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MONTHLY REVIEW
ofCreditandBusinessConditions
S e c o n d

V o l.

25

F e d e r a l

JUNE

M O N E Y

R e s e r v e

1, 19 43

M A R K E T

The Second War Loan drive was brought to a close on May
1, and when the final tabulations were completed it appeared
that a grand total of $18,500,000,000 of Government securities

D is tr ic t

IN

No, 6

M A Y

Nevertheless, War Loan account deposits at the end of May
were still in the neighborhood of $11,000,000,000.
On May 10 it was announced that the Treasury Department

Funds continued to flow

had decided to change the method of making calls from War

into the Treasury from the drive through the first ten days of

Loan depositaries, in order to lessen the work and inconveni­

May— it was on the 10th that banks made settlements for the

ence caused by frequent, small-percentage calls and remittances

were sold during the campaign.*

$2,138,000,000 of 2 per cent bonds allotted to them— and the

in banks where the working staffs are small.

Treasury’s working balance was built up to a level in excess

were divided into two groups, based upon the size of their

Depositaries

of $14,000,000,000. The corresponding maximum at the end of

War Loan balances. For "Group A ” depositaries, those having

the first War Loan drive was slightly short of $10,000,000,000.

War Loan balances of $300,000 or less at the close of business

The funds placed at the disposal of the Government as a

May 11, a special schedule was established running through

result of the campaign were of such magnitude as to cover

the end of August, involving seven repayments of approxi­

projected cash requirements of the Treasury for a considerably

mately equal size spaced at two and three week intervals. Calls

longer period than had been anticipated, and it now appears
that the next major War Loan drive will not be scheduled

on depositaries having War Loan balances of more than

before September.

B”, will be issued in the same manner that calls have been made
heretofore.

While the Treasury will have to provide

for a number of issues maturing or called for payment in June,

$300,000 at the close of business May 11, classed in "Group

July, and August, as well as to meet the heavy rate of expendi­

Member bank reserve requirements, which declined more

tures involved in the prosecution of the war, these require­

than $1,300,000,000 over the period of the drive, as a result of
heavy nonbank purchases of Government securities and the

ments can be met through the combination of current tax
revenues (which may, under new personal income tax legisla­

accompanying conversion of customers’ deposits into War

tion, be both enlarged and more evenly distributed), continu­
ing receipts from sales of Savings bonds, Tax notes, and Treas­
ury bills, drafts upon the large War Loan account balances,
and a restricted amount of interim market financing.

Loan account deposits, reversed their direction after the close

Treasury deposits with the Federal Reserve Banks, which
amounted to $722,000,000 on May 5 were gradually drawn
down during the remainder of May, reaching $345,000,000
on May 26. Inasmuch as only limited calls were made for
repayment of funds accumulated with commercial banks in
War Loan deposit accounts during the first half of the month,
balances in these accounts continued to rise through the 15 th,
reflecting book credit payments for Savings bonds and Tax
notes sold after the termination of the drive, and reached a
maximum of $12,790,000,000 on that date.

In comparison

with the $483,000,000 total of the first half of May, calls dur­
ing the second half of the month totaled $2,033,000,000.
* The results of the Second War Loan drive are presented in detail
in a separate section of this R ev iew , pp. 42-3.




of the campaign, and between May 5 and May 26 increased
$560,000,000.
The rising tendency of reserve require­
ments may be expected to continue, as pointed out in last
month’s issue of this Review, up to the time of the next War
Loan drive, as War Loan account deposits, which are exempted
from legal reserve requirements, are drawn down and, through
Government expenditures, converted into deposits of business
firms and individuals against which reserves must be carried,
The effect of increasing reserve requirements, together with
losses of reserve funds through a further expansion in currency
circulation, in reducing member bank excess reserves, was only
partly offset during May by net disbursements from Treasury
deposits with the Federal Reserve Banks.

Nevertheless, mem­

ber banks continued in general to enlarge their holdings of
Government securities, by purchases from dealers or from
other investors, by bidding for the weekly issues of Treasury
bills, and, as their individual reserve positions permitted, by
reacquiring bills previously sold to the Reserve Bank under

MONTHLY REVIEW, JUNE 1, 1943

42

repurchase option. It was evident that the tendency for banks
to keep their available reserve funds actively employed, which

bills. Reversing the tendency apparent during the period of
the Second War Loan drive, there was an inward movement

had been apparent for a number of months in the larger metro­

of business funds from other sections of the country to New

politan institutions, was becoming more widespread.

York City during May, and inasmuch as this flow more than

The active demand for Government securities during May

counterbalanced losses of reserves through Treasury trans­

was apparent in the firm price quotations that prevailed and

actions and net currency payments, as well as a rise in reserve

in the premiums commanded by the new issues sold during the

requirements, New York banks were enabled to show a net

drive, in the reductions that occurred in dealers’ portfolios

increase in their Treasury bill holdings, as well as in other

(reflected in a drop from $1,031,000,000 on April 28 to

types of Government securities, during the month.

$560,000,000 on May 26 in New York banks’ loans to

Purchases of the weekly Treasury bill offerings by the

brokers and dealers for the purpose of purchasing or carrying

smaller purchasers were simplified, in the interest of encourag­

Government securities), and in changes in Federal Reserve
Banks’ holdings of Government securities. In comparison

ing the wider distributionof these securities, by a change,
announced May 6, in the procedure for submitting and hand­

with their peak of $6,705,000,000 on April 14, and with

ling bids.

$6,347,000,000 on April 28, Federal Reserve holdings of

for bills in amounts up to $100,000 from any one bidder at a

Government securities dropped as low as $6,038,000,000 on

fixed price of 99.905 (equivalent to a yield of about Ys per

May 19. Despite a rise to $6,181,000,000 on May 26, as
banks requiring additional reserve funds sold Treasury bills

cent on an annual basis), were allotted in full, with the effect

to Federal Reserve Banks under option accounts, a net reduc­

ing definite amounts of bills up to the $100,000 limit. Bills not

tion of $166,000,000 was shown in total holdings for the

sold under this provision are being allotted as formerly, on the

four weeks ended May 26.

basis of competitive bids. Of the $900,000,000 of bills offered

Over this period Government

Beginning with the issue dated May 12, tenders

of creating a means whereby bidders could be certain of receiv­

bonds held by the Reserve Banks, which had run as high

May 12,19, and 26, $81,000,000, $93,000,000, and $82,000,000,

as $2,793,000,000 on January 6 of this year, were reduced

respectively, were sold under the new provision for acceptance

$274,000,000 further to $1,769,000,000.

in full of fixed-price bids.

There were net in­

creases of $41,000,000 in bills and $102,000,000 in certificates

At the same time, on account of the increasing congestion

of indebtedness, while note holdings decreased $36,000,000.
Reflecting the net contraction in Federal Reserve Banks’

in communication facilities, a change was made in the maturity
dating of Treasury bill issues so as to provide, beginning with

holdings of Government securities, as well as the other factors

the second weekly issue of August, three days instead of two

tending to cut into the surplus funds of banks, excess reserves

between the dates of the opening of Treasury bill bids and

of all member banks declined from $2,220,000,000 on April

the dates when payments by successful bidders are due.

28 to $1,500,000,000 on May 26.

As the central reserve

that time, payments will be due on Thursdays instead of on

city banks of New York and Chicago continued to keep their
funds actively employed and held only limited amounts of

Wednesdays, while bids will continue to be opened on Mon­
days. Over the period of transition Treasury bill issues will

excess reserves throughout the month, the contraction in the

run for 92 days instead of 91, being issued and paid for on
Wednesdays and maturing, thirteen weeks later, on Thursdays.

excess reserves of all member banks was predominantly a
reflection of reduced excess reserves at reserve city and
"country” banks. New York City member banks continued
to follow the practice of adjusting their reserve positions
mainly through adjustments in their holdings of Treasury

May 29, 1942 April 30,1943 May 28, 1943
Stock Exchange call loans......................
Stock Exchange 90 day loans................
Prime commercial paper-4 to months
Bills— 90 day unindorsed.......................
Average yield on tax exempt Treasury
bonds (not callable within
years).
Average yield on taxable Treasury bonds
(not callable within
years)..........
Average rate on latest Treasury bill
sale 91 day issue....................................
Reserve Bank discount rates:
On advances to member banks se­
cured by Government obligations
callable or maturing in one year or

6

12

12

On other advances to member banks
secured by Government obliga­
tions, and on rediscounts................
Reserve Bank buying rate for 90 day
indorsed bills.........................................
* Nominal




t 92 days

1

*1H
X
A
7

The shift to Thursday payment dates will thus occur in August.
RESULTS OF T H E SECOND W A R L O A N D R IV E
On May 10, the Treasury announced that the final total for
the Second War Loan drive reached $18,543,000,000.

Money Rates in New York

1

At

This

compares with $12,947,000,000 raised during the first drive, in
December, and with a total of approximately $17,000,000,000

1

*1H
H-H
7
A

*1H
A -H
B
A
7

1.94

1.98

1.87

Of even more importance than the total amount raised

2.33

2.31

2.29

during the drive was the distribution between banking and

0.365

0.372

0.373f

raised during the first four Liberty Loan campaigns of the
first World War.

nonbanking investors.

Indications are that this drive was

more successful than the previous one in increasing the net
X

X

absorption of Government securities by nonbanking investors.
As indicated in the table below, allotments to this group of

1

1

X

1

X

$12,550,000,000 in the April drive were nearly double the
X

$6,822,000,000 realized in December.

Allowance should be

made, however, in both drives for a shift of previously out-

43

FEDERAL RESERVE BANK OF NEW Y ORK

indicates that, in addition to $1,473,000,000 of Series E bonds,
purchases by individuals, partnerships, and personal trust

Distribution of Securities Sold in the First and Second War Loan Drives
by Type of Investor
_______________ (In millions of dollars)_______________________ __

United States
April,
1943
Nonbanking investors*
Individuals, partnerships, and per­
sonal trust accounts........................
Insurance companies...........................
Savings banks.......................................
Eleemosynary institutions.................
State and local governments.............
Other corporations and associations.

Decem­
ber, 1942

Second Federal
Reserve District
April,
1943

Decem­
ber, 1942

on the two bond issues, while other corporations and associa­

2,654

737
1,426
730
76
71
1,816

387
1,038
405
43
29
1,095

12,550

6,822

4,856

2,997

Banking sources........................................

5,058

5,087

1,834

1,912

Other sources
Dealers and brokers*..........................
U. S. Government agencies and trust

544

769

439

817

Total from all sources

........................

accounts consisted largely of $425,000,000 in Series F and G
bonds and about $1,000,000,000 in the two new bond issues.
Insurance companies and savings banks concentrated largely

3,290
2,408
1,195
117
503
5,038

1,593
1,699
620
57

200

tions subscribed most heavily for the certificates and Tax notes,
although also purchasing nearly $1,300,000,000 of the two
bond issues.

Commercial banks were limited to allotments of

$2,138,000,000 of the certificates and $2,110,000,000 of the
2 per cent bond issue, in addition to purchases of Treasury
bill offerings. Bank subscriptions to each of the two new issues
totaled nearly $10,000,000,000.

391

270

7

1

Of the $12,550,000,000 subscribed by nonbanking investors

18,543

12,947

7,136

5,727

throughout the country, $4,856,000,000 was credited by the
Treasury to the Second Federal Reserve District.

*For the April drive allotments to dealers earmarked for distribution to non­
banking investors have been credited to the appropriate classes of nonbanking
investors. For the December drive allotments to dealers of the 2 H per cent bonds
(which were not eligible for purchase by commercial banks) ha.ve been credited, to
other corporations and associations, but no reclassification is available for tne
other issues.

standing securities from other investors to commercial banks
before and during each drive. During November and Decem­
ber, commercial banks acquired in the market more than
$1,500,000,000 of Government securities previously held by
other investors.

Even though the redistribution of already

outstanding securities, from other investors to banks, was
probably larger in March-April than in November-December,
it is clear that the net absorption of Government securities
by nonbanking investors was much greater in this campaign
than during that of December.
It should not be assumed, however, that the full increase
in holdings of Government securities by nonbanking investors
represents absorption of funds which might be used other­
wise to increase spending and contribute to inflation.

A large

portion of the amounts obtained in the drive represented
accumulated funds which were not likely to be spent for
consumers* goods and services. This is essentially the case
with funds held by insurance companies, savings banks, and
other corporations and associations.

Although investment of

these funds in Government securities is desirable, from the
viewpoint of preventing inflation it is most important that
the drives absorb the largest possible amounts from current
incomes and temporarily idle funds which might be with­
drawn at any time to be spent for goods and services. Perhaps
the best measure of the success of the drives from this view­
point is the amount purchased directly by individuals. In
the Second War Loan drive a total of $3,290,000,000 was
subscribed by individuals, partnerships, and personal trust
accounts, compared with $1,593,000,000 in the December
drive. Particularly encouraging was the fact that Series E
bond sales in the most recent drive amounted to $1,473,000,000,
slightly more than double the $726,000,000 sold in December.
In addition, both drives brought about increased payroll deduc­
tions for the purchase of Savings bonds out of current income.
Distribution of sales in the April drive by type of issue




Sales to

institutional investors and other corporations accounted for
$4,119,000,000 of the nonbanking total raised in this Dis­
trict, with insurance companies and savings banks contributing
a large portion.

Individuals, partnerships, and personal trust

accounts in this District were credited with subscriptions of
$737,000,000, representing about 22 per cent of the nation­
wide total for this group of investors.

In addition to the

amount raised from nonbanking investors, brokers and dealers
in this District were allotted $439,000,000 of securities not
earmarked for distribution to nonbanking investors. Com­
mercial banks in this area received direct allotments of
$665,000,000 of the % per cent certificates and $580,000,000
of the 2 per cent bonds, and in addition made net purchases
of Treasury bills.
On May 27, the Treasury issued the following statement in
reference to plans for future war financing:
As a result of the highly successful Second War Loan Drive
which brought 181/2 billion dollars into the Treasury in three
weeks, Secretary of the Treasury Henry Morgenthau, Jr., an­
nounced today that the method of selling bonds through volunteer
salesmen would be "streamlined and amplified.”
As the first step, according to Mr. Morgenthau, the existing
Victory Fund Committees and War Savings Staffs in the various
states will be combined into a single organization.
This consolidated organization will function under the direc­
tion of state chairmen who will report directly to the Secretary
of the Treasury and will be responsible for the continuing sale
of War Savings Bonds through the voluntary payroll allotment
and other regular purchase plans. These state organizations will
also be in charge of War Loan drives and will concentrate on
the sale of increasing amounts of bonds to individuals and to
corporations.
In order to facilitate the sale of issues of Government se­
curities to commercial banks, mutual savings banks, insurance
companies and government bond dealers, Mr. Morgenthau has
authorized the Federal Reserve Banks as fiscal agents of the
Treasury to handle sales to these financial institutions separately.
"W e arrived at this plan,” the Secretary said, "after consulta­
tion with the Board of Governors of the Federal Reserve System,
and with the presidents of the 12 Federal Reserve Banks. I
believe that this new arrangement makes the best possible use
of what we learned in the first two War Loan Drives.
"One of the chief considerations in setting up this improved
plan was to make it possible for every one to concentrate on the
sale of bonds to individuals. We are already making great
progress, having sold twice as many bonds to individuals in the
Second Drive as in the first, and having exceeded the quota we
set for individuals in the Second War Loan Drive by nearly a
billion dollars.0

MONTHLY REVIEW, JUNE 1, 1943

44

ments against War Loan account deposits and the shift of

N E W SE C U R IT Y ISSUES
Several offerings of corporate and municipal new security
issues reached the market in May following the close of the
Second War Loan drive; but the total amounted to only about
$86,000,000, somewhat lower than in each of the preceding
two months.

Corporate issues comprised the bulk of the

financing with a total of about $70,000,000,
$20,000,000 was classified as new capital.

of which

Municipal awards

declined still further from the low level of the previous month

customers’ deposits to War Loan deposits associated with the
drive.

In New York City another important factor contribu­

ting to the increase in loans and investments was the expan­
sion in loans to brokers and dealers for the purpose of
purchasing or carrying Government securities.
The accompanying charts illustrate the close correlation
between changes in total loans and investments of banks,
currently dominated by increases in their Government security
holdings, and the movement of bank deposits.

to about $16,000,000.

During the

First and Second War Loan drives there were especially large
net increases in deposits as a result of bank purchases of new

M E M B E R B A N K CR ED IT

issues, while at other times deposits have tended to rise

Between the middle of April and mid-May the expansion

through purchases of Government securities by banks from

in member bank earning assets exceeded in magnitude even

other investors or through bank purchases of new offerings

the increase which occurred last December.

outside of the drives.

In New York

The drives, also, had the effect in each

City total loans and investments of the weekly reporting mem­

case of shifting funds from deposits of individuals and busi­

ber banks rose $1,990,000,000 from April 14 to May 19 com­

ness concerns (adjusted demand deposits) to Government

pared with a net rise of $1,798,000,000 during the five weeks

deposits. After the drives, as the Treasury withdraws its funds

ended December 30, 1942; in 100 cities outside New York

from its War Loan account deposits and spends the proceeds,

member banks reported an increase of $3,128,000,000 between

adjusted demand deposits are built up again.

mid-April and mid-May as against a rise of $1,732,000,000 in

ferences between the geographical distributions of Govern­

the December period.

Through dif­

ment receipts and expenditures, deposits may be rebuilt to

Bank purchases of the Second War Loan issues of % per

different degrees in various localities.

For example, in New

cent certificates of indebtedness and 2 per cent Treasury bonds

York City, as the Treasury withdrew funds from its War Loan

made up the bulk of the increase.

However, as the allotment

accounts after the December drive, a correspondingly large

bases on the bank subscriptions to these new issues were low

amount was not redeposited with banks in this City and the

and as excess reserves were built up substantially during April,

combined total of adjusted demand deposits and War Loan

banks made large purchases of Government obligations already

account deposits declined somewhat.

outstanding, particularly Treasury bonds and bills, and added

however, Government payments exceeded withdrawals and

to their holdings of bills through purchases of the new weekly

the combined total of adjusted demand and War Loan deposits

offerings. The rising tendency of excess reserves during April

continued to increase with only a temporary interruption over

resulted primarily from legislation suspending reserve require-

the March income tax payment period.

Outside New York,

BILLIONS
OFDOLLARS

1942

1943

Loans and Investments, Demand Deposits Adjusted, and U. S.
Government Deposits of Weekly Reporting Member
Banks in New York City




Government Deposits of Weekly Reporting Member Banks
in 100 Cities Outside New York City

45

FEDERAL RESERVE BANK OF NEW YORK

SE C U R IT Y M A R K E T S

Employment within the various civil nonagricultural indus­

Continued demand, particularly from commercial banks,
pushed prices of Government securities in May to new high
levels for the year. The upward movement in the average
price of the three longest term issues of "tax exempt” bonds,
which has been in progress with little interruption since the
latter part of March, reached a level near the end of May
approximately V2 point below the record high in November,
1941.

The average yield on these issues declined from 1.98

tries, as estimated by the Bureau of Labor Statistics, showed
diverse movements between March and April.

Employment

in transportation rose seasonally, and trade, stimulated by the
Easter buying activity, added nearly 100,000 workers. At the
same time a sharp contraseasonal decrease occurred in con­
struction employment, and mining industries also employed
fewer workers during the month.

Manufacturing and civil

government employment was little changed from March.

Yields

New York State factory employment declined slightly dur­

on long term and intermediate term taxable issues also declined

ing April although payrolls and average weekly earnings

during the month, although more moderately, reflecting

continued to rise.

demand from commercial banks following announcement of

and by reduction in the volume of army contracts, while

the low allotment basis on the new 2 per cent bonds.

employment in the apparel industry declined because of sea­

per cent on April 30 to 1.87 per cent a month later.

sonal influences.
Yields on high grade corporate bonds, rated Aaa by Moody’s
Investors Service, showed little change during the month, but
the average of Baa bond yields continued the decline which
Railroad bonds accounted for much of the per­

sistent gain.

Municipal bonds were also strong as Standard

and Poor’s index of prices of high grade municipal bonds
reached the highest level since December, 1941.

continued to rise because of overtime, wage rate increases, and
the use of incentive payments in many war industries.
The War Manpower Commission announced a new stabili­
zation plan for New York City effective May 27. Designed to
promote the orderly transfer of labor within the area, it limits
job changing out of essential industries to cases where workers
have been employed less than full time, are competent to

According to Standard and Poor’s combined index of 90
stocks, May saw a continuation of the persistent increases
in stock prices which started in April, 1942.

Thus additional hiring by aircraft plants,

shipyards, and other war plants was more than offset. Payrolls

began last December and reached a new low of 3.89 per cent
on May 26.

Food processors were affected by shortages

handle more highly skilled jobs, or are receiving less than
standard wages as defined by the War Labor Board.

On May 6 this

index reached 95.1, the highest level since May, 1940.

A 2

Industrial disputes broke out in several industries during
May.

Nearly 480,000 bituminous and anthracite coal miners

point drop on the next day was followed by an irregular
recovery which brought the index to a new high toward the

had walked out by May 1, but returned to work May 3 and
4 pending further negotiations. A strike affecting 24,000

close of the month.

workers in the Chrysler Corporation’s Detroit plants ended

The volume of transactions on the New York Stock
Exchange increased quite sharply during the first half of the
month.

On May 4, more than 2,800,000 shares exchanged

hands, the largest volume since December 29, 1941. Daily
average transactions for the month were well over 1,000,000
shares. There were six days when the number of shares
traded exceeded 2,000,000.
E M P L O Y M E N T A N D P A YR O LLS

May 24 after a four day stoppage.

Operations of large Akron

rubber factories were temporarily interrupted as 50,000 struck
in protest against a wage award of the War Labor Board, but
following an "ultimatum” from President Roosevelt workers
returned on May 27.
M IL L IO N S
OF

60

50

An estimated 200,000 workers were added to total employ­
ment in the United States during April as seasonal demand for

40

agricultural labor drew additional men from the ranks of the
unemployed and from the groups of younger workers just
entering the labor force.

30

The narrowing gap between the

total civilian labor force and total employment indicates that

20

replacements for men going into the armed forces must come
increasingly from sources outside the normal labor force,
especially from the large reserve of women.

The proportion

10

of women employed increased from 20 per cent of the total
number of workers in April, 1941 to 30 per cent in April,
1943 but may go much higher if special problems of child care
and shopping can be solved.




0
Estimates of the Total Labor Force in the United States, Classified
as to Nonagricultural and Agricultural Employment, and
Unemployment (Department of Commerce data)

46

MONTHLY REVIEW, JUNE 1, 1943

B U IL D IN G
The spectacular rise in construction activity during 1941

The reduction in total awards noted earlier resulted from a

and 1942 has been followed, in recent months, by an equally

sharp falling off of public construction, since private build­

pronounced decline. After attaining the highest level recorded,

ing had already declined to a low level.

the volume of construction contracts awarded has been falling

projects made up only about 10 per cent of all contracts

Awards for private

off since last autumn, as the war expansion program neared

awarded in the 37 States in the first four months of the

completion and the War Production Board curtailed the

current year, compared with about 60 per cent in 1940.

amount of materials allotted to new building. The volume of

increased proportion of public ownership of new construction

construction contract awards in 37 States in the first four

has been due principally to the financing of industrial expan­

The

months of this year was 25 per cent below that of the same

sion by the Defense Plant Corporation and the War and

period last year according to the F. W . Dodge Corporation

Navy Departments and the erection of military cantonments,

reports; the volume of industrial contract awards, the chief

airports, etc. In New York and Northern New Jersey awards

During 1942

for private construction projects decreased from two thirds of

industrial plant facilities were greatly expanded to accom­

the total for this area in 1940 to slightly over 15 per cent in
the early months of this year.

factor in the rise, showed a 37 per cent drop.

modate the war needs, and many new airports, army camps,
The War Depart­

Residential building was curtailed in October, 1941 by an

ment has announced that, having completed 90 per cent of

order restricting the use of strategic materials in construction,

and other military facilities were created.

its $10,000,000,000 building program, it now expects con­

and has been contracting since then.

struction for the armed forces to taper off.

months of 1943 awards for private residential building in the

Since October the

During the first four

War Production Board has been curtailing further construc­

37 States amounted to less than one third of the volume

tion and up to May 21 had halted work on projects evaluated

awarded in the same period of 1942, while awards for public

at $1,350,000,000.

On May 12, the War Production Board,

projects in the residential classification, including barracks at

stating that industrial facilities were now sufficiently expanded,

military encampments and housing for workers in war indus­

ordered review of over $5,000,000,000 worth of construction

tries, were only slightly below the year earlier level.

contracts and forbade new projects unless it could be proved
conclusively that existing facilities were not sufficient.

smaller amounts of building materials being allotted to con­

In the Second Federal Reserve District, expansion in construc­
tion in 1942 never was so marked as in other sections of the
country, and the volume of construction contract awards fell in
the first four months of this year to a level lower than that for
any comparable period since 1935. This District possessed in­
dustrial and residential facilities adequate to accommodate a

With

struction and nonessential building virtually stopped, residen­
tial building activity is being increasingly concentrated upon
the conversion and repair of already existing structures.

In

his request for an additional $400,000,000 appropriation for
war housing on May 13, the President stated that three fifths
of the housing needs of war workers were being met by con­

sizable increase in production, and important sections of the

version, repair, and the more effective use of existing struc­

District have not received war contracts in large enough volume
to require expansion proportionate to that in other parts of the
country with less extensive facilities and larger war contracts.
MILLIONS
MILLIONS
OFDOLLARS
OFDOLLARS

tures; one fifth of the remainder was being met by privately

Average Daily Value of Construction, Contract Awards in 37 States
and in Second Federal Reserve District (6 month moving averages of
F .W . Dodge Corporation data* adjusted for seasonal variation)

Average Daily Value of Construction Contract Awards for Public and
Private Ownership in 37 States (6 month moving averages of
F. W . Dodge Corporation data, adjusted for seasonal variation)




financed construction and the rest by the Governments war
housing program.
MILLIONS
OFDOLLARS

FEDERAL RESERVE BANK OF NEW YORK

47

even bigger month in merchant shipbuilding than April, when

COST OF L IV IN G O V E R T H E W A R PERIO D
For a year and a half after the outbreak of the war, the
cost of living in this country showed very little change. Price

a record total of 157 vessels was delivered.
For the month of April, the seasonally adjusted index of

movements were diverse and generally of small amplitude.
According to published indexes, a slight decline in the cost

production and trade computed at this bank showed a further
decline of two points to 124 per cent of estimated long term

of housefurnishings offset small increases in food and fuel

trend. As in the previous month, the index was influenced by

prices.

Early in 1941, however, the character of price move­

ments changed to a steady and general rise which communi­

slackening in the volume of retail trade.

Department stores

and variety chains reported increases in sales over March, but

cated itself to nearly all types of consumer goods and has per­

the advances were much smaller than those that have occurred

sisted until the present date. Between January, 1941 and
May, 1942 the cost of living index of the Bureau of Labor

in most other years when Easter has fallen late in April. Mail
order house sales rose by about the usual seasonal amount,

Statistics rose 15 per cent, an average increase of nearly 1

while sales by grocery chain stores dropped off under the
impact of further rationing controls.

per cent a month, resulting primarily from the rapid advance
May, 1942, when most prices were placed under general

There was a two point recession in the production index
during April, attributable to further rapid contraction in both

ceilings, the over-all increase has been at an average monthly

residential and nonresidential building, as the war construc­

rate of 0.6 per cent.

tion program neared completion.

in the prices of food, clothing, and housefurnishings.

Since

This is a somewhat smaller monthly

change than prevailed in the earlier period, but in March,
1943, the index still showed no tendency to level off.
Retail food prices have been the major factor in this con­
tinued rise.
1941.

They have advanced steadily since early in

Last month the problem of further increases in the

In many lines of industry

— steel, cotton goods, and petroleum producing— there was
little change in rates of activity between March and April,
while mining of anthracite and bituminous coal was reduced
by work stoppages, and meatpacking and flour production
declined.

On the other hand, output of planes, ships, and

cost of living and especially in food prices occupied the atten­

other war material continued to mount in April.

tion of several Government agencies.

The Bureau of Labor

to the record delivery of 1,606,600 tons of merchant shipping,

Statistics further revised its index of living costs to reflect
the changed consumer buying patterns resulting from ration­

new records were also set for the delivery of naval aircraft and

ing and the disappearance or substitution of certain commodi­

a new high of somewhat less than 7,000 planes, exceeding the

ties.

Several additional foods were included in the index,

and adjustments made in the weighting to provide a more
accurate yardstick for the application of price and wage con­
trols. Meanwhile, the Office of Price Administration, in order
to facilitate the enforcement of price maximums, converted

In addition

the completion of combat vessels. Airplane production was at
March total of 6,200.

However, Donald Nelson, Chairman of

the W.P.B., has warned that we are nearing top capacity, and
the rapid rate of increase made in munitions production during
the past year cannot be sustained for many months longer.

its system of markups to uniform dollar-and-cents ceilings on
well known food brands, applicable to all stores of a given
class in each community. These community ceilings, known
alike to buyers and sellers, can be checked by consumer price

1942

1943

April

Feb.

March

April

124p

Indexes of Production and Trade*

100

A plan to roll back prices

(
“ estimated long term trend)
Index of Production and Trade.................

114

128

126p

of a few important foods such as meats, butter, and coffee has
been announced for June 1. The O.P.A. would accomplish

Production..................................................

121

136

136p

134p

Producers’ goods— to ta l....................
Producers’ durable goods..............
Producers’ nondurable goods........

146
163
126

174
207
136

173p
205p
136p

171p
203p
135p

Consumers’ goods— tota l...................
Consumers’ durable goods.............
Consumers’ nondurable goods___

89
47
103

41
104

p
39p
104p

88

p
36p
103p

Durable goods— total..........................
Nondurable goods— total...................

129

112

158
117

156p
117p

154p
116p

Primary distribution...............................
Distribution to consumer......................
Miscellaneous services............................

131
89
118

145
96
157

149p
85 p
160p

151p
80p
163p

115

121

123

134

148

14 9p

57
85

69
75

panels organized in each locality.

this roll-back with the aid of subsidies paid to processors who
find themselves unable to operate under lower prices.
PRO D U CTIO N A N D T R A D E
According to preliminary indications, manufacturing activity
in May was maintained close to the April level.

Steel mills

operated at a slightly lower rate than in April, while output of
crude petroleum and electric power ran somewhat higher.

Cost of Living, Bureau of Labor Statistics
(100*1935-39 average)...............................

Bituminous coal mining was affected by work stoppages in

Wage rates

the first part of the month, but subsequently recovered to the

Velocity of Demand Deposits*

high level prevailing in previous weeks.

Munitions produc­

tion continued at a high rate, and Rear Admiral Vickery of
the Maritime Commission predicted that May would be an




(100=1926 average).....................................
(100=1935-39 average)
New York C i t y ............................................
Outside New York C ity..............................
p Preliminary.

88

* Adjusted for seasonal variation.

62
78

86

83
89

MONTHLY REVIEW, JUNE 1, 1943

48

F U R N ITU R E STORE TR A D E

D E P A R T M E N T STORE T R A D E

Sales of furniture stores in this District during April were

During the three weeks ended May 22, sales of reporting

5 per cent below the corresponding period last year, on the

department stores in this District were about 11 per cent

basis of data submitted to this bank by approximately 60

greater than in the corresponding period last year, while

cooperating stores.

Year-to-year percentage declines have

apparel stores exceeded year ago sales by about 34 per cent.

been experienced every month since May, 1942, when the

Sales of department stores in May apparently declined from

compilations of furniture store figures began.

the April level by less than the seasonal amount.

The decline of

5 per cent for April, however, was the smallest year-to-year

In April department store sales in this District were 8

drop in dollar sales recorded over this period; in the com­

per cent greater than in April, 1942, an increase that appears

parison of August, 1942 with August, 1941 (when a general

to have been largely accounted for by the lateness of the date

wave of retail buying had appeared), the decline amounted to

of Easter this year (April 25, compared with April 5 last

31 per cent.
Furniture is sold predominantly on credit, although, through

year).

On a seasonally adjusted basis, sales declined about

9 per cent from March to April of this year.

the effect of consumer credit regulations, cash sales have been

Stocks on hand of department stores in this District at the

accounting for an increasing proportion of total sales during

end of April were 32 per cent lower at retail valuations than

the past year, and at the same time the average period over

in April of last year, and the seasonally adjusted index of

which credit has been extended has been shortened.

stocks reached the lowest level since July, 1941.

In April

85 per cent of sales were made on credit, compared with 88
per cent in April, 1942.

Collections during April against

accounts outstanding March 31 amounted to 14 V2 per cent
this year; the corresponding percentage last year was 11.
Accounts receivable of the cooperating furniture stores in this

Returns

from a limited number of department stores in this District
show that at the end of April outstanding orders for mer­
chandise purchased by the stores but not yet delivered to them
were 15 per cent above April, 1942, and 14 per cent above
those at the end of March, 1943.

District declined 39 per cent during the year ended April 30.
Stocks on hand at the close of April represented 5.7 months’
Percentage changes from a year earlier

supply at the current rate of sales against 6.4 months’ supply
one year earlier.

The dollar value of stocks on hand declined

Department stores

Net sales

14 per cent during this period.
April, 1943
New York C ity .....................................
Northern New Jersey..............................

Percentage changes
April, 1942 to April, 1943
Furniture stores
Total
sales

Accounts
receivable*

Collec­
tions

Stocks*
on hand

- 4
-2 5

-1 5
-1 5

- 9
-1 4
- 9
+
-1 9
-1 6
- 3
+

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

-2 5
-1 9
-2 3
- 7
+
-1 4
-1 3
-1 9
-

Total outside New York City

-1 3

-4 0

-1 5

Total Second District...........

-

-3 9

-

New York C ity.................................
Northern New Jersey.....................
Newark...........................................
Other localities.............................
Westchester-Fairfield......................
Hudson River Valley......................
Central New York State................
Syracuse.........................................
Other localities.............................
Western New York State..............
Buffalo............................................
Rochester.......................................
Other localities.............................

0

-2 3
-2 6

-22

8

2

5

—

2

8
2

8

-22
-1 3
+ 6
+ 2

Westchester and Fairfield Counties . ..
Bridgeport............................................
Lower Hudson River Valley.................
Poughkeepsie........................................
Upper Hudson River Valley.................
Schenectady..........................................
Central New York State.......................
Mohawk River Valley........................

-1 9
—

-1 6
-1 6

-20
- 8
—

-1 3
-1 4

♦End of month.

Northern New York State.....................
Southern New York State.....................
Binghamton..........................................
Western New York State.......................
Niagara Falls........................................
All department stores................
Apparel stores..............................

+10
2

+
+ 5
+ 3
+
+
+
+

2
2
1
1
—10
+ 18
+12
+ 15
+ 17
+
+
+
+

10
1
6
10
—10
+ 10
+11
+37
+ 7

8
+20
+

Stocks on
Jan. through
hand
April, 1943 April 30,1943
+
—
—
—
—
—

5
5
3
4
5

— 36
— 37
— 38
— 25
— 26
— 15

— 7
— 16
+ 5
+
+

— 7

2
0

— 13
— 27
— 17

8
11

+
—
+
+
—
+

— 31

7
3
7
9
4
9

—12
—
— 18

+10
+34
+ 6

—12
— 6

+ 4

— 32

+17

— 18

— 27

April, 1943 compared with April, 1942
Furniture stores
Outside
Total
District New York City New York City
Credit sales as per cent of total sales
April, 1943.........................................
April, 1942.........................................
Stocks on hand, end of month, as ratio
to month’s sales
April, 1943................ .........................
April, 1942.........................................
Collections, exclusive of down pay­
ments, as per cent of receivables,
first of month
April, 1943.........................................
April, 1942.........................................




84.6
87.5

84.2
87.5

85.2
87.5

5.7
6.4

5.8
6.9

5.6
5.5

14.5

14.0
10.5

15.9

11.0

Indexes of Department Store Sales and Stocks, Second Federal Reserve District
(1923-25 average = 100)
1942

1943

April

Feb.

March

April

Sales (average daily), unadjusted.................
Sales (average daily), seasonally adjusted..

106

112
138

104
127

117
115

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

152
150r

105
lllr

107
106

100

12.1
r— Revised.

110

99

FEDERAL RESERVE BANK OF NEW YORK
M O NTHLY REVIEW, JUNE 1, 1943
General Business and Financial Conditions in the United States
(Summarized by the Board of Governors of the Federal Reserve System)

I

NDUSTRIAL activity in April and the early part of May increased somewhat further, and

retail trade was maintained in large volume.
In d u s t r i a l P r o d u c t i o n

Index of Physical Volume of Industrial Produc­
tion, Adjusted for Seasonal Variation
(1 9 35 -3 9 average — 100 per cent)

Indexes of Value of Department Store Sales and
Stocks, Adjusted for Seasonal Variation
(19 23 -2 5 average — 100 per cent)

The Board’s index of total industrial output rose slightly in April, reflecting further
increases in activity in war industries, while output in most other lines showed little change.
Production of armaments in the machinery and transportation equipment industries rose
to new high levels. Activity at steel mills increased somewhat further. Lumber production
showed the usual seasonal rise in April and was at a level about 10. per cent less than a year
ago, when problems of maintaining an adequate labor supply in the industry began to develop.
In the cement industry, where production usually advances sharply during the spring months,
production has shown little change this year, reflecting chiefly the restricted volume of current
construction activity.
Total output of manufactured foods in April continued below the seasonally adjusted
peak level reached at the end of last year. Meatpacking and flour production showed decreases
in April, while output of dairy products and other manufactured food products was main­
tained. Volume of output in chemical plants continued to gain. Production of other non­
durable manufactures showed little change.
There was a decline in bituminous coal production in the last week of April, following
the breaking off of negotiations for a new wage contract, but output increased in the early
part of May. Production of coal in March had been at an exceptionally high level. Stocks
on May 1 were considerably higher than a year ago and for bituminous coal were estimated
to be equivalent to 55 days’ supply for industrial purposes. In May the Government took
over the bituminous coal mines.
Value of construction contracts awarded declined in April, reflecting reductions in con­
tracts for Federal work, according to the F. W . Dodge Corporation. Total residential awards
in March and April were at the lowest levels for these months in a number of years.
D is t r ib u t io n

Sales at department and variety stores increased in April, but the rise was less than usually
occurs when Easter falls late in the month. Mail-order sales, principally to persons in small
towns and rural areas, showed about the usual seasonal rise. Value of sales in April continued
at a level substantially higher than a year ago but, with prices higher, the physical volume of
goods sold was probably about the same as in the corresponding period last year.
Carloadings of revenue freight were maintained in large volume in April and the first
week of May. Ore shipments showed a seasonal rise beginning in the last half of April, a
month later than in 1942 when the movement was unusually early.
C o m m o d i t y P r ic e s

Indexes of the Cost of Living as Compiled by
Bureau of Labor Statistics (April figures are
estimates of the Board of Governors;
1935-39 average= 100 per cent)

Wholesale prices of most commodities showed little change from the middle of April
to the middle of May. Retail food prices continued to advance sharply in the latter part of
March and the early part of April and the indexes showed increases of 6 per cent as compared
with January. Retail prices of most other items in the cost of living showed smaller increases
in that period. Plans for more effective enforcement of price ceilings have been announced.
B a n k C r e d it

TOTAt
M

s ^
■

n
V

S

-

.V

4

J

*****

r\ J

A

-

-'-A

v

REQUIRED RESERVES J

^4
N

1 E;<CESS RESERVE!s ______________

-

J

i

iV i/ '

Wednesday Figures of Total Member Bank Re­
serve Balances at Federal Reserve Banks, with
Estimates of Required and Excess Reserves
(Latest figures are for May 12)




During May, as the Treasury made disbursements out of war loan accounts, which had
been built up during the recent drive, there was a growth of bank deposits subject to reserve
requirements and a decrease in member bank excess reserves. Continued withdrawals of cur­
rency also reduced bank reserves. Nevertheless, the reserves of member banks were sufficient
to enable them to make substantial repurchases of bills which had been sold to the Reserve
Banks under option. In addition, the Federal Reserve System sold some bonds in response to
a market demand.
Government security holdings at reporting member banks in 101 leading cities increased
by 4.3 billion dollars in the four weeks ended May 12. These increases reflected purchases of
new issues during the War Loan drive, as well as substantial market purchases.
In New York City, loans to brokers and dealers for purchasing or carrying securities
increased by 860 million dollars during the three weeks of the War Loan drive, and subse­
quently declined in the first three weeks of May; these changes reflected almost entirely activity
in loans for purchasing or carrying Government securities, which on May 19 amounted to
580 million dollars of the total 1,020 million dollars outstanding; other loans to brokers and
dealers by New York City banks rose by 90 million dollars from the end of March to May 19-