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MONTHLY REVIEW o f C r e d it a n d S e c o n d 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 March 1,1940 M o n e y M a r k e t in F e b r u a r y inflow o f gold, because o f the seasonal rise in the amount o f currency in circulation and Treasury receipts in excess of expenditures. On the other hand, during most o f January, 1940, the rise in member bank reserves was considerably more rapid than the increase in the gold stock, as payments fo r gold purchased by the Treasury were supplemented by the seasonal retirement o f cur rency from circulation and net expenditures by the Government. A tem porary interruption o f this move ment occurred in the last week o f January and the first week o f February, due chiefly to the collection o f social security tax payments, but subsequently member bank reserves again rose rapidly. Consequently, despite an increase in the reserve requirements o f New Y ork City member banks, accom panying a rise in their deposits to new high levels, excess reserves o f member banks in the latter half o f February reached higher levels than ever before. F o r all member banks, excess reserves on F eb ruary 28 totaled $5,690,000,000, and fo r New Y ork City banks amounted to $3,300,000,000. The further increase in idle bank funds apparently was an influence tending to offset the disturbing effects o f developments abroad on the market fo r high grade securities, as, except fo r some minor irregularities, the prices o f such securities remained firm during February. Prices o f lower grade bonds and stocks also showed a considerable degree o f stability, despite the recession in industrial activity since December. In this case, how- Gold continued to come to this country in substantial amounts during the past month. W eekly reports o f the Department o f Commerce on gold imports during the first three weeks o f February indicated that gold ship ments were received in that period from widely scattered sources, from iNurwK to South A frica and from Canada to Australia. In the fou r weeks ended February 28, the increase in the United States gold stock amounted to $235,000,000, an average weekly gain o f $59,000,000. In spite o f the large sales of gold to the Treasury, most of which were fo r foreign official accounts, foreign central bank balances in the Reserve Banks showed a net reduc tion of $26,000,000 during this period, indicating that foreign expenditures here have been exceeding foreign sales of gold to this country. W hile some transfers of funds to this country fo r the account of nonresidents of the countries at war have been reported, it seems fa ir to assume that a large part o f the proceeds o f the gold imports and the reduction in foreign central bank balances in this country was actually spent in this country by foreigners, including foreign governments. The figures for the past month, together with similar figures fo r other recent months, suggest a rate o f foreign spending in the United States well above that indicated by the reported excess o f merchandise exports over imports. In the past fou r months foreign spending here appears to have averaged at least $200,000,000 a month. The disparity between this figure and the average excess o f reported valuations of mer chandise exports over imports during these months may be attributable in part to the requirement of the Neutral ity A ct that foreign purchasers o f war materials must make fu ll payment for, and acquire title to such mate rials in advance o f their shipment from the United States, partly to advance payments against the cost of produc tion o f such materials, and partly to payments made, in some cases, fo r the expansion o f productive facilities required to expedite deliveries. A s the accom panying chart indicates, the continued inflow of gold has been paralleled in a general way by a further rise in the volume o f member bank reserves. Tem porary disparities have been caused by other factors, however, such as changes in the volume of currency in circulation and fluctuations from week to week in the volume of net expenditures or receipts of the Govern ment. F or several weeks late in 1939, for example, the volume o f member bank reserves diminished despite an Gold Stock of the United States and Member Bank Reserve Balances at the Federal Reserve Banks 18 MONTHLY REVIEW, MARCH 1, 1940 ever, the stability of the market probably was not closely related to the further growth of idle funds available for investment. It might more accurately be attributed to the discounting of the current recession in industrial activity by the security markets last fall, well in advance of any actual curtailment of production, and perhaps also to the expectation in some quarters that the recession will not be long continued. M oney rates, both fo r long and short term obligations, remained practically unchanged during February. M oney Rates in New York Feb. 28, 1939 Jan. 31,1940 Feb. 28,1940 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 years)....................................................... Average yield on Treasury bonds (not callable within 12 years)..................... Average rate on latest^Treasury bill sale, 91 day issue.................................. Federal Reserve Bank of New York discount rate.......................................... Federal Reserve Bank of New York buying rate for 90 day indorsed bills. 1 *1K 1 *1K X -X X -X 1 *1X x -x A 7 A 7 A 7 0 .5 7 0 .5 0 0 .4 4 2.39 2.33 2 .33 0.004 0.004 0.005 1 1 1 X X X ~-*N ominal. M em ber B a n k C r e d it Total loans and investments of all weekly reporting member banks in 101 principal cities throughout the country showed only a small net increase in the four weeks ended February 21, as a moderate increase in New Y ork City was partly offset by a slight decline elsewhere. In the reporting New Y ork City banks, the amount o f commercial and industrial loans again declined slightly, and loans on securities showed a further small reduction, but there were small increases in other loans and a further expansion o f investment portfolios. The principal in creases in investments during the fo u r week period were in holdings of United States Government notes and bonds which rose $31,000,000, in United States Government guaranteed securities which increased $44,000,000, and in “ oth er’ ’ securities which increased $79,000,000. The latter increase which brought such holdings to a higher level than ever before, apparently was due chiefly to purchases of the securities o f municipalities and other governmental agencies, such as the Triborough Bridge A uthority. H oldings o f Treasury bills were reduced $81,000,000 further. In 100 other principal cities, commercial and industrial loans increased slightly in the four weeks ended February 21, but total investments were reduced by $40,000,000. H oldings of Treasury bills increased slightly, but there were further small declines in holdings of Treasury bonds and notes, and a reduction o f $31,000,000 in hold ings of Government guaranteed securities. Demand deposits o f the New Y ork City banks, ex clusive o f interbank deposits, rose $164,000,000 further during the fou r week period, and again reached higher levels than ever before. Banks in the 100 other cities covered by the reports, however, showed a net reduction of $71,000,000 in demand deposits during the same period. G o v e rn m e n t S e c u r itie s The Government security market was quiet but rather sensitive during February, reflecting in part continued apprehension over possible foreign developments in the spring, and in part, later in the month, the approach o f the quarterly financing period of the Treasury. W ith respect to long term Treasury bonds, the average price advanced ^ point on the opening day of the month and then eased about % point, after which it rose another point to reach the m on th ’s high on the 13th. On that date, however, the average price remained about y2 point below the January high. In the second half of the month, prices o f long term Governm ent’s eased gradu ally, but remained slightly above the end o f January level. Treasury note prices also firmed in the opening two days of February, when the average yield on 3 to 5 year issues declined to 0.46 per cent, as com pared with the January low o f 0.43 per cent, and in the subsequent part o f February showed little change. On February 14, the Treasury issued a call fo r redemp tion on June 15, 1940, o f the $353,000,000 o f 3 % per cent Treasury bonds o f 1940-43 outstanding; at the same time the Treasury indicated that holders of these securi ties might, prior to the redemption date, be offered the privilege of exchanging them fo r new interest bearing securities o f the Treasury. Treasury bill financing during February included the sale of fou r weekly issues o f $100,000,000 each, which replaced similar maturities. F or the issue dated Febru ary 7, the accepted bids were at prices ranging from slightly above par down to 99.999, the average price being only fractionally below par, but fo r the issues o f the three succeeding weeks, the average prices were such as to produce average yields o f 0.005 to 0.006 per cent, as compared with 0.004 per cent on the last issue o f January. C o m m e r c ia l P a p e r a n d B il l s Although during February the prevailing level o f rates fo r average grade prime fou r to six month com mercial paper remained in the % -% per cent range which has been in effect since the latter part of November, the tendency toward new low levels became somewhat more evident, in that a further increase was reported in the amount o f choice paper sold at % per cent. Sales o f paper at y2 per cent still constituted the largest part o f the aggregate amount o f business consummated. Bank investment demand fo r notes o f commercial concerns again, to a considerable extent, went unfilled, owing to the continued inability o f dealers to acquire adequate supplies o f paper. The small supply, however, remained representative o f a rather wide variety o f business enter prise. Reports to this bank by commercial paper con cerns show that $219,400,000 o f paper was outstanding at the end o f January, the largest amount since the $225,300,000 total fo r June, 1938. A month earlier out standings were $209,900,000 and a year ago the amount was $195,200,000. To an even greater degree than in commercial paper, the conditions of limited supply and active demand con tinued to characterize the market fo r bankers acceptances during February. D ealers’ quoted rates remained un changed. On January 31 the volume o f bills outstanding totaled $229,000,000, a decrease, usual in January, of about $4,000,000 from the December total. This decrease resulted from slight declines in the several classifications FEDERAL RESERVE BANK OF NEW YORK shown in the accom panying tabulation. In comparison with a year ago the January volume was $26,000,000 lower, reflecting a drop o f $32,000,000 in bills based on goods stored in or shipped between foreign countries and a decline o f $19,000,000 in export bills, partly offset by an increase o f $14,000,000 in bills drawn to furnish dollar exchange and an increase of nearly equal amount in im port bills. (Millions of dollars) T ype of acceptance Im port..................................................... E xp ort..................................................... Domestic shipm ent.............................. Domestic warehouse credit................. Dollar exchange.................................... Based on goods stored in or shipped between foreign countries.............. T o ta l................................................ Jan. 31,1939 Dec. 30,1939 Jan. 31,1940 57 11 42 2 102 39 10 44 16 101 38 8 43 16 55 22 23 255 233 229 S e c u r it y M a r k e t s Stock prices continued to fluctuate within narrow limits in February and the turnover o f shares on the New Y ork Stock Exchange remained extremely light. In the first week of the month, the general average of stock prices advanced about 3 per cent, but did not equal the quotations o f the first part of January, and subse quently prices eased irregularly, and as the month closed were only slightly higher than at the end o f January. The announcement reaching this market on February 19, that residents o f the United Kingdom had been ordered to deliver to the British Treasury their holdings o f 60 specified common and preferred shares o f American corporations, in order to insure orderly liquidation o f these securities in Am erican markets, had no appreciable effect on either prices or activity on the New Y ork Stock Exchange. Prices o f medium and lower grade bonds advanced slightly in the first half of February, during which period public utility bonds o f this grade touched higher quota tions than in January. Industrial bonds rose to about the January highs, while railroad bonds o f this grade failed to advance as high as in the first part o f January. In the latter part o f February there was some easing in the less high grade bonds, but average prices, as com puted b y M ood y ’s Investors Service, closed the month higher than at the end o f January, particularly in the case o f Baa public utility bonds. H igh grade corporation bonds advanced further dur ing the first half o f February, and M ood y ’s average price o f Aaa bonds reached a new high. In the second half o f the month, there was a moderate recession from the high reached on the 15th. H igh grade municipal issues recov ered somewhat in the first half o f February, follow ing the decline in the second half o f January, but later in F ebruary these issues declined again to below the level prevailing at the end o f January. A ccord in g to the Standard Statistics Company, the average yield on high grade municipal bonds stood at 2.65 per cent on Febru ary 28, as compared with the recent low of 2.49 per cent, reached in the first part o f January. 19 N e w F in a n c in g Two exceptionally large flotations, $105,000,000 Beth lehem Steel Corporation refunding bonds and debentures and $98,500,000 Triborough B ridge Authority revenue bonds, raised F eb ru a ry’s aggregate o f corporate and municipal new security issues to $430,000,000, an amount which exceeds the total o f any month since June, 1939. The Bethlehem Steel issues represented the largest single piece of industrial financing to have been undertaken since the passage o f the Securities A ct o f 1933, and the Triborough B ridge offering was reported as the largest single amount o f revenue bonds ever to have been issued by a local governmental body. Both o f these issues were publicly offered, the first on February 29, and the second on February 14. O f the $255,000,000 total o f corporate issues, $42,000,000, the greatest amount since July, 1939, was fo r the purpose o f raising new capital. Details o f the larger issues publicly offered during the past month are as follow s: $105,000,000 Bethlehem Steel Corporation refunding securities composed of $30,000,000 of 20 year 3 per cent consolidated mortgage bonds, priced at 98 to yield about 3.14 per cent; $40,000,000 of 25 year 3 % per cent consolidated mortgage bonds, priced at 100; $35,000,000 of 0.50 per cent to 2.60 per cent serial debentures maturing from 1941 to 1950, priced at 100 26.000.000 Kentucky Utilities Company securities composed of $20,000,000 of 4 per cent first mortgage bonds of 1970, priced at 102 to yield about 3.89 per cent and $6,000,000 of 4% per cent sinking fund mortgage bonds of 1955, priced at 101 y2 to yield about 4.36 per cent, all for refunding purposes 25.000.000 Dayton Power and Light Company 3 per cent first mortgage bonds of 1970, priced at 104 to yield 2.801 per cent; $19,700,000 for refunding purposes 16.000.000 Southwestern Gas and Electric Company 3 % per cent first mortgage bonds of 1970, priced at 103 to yield 3.10 per cent, for refunding purposes; also 75,000 shares of 5 per cent preferred stock offered to holders of outstanding 7 per cent pre ferred stock 10.000.000 Skelly Oil Company 3 per cent debentures of 1950, priced at 100, for refunding purposes 98,500,000 Triborough Bridge Authority revenue bonds com posed of $50,000,000 of 3 % per cent sinking fund bonds of 1980, priced at 1 0 2 % to yield 3.15 per cent; $8,500,000 of 2 % per cent serial bonds of 1945-52, priced to yield from 1.50 per cent to 2.50 per cent; and $40,000,000 of 3 per cent serial bonds of 1953-75, priced to yield from 2.55 to 3.00 per cent up to 1970 maturities and at 9 9 ^ for maturities from 1971 to 1975; $81,000,000 for refunding purposes 33.000.000 Port of New York Authority 3 per cent general and refunding bonds of 1976 awarded at a net interest cost of 3.022 per cent and reoffered at 100% to yield 2.989 per cent. A n interesting feature o f the Triborough Bridge A uthority financing is the fact that approximately $81,000,000 o f the proceeds o f the sale w ill be used to refund at the present time (b y payment o f interest to the call date plus the call price) $71,000,000 o f outstand ing bonds callable at 105 on A p ril 1, 1942. The first long term bonds o f local housing authorities, aggregating $1,700,000 fo r fou r cities, were awarded on February 15 20 MONTHLY REVIEW, MARCH 1, 1940 and the bonds of some of the authorities were reoffered on February 20. The securities carried various coupon rates from i y 2 per cent to 2 % per cent, maturities from 1940 to 1966, and were reoffered to the public at prices to yield from 0.20 per cent to 2.65 per cent according to maturity. One large private sale o f securities was an nounced during the past month, that of $30,000,000 Commercial Investment Trust Corporation notes to two insurance companies. These consisted of $20,000,000 of 2 per cent notes due in 1947 and $10,000,000 o f 1 per cent notes due in 1943; the proceeds will be used to finance expansion o f the com pany’s operations. Tem porary financing accounted for an additional $135,000,000 during the month and included $75,000,000 o f fou r month 0.15 per cent notes of the State o f New Y o rk ; also $23,450,000 o f 0.75 per cent Federal Inter mediate Credit Bank consolidated debentures maturing in December, 1940, which were sold at prices to yield 0.30 per cent per annum. C en tra l B a n k R a te C h an ges On February 17 the rediscount rate o f the Bank o f Latvia, applicable to banks, was raised from 4 % to 5 per cent, and the rate fo r other borrowers was advanced from 5 to 5 % per cent. The lower rates had been in effect since January 1, 1939. railroad equipment, paper and paper products, and textile groups o f companies. F or the entire year 1939, aggregate net profits o f these 221 companies were nearly twice the total reported by these companies fo r 1938. The indications are, however, that profits o f principal companies fo r 1939 remained about one-fourth less than fo r the fu ll year 1937. This bank’s tabulation o f annual business profits, covering a much larger number o f companies, will appear in the A p ril 1 Review. (Net profits in millions of dollars) 1939 1938 Corporation group Automobiles and automobile parts. . . Building materials.................................. Chemicals and drugs.............................. Electrical equipm ent.............................. F ood and food products........................ Machinery and to o ls.............................. Paper and paper products..................... Railroad equipm ent................................ S teel............................................................ Miscellaneous........................................... Total, 14 groups.............................. No. Third Fourth of Fourth cos. quarter Year quarter quarter 31 14 22 11 24 19 22 8 7 7 19 9 7 21 221 7 7 .5 ^6 .6 19.7 4 .9 2 5.3 3 .6 5 .6 0 .5 4 .2 0 .9 13.3 6 .3 108.2 15.0 7 0.8 16.4 8 3.0 13.0 2 0 .0 7 .4 3 .0 24.1 — 1 .8 — 6 .0 7 .5 4 .6 2 3.5 177.8 381.3 2 .0 17.9 8 .3 2 7.8 5 .7 8 8 .1 2 1 .1 11.4 3 2.4 ‘" 8 .3 2 3.6 5 .2 6 .6 8 .6 10.4 1.4 2 .8 8 .1 1.6 8 .8 9 .5 4 .3 70.9 6 .4 4 .6 9 .8 147.8 289.1 2 8.2 2 .7 2 .4 Year 242.4 29.2 108.1 26.1 8 3.8 19.8 30.1 5 .6 24.4 7 .5 119.0 11 .8 11 .1 3 5.0 753.9 — Deficit. B u s in e s s P r o fit s F o r e ig n E x c h a n g e s The sharp rise in industrial production which followed the outbreak of hostilities in Europe last September was reflected in a very large increase in profits of several groups of industrial corporations during the last quarter o f 1939. A com pilation o f the quarterly profits o f 221 industrial and mercantile corporations whose reports have been issued by this time indicates that aggregate fourth quarter net profits o f this group o f companies were nearly double those o f the third quarter o f 1939 and some 60 per cent larger than in the fourth quarter o f 1938. On the basis o f the profits reported by this group o f companies it appears that seasonally adjusted profits o f leading companies rose in the fourth quarter o f the year to at least the same general level as prevailed in the first nine months of 1937, a level which was the highest since the third quarter o f 1929. However, it should be emphasized that the reports from which this conclusion is drawn are, in general, those o f the larger corporations o f the country, and include a large propor tion o f companies producing durable goods, whose output rose more rapidly in the fourth quarter o f 1939 than the output of nondurable goods. Profits reports fo r all cor porations in the country, were they available, undoubt edly would show a less favorable comparison than is indicated fo r these principal corporations. A ll o f the groups of companies listed in the follow ing table showed increases in profits between the third and fourth quarters o f 1939, and some o f the principal groups o f companies, such as the automobile and steel com panies, reported profits which were considerably above seasonal expectations fo r the fourth quarter. A s com pared with the fourth quarter o f 1938, the largest per centage increases were reported in profits of the steel, One o f the outstanding developments in the foreign exchange markets during February was an accelerated flight o f capital from Sweden, which culminated in the introduction o f official exchange control in Sweden on February 25. The new regulations, which strengthened the inform al control over capital transfers applied by Swedish banks since the middle o f December, invested the Riksbank and authorized banks with a m onopoly o f exchange transactions and provided fo r the control o f foreign exchange. Foreign exchange w ill be made avail able only fo r approved transactions, and the export and im port of bank notes and securities are prohibited. The new restrictions do not affect Sweden’s clearing agree ments with other countries. Despite the recent pressure, the Swedish krona rate was maintained throughout the past month near the level o f $0.2382. Trading in the other neutral European exchanges was featured b y irregular fluctuations in the belga and the guilder. The Belgian currency, which had risen to a fou r month high o f $0.1698% on January 29, receded to as low as $0.1681:*/2 in the middle o f February. Sub sequently, however, the belga showed some renewed firm ness, ending February at $0.16871/2. A fte r opening the month at $0.5309, the Netherlands currency rose to $0.5326 during the first week. A reaction then occurred, but the rate turned upw ard again in the latter part of the month, accom panying the offering o f a new Nether lands Government issue, which was oversubscribed. A t the end o f the month the guilder was quoted at $0.53191/2. Swiss exchange, meanwhile, continued steady at about the rate which has prevailed since the latter part o f November. W ith respect to the currencies o f the allied countries, FEDERAL RESERVE BANK OF NEW YORK a weaker tendency was shown during the first half o f the past month. The pound-dollar rate, which had ad vanced to as high as $4.00 toward the end o f January, declined irregularly to reach a low point o f $3.94% on February 15. This reaction was reportedly due in large part to relatively heavy European and South American offerings o f the British currency, presumably induced by rumors o f an impending tightening o f the British exchange regulations. D uring the second half o f F eb ruary, however, quotations fo r the pound sterling outside the London official market held fairly stable at about $ 3 ,951/2 until the end of February when the rate declined to $4.94% . In the forw ard market, the discount on three month sterling deliveries narrowed during the month from the equivalent o f 3 % per cent per annum to about 3 % per cent. The New Y ork rate fo r French francs continued to keep more or less in line with sterling, in view o f the official cross rate o f 176% francs to the pound. Toward the end o f February the franc was quoted in this market at $0.0223%, as compared with the high o f $0.0226% reached about a month earlier. The Canadian dollar showed some weakness against United States currency during February, its discount widening from 12 5 /1 6 per cent on January 31 to 13% per cent near the end o f February, the largest discount in about three months. O f the Latin American curren cies, the “ fr e e ” rate fo r the Argentine peso, which im proved noticeably in January, appreciated further in early February, reaching $0.2347 on February 8, as compared with about $0.2250 at the beginning o f Janu ary. Despite adverse pressure, reported to have been occasioned largely b y discussion in this country o f a proposal to suspend the foreign silver purchase p rovi sions o f the Silver Purchase A ct, the dollar rate fo r the Mexican peso was maintained at about $0.1672 through out the past month. G o ld M o v e m e n t The volume o f gold imports into the United States declined somewhat further during February, but con tinued to be very substantial. In addition, the amount o f gold held under earmark fo r foreign account at the Federal Eeserve Bank o f New Y ork decreased about $35,000,000 further during the month, follow ing a de crease o f $40,000,000 in January. Chiefly as a result o f these factors, the gold stock o f the United States increased about $245,000,000 in February, after a gain o f $287,000,000 in January. The amount o f gold held under earmark fo r foreign account at the Federal R e serve Bank o f New Y ork at the end o f the month amounted to about $1,085,000,000. A s reported by the Department o f Commerce, gold imports into the United States during the fo u r weeks ended February 21 totaled $216,900,000, o f which $43,400,000 came from Canada, $32,700,000 from Sweden, $25,500,000 from the Netherlands, $21,300,000 from the Union o f South A frica, $20,300,000 from E n g land, $19,100,000 from Norway, $14,300,000 from India, $10,500,000 from Switzerland, $6,400,000 from Australia, $5,600,000 from Russia, $4,900,000 from Japan, $2,800,000 from Italy, $1,400,000 from H ong Kong, $1,400,000 from the Philippines, $1,000,000 from B el gium, and $500,000 from New Zealand. 21 P r o d u c t io n a n d T r a d e Available weekly data indicate that there was a further decline in business activity in February. Steel mill operations continued to slacken, although the rate o f decline was less marked during the latter half o f the month. F o r February as a whole, ingot production ap pears to have averaged slightly above two-thirds o f theo retical capacity, as com pared with 83 per cent o f capacity in January and 93 per cent in November. New orders booked by steel mills continued to lag behind current output, although trade reports indicated an increase in export business. Cotton textile mill activity appears to have been generally well maintained in February, despite the fact that sales were again reported below output. Autom obile production declined seasonally. Incomplete data on department store sales in the New Y ork District indicate a decrease from the January level, although the rate o f sales is usually greater in February than in January. Indexes o f electric power production and railway freight traffic have also reflected the recent decline in activity, although the decline in the form er apparently has been less in proportion to the rise last year than in indexes o f industrial production. A s shown in the accom panying diagram, electric power production de clined in January and February sufficiently, after seasonal adjustment, to cancel approximately one-fourth o f the June-December rise. The general level o f business activity declined in January, follow ing the substantial advance which had occurred during the last seven months o f 1939. Retail trade, as is usual, contracted sharply, and available monthly data indicate that the drop was larger than in many other years. R ailroad car loadings o f mer chandise and miscellaneous freight showed a rather p ro nounced decline from the December level, but shipments o f bulk freight increased. The volume o f industrial p ro duction was considerably reduced, on a seasonally ad justed basis, owing in substantial part to curtailment o f output or absence o f expansion in some important lines where increases usually occur between December and J anuary. Daily Average Volume of Electric Power Production, Adjusted for Seasonal Variation (Four week moving averages) MONTHLY REVIEW, MARCH 1, 1940 22 (Adjusted for seasonal variations, for estimated long term trend, and where necessary for price changes) 1939 Industrial Production Steel................................................................. Passenger cars............................................... M otor trucks................................................. Bituminous co a l........................................... Crude petroleum .......................................... Electric power r............................................ Cement........................................................... Cotton consum ption.................................... W ool consumption r.................................... Shoes........................................................... Meat packing................................................ Tobacco products......................................... Employment Employment, manufacturing, U. S......... Employee hours, manufacturing, U. S ... Construction Residential building contracts.................. Nonresidential building and engineering contracts.................................................... PER C E N T 1940 Jan. N ov. Dec. Jan. 69 73 78 78r 126 64 87 95 92 98 67 115 129 107 89 83 97p 91p 99p 88 91 57 95 r 104 116 12 2 86 91 85 94 99p 73 12 2 121 88 10 0 87 95 116p 104 95 96 81 105 94 106 94 117 iio 104p 108p 103 85 105p 91p 47 49 37 42 69 68 98 44 Primary Distribution Car loadings, merchandise and misc Car loadings, other...................................... Exports........................................................... Im ports........................................................... 79 74r 71 74 90 95 80 85 93 85 98 94 86 Distribution to Consumer Department store sales, U. S.................... Department store sales, 2nd District . . . Chain grocery sales r .................................. Other chain store sales............................... Mail order house sales................................ New passenger car registrations............... 76 93 97 91 70 Velocity o f Deposits* Velocity of demand deposits, outside New Y ork C ity (1919-25 average = 10 0 ) . . Velocity of demand deposits, New York C ity (1919-25 average = 1 0 0 ) ........... Cost o f Living and Wages* Cost of living (1913 a v era g e= 1 0 0 ) ........ Wage rates (1926 a v era g e= 10 0 ) ............. p Preliminary. r Revised. 86 93 85 10 1 93 p 83 p 10 1 89 109p 89p 89p 82 p 98p 97p •97p 97 96r 76 109p 108p 73 61 62 64 59 36 30 35 27 147 148 112 147 114p 147p 111 * N ot adjusted for trend. C o m m o d i t y P r ic e s Commodity price movements during February were irregular, but in most cases o f moderate proportions. Nonferrous metal prices, which had been tending down wards, strengthened toward the end o f the month, although the general level of all wholesale prices de clined slightly further. The course o f political developments abroad appar ently exerted an im portant influence on wheat markets in this country during February. Cash wheat at Kansas City rose as high as $1.051/o a bushel on February 21, 7 % cents above the level at the end o f January, though the gain fo r the month as a whole was reduced b y a subsequent reaction. Other factors in the rise included sizable British purchases o f Canadian wheat, reports o f extensive damage to European crops b y cold weather, and an estimate that the current Argentine crop would be the smallest since 1917. Corn prices moved within relatively narrow limits around 58 cents a bushel, as the increased quantity o f the grain being sealed under Government loan tended to offset the threat o f com peti tion from the large new Argentine crop. Although the export subsidy was terminated at the end o f January, the average price o f cotton at ten Southern markets ad vanced % cent to 10% cents a pound. On the other hand, Daily Index o f Prices of 28 Basic Commodities, Computed by Bureau of Labor Statistics (A ugust, 19 39= 10 0 per cent) domestic wool prices eased several cents further, and silk declined 21 cents to $2.90 a pound by the middle o f February, the lowest level since early September. R ub ber receded % cent to 1 8 ^ cents a pound follow ing the announcement by the International Rubber Regulation Committee that the export quota fo r the second quarter o f 1940 would remain unchanged at 80 per cent o f basic quotas. Steers, however, rose sharply to more than $10.00 a hundredweight fo r the first time since Septem ber, and raw sugar in New Y ork was quoted somewhat higher as the Government reduced the 1940 domestic sugar consumption estimate on which im port quota allot ments are based. Metal markets, which had continued to decline during the first part o f February, became firmer subsequently. The produ cers’ price o f electrolytic copper, which had been cut % cent a pound in the first week o f February, was increased ^ cent to 1 1% cents a pound on February 20, accom panying reports o f the largest sales o f the metal since September. The International Tin Commit tee reduced export quotas from 120 per cent to 80 per cent o f standard, and the price o f the metal in this country rose 2 cents to 4 7 % cents a pound. The price o f zinc was advanced ^4 cent to 5 % cents a pound, and lead recovered a ^ cent decline which had occurred early in the month. Scrap steel quotations appeared to level off in the final week o f the month. The accom panying diagram shows the Bureau o f Labor Statistics’ new daily index o f spot market prices o f 28 basic commodities, and two o f its subgroups— foodstuffs and raw industrial commodities. The index begins A ugust 28, 1939, and hence covers the entire war period, including the abrupt rise in September, a de cline and recovery in the final quarter o f 1939, and a renewed decline in the first five or six weeks o f this year, accom panying the downturn in business activity. In the last three weeks o f February the three curves tended to level out, in each case at about 15 per cent above the A ugust average. The daily index is consider ably more sensitive than the B u reau ’s monthly index o f 784 wholesale prices, which is estimated fo r Febru ary at only 5 per cent above its prewar level. FEDERAL RESERVE BANK OF NEW YORK Building D uring January the daily average rate of construction contract awards in the 37 States included in the F . W . Dodge Corporation survey was 42 per cent below the high level of December and 25 per cent lower than a year ago. The sharp decline from the preceding month was prin cipally the result o f a 67 per cent decrease in the heavy engineering classification, which in December included a large Tennessee V alley A uthority project. Contracts fo r residential building registered a reduction, but con tracts fo r public purpose building were slightly above the level o f the previous month. The latter type o f con struction, however, showed a 64 per cent decrease from the relatively large volume in January o f last year. Contracts fo r heavy engineering projects were 27 per cent smaller than in January, 1939. In the New Y ork and Northern New Jersey area the average daily rate of contract awards was only 5 per cent lower than in December, but as com pared with January o f last year, the reduction in the volume o f total construction contracts in this area amounted to 51 per cent. A ll the m ajor construction categories par ticipated in the decline from a year ago, with the excep tion o f commercial and industrial building, which, con tinuing the rising tendency o f recent months, was 19 per cent larger than in January, 1939. Residential build ing contracts were 7 per cent less than a year previous. In January, contracts fo r apartment house construc tion constituted a larger proportion o f all residential contracts than a year ago, both in the New Y ork area and in other areas. The relative growth in apartment house construction is indicated in the accom panying diagram, which shows that, fo r the year 1939, apartment house construction in the New Y ork area accounted fo r 54 per cent of all residential construction, as com pared with only 40 per cent in 1935, and that in other areas 1939 apartment house construction amounted to 17 per cent o f the total, as compared with 12 per cent in 1935. Meanwhile, in New Y ork the proportion o f contracts fo r one fam ily houses (fo r sale or rent) has remained approxim ately the same, and has increased somewhat in N E W YORK & NO R TH ER N N .J OTHER AREAS PCRCeNT A L L O THER O N E F A M IL Y OWNCR OCCUPANCY ONE FA M ILY SALE OR RENT 23 other sections, but the proportion of contracts for owner occupied one fam ily houses has been declining, both in New Y ork and elsewhere. D uring the first three weeks o f February, total con struction contracts in the 37 States were awarded at approximately the same daily average rate as in Janu a ry ; the effect o f a substantial increase in the category o f nonresidential building about offset decreases in awards fo r heavy engineering projects and fo r residential building. Compared with the corresponding period of February, 1939, total contract awards were 14 per cent lower, owing chiefly to a large reduction in the heavy engineering classification. E m p l o y m e n t a n d P a y r o lls Factories reporting to the New Y ork State Depart ment o f Labor in January showed decreases o f 2 per cent in employment and 3 % per cent in payrolls. The decline in employment was of about the usual seasonal magnitude, but the reduction in payrolls appears to have been slightly larger than usual. Compared with Janu ary, 1939, factory employment in New Y ork State was 12 per cent higher and payrolls were 16 per cent greater. A ll o f the m ajor industrial groups reported declines fo r the month in both employment and payrolls; the chief declines occurred in textile mills, in fur, leather, and rubber goods plants, and in the stone, clay, and glass industry. However, in several subgroups increased work ing forces were rep orted ; this was true o f the millinery, m en’s clothing, and automobile and airplane industries. F o r the country as a whole, the United States Depart ment o f Labor reported a decline in nonagricultural employment o f more than 1,000,000 workers between the middle o f December and the middle o f January— some what more than the usual seasonal reduction. A bout half o f the reduction from December to January occurred in retail trade, where approxim ately 600,000 workers were laid off after the close o f the holiday trade. In addition there was a decrease o f 200,000 workers in factory employment and about 200,000 in construc tion work. However, there were estimated to be about 1,100,000 more nonagricultural workers employed in January, 1940, than there were a year ago. United States factories reported declines o f 2y2 per cent in employment and 5 % per cent in payrolls, which are somewhat larger than the usual decreases experienced in January. The durable and nondurable goods cate gories shared about equally in the decline, and, with the exception o f the transportation equipment and leather goods groups, all m ajor industrial classifications em ployed fewer workers in January than in December. Compared with January, 1939, however, total factory employment was 10 per cent higher and payrolls were 17 per cent greater. F o r e ig n T r a d e APARTM ENTS 1935 *36 *3 8 *3 9 Percentage Distribution o f Principal Types o f Residential Building Contracts in the New Y ork and Northern New Jersey Area, and in Other Areas from which Reports are Collected by the F. W . Dodge Corporation D uring January merchandise exports from the United States were valued at $369,000,000, an amount which was slightly larger than the December figure, contrary to the usual tendency for exports to decline substan tially at this time o f year. A s com pared with the low level o f a year ago, exports in January o f this year were 73 per cent higher. Imports, with a value o f 24 MONTHLY REVIEW, MARCH 1. 1940 showed a large increase. On the other hand, the exports o f tobacco and gasoline were smaller in value than a year ago. A m ong the imports, the largest percentage gain occurred in receipts o f furs, but there were also large increases in the value o f wool, sugar, rubber, and tin imports. Im ports o f silk were slightly smaller in quan tity than a year ago, but, owing to the price rise, were 86 per cent larger in value than in January, 1939. Receipts o f coffee showed a moderate decrease from a year ago, in quantity as well as in value. D e p a rtm e n t S tore T r a d e 1935 1936 1937 1938 1939 1940 Daily Average Value o f United States Merchandise Exports and Imports, A djusted for Seasonal Variation $242,000,000, were somewhat smaller than in the pre ceding month, but showed an increase o f 36 per cent over a year ago. The resulting $127,000,000 excess of exports in January o f this year was larger than in any month since October, 1929. A s is indicated in the accom panying diagram, both exports and imports o f this country have increased approxim ately 30 per cent, on a seasonally adjusted basis, since last September. The increase has carried exports to a considerably higher point than was reached in 1937, while imports have not yet reached the 1937 peak. The follow in g table shows the percentage changes which have occurred between January, 1939 and Janu ary, 1940 in the value of the 10 export classifications o f greatest importance (during 1939) in this cou n try’s foreign trade, and in the values of the most important imports. Reflecting heavy European demand, exports o f aircraft from the United States in January were more than five times as large as in January, 1939, and the value o f exports of raw cotton and semifinished copper showed increases o f 300 per cent and 225 per cent, respectively, reflecting not only large increases in quantity, but also higher p rices; a year ago, raw cotton exports were at an extremely low level. In addition, ex ports of metal working machinery were more than double those of a year ago, and lubricating oil exports Exports Individual items Imports Percentage change in value Jan., 1940 compared with Jan., 1939 + 42 0 + 30 0 + 22 5 + 117 + 82 + 39 A ircraft....................................... Cotton, unmanufactured........ C opper........................................ Metalworking m achinery. . . . Lubricating o il.......................... C o a l............................................. Automobiles, parts, and ac cessories.................................. Crude petroleum ...................... Gasoline, and other motor fuel T ob a cco...................................... — — 28 Total 10 exports............... All exports......................... Individual items Percentage change in value Jan., 1940 compared with Jan., 1939 F o r the three weeks ended February 17, total sales o f the reporting department stores in this D istrict fell slightly below those o f the corresponding period of 1939, apparently owing in part to bad weather conditions in the third week, and were also below the January level, although the rate o f sales is usually somewhat greater in February than in January. Total January sales o f the reporting department stores in this D istrict were about 14% per cent higher than last year, but about one-third of the increase was due to one more business day than in January, 1939. A s com pared with the preceding month, when sales reached their seasonal peak, about the usual decline was shown. January sales o f the leading apparel stores in this District were 12.2 per cent higher than last year, and on an average daily basis the year-to-year increase was larger than in the previous two months. Stocks o f merchandise on hand in the department stores, at retail valuation, were about 1 % per cent higher at the end o f January than a year ago, and apparel store stocks were about 8 % per cent lower. 1940 5 0.4 3 9.4 5 5.8 3 7.7 4 1.4 40.9 35.9 50.7 3 8.4 54.9 3 9.8 3 8 .4 4 3.1 37.0 New Y ork and B rooklyn............... Northern New Y ork State........ Southern New Y ork State........ Central New Y ork S tate........... Hudson River Valley D istrict. . Westchester and Stam ford....... Niagara Falls................................ + 1 4 .9 + 7 .9 + 1 3 .4 + 1 9 .0 + 1 5 .8 + 1 6 .7 + 1 1 .9 + 1 0 .7 + 1 5 .9 + 1 5 .5 + 1 4 .9 — 2 .5 + 1 1 .9 All department stores............ + 1 4 .6 + 1 .4 4 6.8 4 6.1 Apparel stores.......................... + 1 2 .2 — 8 .6 4 9.6 50.1 Northern New Jersey..................... ••. • . •. . Department Store Sales and Stocks, Second Federal Reserve District (1923-25 average=100) Sales, unadjusted.............................................. Sales, seasonally adjusted .............................. + 10 8 Total 10 imports + 64 Stocks, unadjusted........................................... Stocks, adjusted............................................... + 73 All imports . . . + 36 0 13 1939 + 0 .2 + 3 .4 + 2 .0 + 4 .3 + 5 .8 — 2 .9 + 5 .9 Net sales + 21 3 +15 5 +128 +115 + 11 3 + 86 + 53 + 11 + 3 — 16 11 Stock on hand end of month Locality Furs, undressed.. W o o l..................... Sugar, ca n e......... Rubber, cru d e.. . T in ........................ Silk, raw.............. W ood p u lp ........... Newsprint paper. Hides and skins . + Per cent of accounts outstanding December 31 collected in January Percentage change January, 1940 compared with January, 1939 1939 Jan. r Revised 68 86 68 r 76r 1940 N ov. Dec. Jan. 115 97 172 95 74 94 93 78 76 77 69 77