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ofCredit andBusinessConditions
S e c o n d

F e d e r a l

Federal E eserve B ank, N ew Y o rk

M o n e y M a r k e t in M a y
Considerable interest was manifest in the money
market during May as to the progress of the Treasury’s
program for the sale of defense savings obligations. In­
terest in the subject has at least two aspects: first, the
sales of such securities will be a measure of the absorp­
tion of savings out of current incomes and previously
accumulated idle funds, which might otherwise be used,
at least in part, for the purchase of consumers’ goods
requiring materials and labor for their production that
are needed for the defense program; and, second, sales
of securities of the savings bond type will give an indica­
tion as to the amount of borrowing which will remain
to be accomplished by sales of the usual types of “ mar­
ket” securities.
The figures that have been released by the Treasury
show that completed sales of defense savings obligations
from May 1 through May 24 amounted to $350,700,000,
including sales of Series E, F, and G Savings Bonds
as well as Defense Postal Savings Stamps. As com­
pared with this total for the United States, sales in the
Second Federal Eeserve District totaled $106,000,000,
not including Defense Postal Savings Stamp sales nor
sales of Series E bonds through the post offices. It is
expected that reports for the final week of May will
show a further substantial volume of sales, as it is
believed that in the latter part of May increased amounts
of trust funds were invested in the Series G bonds. These
latter purchases represented, in part, switches out of
other securities which were deferred until late in the
month because, by the terms of the Savings Bonds, pur­
chases made any time within a month earn interest from
the first of that month.
Sales of Savings Bonds in immediately ensuing months
are not expected to equal the May volume, since it is
likely that a part of the May sales represented invest­
ments of accumulated idle funds that cannot be repeated
in the near future, and since some subscribers may have
purchased in the first month their full quota for this year.
On the other hand, investments of current savings in
Savings Bonds may tend to increase in coming months.
Arrangements for the investment in defense savings obli­
gations of a portion of current income, as it is earned,
probably have been concluded by only a limited number
of the potential total of such purchasers, and substantial
additions to the class of savers putting funds regularly

R e s e r v e

D is tr ic t

June 1 ,1 9 4 1

into these obligations may occur in the future, partly
through the medium of payroll deduction plans such as
have been made available to the employees of some con­
cerns. In any event, it is difficult to appraise the manner
in which these factors will operate over the next few
months, and it is therefore difficult to estimate the total
amount of funds which may flow into the Treasury
through sales of defense savings obligations over the
next fiscal year.
Meanwhile, during May, Treasury expenditures for
National defense purposes continued to increase. As is
indicated in the accompanying diagram, payments by the
Treasury on this account probably exceeded $800,000,000
for the month, judging from Treasury daily statement
data for the first 29 days. In line with indications by
the Secretary of the Treasury, last March, that the next
public offering of ‘ ‘ market ’ ’ issues of Government securi­
ties would be in May, the Treasury on May 22 made an
offering of $600,000,000 of 2 % per cent Treasury bonds
of 1956-58 for cash, and in conjunction therewith of­
fered bonds of the same issue, and also % per cent
Treasury notes due March 15, 1943, in exchange for
Treasury bonds maturing August 1, 1941, outstanding
in the amount of $834,000,000. The cash offering was
heavily oversubscribed, allotments being only 8 per cent
of subscriptions, and the greater part of the Treasury

U n ited S tates T re a su ry E xp en d itu res fo r N a tion a l D e fe n se P u rp o se s
(M a y , 1941, estim ate based on D a ily S ta tem en t o f th e T re a s u ry
fig u re fo r first 2 9 d a ys o f the m o n th )



bonds due August 1, 1941, were exchanged for the new
bonds rather than the notes.
The outstanding success of this financing indicated that
the market for Government securities had not been
appreciably affected by the substantial reduction in
member bank excess reserves during recent months. In
the first two weeks of May, the excess reserves of the
New York City banks declined $165,000,000 further to
$2,350,000,000 on May 14, and at this figure were nearly
$1,200,000,000 below the year’s high which was reached
in January. During the period since January, the
excess held by all member banks showed a decline of
the same extent, so that banks outside New York City
had no net change in their aggregate excess reserve
position. The decline in excess reserves in New York
since January is to be attributed primarily to a net loss
of about three quarters of a billion dollars of reserve
funds through Treasury transactions, representing the
excess of sales of new Treasury securities and tax collec­
tions over Treasury disbursements in this District. Next
in importance were an outflow of commercial and finan­
cial funds from New York to other parts of the country,
including payments for Government securities sold in
New York by holders outside New York, and a further
increase in the amount of currency outstanding through
New York banks. These losses of reserve funds were
offset only in part by gains resulting, directly or indi­
rectly, from gold imports, which have declined to much
smaller quantities than in 1940.
For the two weeks after May 14, excess reserves, both
in New York and for the country as a whole, showed a
sizable net increase, reflecting chiefly heavy disburse­
ments by the Treasury including those for redemption
of maturing Home Owners’ Loan Corporation bonds,
a sizable part of which were held and redeemed in New
York. In the week ending June 4, however, excess re­
serves are expected to show a large decline, owing to pay­
ments on June 2 on account of subscriptions to the new
Treasury bond issue.

em ber


an k

C r e d it

A further increase of $370,000,000 occurred in the
total loans and investments of the weekly reporting
member banks in 101 cities during the five weeks ended
May 28. A t $27,915,000,000, the total reached a new
high, approximately $5,475,000,000 above the level pre­
vailing before the outbreak of the war. Commercial,
industrial, and agricultural loans rose $165,000,000 fur­
ther during the recent five week period, and the total
of such loans was $1,675,000,000 higher than in August,
1939. The reporting banks’ holdings of United States
Government direct obligations rose $165,000,000 during
the five weeks, reflecting increases in the Treasury bill,
note, and bond holdings of the New York City banks
and an increase in bond holdings by banks in 100 other
cities, partly offset by declines in bill and note holdings
outside New York. Total direct Government security
holdings on May 28 were $2,410,000,000 higher for all re­
porting banks than in August, 1939. Holdings of Govern­
ment guaranteed securities declined $80,000,000 in the five
week period, owing to the redemption of Home Owners’

Loan Corporation bonds, and holdings of other securities
decreased $110,000,000, also owing to maturities. As com­
pared with August, 1939, holdings of Government guar­
anteed securities by reporting banks are now approxi­
mately $735^000,000 higher and holdings of other
securities are $310,000,000 higher. Adjusted demand
deposits of the weekly reporting banks showed a net
increase of $550,000,000 during the five week period,
to reach a new high level on May 28, approximately
$6,200,000,000 above the August, 1939, figure.
M oney Rates in New York
M ay 31, 1940 Apr. 30, 1941 M ay 31, 1941
Stock Exchange call loans. ....................
Stock Exchange 90 day loans...............
Prime commercial paper 4-6 m onths. .
Bills— 90 day unindorsed....................
Average yield on Treasury notes (3-5
Average yield on Treasury bonds (not
callable within 1 2 years) f ...................
Average rate on latest Treasury bill
sale, 91 day issue.................................
Federal Reserve Bank of New York
discount rate.................... ....................
Federal Reserve Bank of New Y ork
buying rate for 90 day indorsed bills




*1 H


*1 M

t t -V s

tt~ 5

t t - 5


0 .8 5



2 .48

2 .0 0

2 .0 0










t “ Tax exempt” issues only.

G o v e r n m e n t S e c u r it ie s

For the month of May as a whole, there was little
net change in long term Government bond prices. Dur­
ing the first half of the month, trading was light and
prices fluctuated over a comparatively narrow range.
Following the disclosure on May 15 of the general nature
of the Treasury’s immediate financing plans, quotations
for the longest term tax exempt Treasury bonds de­
clined on the average about y 2 point, over a period of
several days, to reach the lowest level since the middle
of April. Prices of intermediate term bonds, including
prices of the two taxable issues, also drifted lower. Sub­
sequent to the Treasury’s cash and refunding offer, and
especially after the allotment basis for the cash offering
was announced, prices of both long and intermediate
term bonds advanced. The average price of long term
tax exempt Treasury bonds moved to within about %
of a point of the all-time peak of last December. On
May 31, the new 2 y2 per cent taxable bond issue due
March 15, 1958 was quoted at about 103 on a “ whenissued” basis.
Prices of Treasury notes, particularly tax exempt is­
sues, strengthened markedly during May with resultant
declines in yield. The average yield on 3 to 5 year tax
exempt Treasury notes was reduced by 0.08 per cent to
0.41 per cent. Yields on the taxable % per cent Na­
tional Defense note issues of 1944 and 1945 declined
0.03 per cent and 0.01 per cent, respectively, to 0.67
per cent for the 1944 issue and 0.74 per cent on the
1945 issue.
Accepted bids for the taxable Treasury bills dated
May 7 were tendered on an interest basis averaging
0.096 per cent per annum. The remaining three weekly
issues were awarded at prices equivalent to an interest
rate of about 0.07 per cent. Each of the four issues
was in the amount of $100,000,000 and each replaced
similar maturities.

Toward the end of the month, the Treasury Depart­
ment disclosed plans for making available to certain of
its depositaries and financial agents a special issue of
United States Government bonds, the income from which
will offset, at least in part, the expense incurred by such
institutions because of the greater use of private banking
facilities by the Government in connection with the de­
fense program. The bonds, designated 2 per cent de­
positary bonds, will be issued only to banks which carry
deposits of the Federal Government. They will have
a maturity of twelve years from the date payment for
them is received, and, though not transferable, may be
redeemed at any time on thirty days’ notice; they will
be issued only in registered form and only for use as
collateral to secure deposits of Federal funds. The
Treasury Department was reported to have estimated
that the total issue probably would not exceed

Business Profits
Reported net profits of the 441 industrial and mer­
cantile corporations summarized in the accompanying
table showed a gain of 16 per cent for the first quarter
of this year, as compared with the first three months of
1940 (profits figures for which period have been revised
by some companies to reallocate last year’s Federal
taxes) and showed an increase of 10 per cent over 1937.
In fact, it would appear that reported profits of these
leading corporations for the first quarter of this year
were the highest first quarter profits since 1929, despite
recent increases in wage rates, material costs, and Fed­
eral taxes. During the first quarter of this year, indus­
trial production averaged about 20 per cent higher than
in the first quarter of either 1940 or 1937.
Since the second quarter of 1940, net profits reported
by corporations have been somewhat distorted by varying
procedures followed by individual companies in provid­
ing for current and prospective Federal taxation. For
the first quarter of 1940, some companies have issued
revised profits data making allowance for reallocation of
Federal tax liability, and in all such cases, the revised
profits figures have been lower than those shown by the
initial reports. Similarly, any retroactive enactment of
increased taxes this year will undoubtedly necessitate
future downward revision of this year’s first quarter
profits of a large number of companies.
Large gains over a year ago in first quarter net profits
were reported by companies in the steel, coal mining,
machine tool, building materials (including heating and
plumbing supplies), industrial machinery and accessor­
ies, and aircraft manufacturing industries. On the other
hand, a lower level of net profits was shown by the
petroleum, retail trade, textile, automobile, drug and
cosmetic, and cigar company groups. The gain in profits
over 1937 was concentrated in companies producing dur­
able goods; 215 companies of this type recorded an
aggregate gain of 24 per cent while 190 companies pro­
ducing nondurable goods or providing services showed
a decline of 8 per cent in profits, and mining company


profits were slightly lower in the aggregate, despite
better earnings by the coal and copper groups.
With respect to the impact of higher taxation on earn­
ings during the first quarter of this year, it is interest­
ing to note that for a group of 75 companies that reported
complete profit and loss data, gross sales in the aggre­
gate gained 30 per cent in the first three months of 1941
as compared with the corresponding period of a year
ago. The cost of goods sold, including State and local
taxes, rose 25 per cent between the two periods and net
profit, before payment of Federal income taxes, increased
59 per cent. Amounts reserved for Federal taxes this
year accounted for 46 per cent of net profit before Fed­
eral taxes, as against 21 per cent a year ago, and re­
stricted the rise in net profit after all charges for these
companies to 8 per cent.
During the first quarter of 1941, Class I railroads as
a group reported net income (after payment of all
charges but before dividends) amounting to $69,000,000.
This compares with a deficit of $12,000,000 a year ago
and a profit of $15,000,000 in 1937, and is the best
showing for any first quarter since 1929. Net operating
income (before payment of fixed charges and income
taxes) of telephone companies increased 13 per cent
over 1940 and was the highest first quarter operating
income on record. Net income of other public utilities
increased slightly over the corresponding quarter of
last year, and reached the highest level since the fourth
quarter of 1931.
(N et profits in millions of dollars)
First quarter
Corporation group
Advertising, printing and publishing.
Aircraft manufacturing.........................
Automobile parts and accessories
(excl. tires)......................... ................
Building supplies....................................
Containers (metal and glass)...............
Drugs and cosmetics (incl. soap)........
Electrical equipment.............................
Food and food products:
Other food products..........................
Heating and plum bing..........................
Industrial m ach in ery............................
Machine tools..........................................
C oal.......................................................
Gold and silver...................................
Other m ining.......................................
Motion pictures......................................
Office equipm ent....................................
Paper and paper products...................
Railroad equipment..............................






3 .8


6 0.5

2 .3
3 .0
4 .0







2 0 .6
11 .2

3 9.9
2 6.4

2 .7
8 3.3

3 .3
7 8.9

8 .5
4 1.5

2 5.3

12 .6

4 .8


9 .8

0 .8

8 .2

1 .1

1 .2




4 .5
4 .5
7 .8
7 .9
4 .3
5 .3
2 . 2 - 0 .9 - 0 .4
4 .4
4 .4
1 .3
0 .5
0 .8

4 .1
8 .3
5 .5
0 .7

4 .7
8 .7

3 .9
7 .2
4 .5


7 .6
5 .2
4 .8
4 .3
5 .7

- 1 .2


1 .6

6 .8

2 .2
0 .6
0 .1

4 .1
2 .7
3 .6
4 .5
3 2.4
6 .4
4 5.8
5 .5
0 .9
1 .4



•105.7 -4 2 .8

-1 1 .9

6 9 .0

6 2.5
8 2.3

7 0.9
8 3.2

6 .0

5 .3
3 .5
2 .2

5 .2


0 .6
2 .1

Total, 30 groups.................................




Class I railroads, net incom e...............
Telephone companies, net operating





6 8 .6

11 .0

6 .2

2 .3
2 .4

- 0 .2


- Deficit

2 .1

4 .0
6 4.0



Tobacco (cigars).....................................



- 2 .7

0 .4
1 .4
- 5 .5
- 0 .8
0 .5
- 2 .3

Other public utilities, net incom e. . . .


5 0.0

4 .8
12 .0

3 .2
4 .2
2 .4
5 .2

7 3 .0

2 .9
4 .6
3 .6
4 .4
4 .3
5 .5
8 8 .6

4 .8
0 .9
2 .1




N ew F in an cing
The flotation during May of several new security
issues of substantial size served to raise the month’s
aggregate of new financing to $325,000,000, a total almost
one-third above the relatively low level of the previous
month. Most of this increase was due to a greater volume
of corporate financing, which amounted to $229,000,000
and included $50,000,000 of funds to be used for new
capital purposes. On May 7, the Securities and Exchange
Commission’s new regulation requiring competitive bid­
ding for public utility flotations became effective. As
yet, no new public utility issues have been marketed
under the new rule.
Details of the major new security issues included in the
totals for May are as follows:
C orporate



Union Electric Company of Missouri securities,
consisting of $80,000,000 first mortgage collateral
trust 3% per cent bonds of 1971, priced at
107% to yield 3.00 per cent, and $15,800,000
(150,000 shares) of $4.50 preferred stock, priced
at $105.50 a share; fo r refunding purposes
The Firestone Tire and Rubber Company 3 per
cent debentures of 1961, priced at 99 to yield
3.07 per cent; chiefly fo r refunding purposes
Louisville Gas and Electric Company 5 per cent
cumulative preferred stock, consisting of 780,792
shares priced at $27.25 a share and subject to
an exchange offer to stockholders; for refunding


u n ic ip a l

City of Detroit, Michigan 21/4-3% per cent serial
bonds, maturing from 1943 to 1963; awarded at
a net interest cost of 2.6399 per cent and reof­
fered to yield 0.60 to 2.65 per cent; fo r refund­
ing purposes.

In addition to the above, $62,200,000 of American Vis­
cose Corporation preferred and common stock was of­
fered to the public on May 26; however, the sale of these
securities merely constituted the final step in the transfer
to United States investors of a formerly British owned
direct investment in this country and therefore was not
considered to represent new financing on the part of
the corporation. Short term financing, not included in
the $325,000,000 total above, amounted to $175,000,000,
most of which was accounted for by $75,000,000 State of
New York tax anticipation 0.20 per cent notes, maturing
in November, 1941, $41,800,000 temporary loan notes of
thirteen local housing authorities, and $36,000,000 Fed­
eral Intermediate Credit Bank consolidated debentures.
Security M a rk e ts
The security markets continued relatively inactive dur­
ing May and price movements held within narrow limits.
On the New York Stock Exchange, trading in stocks
declined to as low as 220,000 shares for a full day, the
smallest daily volume since last August. Standard’s
index of closing prices of 90 stocks moved within a range
of only 3 per cent during May and was at practically
the same level at the end of the month as at the begin­
ning. There was a small net gain in industrial share
prices accompanied by minor declines in the railroad
and utility groups. The utility stock price average

computed by Standard reached the lowest level in six
Prices of domestic corporation bonds also tended to
fluctuate within narrow ranges in May. Accompanying
the display of some strength among the medium grade
industrial and railroad bonds early in the month, the
Moody’s Investors Service average of Baa bonds ad­
vanced to a new record high. As a result of a subse­
quent decline in prices of railroad obligations, however,
the Baa price average showed little change for the
month as a whole. Prime corporate bonds, those rated
Aaa by Moody’s Investors Service, moved slightly lower
during May, while high grade municipal bond prices
advanced steadily and towards the close of the month
were at their highest levels so far in 1941.
G o ld M o v e m e n ts
Imports of gold into the United States during May
were in considerably reduced volume. The increase
of about $70,000,000 in the gold stock was the smallest
since July, 1938. Gold held under earmark for foreign
account at the Federal Reserve Banks rose about
$5,000,000 during the month to approximately
In the four weeks ended May 21, the Department of
Commerce reported the receipt of $38,500,000 of gold in
the following principal amounts: $19,300,000 from
Canada, $4,200,000 from Australia, $3,500,000 from
South Africa, $2,800,000 from Colombia, $2,600,000 from
the Philippines, $1,500,000 from Hong Kong, $1,000,000
from Chile, and $600,000 from Mexico.
Foreign E xch anges
In showing a generally firm tendency, Latin American
currencies provided the only significant development in
the past month’s foreign exchange trading in the New
York market. The Cuban peso, which had shown a
steady recovery from the early April reaction, received
considerable stimulus from the announcement on May 6
of a $25,000,000 Export-Import Bank credit to the
Cuban Government to be used for agricultural develop­
ment and diversification and for public works. On May
7 the discount on the Cuban peso vis-a-vis the dollar,
at 2 % per cent, was the narrowest in several years. A p­
proximately this level was maintained through the end
of the month. The Argentine peso was also in some de­
mand in the thin free market during the first half of
May, apparently reflecting a movement of foreign funds
from this country induced by renewed rumors of a
possible extension of the “ blocking99 regulations in
this country. By May 12 the free rate for Argentine
exchange had reached $0.2380 and held near this level
during the subsequent days of May to show a gain of
30 points for the month. The uncontrolled rate for the
Uruguayan peso rose to $0.4212^ during the month, ex­
tending to about 6 per cent the appreciation since midApril.
Among the currencies of the belligerent countries, the
New York quotation for the registered reichsmark con­
tinued to decline through May 13, when it was $0.1170,

or 3 cents below the level prevailing in early March.
Subsequently, however, the rate showed a marked recov­
ery, rising about 3 % cents in the space of one week to
$0.1550, a new high for the war period. It should be
noted, however, that the market here for this exchange
remained extremely thin and, therefore, unduly sensi­
tive to relatively small changes in supply and demand.
At the end of the month the registered mark was quoted
at $0.1450. On May 27 the official rate for the Italian
lira was raised from $0.0505 to $0.05261/4, thereby rees­
tablishing the rate prevailing prior to August 31, 1939,
when a gradual decline to the $0.0505 level began. While
this change is interesting, particularly in view of the
fact that the lira has thus returned to its theoretical par
value, its significance would not appear to be great.
Trading in unofficial sterling was restricted further dur­
ing the past month by the British action in adding a
group of 12 Latin American countries, mostly in the
Caribbean area and including Cuba, Venezuela, Mexico,
and Panama (except the Canal Zone), to the list of those
countries holding “ special accounts” in sterling under
the British exchange regulations. The procedure to be
followed for these countries will be the same as that now
in effect for other countries with “ special accounts,”
except that the area will be treated as a unit and trans­
fers between sterling accounts within the group will be
freely permitted. In the unofficial market in New York,
the pound sterling held steady around $4.03%, the same
as the official London buying rate for dollars.
Central B a n k R a te C hange
On May 29 the Swedish Riksbank lowered its dis­
count rate from 3 % to 3 per cent, the higher rate having
been in effect since May 17, 1940.
P roduction and T ra d e
Preliminary data for May indicate a renewed rise
in the general level of business activity following a
temporary decline in April resulting from strikes in the
bituminous coal and automobile industries.
From about 94% per cent of capacity at the end of
April steel mill operations recovered to practically full
capacity by the middle of May. Orders for steel re­
quired directly or indirectly in defense work continued
in large volume during May, but some decline was
reported in the demand for steel for nondefense pur­
poses. Bituminous coal production recovered sharply
following the reopening of the mines at the end of April
and by the middle of May output was running about 30
per cent ahead of a year ago. Railroad loadings of
coal and coke likewise increased rapidly, and, as ship­
ments of other classes of freight continued heavy, total
car loadings moved up to a point somewhat above last
fall’s peak.
Seasonally adjusted figures for electric
power production indicate a recovery in the first three
weeks of May from a decline in April.
Automobile production in May ran at the highest rate
in four years, and consumer demand continued excep­
tionally large. During the first half of May the cotton
gray goods market was active, but following the an­


nouncement on May 19 that price ceilings would be set
on combed yarns by the Office of Price Administration
and Civilian Supply, the volume of sales fell off sharply.
Nevertheless, cotton mill activity was reported to have
been maintained at a high level.
This bank’s monthly index of production and trade
for April declined one point from the level of February
and March to 103 per cent of estimated long term trend.
In April, 1940, when the general level of business
activity was at the low ebb of the war period, the index
was 87. While operations in many lines of business
were maintained at or above March levels during April,
work stoppages resulting from labor disputes led to
the decline in the index.
Production of bituminous coal during April was re­
duced to one eighth of the rate of March, reflecting the
shutdown of most mines for virtually the entire month.
As a result, railway freight traffic was reduced, and
industries such as coke, pig iron, and steel, which are
particularly dependent upon coal, were increasingly
affected by the strike as the month progressed. With
these exceptions, defense industries generally expanded
operations further during April. Judging from esti­
mates of man-hours of employment, operations in air­
craft plants ran about two and one-half times the level
of April, 1940, shipyards expanded operations to double
the rate of a year before, and there were large increases
over April, 1940 in activity at plants producing machin­
ery, electrical apparatus, chemicals, and railway equip­
ment. Construction work, judging from data on the
production of construction materials and on contract
awards, remained well above the level of a year ago,
production of agricultural implements recovered sharply,
and cotton and woolen textile mills continued to run at
exceptionally high levels.
A two weeks’ suspension of operations by a major
producer curtailed automobile output during April, but
retail sales, totaling 557,000 units for passenger cars and
trucks combined, were at a record high and new car
stocks were cut substantially. As indicated in the ac­
companying chart comparing retail sales of new pasTHOUSANDS

f ■■■

5 0 0J



DOMES Tlic m a r k e t I





.. ..





---- 1-----1---- 1-----1___1___ 1___1___ — 1___ 1___1___ __ i___i___ i___




U nited S ta tes P ro d u ctio n o f P a ss e n g e r A u to m o b ile s fo r D om estic
M a rk et and R eta il Sales o f P a ss e n g e r Cars (P ro d u c tio n d ata are
D ep a rtm en t o f C om m erce fig u re s, and retail sales a re
figu res o f A u to m o b ile M a n u fa ctu re rs A s s o cia tio n )



senger ears with production for the domestic market,
dealers’ stocks of passenger cars, which had been built
up to a high level during the winter, were reduced to
the extent of approximately 50,000 units in March and
120,000 during April. Production of consumers’ goods
in general ran 10 or 15 per cent higher in April than in
the corresponding month of 1940. Retail trade on the
whole appears to have shown a year-to-year increase of
approximately similar magnitude.
(Adjusted for seasonal variations and estimated long term trend;
series reported in dollars are also adjusted for price changes)

year, and in April this year. Even so, the daily rate
of sales increased more than usual from March to April,
taking account of the date of Easter and other seasonal
factors. For the first four months of the year average
daily sales were 11 per cent higher this year than in
1940 and about 3 ^ per cent greater than in 1937.
Retail stocks of merchandise on hand in the depart­
ment stores at the end of April were 9 per cent higher
than a year ago, but remained low relative to the cur­
rent rate of sales.
Percentage changes from a year ago








Production of:
Producers’ durable good s...................
Producers’ nondurable goods.................



112 p


Consumers’ durable g ood s.....................
Consumers’ nondurable goods...............

72 r

10 0

10 2 p

10 2 p

New York City (includes Brooklyn).
Northern New Jersey..........................

Primary distribution....................................
Distribution to consumer...........................




104 p

Westchester and Fairfield Counties..

In d ex o f Production and Trade .......................


Industrial Production

Autom obiles...................................................
Bituminous coal............................................
Crude petroleum ..........................................
Electric p ow er...............................................
Cotton consum ption....................................
W ool consumption.......................................
Meat packing................................................
T obacco products.........................................

10 1

78 r
90 !•




12 0

84 p



H 5p














10 0






10 1

10 2 r

10 1

M anufacturing Em ploym ent

Man-hours of em ploym ent.........................

Residential building contracts...................
Nonresidential building and engineering

Stock on hand
end of month

Net sales
Departm ent stores
A pr.

Lower Hudson River V a lley..............
Upper Hudson River V a lle y .............
Central New Y ork S tate....................
Mohawk River V alley.....................
Northern New Y ork State.................
Southern New Y ork S ta te .................
Bingham ton......................................

Jan. through
Apr. 1941



+ 8
+ 12
+ 12

+ 9
+ 8
+ 8


+ 11


+ 11



+ 3

+ 12





+ 12





+ 10


+ 4


+ 12

+ 9
+ 6

All department stores.....................


+ 11

+ 9

Apparel stores.......................................


+ 7

+ 5

Western New Y ork S tate...................
Niagara Falls................. ...................




+ 8

Prim a ry Distribution

R y. freight car loadings, mdse, and m isc..
R y. freight car loadings, other..................
E xports...........................................................
Im ports...........................................................

10 0

10 0

Department store sales (U. S .) .................
Grocery chain store sales............................
Variety chain store sales.............................
Mail order house sales..................................
New passenger car sales..............................





10 0

10 1















106 p

10 1

Velocity o f D ep osits*

Velocity of demand deposits, outside New
York City (1919-25 a v era g e= 10 0 ) . . . .
Velocity of demand deposits, New York
C ity (1919-25 a vera g e= 10 0 ) .................
Cost of living (1935-39 a v era g e= 10 0 ) . . .
Wage rates (1926 a v era g e= 10 0 ) ..............
r Revised.





Sales (average daily), unadjusted.........................
Sales (average daily), seasonally a d ju s te d .........




10 0

Stocks, unadjusted....................................................
Stocks, seasonally adjusted....................................







r Revised

Cost o f Living and W ages *

* N ot adjusted for trend.

D e p a r tm e n t Store T ra d e
Sales of the reporting department stores in the Second
Federal Reserve District during May were about 12%
per cent higher than in the corresponding month of last
year, but the daily rate of sales appears to have declined
somewhat more than seasonally from the high April
level, the changing date of Easter and other seasonal
factors considered.
During April, sales of the reporting department stores
were 21 per cent higher than in April, 1940, owing in
some part to the fact that Easter fell in March last



Distribution to Consumer

p Preliminary.

Indexes of Department Store Sales and Stocks, Second Federal Reserve District
(1923-25 average=100)


B u ild in g
The daily rate at which construction contracts were
awarded in New York and Northern New Jersey during
April was 22 per cent above the comparatively low level
of the previous month, and was slightly higher than in
April, 1940. With the exception of public and private
utilities, increases over March were recorded in contract
awards in each of the principal construction categories.
The most striking gain occurred in the case of awards
for factory buildings, which were 88 per cent higher
than in March and nearly two and a half times as large
as in April, 1940. Although a third greater than in March,
contracts for residential building in this area were con­
siderably below the level of a year ago.



volume of industrial building recently has exceeded all
previous levels.
E m p lo y m e n t and P ayrolls

D aily A v e ra g e C on tra cts A w ard ed fo r Ind ustrial B u ildin g in 3 7 S ta tes
(F . W . D od g e C orp ora tion d a ta ; six m on th m ov in g a vera g e s
o f m on th ly, season a lly a d ju sted d a ta )

In contrast to the March to April advance in the New
York and Northern New Jersey area, daily average con­
struction contract awards for April in the 37 States
covered by the F. W . Dodge Corporation report declined
about 8 per cent from March. Government contracts
for defense construction included in the April figures
were considerably lower than those reported in March
and this decline mainly accounted for the reduction in
total contract awards between the two months. As com­
pared with April, 1940, however, total contract awards
in the 37 States were 35 per cent higher. Contracts
for publicly financed projects were 63 per cent larger
than a year earlier and privately financed work advanced
21 per cent. Reflecting an active demand for one and
two family dwellings, including homes to be constructed
under Government sponsorship for defense workers,
contract awards for residential buildings in April were
higher than in any month since July, 1929. Awards for
this type of building were about one-fifth greater than
in either the previous month or in April a year ago.
During the first three weeks of May the daily rate
of construction contract awards in the 37 States in­
creased 10 per cent from the average for April. The
gain was due to increases in heavy engineering projects
and nonresidential building work. Residential building
was slightly lower than in April. Compared with the
corresponding period of 1940 awards during the first
three weeks of May were up 49 per cent; all three prin­
cipal construction categories showed substantial year-toyear gains, the most pronounced of which was in nonresi­
dential building.
One of the outstanding features in the construction
industry over the past year has been a steep rise in the
volume of industrial building, much of it arising directly
or indirectly from the National defense program. As
the accompanying chart shows, industrial building was
increasing slowly prior to the outbreak of the war in
September, 1939, and continued a gradual upward
movement until the middle of 1940. Then, with the
inauguration of the National defense program, a very
rapid expansion began. It appears probable that the

According to the New York State Department of
Labor, factory employment in New York State rose 1 %
per cent between March and April and payrolls increased
3 per cent, although ordinarily both employment and
payrolls tend to decline in April. These gains princi­
pally reflected maintenance of a high level of employ­
ment and payrolls in the men’s clothing industry (at a
time of year when decreases ordinarily occur) and con­
tinued expansion in the airplane, shipbuilding, firearms,
railway equipment, and other durable goods industries
particularly stimulated by defense orders. All indus­
trial areas of the State showed considerable increases in
factory employment over April, 1940, ranging from 7 y 2
per cent for the Binghamton-Endicott-Johnson City area
to 42% per cent in Buffalo.
As the accompanying diagram indicates, this bank’s
seasonally adjusted index of New York State factory
employment in April was 14 per cent above the highest
point reached in 1929, and the index of payrolls exceeded
its 1929 peak by 13 per cent. Both indexes have attained
the highest levels in more than twenty years. Over
the course of the past year, the payrolls index has
consistently advanced at a more rapid rate than the
employment index, largely as a result of longer working
hours and increases in wage rates. In the twelve months
ended April, 1941, payrolls rose 45 per cent, while em­
ployment increased 23 per cent.
Factory employment in the United States as a whole
increased 2 per cent during April, and payrolls rose
2 y 2 per cent. Although increases in both working forces
and payrolls were general, the largest gains continued
to be concentrated in lines closely allied with the defense
program, such as foundries, machine shops, electrical
manufacturing, and aircraft. There was a sharp recov­
ery in employment in the agricultural implements indus­
try, reflecting the settlement of labor difficulties, and a
marked gain was also shown by producers of radios and

Factory Employment and Payrolls inNewYork State, Adjusted
for Seasonal Variation and to Census Data
(1925-27 average=100 per cent)



Wage rate increases in April were
reported to have affected more workers than in any
month since April, 1937. Of the 5,300,000 factory work­
ers whose wages are included in the United States
Department of Labor survey, 500,000 received pay
increases averaging 8 % per cent. Among others, em­
ployees in the steel, cotton goods, aircraft, woolen and
worsted goods, and electrical machinery industries were
affected. Compared with April, 1940, factory working
forces were 18% per cent larger and payrolls 37% per
cent greater.
According to the estimates of the Department of Labor,
total nonagricultural employment in the United States
rose to 37,600,000 during April, 150,000 greater than the
peak month of 1929. There was an increase over March
of 390,000 and over April, 1940 of 2,700,000.
largest month-to-month gains were reported in trade,
manufacturing, and construction; mining employment,
however, showed a decrease of over 300,000, owing to
the bituminous coal strike. Military and naval personnel,
which is not included in the estimate of nonagricultural
employment, rose 189,000 during April to a peak of
over 1,500,000. Military and naval forces a year earlier
totaled 461,000.
C o m m o d ity Prices
Further price advances occurred in many of the un­
controlled wholesale commodity markets, particularly
the domestic agricultural markets, during May. Despite
the controls which have been placed on the prices of
many industrial materials important to the defense
program, the Bureau of Labor Statistics weekly whole­
sale price index rose 2 % per cent further from April
26 to May 24, to a point 14 per cent above the level
prevailing at the outbreak of war. The index for May
24 approached the upper range prevailing in 1937, as the
accompanying diagram indicates, and was otherwise the
highest since 1930.
The dominating influence during May in the general
strength of farm prices was the final passage of legisla­
tion requiring the Commodity Credit Corporation to

make loans on the 1941 crops of cotton, corn, wheat,
tobacco, and rice at 85 per cent of parity x>rices— a sub­
stantial increase over rates on previous years’ crops.
Reflecting not only enactment of the loan legislation,
but also reports of unfavorable weather in the growing
areas, cotton prices rose to new highs since 1937. The
price of spot cotton in 10 Southern markets averaged
12.86 cents a pound on May 31, a net gain of about
a cent and a half from the end of April. Wheat prices
advanced sharply up to the middle of the month, but,
responding to favorable new crop prospects and freer
movement of the grain at the attractive prices attained,
subsequently lost a considerable part of the early gain.
Spring wheat in Minneapolis, after selling as high as
$1.00% a bushel, closed on May 31 at 9 4 % cents a
bushel— up 2 % cents for the month. Despite sales of
corn from holdings of the Commodity Credit Corpora­
tion, corn prices advanced 3 % cents during the month
to 73% cents a bushel on May 31. Accompanying sizable
purchases of hog products by the Surplus Marketing
Administration, hogs rose to $9.46 a hundredweight on
May 26— the highest price in about three years— and
closed the month at $9.34 a hundredweight, a net ad­
vance of 86 cents from the end of April. Further
strength was also shown in prices of lard and cotton­
seed oil.
Following the announcement by the Maritime Com­
mission of the creation of a 2,000,000 ton shipping pool
for making cargo space available for British and United
States defense needs, trade anxiety over adequate ship­
ping facilities for other purposes developed and as a
result prices of import commodities generally moved to
appreciably higher levels. Subsequently, however, pos­
sibly reflecting the expectation of official controls over
such commodities, these prices weakened somewhat. Rub­
ber prices in New York advanced to 25 cents a pound on
May 12 but closed on May 31 at 22% cents a pound,
the lowest level since early April. Silk prices in New
York advanced 12 cents to $2.93% a pound on May
21, but half of that gain was canceled in subsequent
days’ trading. Coffee prices moved gradually upwards
throughout the month, and on May 28 the Inter-American
Coffee Board increased quotas for importation of coffee
into the United States. Sugar prices also tended higher.
Excepting the slight fluctuation in tin prices, the
metal markets were generally unchanged throughout
May. The Office of Production Management issued an
order early in the month requiring tin can and tin plate
manufacturers to make a reduction of 10 per cent in
the amount of tin coating used for most food containers,
and also added approximately forty-five new items to
the "priorities critical list.” The Office of Price A d­
ministration and Civilian Supply revised maximum
prices for aluminum, scrap iron and steel, and requested
makers of machine tools not to raise prices at this time.
Reflecting heavy demands for aluminum and nickel,
the Priorities Division of the Office of Production Man­
agement has put heavy restrictions on civilian use of
these metals, and recently has also announced a further
increase in the percentage of zinc production allocated
to the pool for defense.


Business Conditions in the United States
(Summarized by the Board of Governors of the Federal Eeserve System)
W HOLESALE commodity prices advanced sharply in A p ril and the first
half of May, w ith the exception principally of metals fo r which maximum
prices had been established. Industrial production declined in A pril, owing
to reduced output of coal and automobiles, but increased rapidly in the first
half of May as operations in these industries were resumed.

Index o f P h y sica l V olu m e o f Ind ustrial P ro d u c­
tion, A d ju s te d fo r Seasonal V aria tion (1 9 3 5 1 939 a v e ra g e —: 100 per c e n t; durable m a n u fa c­
tures, non durable m an u fa ctu res, and m inerals
e xp ressed in term s o f p oin ts in to ta l in d ex)

U. S . B ureau o f L a b or S ta tistics Ind exes o f
W h olesa le P rice s , B ased on 12 F o o d ­
s tu ffs an d 16 In d ustrial M aterials
(A u g u s t, 1 9 3 9 = 1 0 0 p er ce n t)

r o d u c t io n

In A p ril the Board’s seasonally adjusted index of industrial production
declined to 139 per cent of the 1935-1939 average, a drop of 4 points from
March. The decline reflected chiefly a sharp reduction in output of bituminous
coal, as most mines were closed during the entire month. The mines were
reopened on A p ril 30 and in the first ha lf of May coal output increased rapidly.
Automobile production also declined in A p ril, owing to stoppage of work
at plants of the Ford Motor Company during an industrial dispute. This was
settled about the middle of the month and domestic output has since advanced
to a high monthly rate of over 500,000 cars and trucks. Announcement by
the Office of Production Management that output in the twelve months ending
July 31 would approximate 5,290,000 units indicates that a rate close to that
now prevailing should be maintained through July, although there is usually
a considerable decline in this period.
Steel production was curtailed somewhat in the latter half of A p ril by
shortages of coal and coke and output declined from a level of 100 per cent
of capacity to 94 per cent at the month end. Subsequently output increased,
reaching 99 per cent by the middle of May.
In most other lines activity continued to increase during A p ril and the
first h a lf of May. Machinery production rose further and a ctivity in the
aircra ft and shipbuilding industries continued to expand rapidly. Consump­
tion of nonferrous metals also advanced, and, as in March, domestic sources
of copper were supplemented by large supplies from La tin America. Textile
production rose further from the high rate prevailing in March. Consumption
of raw cotton in A p ril amounted to 920,000 bales, a new record level, and
rayon deliveries also rose to a new peak. A t wool textile mills activity was
maintained near the high March rate. Continued advances were reported in
the chemical, paper, and food industries.
Anthracite production declined considerably in A p ril, owing to a delay by
dealers in placing usual spring orders, but increased in the first h a lf of May.
Output of crude petroleum showed little change from the March rate, following
some increase from the reduced level of the winter months. Iron ore ship­
ments in A p ril amounted to about 7,000,000 tons, an exceptionally large
amount fo r this time of year, and mine output of nonferrous metals continued
at near capacity rates.
Value of construction contract awards in A p ril declined somewhat from
the high March total, owing principally to a smaller volume of defense plant
contracts, according to F. W. Dodge Corporation reports. There was an
increase in contracts fo r publicly financed defense housing, and awards fo r
private residential building rose by about the usual seasonal amount.
D is t r ib u t io n

Sales of general merchandise at department and variety stores showed
about the usual seasonal rise from March to A p ril, making allowance for the
changing date of Easter. Retail sales of new automobiles, which had amounted
to 526,000 cars and trucks in March, rose further in A p ril and sales of used
cars were at peak levels.
Freight car loadings declined sharply in A p ril, reflecting a reduction in
shipments of coal and coke, but increased in the first half o f May when coal
mines were reopened. By the middle of the month total loadings had risen
to a weekly rate one-fourth higher than in the corresponding period last year
and about the same as the seasonal peak reached in the autumn o f 1940.
Co m m o d it y P r ic e s
W e d n esd a y F igu res fo r R ep ortin g M em ber
B an ks in 101 L ea d in g C ities (L a te s t
figu res are fo r M a y 7 )

Prices of most basic commodities, both domestic and imported, advanced
sharply further in the first ha lf of May following a short period of little
change during the latter part of A p ril. Price increases were most pronounced
fo r agricultural commodities reflecting in part the prospect of legislation
raising Federal loan rates fo r basic farm crops. Prices of a number of
semimanufactured industrial products, including petroleum products, coke,
leather, textile yarns and fabrics, and building materials, also advanced.
Metal prices, now fo r the most part subject to Federal control, remained at
the maximum levels established earlier.


C r e d it

Bank loans and investments have shown a marked rise since last sum­
mer the increase at reporting banks in 101 leading cities amounting to
$4,000,000,000. In A p ril and early May holdings of investments by these
banks increased considerably, mostly at New York City banks, reflecting
substantial purchases of newly issued Reconstruction Finance Corporation
notes. Increases in commercial loans in this period were somewhat smaller
than during the preceding two months.
Excess reserves of member banks were $5,700,000,000 on May 14. Since
January they have declined by about $1,100,000,000, owing largely to increases
in Treasury deposits w ith the Reserve Banks and in currency in circulation.
The decrease has occurred entirely at New York City banks.

Wednesday Figures of Estimated Excess Re­
serves of All Member Banks (Latest
figures are for May 7)

U n it e d S t a t e s G o v e r n m e n t S e c u r it y P r ic e s

Prices of United States Government securities, which had risen sharply
from A p ril 9 to A p ril 21, subsequently declined irregularly through May 15.
On that date the 1960-65 bonds were % of a point lower than on A p ril 21
and about 1% points below the all-time peak reached on December 10, 1940.
The yield on this issue is currently about 2.09 per cent, compared w ith 2.03
per cent on December 10.