. +32.3
+ 27.9
—29. If + 0.6+
Shoes.............................................................. + 4.1
+26.2
+io'.i
+18.9
Hardware....................................................... +17.9
+42.0
+43.9
+22.4 — 1.8
+169.4 —21.9 {
Weighted average.................................
+27.6
Per cent of
accounts
outstanding
March 31
collected in
April
1933
1934
85.6
36.2
30.4
64.4
46.7
20.1
39.9
52.5
35.2
17.1
94.7
36.7
36.3
62.3
44.7
28.3
40.0
51.1
51.2
j 29.4
51.9
56.1
* Including liquor sales; exclusive of liquor sales increase amounted to 4.9 per cent,
f Quantity figures reported by the National Federation of Textiles, Incorporated,
successor to the Silk Association of America, Incorporated; not included in
weighted average for total wholesale trade.
FEDERAL RESERVE BANK OF NEW YORK
MONTHLY REVIEW, JUNE 1, 1934
Business Conditions in the United States
(Summarized by the Federal Reserve Board)
OLUME of manufacturing production increased during April, while the
output of mines declined. Employment and payrolls continued to in
crease. The general level of commodity prices remained substantially un
changed during April and the first three weeks in May, although prices o f
individual commodities showed considerable changes.
V
P r o d u c t io n a n d
Seasonal
Variation
( 1 9 2 3 -2 5
age = 1 0 0 per cen t)
aver
Indexes of D aily A v erage V alu e of D epartm ent
Store Sales ( 1 9 2 3 -2 5 average = : 100
per cen t)
E mployment
Production o f manufactures, which had increased continuously since last
November, showed a further advance in April, according to the B oard’s
seasonally adjusted index, while output o f mines was smaller in April than
in March. The B oard’ s combined index o f industrial production remained
practically unchanged at 85 per cent o f the 1923-1925 average. The growth
in manufacturing reflected increases in iron and steel, automobiles, and meat
packing. Lumber production declined in April, and activity at wool and
silk mills was considerably reduced, while cotton consumption by mills showed
little change. Crude petroleum output continued to increase, but there was
a more than seasonal decline at the beginning of April in the mining o f both
anthracite and bituminous coal. During the first two weeks o f May steel
operations increased further, but declined somewhat in the third week. Out
put of automobiles decreased considerably in May.
Volume of employment and wage payments continued to increase in April,
and employment in factories, according to the new index o f the Bureau o f
Labor Statistics, was larger than at any time since the end o f 1930. There
was a substantial seasonal increase in the number o f workers employed in
private construction as well as in those engaged in projects financed by the
Public Works Administration. Employment on railroads, in metal mining
and quarrying, and in various service activities also increased further, while
in coal mining there was a considerable decrease.
Construction contracts awarded during April, as reported by the F. W.
Dodge Corporation, were smaller in value than during March. There was a
substantial decline in public works contracts, while contracts for privately
financed projects showed a slight increase in April.
Following extended drought in important grain areas, the Department
o f Agriculture forecast of the winter wheat crop was reduced from 492,000,000
bushels on April 1 to 461,000,000 bushels on May 1. This compares with
a five year average for 1927-1931 o f 632,000,000 bushels. The condition of
rye, hay, and pastures has also been adversely affected by the drought.
D is t r ib u t io n
Railroad freight car loadings declined in April as compared with March,
and in the first half of May there was a smaller than seasonal increase in
total loadings. The April decline was largely the result o f a substantial
decrease in coal shipments from the relatively large volume of March. De
partment store sales showed little change from March to April, after allow
ance is made for differences in the number of business days, for usual sea
sonal changes, and for changes in the date o f Easter. Sales continued larger
than a year ago.
C o m m o d it y
G roup Price Indexes o f Bureau o f Labor S ta tis
tics ( 1 9 2 6 average = 1 0 0 per cen t)
B ank
Wednesday Figures for Reporting Member
Banks (Latest figures are for May 16)
P r ic e s
The general level o f wholesale commodity prices, as measured by the
Bureau o f Labor Statistics index, has shown little change during the past
three months. Prices of grains, cotton, silk, and silver, which declined sharply
in April, rose during the first three weeks of May. Rubber prices advanced
sharply until early in May but subsequently declined somewhat, and prices
o f textile products declined during recent weeks. Steel scrap has declined
since March, while finished steel products, automobiles, nonferrous metals,
and building materials advanced. Cattle and beef prices rose during April
and the early part of May, while prices o f hogs declined.
C r e d it
Excess reserves of member banks remained at a level o f about $1,600,000,000 between the middle of April and the middle o f May. There were
110 considerable changes in monetary gold stock or in money in circulation.
The total volume of Reserve Bank credit also showed little change.
A t reporting member banks in leading cities in the five weeks ended
May 16 there were decreases of about $240,000,000 in loans and o f $80,000,000
in investments, the latter reflecting a decrease in holdings o f securities other
than those of the United States Government. Net demand and time deposits
increased by nearly $200,000,000, while United States Government deposits
were reduced by about $300,000,000.
Short term money rates in the open market continued at low levels during
May and yields on United States Treasury bonds declined further to the lowest
levels o f the post-war period.
@FedFRASER