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MONTHLY REVIEW o f C r e d it a n d S e c o n d Federal Reserve Agent B u s in e s s F e d e r a l R e s e r v e C o n d itio n s D is t r ic t Federal Reserve Bank, New York Business Conditions in the U nited States U R T H E R growth in production during January carried the output of basic commodities to the highest point reached since the spring o f 1923. Employment at industrial establishments increased slightly, but remained below the level o f a year ago. Prices of farm products continued to advance and there were smaller increases in the wholesale prices o f most o f the other groups o f commodities. F P r o d u c t io n P roduction in basic industries, after a rapid increase in recent months, advanced 8 per cent, in January and was 34 per cent, above the low point o f last summer. The most important factor in the increase in the level o f production since August has been the greater activity in the iron and steel industry, but in January the output o f lumber, minerals, food products, and paper, and the mill consumption o f cotton also showed considerable increases. The woolen industry was somewhat less active in January and output o f automobiles, though larger than in December, was considerably smaller than a year ago. Further increases during the month in employment in the metal, textile, and leather industries were largely offset by seasonal declines in the number employed in the building materials and food products industries. PER CENT. March 1, 1925 B uilding activity, as measured by contracts awarded, though less in January than during the closing months o f 1924, was near the high level o f a year ago. T r ad e Railroad shipments were in record volume fo r this time o f year, and loadings o f merchandise and miscella neous products were particularly heavy. W holesale trade in January, however, was slightly smaller than in Decem ber. Sales o f groceries, shoes, and hardware were in smaller volume, while sales o f dry goods and drugs increased. Department store sales in most districts were somewhat smaller than a year ago, but sales o f mail order houses were considerably larger. P r ic e s Wholesale prices, as measured by the index o f the Bureau o f Labor Statistics, rose 2 per cent, during January to the highest level in fou r years. The increase o f 10 per cent, in the index since last June represents an advance o f 19 per cent, in prices o f agricultural com modities and 3 per cent, in other commodities. In the first half o f February prices o f grains, wool, coal, and lead declined, while petroleum and gasoline prices ad vanced sharply, and cotton, silk, and rubber showed smaller increases. PERCENT. *1 6 0 WHOLESALE PRICES 1913*100 Index of 22 Basic Commodities Corrected for Seasonal Variation. (1919 = 100 Per cent. Latest figure, January.) 1922 1923 19 &4 1925 Index of U. S. Bureau of Labor Statistics. (1913 = 100 Per Cent, base adopted by Bureau. Latest figure, January.) MONTHLY REVIEW, MARCH 1, 1925 BILLIONSOFDOLLARS BILLIONS OF DOLLARS Reserve Bank Credit Weekly Figures for 12 Federal Reserve Banks (Latest figures, February 18.) Weekly Figures for Member Banks in 101 Leading Cities. (Latest figures, February 11.) B an k C r e d it Loans and investments o f member banks in leading cities, follow ing the rapid growth during the last half o f 1924, declined by about $100,000,000 between the m iddle of January and the m iddle of February. This decrease represents a reduction in the holdings o f invest ments, chiefly at banks in New Y ork, partly offset by an increase in loans. Loans on stocks and bonds increased, though less rapidly than in the latter part of 1924, while loans for commercial purposes declined slightly from the high level reached in the middle o f January. Net demand deposits, owing largely to decreases at New Y ork City banks, declined sharply from the high point reached in the middle of January. A t the Federal Reserve Banks the seasonal liquidation resulting from the return flow o f currency from circula tion came to a close by January 21 and during the fo l low ing fou r weeks there was an increase in total earning assets. This increase reflected largely the demand fo r gold fo r export, which led member banks to increase their discounts at the Reserve Banks. Reserve Bank holdings o f United States securities declined further, while ac ceptances showed relatively little change fo r the period. Money rates, after remaining comparatively steady during most o f January, showed a firmer tendency dur ing February, when rates fo r prime commercial paper advanced to 3% per cent. Effective February 27 the discount rate of the Federal Reserve Bank of New Y ork was increased from 3 to 3y 2 per cent, on all discounts and advances. exports o f gold from New Y ork, loss o f funds to the interior during the early part o f February, and further reduction o f Government security holdings by the Federal Reserve Bank o f New Y ork and by the System. Most o f the decrease in member bank credit within the district was due to a further reduction o f security holdings by New Y ork City banks to a level on February 18 o f $233,000,000, or 12 per cent, below the high point reached last fall. Loans secured by stocks and bonds were relatively little changed, and the volume o f bor row ing fo r commercial purposes, while considerably reduced early in the period, increased $70,000,000 in the week ended February 18, almost to the highest levels o f last fall. The follow ing diagram indicates b y weeks the recent tendencies in the aggregate figures o f loans and invest ments, and deposits, o f reporting banks in the Second District, and in all districts except the Second. BILLIONS OF DOLLARS 8 BILLIONS OF DOLLARS iZ 1 i1................ ALL RET>ORTING \ SANKS SECC>ND D IS T I RICT ALL REP1ORIiNG e>ANKS EXCEPT SECOND C)IST. AJ TOTAL LOAN5 INVESTMEf'i t S & jA ^ TCfTAL LOANS& J 1NVESTME W J r F ^ T a TAL DEPID51T5 10 f v JQVM DEPO!5ITS , Banking Conditions in the Second D istrict The volume of credit extended by reporting member banks in the Second D istrict declined in the latter part o f January and the first half o f February, and on Feb ruary 18 total loans and investments were $178,000,000 lower than on January 14, while total deposits showed a decrease o f $307,000,000. These changes were in con trast with moderate increases fo r reporting banks in other sections o f the country, and accompanied continued -----1-----1— S. i‘ i --- Li---- 1___ ... t..... i APR MAY JUN JUL AUG 5£P OCT NOV DC JAN FEB MAR 192.4 1925 .......i_...j— 1___1___ APR MAYJUN JUL AUG SEP OCTNOV DEC JAN FEB MAR 1924 192£ Total Loans and Investments and Total Deposits of Weekly Reporting Member Banks in the Second District and in all Districts except the Second. A t the Federal Reserve Bank o f New Y ork rediscounts fo r member banks increased substantially in February and in the latter part o f the month exceeded $200,000,000 FEDERAL RESERVE AGENT AT NEW YORK or the highest in over a year. These increases were only partly offset by a decrease in holdings of Government securities, so that total earning assets rose again to approximately the levels prevailing during the holiday trade expansion in December. Velocity of B ank Deposits Increases in January in various phases o f business and financial activity were accompanied by a consider able increase in the velocity o f bank deposits, or rate at which funds are checked out of banks. In the last six months o f 1924 the rate o f turnover o f bank funds in 140 centers outside o f New Y ork fell approxi mately 8 per cent, below the average o f the past six years, a factor which tended to lim it the effects o f the large expansion o f deposits upon prices and general busi ness activity. The increase in velocity in January, accom panied by a further increase in bank deposits, resulted in a larger total of check payments, or debits to indivi dual deposits, than in any previous month. The follow ing diagram shows in percentages o f the six year average the changes in the rate o f turnover fo r 140 centers outside o f New Y ork and compares this with the rate in New Y ork City, which was at a relatively high level during most o f last year, reflecting partly activity in the security markets. 3 In the bill market firmer conditions were indicated by a somewhat reduced demand fo r bills and mod erately increased sales to the Reserve Banks. Open market rates advanced % o f 1 per cent, on most maturi ties to 3 % per cent, on dealers’ purchases o f 90-day bills and 3% per cent, on their sales, the highest rates since May. Yields on Treasury short term issues m aturing in six and nine months also increased slightly. Rates fo r 60-90 day loans on stock market collateral advanced % o f 1 per cent, to 4 per cent., the highest since June. Call money renewals ranging 3 to 4^4 per cent, were generally higher than in January, and late in the month the rate fo r new loans advanced to 5 per cent. MILLIONS OF OOLLAH5 Commercial Paper Outstanding—26 Dealers. PERCENT. Security M arkets Rate of Turnover of Bank Deposits in New York City and in 140 Centers Outside of New York City after Allowance for Sea sonal Variation. (Six-year average =100 Per cent. Latest figures, January.) M on ey M ark et Further outflow o f gold, loss of funds to the interior, and a seasonal increase in the demand fo r funds contri buted to firmer money conditions in February. A somewhat less active demand fo r commercial paper in the middle west, together with small demand at New York, was reflected in a slight advance in open market rates on prime paper to 3 % per cent. Supplies o f paper were reported only moderate follow ing con siderably less than the usual seasonal increase in Janu ary, when the volume o f paper outstanding reported by 26 dealers increased $20,000,000 to $818,000,000 on January 31. The bond market continued active and firm during most o f February. Representative averages o f high grade corporation bonds advanced over % a point to a new high level fo r recent years. United States Govern ment securities were steady and foreign bonds generally firm, although French issues reacted slightly accom pany ing the decline in exchange rates. In the stock market industrial price averages advanced early in the month to a new high point while railroad averages continued at about the highest levels since 1917. Later in the month stocks reacted sharply, but in somewhat slackened trading prices subsequently re covered their losses and both railway and industrial averages held close to the y e a r’s high levels. New security offerings continued in large volume and brought the total since the first o f the year to a billion dollars. Domestic stock issues continued heavy, while foreign issues o f all kinds during the first 26 days o f February totaled $150,000,000. O f these, the largest were $35,000,000 bonds o f the Republic o f Poland, $20,000,000 bonds o f the Est R ailroad o f France, $35,000,000 Canadian National Railw ay bonds, and $25,000,000 six months refunding notes o f the Argentine Government. Foreign Exchange Foreign exchange rates generally reacted in February, follow ing their rapid advance in previous months. Sterling declined over 5 cents to $4.74% , Swiss and Dutch exchanges fell somewhat below par and most other leading European exchanges except those of 4 MONTHLY REVIEW, MARCH 1, 1925 Sweden, Germany, and Austria likewise lost ground. These reactions were accompanied by a slight decline in the Canadian dollar, and losses in rates on Argentina, Brazil, India, and China. The Japanese yen, on the other hand, advanced substantially, accom panying an nouncement o f the governm ent’s policy o f stabilization. European Public Finance A pa rt from the marked rise in exchanges during the past year, one o f the important evidences o f im proved economic conditions in E urope has been the substantial progress made towards a balancing o f governmental budgets. A t the close o f the war the belligerent nations were covering a com paratively small part o f their ex penditures out o f current revenue. W hile neutral coun tries were doing much better, only Sweden and Norway apparently were fu lly paying their way. In 1920-21 England, by heavy taxation and economy, reestablished a balanced budget. Through programs of currency revaluation or stabilization, supported by fo r eign loans, the budgets o f Germany, H ungary, and Poland have been balanced in the past year, and the deficit in A ustria greatly reduced. Improvement in Greek finances since the cessation o f the war and progress in Italy are likewise noteworthy. Denmark, which had achieved a balance in 1922-23, was less successful in 1923-24 as a result o f losses occurring to the State from the failure of the Landmansbank. The follow ing diagram indicates the percentage of government expenditures covered by revenue o f leading European countries by fiscal years. W hile the figures are taken from the best available sources they are in some cases preliminary and subject to later revision. Owing also to the different accounting methods in d if ferent countries, the comparisons should be taken as approximate only. 1919 1920 1921 1922 1923 1924 ENGLAND 1919 1920 1921 1922 1923 1924 FRANCE 1921 1922 1923 1924 Gold M ovem en t Exports o f gold amounting to $32,000,000 from the P ort o f New Y ork during the first 24 days o f February, while considerably smaller than in the corresponding period o f January, raised total exports fo r the country since December 1 to approxim ately $150,000,000. Ship ments aggregating about $12,500,000 to Germany and a like amount to India brought the total movement from the United States since December 1 to $50,000,000 in the case o f Germany, and to a slightly larger sum in the case o f India. In addition to these larger shipments, exports in February included between $1,000,000 and $2,000,000 separately to Venezuela, Poland, H olland, and England, and smaller amounts to eleven other coun tries. There was also reported to have been a substantial shipment o f gold from San Francisco to A ustralia dur ing the month. Final figures on the gold movement fo r the country for January indicated total exports o f $73,000,000, with the exception o f June 1919 the largest amount ever shipped in one month. Im ports aggregated slightly over $4,000,000, o f which more than half was from Canada. Foreign Trade Imports o f merchandise in January showed a further increase o f $13,000,000 to $346,000,000, the highest total since May 1923 and, with the exception o f that month and the two preceding months, the highest since 1920. Exports were practically unchanged at $447,000,000, and, as a result, the export merchandise balance was reduced to $101,000,000, the smallest since last A ugust, but about the same as in January a year ago. The recent increase in imports o f 36 per cent, com pared with last August, or several times more than the 1919 1920 1921 1922 1923 1924 1919 1920 1921 1922 1923 1924 1919 1920 1921 1922 1923 1924 B E L G IU M ITALY GREECE GERMANY 1919*1920 I921T922 1923 B2.4 1919 1920 1921 1922 1923 1924 1919 1920 1921 1922 1923 1924 1919 1920 19211922 19211924' HUNGARY POLAND SWEDEN ^ NORWAY DENMARK Government Revenue in Leading European Countries compared with Expenditures by Fiscal Years. as a percentage of expenditures. 1919 1920 1921 1922 1923 1924 1920 1921 1922 1923 1924 AUSTRIA T919~T920 1521 1922 1923 1924 HOLLAND SWITZERLAND Columns show revenue for each year FEDERAL RESERVE AGENT AT NEW YORK usual seasonal increase, was due in part to increased imports o f raw silk and rubber at higher prices, accom panying greater activity in consuming industries in this country. F or the entire year 1924 the detailed figures recently made available reveal com paratively little change in the general character o f exports and imports notwithstand ing the substantial increase in grain shipments in the later months. This is shown by the follow in g table, which compares the percentages of various m ajor groups o f commodities to the total exports and imports in recent years and in 1913. Im ports Com m odity Group Exports 1913 1922 1923 1924 1913 1923 1924 Foodstuff's in crude condition and food animals.................................................. Foodstuffs partly or wholly prepared. Crude materials for use in manufacturing Manufactures for further use in manu facturing .................................................... Manufactures ready for con sum ption... All com m odities....................................... 9 13 29 14 35 100 100 100 100 100 100 100 100 Production Further marked increase in production occurred in most m anufacturing industries in January. In the iron and steel industry 23 additional blast furnaces were blown in, and average daily production o f pig iron and steel increased almost to the exceptionally high levels o f last March. Despite this activity, unfilled orders o f the Steel Corporation increased 221,000 tons to the highest since A ugust 1923. In February new (Computed trend of past years—100 Per cent.) 1924 Producers’ Goods Pig iron ........................................................... Steel ingots.................................................... Bituminous co a l.......................................... Copper, U. S. m ines.................................... Tin deliveries............................................ Z in c.................................................................. Petroleum ...................................................... Gas and fuel o il............................................ Cotton consum ption.................................... Woolen mill a ctiv ity *................................. C em ent............................................................ Lum ber........................................................... Leather, sole.................................................. Consumers' Goods Cattle slaughtered....................................... Calves slaughtered....................................... Sheep slaughtered........................................ Hogs slaughtered......................................... Sugar meltings, U. S. p orts....................... Wheat flour................................................... C igars.............................................................. Cigarettes....................................................... Tobacco, m anufactured.............................. Gasoline.......................................................... T ires*.............................................................. Newsprint...................................................... Paper, to ta l................................................... Boots and shoes............................................ Anthracite coa l............................................. Automobile, a ll............................................. Automobile, passenger................................ Automobile, truck........................................ p=>Preliminary r » Revised 1925 Jan. N ov. Dec. Jan. 94 lO lr 108 111 91 lOOr 126 109 95 94 148r 137 84 76 90r 89 113 124 97 r 118 100 87 98 123r 116 81 92 112r 98 109 75 105r 116 107 92 100 126r 122 87 102 113r 109 i30 97r *96 98p 145r buying failed to keep pace with output, and while calls fo r delivery on old orders raised mill operations to over 90 per cent, o f capacity early in February, the rate o f operations tended to decrease later in the month. A further increase o f nearly 58,000 bales in m ill con sumption o f cotton in January raised this ban k’s index to within 5 per cent, o f computed normal, the highest since November 1923, and woolen m ill activity was also at a relatively high level. Output o f bituminous coal and cement was larger than in any previous January. In the automobile industry, on the other hand, passenger car production, while larger than in December, fell 29 per cent, below January o f last year. The truck output was also larger than in December but smaller than a year ago. The foregoing table gives fo r recent months this ban k’s indexes o f production in percentages o f the com puted trend, after allowance fo r seasonal variation. Indexes of Business A ctivity Indexes o f trade and general business activity showed, as a rule, further advances in January. Bank debits in 140 centers outside o f New Y ork City were larger than in any previous month, notwithstanding that a decline usually occurs from December, and this ban k ’s index advanced to 12 per cent, above the com puted trend, the highest since M ay 1923. Railway loadings o f revenue freight throughout the country in the first six weeks o f the year were over 3 per cent, above the corresponding period a year ago. Increases occurred in every district except the eastern and were particularly marked in merchandise and mis cellaneous loadings in the western districts. The follow ing table gives this ban k ’s indexes, after allowance fo r seasonal variation and, where necessary, fo r price changes. (Computed trend of past years=100 Per cent.) 1924 Jan. Primary Distribution C ar loadings, merchandise and m is c . . . . C ar loadings, o th e r................... .................. Wholesale trade, Second D is t r ic t............. E x p o rts ........................................................... Im p o rts ........................................................... G rain e xpo rts................................................ Panama C anal tr a ffic .................................. Distribution to Consumer 106 145 92 113 90 99r 98r 99 115 125 144 109 100 79 97 142 139 152 104 146 77 110 91 9Or lO lr 69 93 120 158 107 96 81 78 110 112 104 109 174 81 119 110 lO lr lOOr 84 98 133 165 106 102 79 86 97 92 118 * = Seasonal variation not allowed for 110 149 83 112 i03r 102r 90 111 i09 77p 90 lOOp 94p 122p D ep a rtm e n t store sales, Second D is tric t. C hain store sales........................................... M a il order sales............................................ L ife insurance paid fo r ................................ M agazine a d v e rtis in g .................................. Newspaper a d v e rtis in g ............................... General Business Activity B a n k debits, outside of N ew Y o rk C ity . B a n k debits, N ew Y o rk C it y ................... V e lo c ity of bank deposits, outside of New Y o rk C it y ........................................ V e lo city of b ank deposits, New Y o rk C it y ......................................................... Postal receipts.......................................... E le c tric p ow e r.................................. E m p lo ym e n t, N . Y . State fa c to rie s ... Business fa ilu re s ....................................... p=»Preliminary r=»Revised 101 N ov. Dec. Jan. 102 103 104 113 96 96p 112p 108 105 105 91 62 146 119 106 88 100 99r 92 92 103 97 96 101 104 1925 102 101 110 93 89 108 93 120 104r 97 90 107 99 92 103r 99 104 125 98 92 99 104 118 110 97 r 92 98 98 92 112 122 lOOr 94r 92r lO lr llO r 106r 94 lOOr 91 107r 103 107r 91 111 r 98 101 105r 99 91 102 111 92 98 MONTHLY REVIEW, M ARCH 1, 1925 6 (1913=100 Per cent.) E m p lo y m e n t a n d W a g e s F actory employment in January declined slightly in New Y ork State, in accordance with the seasonal ten dency, but fo r the country as a whole increased about 1 per cent, to the highest point since May. Both in New Y ork State and fo r the country generally, the fig ures continued considerably below a year ago, and while a shortage of skilled mechanics was reported in a few localities, there continued to be a surplus o f unskilled and semi-skilled labor. In contrast, production in basic industries reached levels substantially higher than a year ago, and while the figures do not cover precisely the same establishments an increase in the output of goods per worker appears to be indicated. The follow ing table compares indexes of factory employment and production in basic industries in January with recent years, and indicates also the relative position o f wages and wholesale prices. (191 9 -1 00 Per cent.) Production (F. R. B. In d ex )............................... Em ploym ent (F. R. B. Ind ex)........................... Wages (N. Y . State Factories)........................... C om m odity Prices (U. S. Dept, of L a b or). . . . Jan. 1923 Jan. 1924 Jan. 1925 121 99 112 76 120 98 118 73 126p 93 120 78 p=-Preliminary W age reductions in the cotton industry and to a limited extent in the iron and steel industry were re ported in other districts, but in general wage scales held steady. Total payrolls and average weekly earnings, however, were reduced somewhat by time out fo r factory inventory and repair work. Percentage Change from Com m odity Group Jan. 1925 June 1924 Jan. 1924 Farm products........................................... F o o d s............................................................ Cloths and clothing.................................. Fuel and lighting....................................... Metals and metal products..................... Building m aterials.................................... Chemicals and drugs................................ House furnishings...................................... M iscellaneous............................................. 163.4 159.8 191.1 167.9 136.3 179.3 135.2 172.6 127.1 + 2 1 .9 + 1 7 .8 + 2 .1 — 3 .9 + 3 .1 + 3 .8 + 6 .8 + 0 .5 + 1 4 .4 + 1 3 .5 + 1 1 .7 — 4 .4 — 0 .7 — 4 .0 — 0 .9 + 2 .4 — 1 .9 + 8 .6 All com m odities.................................... 160.0 + 1 0 .7 + 6 .0 D uring the first three weeks o f February reactions from the January high levels were general among basic commodities. Due, however, to increases in prices o f hogs, petroleum, and silk, this ban k ’s weekly index o f 20 basic commodities remained approxim ately at the January high level. The follow ing diagram, com paring recent price move ments in Great Britain and the United States, indicates some downward tendency recently in England, reflecting the rise in sterling exchange in January. A large part o f the spread, however, which developed between price levels in the two countries, follow in g the fall in sterling a year ago, remains. PERCENT, Building Building contracts awarded throughout the country in January, while 10 per cent, smaller than in Decem ber, were practically equal to the exceptionally large figures o f last year. Contemplated new work, as re ported by the F . W . D odge Corporation, and permits issued in leading cities, were also close to the 1924 totals. Building materials prices advanced in January, and according to the Department o f L a b or’s index were 6 per cent, higher than last summer, though slightly lower than a year ago. B uilding wages continued gen erally unchanged. Com m odity Prices Further rise of 2 per cent, in the Department of L a b or’s index of wholesale prices occurred in January and brought the index to the highest level since 1921. A s over the past six months, this advance was due largely to rise in farm products and foods. The follow ing table, showing recent tendencies in the various commodity groups, indicates that as compared with last June most o f the advance has been in commodities which had been below the general average, while com pared with January last year, all groups but fou r show actual decreases. Department of Labor Index of Wholesale Prices in the United States and the Economist Index of Prices in Engand. (Latest figures, January. 1913 average = 100 Per cent).) Business Profits Available financial statements o f 102 important manu factu ring and distributing concerns fo r 1924 reveal a substantial decrease in aggregate net profits com pared with 1923, due to smaller profits in the steel and railroad equipment, and textile and clothing industries. In the case o f motor and accessory companies, not included in the list, owing to delay in publication o f annual state ments, figures fo r 9 months also indicate substantially smaller profits than in 1923. Other groups o f industrial and merchandising companies included in the list, on the other hand, showed little change or had profits some what larger than last year. 7 FEDERAL RESERVE AGENT A T NEW Y O R K Net profits of public utility companies, both telephone and other utilities, continued the increase which has been in progress since 1918. Earnings o f Class I railroads continued at the relatively high level reached in 1923, notwithstanding a decline o f about 7 per cent, in traffic, which was offset by economies in operation. (Net Profits in r Millions of Dollars) Group Steel and railroad equipment___ Oils.................................................... Food and food products............... Clothing (inc. leather & textiles) T ob a cco............................................ Miscellaneous industrials............. Stores................................................ N o. of Corpo 1917 1918 1919 1920 1921 1922 1923 1924 rations 16 9 12 11 7 37 Total 7 groups............................ 10 102 Telephone........................................ Other public utilities..................... 70 27 310 198 17 13 53 65 52 41 28 29 133 108 41 37 130 162 17 18 55 57 59 6 33 30 78 75 25 56 175 123 12 13 75 75 35 17 49 56 93 95 65 68 647 478 427 374 172 347 504 447 Total public utilities................. 97 125 113 120 Total 9 groups ......................... 199 772 591 547 501 Class I railroads............................. 192 934 639 516 127 107 46 126 71 136 150p 84 96 153 197 220 246 325 544 724 693 58 616 777 984 987 ♦Deficit p —Preliminary the sales figures, the comparative merchandise stocks fo r January in 1925 and 1924, in fou r lines from which a representative number o f reports was obtained. A s in dicated in the table, stocks held by cotton jobbers and shoe dealers are running considerably below last year, while those o f dealers in groceries and jew elry and dia monds are higher than a year ago. D epartm ent Store Business January sales o f 79 leading department stores in this district averaged 1.4 per cent, larger than a year ago, which is less than the usual year to year increase. More than half o f the reports, especially those from the smaller stores, showed a decrease in sales com pared with last year. W liile apparel stores reported a substantial increase, this was due, as in recent months, to store expansion during the year. Department store stocks o f merchandise on hand on January 31 showed about the same increase over a year ago as did sales. The average amount o f the individual sales transaction was $2.87, the same as in January 1924. The follow ing table compares January sales and stocks in the various localities in the district with those o f a year ago. W holesale Trade January sales in most o f the reporting lines of whole sale trade in this district fell below those o f January 1924. A s the aggregate sales last year, however, were fairly large, this ban k ’s index, which allows fo r price changes and seasonal variation, advanced 3 points from the December figure to 96 per cent, of the com puted trend or normal. Commission house sales o f cotton goods, which were unusually low last year, increased 18 per cent., and in creases occurred also in silk goods, w om en’s dresses, m en ’s clothing, and paper. Reductions, on the other hand, ranging from 4 to 27 per cent., occurred in gro ceries, w om en’s coats and suits, stationery, machine tools, shoes, and job bers’ sales of cotton goods. Beginning with January this bank has undertaken the collection o f stock figures in certain lines of wholesale trade, and the follow ing table gives, in conjunction with C omm odity January 1925 Sales Stocks on Jan. 31, 1925 Percentage Percentage Change Change from from December 1924 January 1924 Percentage Change from Jan. 31, 1924 Cotton— Commission houses W omen’s dresses..................... Silk good s................................. M en’s clothing........................ Paper......................................... Diam onds................................. Jewelry...................................... D rugs........................................ Hardware................................. Groceries..................... . .......... W om en’s coat* and suits----Stationery................................ Shoes......................................... Machine tools......................... C otton— Jobbers.................... — 6 .5 — 54.7 + 7 .6 — 14.7 — 6 .5 + 8 2 .9 + 3 .0 — 19.9 — 1'5.8 — 2 6.5 + 1 8 .4 + 5 .9 + 4 .9 + 2 .6 + 1 .8 + 0 .2 — 0 .6 — 1.1 — 1 .8 — 4 .4 — 5 .3 — 7 .4 — 14.9 — 16.3 — 26.7 Weighted A verage............. + 6 .5 — 4 .9 — 6 .6 + 7 7 .0 + 1 8 .0 + 3 0 .6 + 6.6 +i4'.3 — is! 4 — i9!9 Percentage Change in Sales January 1924 to January 1925 Percentage Change in Stock January 31, 1924 to January 31, 1925 R ochester...................................................... Syracuse........................................................ N ewark.......................................................... Bridgeport.................................................... Elsewhere..................................................... Northern New York State................... Central New York S tate...................... Southern New York S ta te................... Hudson River Valley D istrict............. Capital D istrict...................................... + + + — + + + — — + — + 0 .7 4 .6 4 .5 0 .2 2 .8 1.1 1 .2 5 .1 6 .3 4 .4 6 .8 9 .4 + 1 .4 — 6 .3 + 7 .7 + 2 .7 + 1 1 .0 + 5 .6 — 8 .3 All department stores................................ + 1.4 + Apparel stores.............................................. Mail order houses....................................... + 1 3 .3 + 1 0 .7 1.5 + 4 6 .3 The chief increases in sales by departments were in shoes, cotton and linen goods, furniture and home fu r nishings, w om en’s apparel, and toilet articles and drugs. Changes in sales and stocks in these and other depart ments are shown in the table follow ing. Shoes.............................................................. Cotton good s ............................................... F urniture..................................................... W om en’s and Misses’ ready-to-wear. . . Toilet articles and drugs........................... Linens and handkerchiefs......................... Home furnishings........................................ M en’s furnishings....................................... W om en’s accessories.................................. Woolen goods............................................... H osiery.......................................................... Silk good s..................................................... Silverware and jew elry.............................. Books and stationery................................ M en’s and boys’ wear................................ Miscellaneous............................................... Percentage Change in Sales January 1924 to January 1925 Percentage Change in Stock January 31, 1924 to January 31, 1925 + 2 4 .7 + 1 4 .4 + 1 2 .2 + 1 0 .7 + 8 .8 + 8 .8 + 5 .8 + 4 .7 + 2 .9 + 2.1 + 0 .2 — 2 .0 — 3 .5 — 7 .0 — 8 .9 — 3 .5 + 1.1 — 2 .7 — 2 .9 + 1 3 .8 + 5 .7 — 1 .6 + 4 .7 + 1 0 .7 + 7.1 — 15.1 — 3 .8 — 10.4 0 + 1 0 .7 + 1 1 .2 — 4 .2 (Extract from the Annual Report of this bank just issued. Copies of the report will be furnished on request.) Relation of Reserve B ank Loans and Investm ents to M o n ey M ark et M ovem ents H E New Y ork money market is the leading money market o f the country, the one that is central and national in scope. A s such it is the market to which gravitates the idle money o f other sections in the effort to find employment and thus it becomes a pool o f the cou n try’s surplus funds. A bank with funds on hand which it is likely to need on a d a y ’s notice puts these funds in the New Y ork money market. Many large financial and industrial concerns do likewise. In the market these funds are invested in short term se curities, such as short Government securities, short mu nicipal securities, bankers acceptances, or other short obligations, or they are lent on a day to day basis as call money, either to brokers to carry stocks and bonds or to dealers in Government securities and bankers ac ceptances to carry their portfolios. Such obligations involve a minimum o f risk and can usually be converted into cash immediately. A s the funds so invested or lent are needed from time to time, the securities are sold or the loans called, thus making possible an immediate withdrawal o f the funds. in the same way as other money markets have access to the Federal Reserve Banks o f their districts. In a rap idly changing market, like that o f New Y ork, which employs surplus funds, the supply o f funds is never in complete equilibrium with the demand. One week the supply o f funds will be large and another week unusual needs in some parts o f the country w ill draw off funds. I f all o f these tem porary fluctuations in the supply o f funds were reflected in changes in money rates the move ment o f rates would be wide and irregular. A s a matter o f fact, any tem porary shortage o f funds in the market is usually met by the use o f funds from the Federal Reserve Bank. Similarly, when member banks are bor row ing at the Reserve Bank, a large excess o f funds seldom occurs, because any available funds are generally used to reduce or repay loans at the Reserve Bank. Banks and industrial concerns all over the country have funds em ployed in the New Y ork money market, and there is a constant movement, to and fro, o f these funds. Alm ost any sudden need fo r funds in any part o f the country finds reflection in some withdrawal o f funds from the New Y ork money market, while any accumulation of funds in any part o f the country is apt to result in an increase in the supply o f funds in the New Y ork market. The New Y ork City banks as the depositaries o f out-of-town banks and industrial con cerns are the principal agencies through which funds reach or are withdrawn from the New Y ork money market. (1 ) Member banks whose reserves have been depleted by withdrawals o f deposits or currency, or fo r any other reason, may restore these reserves by discounting paper at the Reserve Bank at its established discount rate. In such transactions the initiative lies with the member bank. T R e l a t io n of R eserve B a n k to M oney M arket The Federal Reserve Bank o f New Y ork has two rela tions to the New Y ork money market. In the first place it has certain mechanical relation ships. The Federal Reserve Bank furnishes the mechan ism by which currency is issued or retired, Government securities are issued and redeemed, and by which funds are transferred to and from all parts o f the country fo r the Government and fo r member banks. Transfers o f funds include not only direct telegraphic transfers, but also the daily settlements made between New Y ork and other sections fo r the immense volume o f checks either deposited in or drawn upon the banks o f this district. In fact, practically all financial transactions o f banks, business houses, and the Government, between this dis trict and other districts, are reflected in wire transfers or settlements made through this bank. In the second place the Federal Reserve Bank o f New Y ork is a credit reservoir to which, largely through the member banks, the New Y ork money market has access, H ow F e d e r a l R e s e r v e F u n d s R e a c h t h e M a r k e t Funds from the Federal Reserve reservoir reach the market mainly in fou r w a y s : (2 ) Member banks, discount houses, bankers, and others may obtain funds from the Reserve Bank from time to time by selling to it bankers acceptances. The immediate initiative in such transactions lies as a rule not with the Reserve Bank but with the sellers, since the Reserve Bank stands ready to purchase at its established buying rate all offerings o f bankers acceptances that carry not less than two good banking names and meet certain other eligibility requirements. (3 ) Dealers in short Government securities and bank ers acceptances, in addition to selling such securities outright to the Reserve Bank, may obtain funds from time to time by selling them to the Reserve Bank, at established rates fo r this type o f transaction, under agreement to repurchase them w ithin fifteen days. In these transactions the immediate initiative is taken by the dealers. (4 ) The Reserve Bank may furnish funds directly to the market by purchasing short Government or m unici pal securities, or may withdraw funds from the market either by selling such securities or by not replacing them when they mature. Transactions o f this nature are ordinarily undertaken on the initiative o f the Reserve Bank. These fou r classes o f loans or investments constitute the m ajor earning assets o f the Federal Reserve Bank, and changes in money market conditions are prom ptly reflected in one or more o f them.