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M O N TH L Y REVIEW
O f Credit and Business Conditions
F E D E R A L
V o l.
R E S E R V E
26
B A N K
MARCH
M O N E Y
M A R K E T
The Fourth War Loan drive officially was brought to a close
1,
O F
N E W
1944
IN
Y O R K
No. 3
FE B R U A R Y
volume of the Third War Loan.
There is reason to believe
Inasmuch as sales of Savings bonds and notes
that the bulk of the purchases of securities paid for by bank
reported to the Treasury up to the end of the month were
borrowing in the recent drive was made with a view to liqui
dating the loans out of income, and that the contraction in the
February 15.
credited to the drive total, final figures on aggregate sales are
not available at this writing, but it has been estimated that the
amount of credit extended subscribers may be taken as a crude
over-all total would exceed $16,250,000,000.
measure of the reduction in the "speculative” participation.
Securities offered
to commercial banks, under special restrictions related to
Another element which has served to inflate the drive totals
amounts of savings deposits held by such banks, were not in
has been selling by nonbank investors of Government securities
cluded in the goal for the drive.
previously held by them and the investment of the proceeds in
The emphasis of the Fourth War Loan, quite properly, was
on gaining the maximum possible distribution to individuals,
the securities offered in the drives. Some such transactions
have been in the nature of portfolio adjustments while others
rather than on the aggregate sales total.
The objective goal
have enabled the sellers to show larger subscriptions in the
for sales to individuals was raised from $5,000,000,000 for the
September campaign to $5,500,000,000 while the over-all sales
drives. In any case, the result has been a transfer of securities
from the hands of nonbank investors to banks and an enlarge
ment of the War Loan drive sales totals.
goal was lowered from $15,000,000,000 to $14,000,000,000.
By deliberate policy, a good deal of the "froth” that had
In the Second and Third drives
No effort has been made to interfere with the normal pro
cesses of portfolio adjustments by nonbank investors in prepa
ration for and during the course of the War Loan drives, and
large volumes of securities were acquired during the drives by
nonbank investors and paid for by borrowing from banks,
with the intention of subsequent resale to obtain profits from
so long as there is an active demand on the part of banks for
the securities which nonbank investors may be disposed to
sell, a flow of securities from nonbank investors to banks in
the premiums commanded by the securities after the close of
the campaigns as well as from differentials between coupon
rates of interest and interest charged by the banks. These
securities were generally absorbed by commercial banks, direct
offerings to which had been restricted as a means of checking
the rapid growth of bank deposits, and in this way securities
connection with the drives is perhaps inevitable, though the
entered into the results of the earlier drives was eliminated
from the Fourth War Loan.
increased emphasis in the drives upon sales of securities to
individuals has lessened the pressure upon institutional in
vestors to sell securities in order to enlarge their subscriptions
for the new offerings.
So far as the banks are concerned, their demand for Govern
ment securities is intensified during the periods of the War
which soon went to banks were included in the drive totals for
sales to nonbank investors. Speculative activities of this type,
and the associated indirect participation of banks in the drive,
Loan drives by the sharp reductions in their reserve require
ments as customers’ purchases of Government securities trans
were checked in connection with the Fourth War Loan by
fer funds from classifications of deposits against which reserves
requests to banks and security dealers to refrain from financing
are required to War Loan account deposits which are free
subscriptions where subsequent prompt sale of the securities
from reserve requirements.1 In the Fourth War Loan, as in
was intended.
the Second and Third, the banks made large market purchases
This policy was reinforced by the relatively
small premiums which speculative purchasers had been able
of Government securities.
to obtain on securities purchased in the Third War Loan.
securities from nonbanking investors to banks during Novem
It may be estimated, roughly, that bank loans to nonbank
investors subscribing to securities during the Fourth drive
amounted to $1,250,000,000, about 40 per cent less than the
However, shifts of Government
ber and December, prior to the opening of the Fourth War
1 This influence has been operative since April 13, 1943, at the
start of the Second War Loan drive, when reserve requirements against
War Loan account deposits were removed.
13
M O N T H L Y R E V IE W , M A R C H 1, 1944
Estimated Absorption of United States Government Securities
by Nonbanking Investors*
(In billions of dollars)
T o ta l
absorption
D a te
(net)f
Net
Participation p articip ation N e t m arket
in
in T reasu ry
sales ( — ) of
W a r Loan
financing ou t certificates,
drives
side W a r Loan
notes, and
drives J
bonds
1942
2n d h a lf..............................
+ 1 4 .9
+
19 43
1st h a lf ...............................
2n d h a lf .............................
+ 1 3 .7
+ 1 4 .2
1942
J u ly .......................................
A u g u s t .................................
S ep te m b er.........................
O c to b e r ...............................
N o v e m b e r .........................
D e c e m b e r..........................
+
+
+
+
+
+
1 .9
2 .2
1 .8
2 .3
0 .8
5 .9
+
+
+
1 .1
2 .1
0 .4
+ 1 0 .4
— 3 .0
+ 1 3 .1
+ 1 8 .3
+
+
4 .3
1 .0
3 .7
— 5 .1
0
0
0
0
0
7 .6
+
+
+
+
+
-
2 .2
2 .5
2 .1
2 .9
1 .5
0 .8
- 0 .4
+ 0 .7
+ 0 .1
+ 1 3 .5
+ 0 .4
- 0 .4
0
0
0
+ 1 3 .1
0
0
0
+ 1 8 .3
0
0
+
+
+
+
+
+
-
1 .6
2 .4
0 .7
0 .2
0 .2
1 .6
0 .9
2 .1
0 .8
0 .3
+ 12 v
+ 16?)
-
Ip
+
7 .6
— 0 .2
0 .3
— 0 .2
— 0 .7
— 0 .7
— 0 .8
F e b r u a r y ...........................
M a r c h .................................
A p r il -M a y .........................
Ju n e......................................
J u ly .......................................
A u g u s t ................................
S ep tem b er-O ctob er. . .
N o v e m b e r .........................
D e c e m b e r ..........................
19 44
J a n u a r y -F e b r u a r y . .
*
f
%
p
. .
+ 1 0 .5
W e e k ended
T reasury
b ills
1944
Jan.
5 ...................
Jan. 1 2 ...................
Jan. 1 9 ...................
Fe b . 2 ....................
F eb. 9 ....................
F e b . 1 6 ....................
F e b . 2 3 ...................
Certificates
of indebt-|
edness
- 43
+165
8
+ 14
+
+
+
+
-4 2 1
-6 4 0
+144
+447
-1 2 8
+ 38
+ 78
+
8
70 •
37
64
98
T reasury
n otes
+
1
0
0
0
+266
I 11
1
? - 36
B on d s
T o ta l
8
2
2
1
+ 36
+204
+ 58
+113
+ 37
+ " 2
+
4
+
3
-2 4 6
-6 1 1
+225
+422
+
+
+
+
—
1943
January.........................
Changes in Holdings of U . S. Government Securities
by Federal Reserve Banks, Direct and Guaranteed
(In millions of dollars)
0 .5
0 .3
—
0 .3
—
2 .4
—
0 .3
—
0 .9
—
0 .9
— 2 .7
—
0 .4
— 0 .2
—
—
3V
U . S. G ove rn m en t agencies and trust funds excluded.
B ecause of rounding, the totals in som e cases do not agree with the sum s of the
individual item s.
A llo tm e n ts of new m arket issues plus purchases of “ ta p ” issues outside W a r
L oan drives less redem ptions of securities for cash or in p a y m e n t of t a x e s .
A ll changes in T reasury b ill holdings of n onbank investors are placed in this
item ,
Prelim inary.
Loan, were substantially smaller than in the months imme
diately preceding the Third drive, as indicated in the "net
Reserve Banks declined $857,000,000 to $11,169,000,000,
during the two weeks ended February 9-
Treasury bill hold
ings, taken alone, declined $1,061,000,000 during this period
as the banks repurchased bills previously sold to the Reserve
Banks under repurchase option and took larger amounts of
the weekly bill offerings. The Reserve Banks, on the other
hand, made net purchases of other classes of securities, prin
cipally certificates of indebtedness, absorbing a part of the
sales of such securities by corporations and other nonbank
investors.
Between February 9 and 23 the Federal Reserve
Banks made additional purchases of certificates, and, with the
falling off in excess reserves, member bank sales of Treasury
bills led to a rise of nearly $600,000,000 in the Federal Reserve
bill portfolio.
For the central reserve city banks of New York, the drop
in reserve requirements, which approached $400,000,000 in
market sales” column of the accompanying table.
the aggregate, was concentrated to a large extent in the state
M ember Ba n k R eserve Positions
ment week ended February 2. The reserves thus released,
together with nearly $300,000,000 gained through Treasury
During the early part of February, as the heavy sales of
Government securities in the War Loan drive shifted large
amounts of funds from private deposits to War Loan account
deposits, reserve requirements of all member banks dropped
by about $1,000,000,000. At the same time reserve balances
were enlarged by a reduction in Treasury balances held in the
Reserve Banks. The member banks responded to the improve
ment in their reserve positions by making large purchases of
Government securities, partly from the Federal Reserve Banks
(Treasury bills) and partly from nonbanking investors (chiefly
Treasury certificates).
The banks also added to their Govern
operations, were partly absorbed by a $400,000,000 net out
flow of commercial and financial funds to other sections of
the country, and for the rest were used largely to repurchase
Treasury bills from the Reserve Banks. During the following
statement week, ended February 9, the New York banks again
employed their available funds to increase further their Gov
ernment security portfolios. Between February 9 and Feb
ruary 23, however, Treasury transactions resulted in losses of
reserves and the New York banks were net sellers of Treasury
bills to the Reserve Bank in the day-to-day adjustments of
their reserve positions.
ment securities by purchasing Series F and G Savings bonds
The outflow of commercial and financial funds from New
and 2lA and 2^2 per cent Treasury bonds offered in the drive
York during the week ended February 2 marked the approxi
under a special provision permitting limited investments in
mate end of the shifts of balances out of the city for the pre
these securities against savings deposits.
Despite member bank purchases of Government securities,
sumed purpose of entering subscriptions to War Loan drive
securities in other centers.
The aggregate outflow, which
their excess reserves rose from the $1,100,000,000 average
amounted to approximately $700,000,000 between the end of
level of January to about $1,400,000,000 during the first part
December and February 2, was considerably smaller than for
of February.
the period of the Third War Loan when the outflow totaled
Later in the month, as reserve requirements
again increased, and as Treasury deposits with the Federal
$1,400,000,000.
Reserve Banks were built up, excess reserves dropped off and
some part seasonal factors, it would appear that transfers of
on February 23 had returned to around $1,100,000,000.
Total holdings of Government securities by the Federal
Although the difference probably reflects in
funds out of New York in connection with the Fourth War
Loan were considerably less than those of the Third drive.
FED ERAL RESERVE B A N K OF NEW Y O R K
FOURTHWARLOANDRIVE
On February 23, the Treasury announced that the Fourth
War Loan drive, with a goal of $14,000,000,000, had been
oversubscribed by $1,884,000,000 with a week’s tabulating
yet to be completed before a final total would be reached.
Although the drive closed officially on February 15, sales of
Savings bonds and Savings ("tax” ) notes cleared through the
Federal Reserve Banks during the remainder of February were
to be included in final drive totals.
Limited purchases which
commercial banks were permitted to make against their savings
deposits are not included in the drive figures.
During the
Third drive, when the goal was $15,000,000,000, the Treasury
raised $18,313,000,000.
Sales to nonbank investors during
the Second and First drives were
$13,085,000,000
and
$7,590,000,000, respectively.
The major emphasis during the January-February drive was
certificates of indebtedness ran well ahead of the Third drive
totals.
By February 15, the day when subscription books to the
new market issues closed, both New York City and New York
State had exceeded their over-all goals. Preliminary figures
through February 25 showed sales of $4,589,000,000 for the
State against a quota of $4,198,000,000, and $3,967,000,000
for the City against a goal of $3,683,000,000.
Thus, not only does the
Government obtain needed funds for carrying on the war,
but the danger is lessened that these funds might be used to
bid up prices on the limited amount of available consumer
goods.
Up to February 23, tabulated sales to individuals
amounted to $4,562,000,000.
This was about 83 per cent of
the quota which had been set at $5,500,000,000, and may be
compared with final Third drive sales of $5,377,000,000.
The
reduction from the total of the Third drive undoubtedly is
explained by a sharp drop in speculative purchases of market
issues as well as the incomplete returns from the Fourth drive.
Sales to individuals in the Second and First drives were
$3,290,000,000 and $1,593,000,000, respectively.
Both these
figures will be raised as the additional sales of Savings bonds
and Savings notes are included.
By February 25, tabulations
of sales to individuals in the State showed a total of about 85
per cent of the established quota, and in New York City a
total of about 82 per cent.
Series E bonds, however, in both
New York City and State, as in the nation, were already sub
stantially in excess of sales during the entire Third campaign.
New York State showed Series E bond sales of $310,000,000
and New York City sales of $187,000,000.
placed on securing as many subscriptions and as large sums
as possible from individual investors.
19
F i n a n c i n g O u t sid e
the
D rive
The opportunity was offered to holders of certificates of
indebtedness of Series A -1944, maturing on February 1, 1944,
to exchange them for 0.90 per cent Treasury notes of March
1,
1945.
Of
the $2,211,161,000
certificates outstanding,
$2,126,447,000 were offered in exchange for the new thirteen
month notes; $1,029,319,000 were exchanged in the Second
District.
MEMBERBANKCREDIT
Although commercial banks were excluded from direct
participation in the Fourth War Loan drive, the principal
changes in member bank credit during the past two months
to a large extent were closely associated with the drivfe. These
By February 23, sales of Series E Savings bonds, the type
changes included a marked increase in bank holdings of
especially designed for the small investor, amounted to
Government securities, an expansion in loans for purchasing
$2,585,000,000,
of
or carrying securities, a rise in total deposits, and a shift in
$3,000,000,000 will be met. These results are gratifying, for
even the incomplete figures show improvement over the
previous War Loan when sales of this issue totaled
and
it
seems
likely
that
the
goal
deposits from private to public accounts.
The weekly reporting banks in 101 cities purchased about
$2,472,000,000, although a goal of $3,000,000,000 had also
been set at that time. Improvement over the earlier drives
is even more pronounced; only $1,473,000,000 Series E bonds
and through the week of February 16. Part of this increase
represented the repurchase of Treasury bills from the Reserve
Banks, part the purchase of F and G Savings bonds and
were sold in the Second campaign and $726,000,000 in the
First.
of IVa per cent and IVz per cent Treasury bonds which was
limited to a portion of their savings deposits; the bulk of the
The decline in sales during the Fourth drive centered
3 billion dollars of Government securities during January
increase, however, represented market purchases of already
largely about the IVz per cent and 2 Va per cent bonds, both
outstanding issues from nonbank investors.
of limited marketability.
tember and October, the months of the Third War Loan
Reduced selling of previously held
During last Sep
Government securities, on the part of life insurance com
drive, the weekly reporting member banks purchased some
panies, savings banks, and other institutional investors, to
what more than 4 billion dollars of Government securities, but
supplement funds available for the purchase of drive offerings,
in that instance nearly half the increase was accounted for by
was an important factor in this decline.
By the latter part
purchases of two issues offered to commercial banks after the
of February, Savings ( "tax” ) notes had not reached the Third
close of the drive, namely % per cent certificates of indebted
drive figures, but it seems that, with the additional tabu
ness and 2 per cent bonds.
lating days remaining, the difference
(which amounts to
$330,000,000) will be scaled down considerably.
Sales of
Of the 3 billion dollar increase, since the first of the year,
in Government security portfolios of the weekly reporting
MONTHLY REVIEW, MARCH 1, 1944
20
Changes in Holdings of U. S. Government Securities
by the W eekly Reporting Member Banks
(In millions of dollars)
Week ended
Certificates
of
Treasury indebted Treasury
bills
ness
notes
drives, there was a marked shift in deposits from accounts of
individuals and corporations to War Loan accounts of the
Treasury, associated with book credit payments for new issues
Bonds
Guaranteed
obligations
of Government securities.
Total
of January, but from January 19 through February 16 adjusted
New York City
1944
5 ...............
12...............
19...............
2 6 ...............
— 65
-1 5 9
+ 83
-2 3 1
+
+
+
+
Feb. 2 ...............
Feb. 9 ...............
Feb. 16...............
Feb. 2 3 ...............
+344
+239
-1 2 6
-1 5 8
-1 3 6 *
+ 75
+ 78
9
1944
Jan. 5 ...............
Jan. 12...............
Jan. 19...............
Jan. 2 6 ...............
+
6
+ 70
- 19
+166
+
+
+
Feb. 2 ...............
Feb. 9 ...............
Feb. 16...............
Feb. 2 3 ...............
+227
+324
+ 28
-2 7 8
—168*
+ 52
+140
+ 46
Jan.
Jan.
Jan.
Jan.
16
33
39
56
+ 10
- 20
- 23
8
+
+
+
49
25
60
68
— 8
— 4
+ 40
+ 11
+
2
-1 7 5
+199
-1 0 4
+307*
+ 14
+ 10
- 10
+100
+ 51
+ 29
- 22
8
+
— 19
— 9
7
+623
+360
- 18
-2 0 6
100 Other Cities
96
74
43
80
The shift did not become apparent
in the statements of the reporting banks until after the middle
demand deposits declined 3.4 billion dollars, while Govern
ment deposits rose by 6.9 billion.
SEC U R IT Y M A R K E TS
During February, the Government security market con
tinued to reflect the influences of the Fourth War Loan drive.
With the fall in their reserve requirements, associated with
- 13
— 5
+ 9
8
+ 26
+ 52
+ 71
+105
—
—
+
1
5
5
8
- 78
+186
+109
+337
+557*
+123
+ 13
0
+135
+104
+ 62
+ 55
_ 29
9
+
+ 12
1
+722
+612
+255
-1 7 8
the drive, the banks made large additions to their Government
security portfolios. While the banks purchased all types of
securities which they are eligible to hold, transactions in
certificates of indebtedness and partially tax-exempt bonds
were relatively the heaviest.
The securities acquired by the
banks were supplied mainly by corporations (in the case of
* Affected by the exchange of an issue of Treasury certificates of indebtedness
which matured February 1 for 0.90 per cent Treasury notes.
member banks, 2.1 billion was accounted for by purchases of
certificates) and insurance companies and savings banks (in
the case of bonds), which generally employed the proceeds to
enlarge their subscriptions to drive offerings. The Federal
the reporting banks in 100 cities outside New York City.
Reserve Banks, through their participations in operations
These banks’ holdings of Treasury bills increased about 800
conducted under the direction of the Federal Open Market
million dollars, and their net purchases of bonds amounted
to about 560 million. Holdings of notes increased 680 mil
Committee, absorbed a part of the certificates of indebtedness
that were offered in the market. In the latter part of the
lion, while holdings of certificates of indebtedness rose 125
month demands for partially tax-exempt bonds increased con
million.
siderably and their prices strengthened.
The increase in notes was largely accounted for by
the exchange on February 1 of a maturing issue of % per cent
certificates for a new issue of 0.90 per cent notes.
Over the course of the month, yields on partially tax-exempt
Holdings
bonds showed declines ranging for the most part from
of guaranteed securities declined slightly, largely because of
the retirement of a Federal Public Housing Authority note
0.06 to 0.10 per cent. Among the taxable bonds, yields
were little changed on issues callable or maturing after twelve
issue on February 1.
The net increase in Treasury bill port
years, but yields on most of the earlier maturing issues in this
folios of the New York City banks amounted to 85 million
dollars; in holdings of bonds and notes, to roughly 300 million
dollars each; and in certificates of indebtedness, to 160 million.
category receded 0.02 to 0.05 per cent. On Treasury notes,
especially those in the tax-exempt classification, yields also
declined.
The expansion in loans for purchasing or carrying securities
Railroad stock prices rose about 3 per cent during February,
continuing the upward movement which began in December,
associated with the Fourth War Loan drive was considerably
smaller than in the Third drive. In New York City loans to
although as the month closed they were still below their July
brokers and dealers rose 325 million dollars during the six
1943 high level.
weeks ended February 16, compared with an increase of 689
gains, as the result of advances that occurred late in the month.
Public utility share prices also registered net
million during the six weeks ended October 6, while the
Industrial stock prices, after declining about 3 per cent in the
increase in loans to others for purchasing or carrying securities
early part of February, rose during the remainder of the month;
amounted to 430 million compared with 465 million in the
the recovery, however, was not quite sufficient to cancel the
earlier period.
For banks outside New York City, the expan
sion in loans to brokers and dealers during the six weeks
ended February 16 amounted to 123 million dollars compared
earlier loss.
The volume of trading on the New York Stock
Exchange remained at about the January level.
Trading in corporate bonds continued active.
Prices of
with 343 million in the August 25-October 6 period, and
medium and lower grade issues rose slightly while the higher
loans to others rose only 188 million as against 295 million.
grade issues showed little net change.
The expansion in loans and investments was accompanied
Railroad and indus
trial issues in the Baa classification again registered gains, but
by a sharp rise in total deposits of the weekly reporting banks
similar grade utilities declined slightly.
during January and February.
grade issues, utilities rose while the railroad and industrial
As usual during War Loan
Among the higher
21
FED ERAL RESERVE B A N K OF NEW Y O R K
issues declined. At the end of February, Moody’s index of
Aaa bond yields was 2.74 per cent, unchanged for the month;
the Baa bond yields declined slightly from 3.74 per cent to
3.72 per cent. Standard’s index of municipal bond yields
declined from 1.88 per cent on January 26 to 1.85 per cent
on February 9, and remained at that level for the remainder
occur at the same time that output of other products is being
expanded, so that, on the whole, plant facilities are not re
leased for nonwar purposes. Canceled contracts are replaced
by the War Production Board with new war work where
possible. The cutbacks indicated in 1944 war output re
of the month.
experience, which account for the scheduled reduction of com
IN D U STR IAL A C T IV IT Y IN TH E W A R PERIOD
requirements, which bring about a shift from merchant ship
flect such varying factors as revised needs based on battle
bat tanks and small arms munitions; changes in strategic
The gearing of the nation’s economy to total war began
building to landing craft; and the slackening of army expan
with the initiation of the Emergency Defense Program in
the middle of 1940, was hastened by the inauguration of
sion, with the accompanying drop in requirements for army
capital equipment such as ordnance and signal equipment.
lend-lease in March 1941, and was intensified immediately
The shortage of manpower, which has been a major de
after the United States entered the war in December 1941.
terring influence in several important lines of production, is
Industrial output increased sharply through 1942, and further
expected to continue as a limiting factor.
gains were registered in 1943 although the rate of increase
last year was markedly lower than in the years immediately
War Manpower Commission indicate that additions to the
armed forces have not been completely offset by new entrants
preceding. The slower rate of increase in 1943 reflected
several factors: the conversion program was completed; the
into the labor market; the civilian labor force in July 1943
is estimated to have been smaller than a year earlier by some
program providing for additional industrial facilities and
1.3 million persons, and a further decrease of 1.1 million per
sons is expected by July 1944. About 30 per cent of this
Estimates of the
equipment essential for the war effort drew to a close; and
the manpower supply was being drawn down rapidly. That
smaller labor force will probably be employed in the major
gains in war production will be limited during the current year,
war industries by the middle of next year; these industries
and that shifts in output from one war product to another
and the food industries are the only ones that are expected to
will be made, are indicated by the 1944 goals announced
late last year by the War Production Board. Production of
merchant ships and of army ordnance and signal equipment
gain workers. The sharp decline that is anticipated in con
struction activity will result in the employment of a smaller
number of persons in that field; and employment in the trade
is expected to be only moderately above that of last year,
and service industries also is expected to decrease further.
but substantial increases are indicated for aircraft, trucks, and
The bulk of the production gains in the past few years
artillery. On the other hand, sharp reductions from 1943
levels are anticipated for the construction industry, the build
ing of tanks, and the output of small arms.
Cutbacks of certain products in the war production program
occurred in the durable goods industries, whose share in the
total industrial production index of the Board of Governors of
the Federal Reserve System rose from 38 per cent in 1939
to 57 per cent in 1943.
The most striking advances were
Measures of Activity in Selected Industries*
TH O U S A N D S
TH O U S A N D S
THOUSANDS
Daily averages, by months, adjusted for seasonal variation by the Federal Reserve Bank of New York. Plotted on ratio scale to show proportionate changes.
M O N T H L Y R E V I E W , M A R C H 1, 1944
in the transportation equipment group, which is dominated
by aircraft and shipbuilding, and in the machinery industries.
granted to manufacture specified quantities of electric ranges
for home use, flat irons, ice refrigerators, bath tubs, prewar
In the steel industry, a rate of operations close to capacity
model baby carriages, and radio tubes.
was attained in 1941, and since then the volume of output
Board has included in its 1944 goals (contingent, however,
upon the availability of facilities, manpower, and materials)
has continued fairly steady.
(See accompanying chart.)
Attainment of production goals has resulted recently in a
somewhat less stringent steel situation.
The War Production
production of heating and plumbing equipment, washing
Some orders have
machines, alarm clocks, electric fans, gas ranges, electric re
been canceled, and recommendations have been issued for
the discontinuance of a number of steel plant expansion
frigerators, and vacuum cleaners. The situation in regard to
supplies of raw materials, so disturbing an influence in the
production picture earlier in the war program, became markedly
projects.
Copper production,
improved by the end of 1943. But despite the improvement
in raw materials supply, no general resumption of civilian pro
shown on the chart, fluctuated rather narrowly in 1940 and
duction can be anticipated at the present time. The manpower
Output of nonferrous metals and products, as a whole,
increased substantially after mid-1940.
1941, at a level considerably above that in 1939; in 1942 it
situation is still critical; parts and materials, such as electric
advanced, following the introduction of premium price pay
motors, may remain scarce; and although the total supply of
ments; and in 1943 it remained at about the level of the
preceding year. The supply of copper has become somewhat
metals is easier, as in the steel and aluminum industries, fabri
cating facilities are still tight.
easier at the present time, although the smaller demand for
The most drastic curtailment in the war output program
copper for small arms ammunition has tended to be counter
has occurred in the construction industry.
balanced by increased use of copper and brass in other mili
building in 1943 declined sharply from that in the peak
tary products.
year 1942, and schedules for 1944 call for a further drop,
The completion of war construction programs is reflected
in the very sharp decline that occurred in cement output
last year.
No upturn is expected as long as the restrictions
to 33 per cent of the peak year rate.
Among the nondurable manufactures, the chief advances
have occurred in the chemicals and in the rubber products
industries, where war activity has predominated.
Output of
manufactured food products also has increased. Among the
foods industries, the increase in meatpacking that occurred
ties have contracted, with machine tool deliveries in December
1943 about 54 per cent below the peak volume attained in
December 1942. Decisions to retain present restrictions on
new private construction will insure a further decline in
total building.
Indexes of Business
after 1939 reflected substantial requirements of the armed
forces and the lend-lease program, and larger civilian consumer
demand because of increased incomes.
Reduced operations last year in the cotton textile industry,
which are indicated by lowered mill consumption of cotton,
may be contrasted with the sharp gains that occurred in 1940-42.
The lower rate last year was due in large part to the shortage
of skilled workers; and continuation of manpower difficul
ties may well retard activity in 1944.
Gains in bituminous coal production were restricted dur
Consumption has been running substantially in
excess of output, and stocks have been drawn down to fill
requirements.
The sharp contraction that has occurred in the output of
civilian products is indicated by the shift in the civilian pro
portion of total industrial output, from 78 per cent in 1941
to 34 per cent in 1943, a shift that was even more marked
in the production of durable goods for civilian consumption.
As a result of the expansion in total industrial production,
however, the relatively low figure for civilian output in 1943
was equivalent to fully 80 per cent of average production
for civilian use during 1935-39.
The decline has largely
reflected completion both of the Government financed indus
trial facilities program and of military and naval construction.
Machinery and equipment provided for new industrial facili
on private building persist.
ing 1943.
The volume of
Approval has recently been
1943
1944
Index
Industrial production*, 1935-39 = 100 . . . .
( Board of Governors, Federal Reserve
System)
Munitions output, Nov. 1941 = 100..........
{War Production Board)
Electric power output*, 1935-39 = 100 . . .
(Federal Reserve Bank o f New York)
Ton-miles of railway freight*, 1935-39 = 100
(Federal Reserve Bank o f New York)
Sales of all retail stores*, 1935-39 = 1 0 0 ....
(Department of Commerce)
Factory employment
United States, 1939 = 100........................
( Bureau o f Labor Statistics)
New York State, 1935-39 = 100.............
( New York State Dept, of Labor)
Factory payrolls
United States, 1939 = 100........................
(Bureau of Labor Statistics)
New York State, 1935-39 = 100.............
( New York State Dept, of Labor)
Income payments*, 1935-39 = 100.............
( Department of Commerce)
Wage rates, 1926 = 100.................................
(Federal Reserve Bank o f New York)
Cost of living, 1935-39 = 100......................
(.Bureau o f Labor Statistics)
Velocity of demand deposits*, 1935-39 =100
(.Federal Reserve Bank o f Nevj York)
New York C ity.............................................
Outside New York City..............................
*Adjusted for seasonal variation.
Jan.
Nov.
Dec.
Jan.
227
247
241
242p
453
661
662p
649p
176
200
197
199p
214
216
225p
232p
159
176
171 p
165
171
169
166p
156
161
160
158p
291
336
329p
265
304
297
300p
197
222
225p
147
157
158 p
121
124
124
124p
67
78
70
76
65
74
74
81
p Preliminary
FED ERAL RESERVE B A N K OF NEW Y O R K
C O NSU M ER
23
C R E D IT
The total volume of consumer short term credit at the end
stitutions continued to run ahead of the volume of new loans,
of 1943 amounted to about 5.1 billion dollars, roughly one
billion dollars less than that at the end of 1942 and about 4.6
the net declines in the amount of loans outstanding were gen
erally less than half as great as in the previous year.
billion less than the peak figure of 9.7 billion reached at the
end of September 1941.
According to estimates of the Board
A second factor accounting for the smaller contraction dur
ing 1943 in total consumer credit outstanding was the greater
of Governors of the Federal Reserve System, the net contrac
than usual increase in charge account debt during the last four
tion during 1943 lowered the volume of consumer short term
months of the year, which was closely associated with the
indebtedness to a level a little below that prevailing at the
brisk pre-Christmas shopping season.
end of 1935.
The factors which produced the contraction during 1943
loans were more than offset by the expansion of charge account
were, for the most part, those whose effects had been in
evidence since the fall of 1941.
Of these probably the most
important were a diminishing supply of durable goods avail
Declines in instalment
sales, and the total volume of consumer credit outstanding
rose somewhat during the four months’ period, the first increase
of any size since September 1941.
Finally, the volume of single payment loans outstanding
able for civilian consumption, a rapidly rising volume of pur
(principally loans from banks)
chasing power in the hands of the public, tending to encourage
during the last months of the year, after declining in the first
also showed an increase
cash payments for purchases, and regulations of the Board of
three quarters, and it is estimated that the volume of service
Governors of the Federal Reserve System (Regulation W )
limiting the amount of credit that may be extended to con
debt (i.e., amounts due to doctors, hospitals, and service in
stitutions) rose continuously throughout the year.
sumers.
D epartment an d Furniture Stores in the
Second Federal R eserve D istrict
The data in the accompanying table indicate that the decline
in the volume of consumer credit in 1943 was smaller than in
1942 (about 1 billion dollars in contrast to 3.3 billion), and
D ata collected from a group of leading department stores
was due primarily to smaller net declines in both classes of
in the Second Federal Reserve District reveal that even though
instalment credit — loans to finance retail sales and cash loans.
the absolute volume of charge account sales declined by only
As such debt approached minimum levels in certain fields, the
size of the monthly declines, of course, decreased. For example,
relatively small amounts during 1942 and 1943, charged pur
the volume of outstanding instalment debt arising from the
chases accounted for a progressively smaller percentage of the
total sales of these stores. In May 1942 Regulation W was
sale of automobiles was reduced from 2,200 million dollars
broadened to include charge account sales, and the new reg
at the end of September 1941 to less than 300 miilion dollars
ulations stipulated that if purchases were not paid for by the
tenth day of the second calendar month following the date of
at the close of March 1943, an average of 100 million dollars
a month.
During the remaining portion of 1943, the monthly
purchase, the account would be in default.
As a result, the
declines averaged about 12 million dollars. Instalment debt re
rate at which charge accounts were paid off rose sharply, and
sulting from sales of furniture, household appliance, and depart
ment stores and of mail order houses also continued to decline
the amount of charge account debt outstanding on December
during 1943, but in no case was the decline so large as in the
previous year. The contraction in instalment cash loans re
sulted, to a large extent, from a sharp decline in loans for the
Estimated Short Term Consumer Debt Outstanding at End of
Each Month, Classified by Principal Types of Debt*
b il l io n s
OF D O LLAR S
12
repair and modernization of residential property, as such con
struction was held to a minimum by restrictions on the use of
building materials for nonessential purposes. Although re
payments of cash loans made by banks and other lending inEstimated Change in the Volume of Consumer
Short Term Credit*
(In millions of dollars)
Type of credit
1942
1943
Instalment credit
Sale.........................................................
Cash loan.............................................
-2 ,2 5 3
746
-
680
368
Charge accounts......................................
Single-payment loans............................
Service credit...........................................
+
+
15
13
43
Total..............................................
251
132
38
-3 ,3 4 4
* Data of the Board of Governors of the Federal Reserve System.
-1 ,0 3 3
1934
1935
1936
1937
1938
1939
1940
194119421943
* D ata for 1934-August 1942 are those of the Department of Commerce •
for September 1942-December 1943, those of the Board of Governors of the
federal Reserve System.
MONTHLY REVIEW, MARCH 1, 1944
24
Cash and Credit Sales, Department and Furniture Stores,
Second Federal Reserve District
Percentage
d istribu tion *
each of the two peak months of 1943, February and Novem
ber. The adjusted index advanced in both January and
Percentage
change from
preceding y e a r*
Classification
1941
1942
1943
1942
1943
D e p a rtm e n t stores
N e t sales— t o t a l .......................................
C a s h ...........................................................
Charge a c c o u n t...................................
In s t a lm e n t ............................................
100
60
31
9
100
66
27
7
100
70
24
6
+ 9
+19
- 3
-1 6
+ 6
+ 12
5
5
Furniture stores
N e t sales— t o t a l .......................................
C a s h ..........................................................
C r e d itf ...................................................
100
12
88
100
16
84
100
17
83
-1 0
+23
-1 4
+
-
February, and in the latter month it was only 3 per cent
below that in November last year— when early holiday shop
ping was exceptionally heavy— and 5 per cent under the all
time peak of February 1943— when a buying wave occurred,
particularly in clothing, because of fears of future rationing.
Department store stocks, after allowance for seasonal changes,
increased moderately during January.
1
8
3
* D a ta are for calendar years.
P red om in an tly in stalm en t cred it; separate d a ta n ot generally available.
t
As the month closed,
stocks were well above the low of last April, but still con
siderably less than at mid-1942, when the all time high
was recorded.
Reports of sales in the six largest cities of this District
31, 1942 was one-quarter lower than on December 31, 1941.
During 1943 the rate of collections on charge accounts re
mained close to the level of the second half of 1942, and as
there was no appreciable decline in the total value of charged
sales, the amount of such debt outstanding at the end of 1943
indicate that in Newark and Bridgeport the decline which
began in 1943 has continued at an accelerated rate.
Syra
cuse sales, on the other hand, in the first two months this
year were substantially above a year ago, while those in
New York, Buffalo, and Rochester showed very little change.
was roughly equal to that at the end of the previous year.
Data for stocks indicate that Newark and Bridgeport were
On a percentage basis, the contraction in instalment sales
the only ones of the six cities in which stocks declined
during the two-year period was somewhat greater than that
(approximately 15 per cent)
for charge accounts.
January 1944.
However, the importance of this decline
between January 1943 and
Stores in Syracuse reported a stock increase
was relatively minor, as such sales accounted for only a fraction
of 11 per cent, while in the three other large cities stocks
of total sales of these stores.
remained approximately the same as at the close of January
In 1942 the volume of credit sales at a group of leading
furniture stores in this District declined sharply, while cash
sales, which usually account for a relatively small proportion
of the total, showed a marked increase.
a year earlier.
Department and Apparel Store Sales and Stocks, Second Federal Reserve
District, Percentage Change from the Preceding Year
As there was also an
N e t sales
increase in the rate of collections, the amount due these stores
L ocality
for credit purchases was reduced about one third between the
end of 1941 and the end of 1942. In 1943 receivables at
furniture stores were again reduced, in contrast to receivables
at department stores which showed almost no change. The
contraction of furniture store receivables in 1943 was due
entirely to a further increase in the rate at which amounts due
were repaid; the absolute value of credit sales in 1943 was about
the same as in 1942.
Collection Ratio and Percentage Change in Accounts
Receivable, Department and Furniture Stores,
Second Federal Reserve District
A ccou n ts receivable,
percentage change from
preceding year
C ollection ratio*
Classification
D e c.
1941
D e c.
1942
D ec.
1943
D e c. 31,
1942
D e c . 31 ,
1943
D e p a rtm e n t stores
C harge a c co u n ts..........
In sta lm en t accou nts .
41
19
53
26
52
26
-2 5
-3 1
-
Furniture stores
T o t a l a c c o u n t s !...........
13
19
22
-3 3
-2 5
Jan. 1944
D e p a rtm e n t stores, Second D is t r ic t . . .
N ew Y o r k C i t y ..............................................
N e w a r k ..........................................................
W estchester and Fairfield C o u n tie s..
B rid gep ort....................................................
Low er H u dson R iver V a lle y .................
P oughk eepsie.............................................
Upper H u dson R iver V a lle y .................
A lb a n y ...........................................................
S ch en ectad y................................................
Cen tral N ew Y o r k S ta t e .........................
M o h a w k R iver V a lle y ..........................
Southern N e w Y o r k S ta t e ......................
B in g h a m to n ................................................
E lm ir a ............................................................
W e ste rn N e w Y o r k S t a t e ........................
B u ffa lo ...........................................................
N iagara F a lls .............................................
R o ch ester......................................................
A p parel stores (chiefly N e w Y o r k C ity )
4
4
+
2
Jan. through
D e c. 1943
+
Stocks on
hand
Jan. 3 1 , 19 44
-
6
+ 7
- 2
- 2
- 3
- 6
+ 7
+ 9
1
- 4
+ 2
+ 11
+ 11
+ 13
+11
+ 3
+10
+ 14
- 2
+ 9
+11
+23
+ 6
0
-1 1
-1 2
-1 0
-1 7
+ 1
—
+ 2
—
+10
+ 5
5
—
+11
—
+ 8
—
—
+ 3
+ 5
0
+ 2
+
+20
+15
6
Indexes of Department Store Sales and Stocks
Second Federal Reserve District
1944
1943
^Collections d aring m on th as per cent of accounts receivable a t beginning of m o n th .
fP red o m in a n tly in stalm en t accou n ts; separate data n ot generally available.
D E P A R T M E N T STORE T R AD E
For each of the first two months of this year, the seasonally
adjusted index of sales of department stores in the Second
Item
Jan.
Nov.
D e c.
Jan.
1 9 8 5 -3 9 average = 10 0
Sales (average d aily), u n a d ju ste d .....................
Sales (average d aily), seasonally a d ju sted . .
109
138r
181
148
226
123
112
141
1 9 2 3 -2 5 average = 100
Stock s, u n a d ju s te d .....................................................
Stock s, seasonally a d ju s t e d ..................................
109r
119r
132
115
112
115
109
119
Federal Reserve District compared favorably with that for
1
+ 3
— 4
6
-1 2
-1 6
+20
+ 19
1
+ 6
8
+ 9
2
+ 1
+15
+ 4
+ 4
+ 3
+ 5
+ 3
+ 5
6
+ 2
r Revised
FEDERAL RESERVE BANK OF NEW YORK
MONTHLY REVIEW, MARCH 1, 1944
G e n e r a l B u sin ess a n d F in a n c ia l C o n d it io n s in th e U n ite d States
(Summarized by the Board of Governors of the Federal Reserve System)
activity was maintained in January following a decline from November to
December. Commodity prices were steady and retail sales continued in large volume in
January and the first three weeks of February.
I NDUSTRIAL
In d u s t r i a l P r o d u c t i o n
Isidex of Physical Volume of Industrial Produc
tion, Adjusted for Seasonal Variation
(1935-39 average.” 100 per cent)
Indexes of Wholesale Prices Compiled by Bureau
of Labor Statistics (1926 average—100 per
cent; latest figures are for week ended
February 19)
In January the Board’s seasonally adjusted index of industrial production stood at 242
per cent of the 1935-39 average as compared with the peak level of 247 in October and
November 1943.
Steel production increased 4 per cent in January and continued to rise in the first three
weeks of February, reflecting large military requirements for landing craft and other invasion
equipment as well as increasing use of steel for farm machinery and railroad equipment.
Aluminum production was curtailed in January from the peak rate in the last quarter of 1943.
Activity in the transportation equipment group was 5 per cent lower in January than
at the peak in November. The largest decline occurred in commercial shipyards, many of
which were changing from the production of Liberty ships to Victory and other types of
ships. In the automobile industry production of 3,000 trucks was reported during the month
under the greatly enlarged civilian truck program for 1944 which calls for the production of
92,000 mediumweight and 31,500 heavy trucks during the year.
Output of textiles, shoes, and manufactured foods rose slightly in January, following
small declines in December. Chemicals production continued to decline, reflecting a further
curtailment of small arms ammunition output. Output of petroleum and rubber products
showed little change.
Production of coal increased and crude petroleum output continued at a high level in
January and the early part of February. Sunday work was instituted in anthracite mines
during February as a measure to increase production, and output for the week ended Febru
ary 12 was 13 per cent higher than the preceding week.
The value of construction contracts awarded in January, according to reports of the
F. W . Dodge Corporation, declined to the lowest level for the month since 1935.
D is t r ib u t io n
u _
j R1QW
REDRESERVES
Value of department store sales in January and the first three weeks of February was
maintained at a high level for this season of the year. Sales in January exceeded the large
volume of a year ago by about 6 per cent but in February sales were somewhat smaller than
last year when a buying wave developed following the announcement of shoe rationing.
Freight carloadings declined less than usual in January and the first half of February,
owing chiefly to the heavy volume of coal shipments. Movement of grain continued at the
high level of last fall and livestock and lumber shipments were in large volume.
Sa. excess re
P 4 4
C o m m o d it y Prices
V/ednesday Figures of Total Member Bank Re
serve Balances at Federal Reserve Banks,
with Estimates of Required and Excess
Reserves (Latest figures are for
February 16)
Wholesale prices of most commodities continued to show little change in January and
the early part of February. Maximum prices for coke, wood pulp, furniture, and certain
other products were increased moderately.
The cost of living index of the Bureau of Labor Statistics declined from 124.4 per cent
of the 1935-39 average in December to 124.1 in January.
Member Banks in Leading Cities. Demand Deposits
(Adjusted) Exclude U. S. Government and Inter
bank Deposits and Collection Items. Government
Securities Include Direct and Guaranteed Issues
(Latest figures are for February 18)
Purchases of securities in the Fourth War Loan Drive by corporations and individuals
resulted in a release of required reserves of member banks because funds were drawn from
private deposit accounts, which require reserves, to the Government war loan accounts, which
are exempt from reserve requirements. As a consequence, member banks repurchased bills
from the Reserve Banks, and the latter’s holdings of Government securities declined by 520
million dollars.
At reporting member banks in 101. leading cities, adjusted demand deposits decreased
by 3.4 billion dollars in the four weeks ended February 16, while U. S. Government deposits
increased by 6.9 billion, reflecting purchases of Government securities by bank customers
during the war loan drive. Government security holdings at reporting member banks
increased 2.8 billion dollars over the four weeks.
Loans to brokers and dealers increased by 320 million during the drive which was
substantially less than in either of the two previous campaigns. Loans to others for purchas
ing or carrying Government securities rose by about 610 million, two-thirds of which was
at New York City banks. Commercial loans, which had increased substantially during the
Third War Loan Drive, showed little increase during the current period.
Ba n k
C r e d it
@FedFRASER