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MONTHLY REVIEW o f C r e d it a n d S e c o n d Federal Reserve Agent B u s in e s s F e d e r a l R e s e r v e Federal Reserve Bank, New York M o n e y M a r k e t in M a y Due largely to Government disbursements and a re newed inflow o f gold from abroad, deposits in reporting member banks have shown a considerable further expan sion during the past month. Net demand deposits rose to a new high level in reporting New Y ork City banks, and probably also in other principal cities, although strictly comparable records fo r those cities are not avail able back of 1932. The rise in net demand deposits some what exaggerates the expansion in deposits subject to check, however, as it includes a considerable accumula tion of idle balances o f banks of the smaller localities with their city correspondent banks. Furthermore, the volume of deposits subject to check in the smaller towns and cities apparently has not reached levels relatively as high as deposits in the large cities, due partly to the limited banking facilities in some localities resulting from the closing of a large number of banking institu tions from 1930 to early 1933. A n indication o f the course o f deposits subject to check in all member banks is given by the data recently released by the Federal Reserve B oard showing the assets and liabilities o f all member banks at the time o f the last condition statement submitted by members, as o f March 4, 1935. The data fo r demand deposits, adjusted so as to exclude interbank deposits and duplication o f deposits arising out o f checks and other items in process C o n d itio n s D is t r ic t June 1,1935 o f collection, are shown in the accom panying diagram, with comparable figures back to the end o f 1929. These data, o f course, do not reflect the substantial expansion o f the past three months, but, nevertheless, indicate that the money supply in the form o f individual deposits subject to check in member banks has risen to a point where a considerable part o f the shrinkage during the depression has been made up. In fact, the money supply in this form has now reached a level much more nearly approaching pre-depression levels than has busi ness or the general level o f prices. This discrepancy appears to be accounted fo r by the continued low rate of use of available funds, which is indicated by the second diagram. The data in this diagram, which are shown through A p ril o f this year, indicate that the average rate o f turnover o f demand deposits has risen only slightly from the lowest level o f the depression. Nevertheless, there have been indications recently o f somewhat more active use o f the funds available. Privately financed expenditures on building during the past few months have shown the first material expansion since the depression began, and expenditures on new industrial equipment, as reflected by the volume of machine tool orders, have held at fairly high levels for several months, and in A p ril were the highest fo r that month in any year since 1930. Furthermore, the em ploym ent o f money fo r purchases o f stocks and com PERCENT 1930 1931 1932 1933 1934 1935 Demand Deposits of All Member Banks (Adjusted to exclude inter bank deposits and items in process o f collection; United States Government deposits also excluded) Rate of Turnover of Demand Deposits in Principal Cities (Federal Reserve Bank of New York index; 1919>25 av e ra g e s 100 per cent) 42 MONTHLY REVIEW, JUNE 1, 1935 modities, partly speculative in character, appears to have increased somewhat during recent weeks. A t the same time, however, the market fo r the highest grade investments has become somewhat hesitant. Prices o f long term Government bonds during most o f May were at levels slightly below those reached at the end of A pril, and the highest grade corporation bonds in many cases showed small recessions. In some instances, however, the recessions in high grade corporation bonds were related to the revival of refunding operations during the past few months, which have involved the calling o f bonds fo r redemption at prices below those at which they had been selling in the market. M R oney ates The pressure o f funds seeking employment in high grade short term investments, continued to be reflected in the money market. Supplies of such paper remained fa r short of the investment demand, and despite in creased offerings of Treasury bills in the latter part of the month, the yields obtainable from investments in such securities declined slightly further. In fact, Treasury bills of short maturity offered fo r resale in the market were quoted at prices such as to leave almost no yield for the purchaser. Other Government paper o f short maturity which is expected to offer valuable ex change privileges continued to sell in the market at premiums more than sufficient to eliminate all yield to maturity. In the case o f the commercial paper and bill markets, rates remained at the previous low levels, but practically no bills were available in the market, and supplies of high grade commercial paper were far short o f the demand. Money|Rates at New York M ay 31, 1934 April 30,1935 M ay 29, 1935 Stock Exchange call loans....................... Stock Exchange 90 day loans................. Prime commercial paper— 4 to 6 months Bills— 90 day unindorsed........................ Customers’ rates on commercial loans.. Treasury securities: Maturing December (yield )................ Maturing June 1936 (y ield )............... Average yield on Treasury notes (1-5 years)......................................... Average yield on Treasury bonds----Average rate on latest Treasury bill sales 182 day issue.......................................... 273 day issue.......................................... Federal Reserve Bank of New York re discount ra te.......................................... Federal Reserve Bank of New York buying rate for 90 day indorsed bills * Nominal X X 1 *X-1 1 V s -H i * H * X A X X X H t l.7 1 f l .8 3 N o yield N o yield 0.04 N o yield 1 .1 2 2 .8 6 0 .59 2.41 0.57 2.46 o ’. i 5 o '. i i itt IX IX tt tt tt t2 .3 8 0 .0 1 0 .13 f Average rate of leading banks at middle of month M em ber B an k C r e d it The volume of loans and investments in weekly report ing member banks fluctuated irregularly during the past month, and on the whole showed some net decline. In the large New Y ork City banks total loans and invest ments showed an increase of nearly $ 1 0 0 ,000,000 at the beginning of the month, reflecting chiefly loans to se curity dealers to finance the carrying of Government securities purchased by the dealers in anticipation of exchanges fo r new issues, and to some extent an increase in the Government security holdings o f the banks them selves under similar circumstances. Subsequently, how ever, loans to dealers were reduced accom panying the distribution o f the new Government securities acquired by the dealers among other investors, and the banks’ own holdings o f Government securities also diminished, so that total loans and investments showed a net reduc tion fo r the fou r weeks ended May 2 2 o f $80,000,000. The Government security holdings of the reporting New Y ork City banks showed a net reduction of $64,000,000, part o f which, however, was probably related to the net retirement o f Treasury bills at the rate o f $25,000,000 a week, on each o f the first three W ednesdays in May. In addition, investments in securities other than United States Government issues showed a net reduction o f $40,000,000 fo r the period, apparently reflecting chiefly the repayment o f tem porary State and m unicipal bor rowings. Security loans, however, showed a net increase o f $ 2 0 ,000 ,000 , and there was a small increase in hold ings o f Government guaranteed securities. In other reporting cities throughout the country, total loans and investments showed a net reduction of $58,000,000 during the fou r week period, the principal factor in which was a further reduction o f $44,000,000 in security loans, which receded to a new low point fo r many years, but there were also smaller reductions in other loans and in holdings of Government securities. G o vernm ent S e c u r it ie s Prices o f United States Government securities fluctu ated within a narrow range during May, and the aver age yields o f 2.46 per cent on outstanding Treasury bonds and 0.57 per cent on Treasury notes o f 1 to 5 year maturity near the end o f the month were little different from those prevailing at the beginning. The rates at which Treasury bill issues were sold were slightly lower than in A p ril— 0.14 to 0.15 per cent on five issues o f 9 month bills and 0.09 to 0.10 per cent on two issues of 133 day bills. The 133 day bills restored the continuity o f weekly bill maturities which was interrupted early in A p ril when the Treasury issued only 9 month bills for seven consecutive weeks. In all $250,000,000 o f 9 month bills and $100,000,000 of 133 day bills were put out, while maturities consisted o f $375,000,000 o f 6 month bills. In the first three weeks o f M ay there were net maturities of $75,000,000 o f bills, but in the latter half o f the month the Treasury offered $25,000,000 more bills than matured each week. Subscription books to the issue of 2 % per cent Treas ury bonds o f 1955-60 offered only in exchange fo r First Liberty Loan bonds, which are called fo r payment June 15, remained open through M ay 23 when a total o f $744,000,000 o f exchanges had been made. These ex changes together with exchanges o f $864,000,000 o f First L ib e rty ’s fo r 1 % per cent Treasury notes o f 1940, left only $325,000,000 o f F irst Liberty Loan bonds to be redeemed in cash on June 15, or 17 per cent of the amount o f the F irst Liberty Loan outstanding when the redemption call was issued. A new feature o f the Government bond market during May was an offering by the Treasury o f an additional $100,000,000 o f 3 per cent bonds o f the issue o f 1946-48 on a competitive bid basis, similar to the method fo l FEDERAL RESERVE AGENT AT NEW YORK lowed in Treasury bill sales. It was reported that this was the first instance that direct Government bonds have been sold in this manner since 1911 when the 3 per cent Panama Canal Loan was floated. On this Treasury bond issue, tenders received aggregated $270,000,000. The average price on the bonds allotted was 103 4/32, and the premium to be paid will reduce the average yield to the earliest call date to about 2.67 per cent. The Treasury also announced, on behalf of the Home Owners’ Loan Corporation, an issue of Home Owners’ Loan Corporation 1 % per cent bonds o f Series F 1939 in exchange for Home Owners’ Loan Corporation 4 per cent bonds called fo r redemption on July 1. The called bonds are guaranteed by the United States as to inter est only, while the new issue is guaranteed both as to interest and principal. A t the time the exchange offer ing was announced, it was stated that an additional amount of bonds o f Series F 1939, approximately equal to the amount of Home Owners’ Loan Corporation 4 per cent bonds not tendered in exchange fo r the new bonds, would subsequently be offered fo r cash subscription. B il l s a n d Com m e r c ia l P aper Reflecting the low level o f acceptance outstandings, as well as the tendency fo r accepting banks to hold closely practically all of the available bills, the discount market for bills remained dull during May and dealers’ portfolios continued in very small amount. Rates like wise were unchanged. A t the end of A p ril the volume o f acceptances outstanding amounted to $413,000,000, a decline of $53,000,000 from a month earlier due prin cipally to a large reduction in domestic warehouse credit bills. Compared with a year ago the volume o f bills shows a shrinkage of $ 2 0 0 ,000 ,000 , or nearly one-third. A ccepting banks and bankers held 95 per cent o f the bills outstanding on A p ril 30. During the first part of May, some sales o f prime commercial paper maturing in four months were made at % per cent, but throughout the month dealers gen erally continued to quote % per cent as the prevailing rate fo r prime fou r to six month paper. No change occurred in the active bank investment demand fo r business paper nor in the limited volume o f new paper com ing into the market. A t the end o f A p ril commer cial paper houses had outstanding $173,000,000 o f paper, an amount 5 per cent less than on March 31, but 24 per cent more than a year ago. S e c u r it y M a r k e t s The advance in stock prices which began around the middle of March continued further in M ay and trading activity was maintained at a somewhat higher rate than for several months prior to m id-A pril. D uring the first three weeks of May, the advances were principally in prices of industrial stocks, which as a group rose to the highest level since A p ril 1934. In all, industrial stocks advanced nearly 25 per cent above the mid-March lows, but in the closing week of the month turned reactionary, declining about 6 per cent. Public utility stocks, which showed no important advance during the first three weeks of the month, rose several points during the final days of May to the highest level since last October. 43 P R IC E IN D E X M ovements o f Stock and Bond Prices (Standard Statistics Company 90 stock index and M oody's Investors Service data for Aaa and Baa corporate bonds) Railroad shares were rather steady throughout the month. The accom panying diagram shows the recovery that has occurred in the general average o f stock prices dur ing the past 2 % months and the movements that have occurred in corporate bond prices. Corporation bonds o f the highest grade, shown in the top line o f the dia gram, have moved slightly lower since the first part of March, losing about 1 point on the average, while medium grade bonds since the end of March have tended to advance with stock prices, although the extent o f the rise has been much less— about 3 points— and consider able irregularity has been exhibited. A m ong the highest grade bonds, the price declines have been fairly general, while the recovery in lower grade issues has been chiefly in railroad and utility shares. The recent slight reces sion in high grade corporation bonds in many cases has been in issues that have been selling above the prices at which they are callable. The increase in refunding oper ations in the industrial and public utility fields begin ning in March indicated the possibility o f further calling o f bonds fo r redemption prior to maturity. N e w F i n a n c in g D uring May, public offerings o f new securities other than United States Government direct and guaranteed issues were in considerably smaller volume than in A p ril or in March, due largely to a smaller volume o f State, municipal, and farm loan financing. Corporation issues continued in substantial volume, and it appears that in May a part o f the proceeds o f new corporate issues was to supply new capital. In the case o f the $15,000,000 issue o f 4 % per cent ten year debentures by the National Distillers Products Corporation, for instance, the corporation announced that the proceeds after repayment o f $5,000,000 o f bank loans would be used to provide working capital. A n issue o f $50,000,000 National Steel Corporation 4 per cent bonds was floated to provide for refunding in the amount of $ 3 9 ,0 00 ,000 , an advance o f $ 2 ,000,000 to a subsidiary, and the bal ance fo r working capital and reimbursement fo r capital expenditures. Three other sizable corporate issues o f the MONTHLY REVIEW, JUNE 1, 1935 44 month— $15,500,000 San Diego Consolidated Gas and E lectric Company bonds, $13,500,000 Union Oil Com pany o f California debentures, and $12,000,000 Atlantic Coast Line Railroad Company notes— were fo r refund ing purposes including payment o f bank loans. F o r the rest, May security offerings included a number o f small to moderate size State and municipal issues and two small corporate issues. F o r e ig n E x c h a n g e s The principal developments in the foreign exchange market during M ay were pronounced weakness in the French franc and a rise in the pound sterling. The franc showed a downward tendency in the first few days o f the month and dropped on May 9 to a level at which shipments o f gold from Paris to New Y ork be came profitable. Despite heavy engagements o f gold for shipment to this country, the fran c remained consider ably below the lower gold point during the remainder of the month, as is shown in the accom panying diagram. The spread between spot and forw ard quotations in creased sharply, the discount on three month contracts equaling 6 per cent in the latter part o f the month. A ccom panying the weakness of the franc, the pound sterling advanced sharply from $4.84% on M ay 8 to a high of $4.97 on May 25. This rise, follow ing a general upw ard tendency since the middle o f March, was more than sufficient to cancel the January to March decline, as the diagram also indicates, and the pound returned to about the level prevailing last December. Recent ad vances in sterling have occurred during periods o f weak ness in the European gold currencies— the recovery in the latter part o f March coincided with the Belgian exchange crisis; the further advance in the first half o f A p ril was accompanied by weakness in guilders and Swiss fra n cs ; and the gain during May occurred while the French franc was below the gold im port point to the United States. The movements o f the Swiss franc continued to corre spond approxim ately to those of French exchange, but in the first half o f M ay the guilder was somewhat stronger than either of the other two gold bloc cu r rencies, remaining generally above the lower gold point Movements o f Sterling and French Franc Exchange at New York (Latest quotations are for May 28) until M ay 20. The belga held slightly below its new parity o f $0.1695 until M ay 23, but rose sharply there after to $0.1711 on M ay 29. A m ong other European currencies, recessions occurred in the rates fo r the lira, the Polish zloty, the Spanish peseta, and the A ustrian schilling. The sterling area exchanges and the Japanese yen advanced in keeping with the pound sterling, and the Canadian dollar fo r a while was quoted at a slight pre mium fo r the first time in several months. W hile the official rate fo r the Brazilian milreis remained fairly steady the free rate declined further to a new low of $0.0525. Since the market was restored largely to a free basis on February 11, this rate has declined nearly 21 p e r Cent. Closing Cable Rates at New York Exchange on M ay 31, 1934 H olland ........................................... $ .2336 .2263 5.0650 .06588 .3900 .6769 .0853 .2545 .1366 .2612 .3248 April 30, 1935 $ .1699 .2158 4.8300 .06620 .4042 .6787 .0827 .2429 .1371 .2492 .3249 M a y 29, 1935 $ .1711 .2199 4.9250 .06600 .4034 .6756 .0822 .2475 .1367 .2539 .3235 1.0038 .3377 .0850 .8000 .9956 .3220 .0860 .8000 .9994 .3283 .0857 .8000 .3010 .3812 .3275 .2850 .3656 .4150 .2900 .3736 .4188 C e n tra l B a n k R a t e C h an ges A ccom panying the heavy outflow o f gold from France during May, three successive advances in rates were made by the Bank o f France. These changes were as fo llo w s: Rate for Advances on Discount R ate Rates prevailing M ay 1 . Rates effective M ay 24 . Rates effective M ay 27. Rates effective M a y 29 . 2H 3 4 6 G old 3H 4^ 5H 7 Short Treasury Securities Paper (30 day loans) 2% 4H 4% 6H 3 4 6 The 6 per cent discount rate is the highest in force since the period from December 1926 to February 1927, when it stood at 6 % per cent. Rates were also raised in May by the central banks o f Switzerland and the Free City o f Danzig. On the 3rd the Swiss National Bank raised its discount rate from 2 to 2 p er cent, the lower rate having been in force since January 22, 1931. On M ay 2, simultane ously with a devaluation o f 42.37 per cent in the Danzig gulden, giving it a new parity with the dollar o f 18.9938 cents, the Bank o f D anzig raised its rate from 4 to 6 per ce n t The National Bank o f Belgium lowered its discount rate one-half o f 1 per cent to 2 per cent on May 16. On the same day, the Netherlands Bank rate, which had been raised twice in A p ril from 2 % to 4 x/2 per cent, was lowered to 4 per cent, but on M ay 31 the rate was raised to 5 per cent, effective June 1. FEDERAL RESERVE AGENT AT NEW YORK G o ld M o v e m e n t The movement of gold from Europe to the United States which began early in A p ril continued during the first nine days of May when $14,100,000 was received from H olland and $2,100,000 from France. On May 17 a renewed inflow o f gold began, reflecting the weakness of the French franc in the foreign exchange market, and by the end of May a total of $109,500,000 was imported from France. In addition, $2,500,000 was received from Canada, $1,600,000 from England, and $700,000 from China during the month. There was also a receipt of $1,800,000 of gold from Colombia which was immedi ately earmarked on arrival and was therefore without effect on the gold stock. In addition to the M ay imports and to the release of $300,000 from gold held under earmark for foreign ac count, the monetary gold stock was also increased by receipts o f newly mined gold and scrap gold at the mints and assay offices, and the aggregate increase of about $151,000,000 raised the gold stock o f this country to a new high of approxim ately $8,860,000,000. B u s in e s s P r o fit s Aggregate net profits, less deficits, of 279 industrial and mercantile companies fo r the January to March quarter of 1935 were 31 per cent larger than fo r the corresponding quarter of 1934, accom panying an in crease in the volume of business between these two periods which in the case o f basic industrial production amounted to about 1 0 per cent. First quarter profits were also 2 1 per cent larger than those reported fo r the corresponding period of 1931, but were materially less than the earnings in 1930 and roughly half as large as in preceding prosperous years. Although the building supply com pany group was the only one of the indus trial groups to show a combined deficit this year, not all companies for which reports are available in other groups were able to earn net profits; in fact 77 companies, or 28 per cent of the total, reported deficits in 1935. The extent of the improvement in earning capacity, however, is indicated by the fact that 62 per cent of the reporting companies did better than in the first quarter o f 1934— either increasing profits, reducing deficits, or earning some net profits in place of the deficits shown in 1934— while the remaining 38 per cent of the companies did not do as well as a year ago. A m ong the various groups of companies, the largest relative improvement in profits occurred in the copper, machinery and tool, and electrical equipment groups, all of whose profits in 1934 were small. The printing and publishing and household equipment groups also experi enced a substantial rise in earnings, as did the automo bile parts and automobile m anufacturing concerns. Two groups, the steel and railroad equipment concerns, re ported small net profits this year, as against deficits last year. Several groups, however, including the coal and coke, food and food products, motion picture and amuse ment, and clothing and textile companies, had smaller profits this year than last. Contrary to the experience of industrial companies in the aggregate, Class I railroads and public utilities other than telephone companies earned less in the first quarter of 1935 than in 1934. The Class I railroads, after reduc 45 ing their combined deficit to small proportions in the first quarter o f last year, showed a deficit three times as large in the January to March quarter this year, and in the case o f the utilities the decline in profits which has occurred since 1929 proceeded somewhat further. (N et profits in millions of dollars) Corporation group No. of Cos. A utom obiles................... Automobile parts and accessories (excl. tires) Building supplies........... Chemicals and d ru gs.. . Clothing and textiles... Coal and coke................ C op per............................ Electrical equipm ent.. . Food and food products Household equipment. . Machinery and to o ls .. . Metals and mining (excl. copper, coal, and coke) M otion pictures and amusement................. Office equipm ent........... O il.................................... Paper & paper products Printing and publishing Railroad equipment___ T o b a cco .......................... Miscellaneous................. 19 5 42 First Quarter 1931 1933 1934 1935 29.3 3 .0 — 1 .6 2 9.3 3 8.5 26 9 19 9 4 .8 — 2 .5 — 2 .0 17.3 — 0 .3 — 0 .5 — 1.2 — 4 .5 — 3 .3 8 .5 — 0 .7 24.6 13.8 — 0 .1 25.1 0 .7 2 .2 2 .3 19.2 1 .2 9 35 7 13 2 5.8 — 0 .4 0 .7 — 0 .1 7 .9 35.7 0 .9 0 .7 26.0 — 1.5 — 3 .6 — 1.6 — 2 .9 27.2 0 .7 0 .4 8 4 .0 1 .6 1 .4 8 .6 4 5 26 2 .8 — 1 .7 — 0 .3 2 .5 — 10 .8 1.4 1 .0 — 1.7 2 .8 3 .0 9 .1 8 6 6 4 8 1.8 — — — — 1 1 .1 0 .4 1 .2 2 .2 1.1 — 27.9 — 0 .2 0 .8 1.4 0 .1 2 .6 0 .8 0 .8 7 .9 22.3 1.3 2 .0 8 .0 — 2 .9 — 34.6 6 .5 3 .0 — 1.2 — 28.5 0 .5 3 .0 — 0 .2 9 .0 0 .5 1.4 — 0 .9 — 7 .3 0 .4 7 .0 13.7 — 52.4 117.8 154.8 — 54.4 — 94.9 — 15.3 — 4 5 .5 75.8 63.6 6 1.0 59.2 1 .0 5 .3 2 .4 7.1 1 .1 Total, 2 1 groups .. 279 128.4 Class I Railroads Net incom e................. 149 * Other public utilities (except telephone cos.) Net incom e............. 59 8 4.3 — Deficit 1932 11 0 0 .8 0 .1 0 .6 2 .2 0 .1 7 .5 0 .5 9 .7 * N ot Available P r o d u c t io n Data on the volume o f basic industrial activity so far available fo r May indicate that a further slight recession occurred, continuing the decline which began in Febru ary. Operations in the automobile industry were cur tailed early in the month in connection with labor difficulties, and although there was some subsequent pick-up the average rate o f output for the month as a whole was lower than in A pril. Steel ingot production declined somewhat in conform ity with the usual seasonal tendency, and operations in the cotton textile industry were reduced further. Bituminous coal production in creased moderately from the low A p ril level. The extent o f the decline in industrial activity in A pril is indicated by a drop o f 2 points in the Federal Eeserve B o a rd ’s seasonally adjusted index o f industrial produc tion to 86 per cent o f the 1923-25 average. This com pares with the January index o f 90, which was the high est since the summer of 1933; therefore, the indicated recession fo r the three month period from January to A p ril amounted to not more than 4 % per cent. The average rate o f operations in the steel industry for A pril was 45 per cent o f capacity as against 49 per cent in March. Bituminous coal output dropped sharply, and cotton mills continued the gradual curtailment begun in the preceding month. The expansion in automobile p ro duction between March and A p ril was smaller than that experienced between these months in many other years, but nevertheless the number of cars produced was the largest fo r A p ril o f any year since 1929. MONTHLY REVIEW, JUNE 1, 1935 46 (Adjusted for seasonal variations and usual year to year growth) 1935 1934 April Feb. Mar. April 51 64 47 56 56 64 42 64 51 59 46 63 r 49 54 47 64 50r 86 r 70r 109r 72 r lOOr 64r 94r 76 85 71 83 85 70 64p 83 p 66 66 95 58 69 65 72 r Metals Pig iro n ........................................................... Automobiles M otor trucks r ............................................... Fuels Bituminous coal............................................. Anthracite co a l.............................................. Petroleum, cru d e........................................... Petroleum products...................................... Electric power r ............................................. 74r 73 r 85 83 82 119r 66 68 68 p 71 r Textiles and Leather Products Cotton consum ption.................................... W ool mill a ctiv ity ........................................ Silk mill activity............................................ R ayon deliveries........................................... Shoes................................................................ 76 113 91 103 104 87 72 81 95 82 78 109 64 73 74 104p 59 p 10 2 p 105p 78 85 95 82 79 82 105p 83 41r 63 43r 68 67 p 52 Foods and Tobacco Products Meat p a ck in g ................................................ Wheat flour.................................................... Refined sugar deliveries.............................. Tobacco products......................................... M iscellaneous Cement r ......................................................... Tires ................................................................. Newsprint p a p er........................................... Machine tools................................................ p Preliminary r 47r 71 74 40 77 88 38r 69 72 46 48 Revised B u il d i n g D uring A pril, contracts for residential construction increased further to the largest volume since the closing months of 1931. The increase reported by the F. W . Dodge Corporation appears to have been in excess o f the usual seasonal upturn, but although A p ril contracts were nearly double a year ago the amount still remains small in comparison with other recent years, as the accom panying diagram indicates. Increases in residen tial contracts over a year ago were reported in virtually all of the territories included in the Dodge report and the improvement, as in previous months of this year, included increases in contracts fo r apartment houses, M IL L IO N S Daily Average Value of Residential Building Contracts Awarded in 37 States (F. W. Dodge Corporation data) single and two fam ily dwellings, and housing develop ments. In M etropolitan New Y ork and vicinity total con struction contracts placed in A p ril were about threefourths larger than a year ago, due chiefly to the in crease in residential construction, although there was also some increase in nonresidential construction con tracts other than public works and utilities. In the up-State New Y ork Territory, however, total A p ril con tracts were somewhat smaller than a year ago despite an increase in residential work. Total privately financed contracts in the 37 States covered by the Dodge reports reached a volume during A p ril that has been exceeded only in one month, June 1933, since comparable records were started at the be ginning o f 1932. Here again the increase in residential contracts was the principal factor, although there was also some increase in contracts fo r commercial buildings, partly offset by a smaller volume of factory construction. Publicly financed construction, on the other hand, con tinued below the level of a year ago, reflecting the materially smaller contracts fo r public works projects than at this time last year. In the first half o f May, residential building fu lly maintained the A p ril rate, although frequently May reports show some seasonal decline. The principal changes between A p ril and May were a larger than seasonal falling off in public works and utility projects and a more than seasonal advance in other nonresidential contracts. I n d e x e s o f B u s in e s s A c t i v i t y D uring the first three weeks o f May, the movement of merchandise and miscellaneous freight over the railroads receded from the A p ril level, and the movement of bulk freight showed an increase o f somewhat less than the average seasonal proportions owing largely to a decline in grain shipments and a continued low level o f coal loadings. Sales o f department stores in the M etropolitan area o f New Y ork in the first half o f May, however, made a better showing than in A pril, seasonal influences con sidered. D uring A p ril general business activity and the distri bution o f goods showed a downward movement, with most o f this bank’s seasonally adjusted indexes partici pating in the decline. A substantial reduction occurred in the railroad movement o f bulk freight, and the expan sion in department and chain store business in the weeks preceding Easter was o f considerably less than the ex pected proportions. Reductions from the previous month occurred also in the indexes of mail order house sales and wholesale trade, while the indexes of merchan dise and miscellaneous freight car loadings and of bank debits were little changed. Registrations of new pas senger automobiles showed less than the average March to A p ril increase, probably due to the fact that registra tions had already risen with exceptional rapidity because o f the early introduction o f new models this year. As the accom panying diagram indicates, A p ril new car registrations and the total fo r the first four months o f this year were substantially higher than in the corresponding period of any year since 1930. FEDERAL RESERVE AGENT AT NEW YORK 47 farm products declined in price. Grain prices especially moved lower in May reflecting im proved crop prospects; the spot quotation fo r wheat at Minneapolis declined 18% cents to 99% cents a bushel, thus more than can celing the gain which had occurred between mid-March and the end o f A pril, corn decreased 4 % cents to 84% cents, and the average price o f steers showed a net reduction o f 83 cents to $11.67 a hundredweight. THO USANDS OF C A R S E m p l o y m e n t a n d P a y r o ll s Daily Average Registrations o f New Passenger Automobiles (Adjusted for seasonal variations, for usual year to year growth, and where necessary for price changes) 1935 1934 April April Feb. Mar. 60 60 56 63 62 65 47 67 90 61 65 51 75 89 71 67 61 82 75 58 66 r 66 77 72 60 85 97 63 69r 68 p 60 79 79 61 62r 61 43 65 47 65 p 48 p P rim a ry Distribution Car loadings, merchandise and m isc........ Car loadings, oth er...................................... E xports........................................................... Im ports........................................................... Wholesale tra d e............................................ 86 60 58 47p 68 p 77 Distribution to Consumer Department store sales, U. S..................... Department store sales, 2nd D ist............. Chain grocery sales...................................... Other chain store sales................................ Mail order house sales................................ Advertising.................................................... New passenger car registrations r ............. Gasoline consumption.................................. 72 74 66 80 71 61 47r 68 71 68 General B usin ess Activity Bank debits, outside New York C it y .. . . Bank debits, New York C ity ..................... Velocity of demand deposits, outside New York C it y .................................................. Velocity of demand deposits, New York C it y ............................................................. New life insurance sales.............................. Factory employment, United States........ Business failures........................................... Building contracts........................................ New corporations formed, N. Y. State.. . General price level*...................................... Composite index of wages*........................ Cost of livin g *............................................... p Preliminary r Revised 66 56 77 66 69 68 63 64 83 46 44 63 83 40 46 56 84 37 22 20 21 60 58 55 48 53 83 p 45 19 54 137 184 136 142 183 142 141 185 142 142p 187p 142 From the middle o f March to the middle o f A p ril the seasonally adjusted indexes o f employment and payrolls in representative New Y ork State factories advanced fo r the fifth consecutive month. D uring this five month period, employment rose 6 per cent and payrolls 1 1 per cent, after seasonal adjustment, and both indexes reached the highest level since 1931, as the accom panying dia gram indicates. Between mid-March and m id-April, increased employment at construction material plants reflected the spring upturn in building activity, and the number of workers engaged in the metals and machinery factories continued to increase, but little change was re ported in the textile industries. F or the United States as a whole, factory employment and payrolls showed little change from the middle of March to the middle o f A pril. A fter allowance for usual seasonal variations, however, the payrolls index regis tered its seventh consecutive monthly advance, reaching a level more than 20 per cent above the 1934 low point o f last September, and about 5 per cent above a year ago. In the durable goods group o f industries, employment and payrolls continued to rise, the construction mate rials industries especially showing pronounced gains. A m ong the nonm anufacturing industries substantial seasonal advances were reported in the number of work ers engaged in private building construction and in retail trade, but there was a sharp decline in bituminous coal mining which more than offset employment gains in other branches o f the mining industry. The number o f persons engaged on public projects financed by Federal emergency outlays increased by PER C E N T * 1913 average=100 C o m m o d i t y P r ic e s The general level o f actively traded commodity prices continued to advance during most of May, due to in creases in prices of some o f the nonagricultural as well as some agricultural commodities. In the metals group, the current quotation for lead rose 60 points to 4.37% cents a pound, the highest price since October 1933, zinc advanced 20 points to 4.30 cents a pound, and tin closed the month at 51.50 cents a pound, a gain o f % of a cent from the end o f A pril. Scrap steel at Pitts burgh rose 25 cents to $11.75 a ton, follow ing a decline o f $2.00 between mid-January and m id-A pril. Am ong other important commodities, rubber, hides, and wool also moved higher during May, and the aver age price o f hogs rose $1.07 to $10.00 a hundredweight, a new high since October 1930, but several other important Indexes of Employment and Payrolls in New Y ork State Factories, A djusted for Seasonal Variation (Federal Reserve Bank of New Y ork indexes based on State Department of Labor data; 1925-27 average = 100 per cent) 48 MONTHLY REVIEW, JUNE 1, 1935 approxim ately 135,000 from the middle of March to the middle of A pril, due largely to an increase o f about 75,000 in enrollment at Civilian Conservation Camps and to the addition of more than 50,000 workers on P ublic W orks Adm inistration construction projects. Percentage change April 1935 compared with April 1934 Per cent of accounts outstanding March 31 collected in April Locality F o r e ig n T r a d e The foreign merchandise trade of this country during A p ril declined from the previous month, exports amount ing to $164,000,000 and imports to $171,000,000. The resulting im port balance was the first to occur since August 1933, when, accom panying depreciation in the exchange value o f the dollar, imports appeared to have received greater stimulus than exports. A fte r the first expansion in 1933, the dollar value of exports continued to rise, while imports showed no material change. The margin of exports over imports became substantial in the latter half o f 1934, but has narrowed rapidly in recent months. The A p ril 1935 value of imports was 16 per cent above that o f a year ago, while the value o f exports showed a decrease of 9 per cent. Total exports o f raw cotton from the United States continued to be smaller in volume than a year ago but the reduction was not relatively as large as in the previ ous nine months. Demands fo r Am erican cotton in France, Spain, Belgium and a few smaller European consumers of Am erican cotton as well as China showed increases over A p ril 1934, while other leading consum ing countries continued to take less than a year ago. Available statistics on the quantity of crude rubber and coffee imports show a slight decrease from A p ril 1934 in the rubber receipts and an increase in the coffee imports. D e p a r tm e n t S to re T r a d e D uring the first half of May, sales of the reporting department stores in the Metropolitan area o f New Y ork were 2 per cent below the corresponding period a year ago, but compared favorably with sales in preced ing months, after allowance for seasonal fluctuations in trade. In A pril, total sales of the reporting department stores in this district were 6 per cent higher than a year ago, reflecting in part the late date of Easter and also one more shopping day in A p ril this year. The volume of Easter business, however, was smaller than was expected on the basis of seasonal influences, and consequently this bank’s index o f Second District sales declined, follow ing an increase in March. Practically all localities reported substantial gains in sales over a year ago, particularly large increases occurring in the Syracuse, Northern New Y ork State, Southern New Y ork State, and Westchester and Stam ford reporting department stores. Small de clines in sales were registered by the Hudson R iver V alley and Capital D istrict stores. Sales of reporting apparel stores in this district were 1 2 per cent higher than in A p ril 1934. Stocks of merchandise on hand, at retail valuation, continued slightly below the level o f the corresponding period a year ago. Collections of accounts outstanding at the end of the previous month were better this year than last for the department stores in a m ajority of localities and also fo r the apparel stores. Net sales Stock on hand end of month 1934 1935 New Y o r k ......................................................... Buffalo............................................................... R ochester............................................................ Syracuse.............................................................. Northern New Jersey...................................... Bridgeport........................................................... Elsewhere........................................................... Northern New York State......................... Southern New York S ta te.......................... Hudson River Valley D istrict................... Capital D istrict............................................ Westchester and Stam ford......................... + 6 .1 + 6 .4 5 .9 + 1 0 .2 + 4 .2 + 6 .9 + 8 .0 + 12 .1 + 1 4 .8 — 2 .2 — 2 .3 + 2 6 .7 — 3 .9 — 9 .6 — 4 .4 — 5 .9 — 3 .8 + 6 .0 — 10.9 4 8.7 4 2 .5 4 5.2 3 6.3 4 0 .7 37.1 2 7.6 4 8.6 4 5 .3 4 5.4 3 6.8 4 1 .3 3 6 .7 3 1 .8 All department s to r e s ........................ + 6 .0 — 4 .4 4 4.7 45.2 Apparel stores....................................... + 1 2 .1 + 4 .4 4 2.8 4 4.3 W h o le s a le T r a d e Total A p ril sales of the reporting wholesale firms in this district averaged 1 1 per cent above a year ago, and even after allowance fo r one more business day than in A p ril 1934, the advance was the largest recorded since December. Sales of the grocery firms showed the most substantial gain since last November, and the drug, shoe, and m en ’s clothing concerns registered the largest in creases since December. Sales of the paper, diamond, and jew elry firms also compared more favorably with the previous year than in March or February. The declines in hardware, stationery, and cotton goods sales, however, were the most pronounced since last summer, as was the decline in sales o f silk goods which are re ported on a yardage basis by the National Federation o f Textiles, Incorporated. The amount o f merchandise held at the end o f A p ril by the diamond firms was substantially higher than a year ago, and a small increase in stocks was reported by the grocery concerns. The drug, hardware, and jew elry firms, on the other hand, showed small reductions from a year ago. Collections in A p ril o f accounts out standing at the end o f March averaged higher this year than last. Percentage change April 1935 compared with April 1934 Per oent of accounts outstanding March 31 4 collected in April Com m odity Net sales M en’s clothing................................................... Cotton go o d s ..................................................... Silk go o d s........................................................... S hoes............................................................. .. D rugs................................................................... Stationery........................................................... P aper......................... ............................. Weighted average..................................... + 8 .2 + 2 8 .5 — 16.4 — 31.9* + 1 9 .1 + 7 .1 — 2 .3 — 5 .6 + 7.1 + 9 .3 + 3 .3 + 1 0 .9 Stock end of month + 3 .6 — 1 2 .6* — 1 .3 — 0 .2 + 2 4 .8 — 2 .7 1934 1935 94.1 39.5 36.3 62.3 4 4.7 28.3 40 .0 49.6 5 1.2 94.1 4 9.5 38.4 59.3 49.1 27.0 39.4 55.8 48.2 } 29.4 } 2 5.7 56.5 58.6 * Quantity figures reported by the National Federation of Textiles, Incorporated, not included in weighted average for total wholesale trade. FEDERAL RESERVE BANK OF NEW YORK MONTHLY REVIEW, JUNE 1, 1935 B u s in e s s C o n d it io n s in t h e U n i t e d S t a t e s (Summarized by the Federal Eeserve Board) ACTORY production and employment showed little change in April, while output at mines declined. Residential construction showed a further increase. F P Index Number o f Production of Manufactures and Minerals Combined, Adjusted for Seasonal Variation (1923-25 average = 1 0 0 per cent) PER CENT I EMPLOY MENT r 'V r .. .... \ / V PAYROL L. 1929 1930 1931 1932 1933 1934 1935 Index Numbers of Factory Employment and Payrolls, W ithout Adjustm ent for Seasonal Variation (1923-25 average = 100 per cent) r o d u c t io n a n d E m ploym ent Combined output of factories and mines, as measured by the Federal Reserve Board’s seasonally adjusted index of industrial production, declined from 88 per cent of the 1923-25 average in March to 86 per cent in April. This downward movement reflected chiefly decreases in the output of steel, cotton and silk textiles, and bituminous coal, offset in part by increased mill consumption of wool, and larger output of anthracite. At steel mills output declined from 49 per cent of capacity in March to 45 per cent in April and, according to trade reports, showed a further slight decline in the first three weeks of May. In the automobile industry there was a further increase in production during April, followed by a decline in the early part of May, partly as a consequence of labor disputes. In the tobacco industry activity was maintained at recent high levels. Output of bituminous coal declined sharply at the beginning of April, following a period of relatively high pro duction earlier in the year. The total number of workers employed in factories was about the same in the middle of April as a month earlier and factory payrolls also showed little change. Declines in employment were reported for railroad repair shops and textile mills, while in the machinery industries employment continued to increase and in the men’s clothing industry it showed none of the usual seasonal decline. In agriculture and in the building industry employment in creased seasonally. Total value of construction contracts of all kinds, as reported by the F. W. Dodge Corporation, showed little change from March to April. A fur ther increase in residential projects was offset in the total by a decline in contracts for other types of construction. D is t r ib u t io n Total freight car loadings declined in April, contrary to seasonal ten dency, chiefly as a consequence of a large decrease in shipments of bituminous coal. Department store sales, which had shown a sharp increase in March, increased by considerably less than the estimated seasonal amount in April. Co m m o d it y P r ic e s The general level of wholesale commodity prices, as measured by the index of the Bureau of Labor Statistics, has shown little change since the middle of April, following an increase in the early part of the month, and in the week ended May 18 was at 80.0 per cent of the 1926 average as com pared with 79.9 per cent in the week ended April 13. For this period the prices of cotton, hogs, hides, and nonferrous metals increased somewhat, while grains and butter declined. In the following week there were further increases in the prices of hogs and of lead, while prices of wheat decreased further. Value of Construction Contracts Awarded (Three month m oving averages o f F. W . Dodge Corporation data for 37 Eastern States, adjusted for seasonal variation) PER CENT B a n k Cr e d it During the five weeks ended May 22 member bank balances with the Fed eral Reserve Banks increased to $4,820,000,000, the highest figure on record, and excess reserves rose to a new high level of over $2,350,000,000. The principal factors in the increase of member bank reserve balances were the disbursement by the Treasury of $240,000,000 of funds previously held in the form of cash or on deposit with the Federal Reserve Banks and further gold imports of $90,000,000. Deposits of reporting banks in leading cities increased further during the four week period ended May 15, reflecting chiefly disbursements by the United States Treasury. Group Price Indexes of the Bureau of Labor Statistics (1926 average r= 100 per cent) Yields on short term Government securities declined slightly further dur ing this period, while other short term open market money rates remained at low levels. The discount rate was reduced from 2 per cent to 1 ^ per cent at the Federal Reserve Bank of Cleveland and from 2% per cent to 2 per cent at the Richmond, Minneapolis, Kansas City, and Dallas Banks. Rates are now i y 2 per cent at New York and Cleveland, and 2 per cent at all the other Reserve Banks.
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