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MONTHLY REVIEW O f C r e In B y th e F ed era l d i t th e a n d B S e c o n d R e se rv e u s i n e s s F e d e r a l A g e n t, R e s e r v e F ed era l C o n d i t i o n s D is tr ic t R e se rv e B an k , N ew Y ork New York, May 1,1921 C r e d it C o n d itio n s R E D IT conditions have continued to improve during the last thirty days and the reserve per centage of the Federal Reserve System now stands at 54.1 per cent, as compared with 46.4 per cent, on January 7. One-half of this increase in the reserve per centage has been due, however, to the inflow of over $200,000,000 of gold from foreign countries since January 1, practically all of which has entered into the reserves of the Federal Reserve Banks. The rest of the increase was due to a decline of $423,000,000 in the volume of Federal Reserve notes in circulation, accompanied b y a decline of $640,000,000 in the loans and discounts of the Federal Reserve Banks. C Individual Federal Reserve Banks, chiefly those in the agricultural sections of the country, are now beginning to feel the seasonal demands for credit. Whereas in the early weeks of the year the loans of all Federal Reserve Banks were declining, several of them now report in creasing loans and two of them, the Federal Reserve Banks of Richm ond and Minneapolis, have rediscounted with the New Y ork Reserve Bank. This reflects a transfer of credit pressure from the New Y ork district where it was felt earlier in the year to other Federal Reserve districts. per cent. Details of this inquiry, together with the findings of similar inquiries conducted by other Federal Reserve Banks, are given elsewhere in the R e v i e w . S a v in g s B a n k D e p o s its This bank has received from twenty-one representa tive savings banks in the Second Federal Reserve District figures showing their gross deposits on the tenth day of each month beginning January, 1918. The deposits of eleven of these institutions located in the five boroughs of New York City represent practically one-half of the deposits in the 59 savings banks in Greater New York. The deposits of the ten other banks, eight of them in New York State and one each in New Jersey and Con necticut, aggregate slightly less than one-half the savings bank deposits of this district outside New York City. The accompanying diagram shows the trend of these monthly figures, expressed in percentages of the average The decline in wholesale prices has slackened notice ably. The Department of Labor index fell less during March than in any month since last June, and in each month since last December the percentage declines have been successively smaller. It is now 40 per cent, below the maximum of last M ay. The index of twelve basic commodities maintained b y this bank fell very slightly in recent weeks and at times was practically stationary. Living costs continued to decline slowly and according to figures prepared by the National Industrial Conference Board are 18 per cent. Jbelow maximum. Living costs are, however, at almost the same point above the 1913 level as are wholesale prices. Reductions in wages have taken place in recent months, but there is considerable divergence between the differ ent industries in the extent to which reductions have been made. An inquiry which this bank mad$ from 156 c o n c e r n s i n t hi s d i s t r i c t e m p l o y i n g a b o u t 415,000 workers shows that 57 per cent, of them have reduced wages in amounts varying between 5 and 25 Deposits of 11 Savings Banks in New York City and 10 Savings Banks in the Second District outside New York City, in Percentages of Average Deposits in 1918 2 M ONTHLY REVIEW for the year 1918. In the past two months savings deposits in New Y ork C ity have shown an increase, cor responding closely with the movement in the same months of 1919 and 1920. Outside of New Y ork City the effect of unemployment and of the diminished value of farm products is reflected in a slight decrease in deposits. During the past tw o years deposits have grown faster in New Y ork C ity than outside. This was particularly true in 1919. In spite of falling prices, 1920 was a year of rapid increase in savings deposits throughout the district. There is ordinarily a strikingly sharp increase each year in the totals for January and July, largely as the result of the semi-annual crediting of interest. G o ld R e s e r v e s o f P r in c ip a l E u r o p e a n B a n k s The following diagram shows the changes in gold hold ings of the Bank of England (excluding gold held b y the Treasury against currency notes), Bank of France (includ ing gold held abroad), and the Reichsbank during the past seven years. The figures for each bank are shown as percentages of the average figures for gold reserves in the six months just preceding the European war, January to June, 1914. A t no time since the beginning of the war have the gold reserves of England and France been as low as the pre-war average and in the case of the Bank of England they have more than trebled. Large reserves were built up in spite of heavy exports of gold during the early part of the war b y calling into the central banks the gold in general circulation. The decline in reserves of the Reichsbank early in 1919 was due largely to pay ments on account of American relief. There are no figures for the United States strictly com parable with the figures of the gold holdings of the Banks of the three European nations. In the early years of the European war the Federal Reserve system was just be coming established and its gold reserve being built up from nothing. This reserve was secured from member banks, from stocks in general circulation and from Euro pean countries. From August 1914 to 1918 the coun try’s total stock of monetary gold increased from about $1,900,000,000 to about $3,000,000,000. There were some losses through export in 1919, but this country now holds about one-third of the world’s stock of monetary gold. M ore than two-thirds of this gold is included in the reserve funds of the Federal Reserve Banks. The comparative gold holdings of the three principal European Banks and the Federal Reserve Banks, con verted to dollars, at the middle of April were as follows. As in the diagram Bank of England figures do not in clude $138,695,250 Treasury gold held as reserve for currency notes and Bank of France figures do include $376,034,841 gold held abroad. $ 624,607,000 1.062.493.000 266,019,000 2.286.879.000 Bank of England.......... Bank of France............. Reichsbank.................... Federal Reserve Banks PER CENT. 950 G o ld M o v e m e n t s Gold imports in M arch totaled $106,222,000 against exports of $710,000. Imports in the first quarter of the year amount to $183,000,000. As exports were less than $5,000,000 the net gain thus far is considerably in excess of the net gain of $107,000,000 for the entire year 1920. The following table shows the amounts received from dif ferent countries each month in the quarter. The figures in some instances are revised from the preliminary figures published currently in the R e v ie w . Country February March Total France............. $ 4,695,000 17,765,000 England.......... 188,000 Canada. . . . . . 1.312.000 China.............. 1.014.000 British India.. 8.661.000 All Other........ $13,584,000 9.323.000 539,000 5.695.000 5.008.000 8.730.000 $ 45,807,000 $ 64,086,000 24.075.000 51.163.000 19.825.000 20.552.000 2.654.000 9.661.000 2.059.000 8.081.000 11.803.000 29.194.000 $33,635,000 $42,879,000 $106,223,000 $182,737,000 Total. . . . Gold Reserves of Principal European Banks Expressed as Percentages of the Average for the First Six Months of 1914 January In the first ten days of April gold imports amounted to $18,537,000. The largest shipments were from Sweden, England, the Netherlands, and France. FEDERAL RESERVE AGENT AT N EW YORK Commercial Paper Demand for commercial paper became freer in April, and the majority of the dealers reduced their ruling offer ing rates to Per cent. There was still, however, a considerable volume of paper sold at 1% per cent. The distinct preference on the part of buyers for paper of concerns which have not been frequent borrowers in the open market, and the shortage of paper of this character, contributed to an unusually wide spread in rates. Whereas sales of prime New England mill double name paper were recorded as low as 7 per cent, some buyers continued to demand 8 per cent, for paper originating in industries in which confidence was not so general. The market in New Y ork City showed increased ac tivity, but country banks continued to absorb the bulk of the offerings. The following diagram indicates that commercial paper outstanding of eleven principal dealers on M arch 31 was down nearly to the lowest point, reached in the fall of 1918. MILLIONS CF DOLLARS 3 three weteks. This bank continues to add two or three members each week to the list of member banks for which bills are purchased. While bills drawn for the purpose of furnishing dollar exchange continue to predominate in the local market, there has been an increasing proportion of metal, grain, and packers’ bills recently. The volume of sugar bills offered has fluctuated rather widely, but these, also, are in heavier volume now than a month ago. The minimum buying rate of the Federal Reserve Bank has remained unchanged at 5 % to 6 per cent., according to maturity, for indorsed prime bills. S to ck M a r k e t M o n e y R a te s Easier conditions prevailed in the stock exchange money market late in M arch and early in April, largely a reflection of a flow of funds toward New York, which was due in part to Government payments to the railroads and redemption of Treasury certificates. Rates ranged somewhat lower than during the period of comparative ease in January, and the subsequent reaction to higher rates was less pronounced. Call loans in the last ten days of M arch were typically 6 J/2 per cent., compared with 7 per cent, in the preceding two months. Early in April, renewal rates fell to 53^ per cent, for the first time since 1919, and the closing rate once reached 5 per cent. Time money became slightly easier at 6 ^ to 7 per cent., compared with 6 J^ to I 1 / } per cent, a month ago, but little business was transacted. N e w F in a n c in g T h e B ill M a r k e t N inety-day bills of the large New Y ork banks held firmly at 5 % to 6 per cent, during the last ten days of M arch and until after the completion of April 1 pay ments. A t that time a further easing of call money rates diverted funds to the bill market, and some dealers re duced their offering rate for the best 90-day bills to 5% per cent, while others quoted 5 % or 5%. During the first three weeks of April the ruling rate fluctuated between these figures with a tendency toward the end of the period to center on 5 ^ . Evidence of the further broadening of this market is found in a report b y two dealers of the addition of 45 new buyers of bankers acceptances to their lists within Larger offerings of new securities at the close of March and in April were evidence that the comparative quietness of the preceding weeks had done much to reduce the large floating supply of only partly distributed issues. Num er ous small offerings and several of substantial size were reported well sold. Distributors, however, were cautious about oversupplying the market, in view of further large financing anticipated in the near future. New corporate offerings were still on a high-income basis, and original bids for $47,000,000 New Y ork City short-term notes, offered on an interest basis restricted to 6 per cent., fell far short of the total issue. Subsequently, however, the issue was placed on this basis. New corporation financing in M arch was $138,700,000, the smallest for any month in nearly two years and a decrease of nearly 50 per cent, compared with March of last year. Offerings were chiefly industrial securities, and as in past months notes and bonds greatly exceeded stock issues. Of total offerings for the month, it is esti mated that about 25 per cent, were to pay off maturing obligations. 4 MONTHLY REVIEW B ond M arket The bond market during the four weeks ended April 20 was comparatively dull. Average prices for industrial and railroad bonds held practically steady, although a number of individual railroad issues reached lower levels. Public utility and foreign government bonds showed some tendency to rise. Japanese sterling bonds, City of Paris 6’s, Mexican bonds, Chinese Government railway 5 ’s, and Cuban issues displayed conspicuous strength. March sales of corporation, foreign government, and miscellaneous bonds totaled $91,000,000, which, with the exception of February, was the smallest monthly volume of sales since August. U n i t e d S t a t e s S e c u r i t ie s March sales of Liberty bonds and Victory notes on the New York Stock Exchange were $137,000,000, the lowest total for any month since 1918 and 39 per cent, less than sales in March, 1920. Lower money rates early in April apparently stimulated a moderate upward movement in prices, and the 4 ^ per cent, issues reached the highest levels since January. Later, however, prices reacted somewhat; so that on April 20 the general average was only slightly above that prevailing on March 21. The tax-exempt 3 ^ ’s were heavy throughout the period in the vicinity of 1920 low levels. The new April 15 issue of Treasury certificates of six months’ maturity at 53^ per cent, was more than 100 per cent, oversubscribed. Out of total allotments of $191,000,000 this district received $74,000,000, or 39 per cent. An active market continues for existing issues of certificates of indebtedness, and prices for all issues are quoted at or slightly above par. the rescinding of the general strike order the rate again rose above $3.93. Lire advanced nearly one cent, or practically 19 per cent, within the month. Lire have appreciated more than 40 per cent, since the first of the year. This rapid rise appears to have its chief foundation in evidence of im proved financial and economic conditions in Italy. Other continental rates moved more irregularly and closed the month practically unchanged. During April rates on both Hongkong and Shanghai advanced in response to higher quotations for bar silver, but Indian and Japanese exchanges touched new low levels for the year. South American rates tended lower and both Argentine and Chilean exchanges closed the period at the lowest quotations reached this year. The following table shows the closing quotations for principal exchanges on April 23, the change from last month, and the percentage depreciation from par. Country April 23 Last Change from March 19 Per Cent. Depreciation from Par England................................. France.................................... Italy....................................... Spain...................................... Germany................................ Switzerland............................ Sweden (Stockholm)............. Holland.................................. Belgium.................................. Argentina............................... China (Hongkong)............... China (Shanghai).................. Japan (Yokohama)............... 3.9350 .0733 .0485 .1384 .0151 .1731 .2360 . 3484 .0746 .3154 .5038 .6588 .4825 .8900 .6063 + .0225 +.0038 + .0079 -.0 0 1 1 — .0010 — .0006 + .0055 + .0044 + .0018 — .0224 + .0338 + .0263 .0 + .0150 + .0288 19.1 62.0 74.9 28.3 93.7 10.3 11.9 13.3 61.3 25.7 * * 3.2 11.0 S to ck M a r k e t Bar Silver in N. Y ................ The stock market continued to reflect a lack of incentive fot any decisive change in either direction. Averages of representative railroad stocks sagged lower until they again reached the vicinity of 1920 low levels. Announcement of the proposed abrogation on July 1 of the railway labor national agreements regarding working conditions caused prices to rally sharply from the lowest point, but the forward movement was not sustained. Industrials fluctuated narrowly in the neighborhood of the level which has been maintained since early in the year. Just after the 20th of April there was a rally of about two points in both rail and industrial averages. March stock sales totaled 16,300,000 shares, an increase over the totals for January or February, but a decrease of 44 per cent, compared with sales in March last year. Trading in April was less active than in March. *Silver Exchange Basis. F o r e ig n E x c h a n g e Fluctuations in British and continental exchange rates were within rather narrow limits during the past month, mainly as a result of limited offerings of commercial bills on the various centers. Sterling advanced slightly in a quiet market in the last week of March, touching $ 3 .9 3 ^ , the highest rate on London since July 12, 1920. Thereafter, fluctuations were governed largely by news developments in connection with the British labor crisis. On the announcement of E x c h a n g e R a t e s a n d C u r r e n c y D e p r e c ia tio n From time to time there have been references in the R e v ie w to the theory of foreign exchanges put forward in 1861 by Viscount Goschen. The theory is to the effect that the primary reason for the wide divergence of foreign exchanges from their gold parity is found in the relative depreciation of currencies in different countries, or, to put the same idea in another way, in the relative domestic purchasing power of the currencies of different countries. The best measure of currency depreciation or change in the purchasing power of currency is found in index numbers for wholesale commodity prices. If commodity prices are doubled, for example, the purchasing power of money is cut in half. From the comparative levels of wholesale prices in two countries, it is possible to compute percentages showing the decline in purchasing power of money in one country as compared with the decline in another country. In the accompanying diagram lines are plotted to show the percentage decline in the purchasing power of currency in three European countries as compared with the pur chasing power of the United States dollar. For each country there is also plotted a line showing the percentage depreciation from par of its exchange at New York. A FEDERAL RESERVE AGENT AT N EW YORK comparison of the two lines shows that as Goschen indi cated the exchanges of these countries have, since free movements of the exchanges began, moved very closely with the relative purchasing power of their currencies as expressed in their wholesale prices. Prior to 1919, the principal allied exchanges were “ pegged,” or arbitrarily fixed, and did not decline with price inflation. Consequently, little relation is shown between the two lines on the diagram prior to 1919, especially for France and England. After the exchanges were “ unpegged,” depreciation in exchange and deprecia tion in purchasing power moved in the same general direction. It is notable, however, that since the early part of 1919 exchanges have been constantly lower than relative purchasing power. The most important factor in this difference has undoubtedly been the constant balance of indebtedness against the European countries and in favor of the United States. A further factor has been the uncertainty of the political situation in Europe. In the past few months there has been a distinct tendency for exchanges to rise nearer to the purchasing power levels. PER CENT DEPRECIATION ZO 40 60 80 100 0 210 40 60 60 100 0 / / /t EX^HANGE^/ _ 4-0 60 ______ PJJfiCH\t'vSIN&’pQWFR 0!FCURBFNGY \ * 00 100 Conditions in South America are reported as particu larly unsatisfactory, as the renewed weakness of the exchanges has not only discouraged new business but has increased the difficulties involved in collecting on goods already contracted for and shipped. It is being found necessary to re-extend many credits which are now falling due. Both dollars and sterling in some of the South American countries have recently reached new high levels. In Australia, on the other hand, where payments in dollars came practically to a standstill, due to depletion of Australian balances abroad, there has been an improve ment in collections, and Australian banks are remitting somewhat more freely. The new facility of bankers ac ceptance credit in this country for the creation of dollar exchange in Australasia is helpful in this regard. Japanese buyers have recently taken substantial, tonnages of steel for both private and government use. Elsewhere the steel market remains comparatively quiet. Some exporters of machinery report an increased demand from Europe for construction machinery of all kinds, and a larger call from Japan for machine tools. Higher prices for silver have been accompanied by a larger demand from China and India for cotton goods, and considerable sales to the Levant were also reported. Exports of raw cotton continue to decrease, and March shipments of 375,180 bales were 50 per cent, less than in March last year. Germany led as the country of destina tion. Much cotton is being shipped by Americans to Bremen and sold from stocks there, not only to German spinners but to spinners in other parts of Central Europe. This buying, which fell off a month or so ago during the first disagreements over the German reparations, is again going forward. An exporting house which has been carry ing on shipments of this kind reports that payments are being made largely in cash. 0 Z0 5 ITALY 19i7 \91Q 1919 19Z0 Foreign demand for American wheat has been active, and Italy, Holland, Germany, and Great Britain were leading buyers. American wheat continues to undersell Argentine wheat. March foreign trade figures reported by the Depart ment of Commerce showed a further heavy decline in the value of exports. Shipments totaled $387,000,000, the smallest for one month since 1917, and a decrease of 53 per cent, compared with the total of March last year. Imports, on the other hand, continued the increase shown in February. The export balance was reduced to $135,000,000, compared with $296,000,000 in March last year, and $335,000,000 in March two years ago. The following table compares the monthly totals of exports and imports during the first quarter of this year with the totals for the corresponding period last year. 19Z\ Depreciation of Foreign Exchange from Par and Depreciation of the Purchasing Power of Foreign Currencies from the Purchasing Power of the Dollar. The Zero Line Represents the Value of the Dollar and the Figures for Exchange and Purchasing Power are Plotted as Percentages Below Full Dollar Value. Exports Month 1921 F o r e ig n T r a d e Although reports from exporters indicate an increased demand in certain foreign markets for certain lines of American products, there has been no general revival in activity. Imports February.... March.......... $655,000,000 489.000.000 387.000.000 1920 1921 $722,000,000 $209,000,000 645.000.000 215.000.000 820.000.000 252.000.000 1920 $474,000,000 467.000.000 524.000.000 Total........ $1,531,000,000 $2,187,000,000 $676,000,000 $1,465,000,000 6 MONTHLY REVIEW PER CENT, W o r l d C o m m o d i t y P r ic e s The latest reported index numbers for the general level of commodity prices in the United States, England, Prance, and Germany show a slackening in the rate of decline. In the case of all but the United States the slower price decline accompanied an expansion in note circulation. The check in the decline was most notable in Germany, in which the expansion in note circulation was most marked. The April 2 index of the Frankfurter Zeitung showed declines in textile prices, an advance in mineral prices, and little change in food and miscellaneous groups. In the index numbers of the General Statistical Bureau of France the food groups, which contain a number of im ported commodities, showed increases in price which offset in some measure considerable downward move ments of other groups. During April the prices of raw materials in both Eng land and the United States, as shown by this bank’s weekly indices of prices of basic commodities, have con tinued to decline, but at a very moderate rate. The table and diagram on this page trace in more detail the movements in those countries which regularly publish price indices. D o m e s t i c P r ic e s Wholesale Commodity Prices in Four Countries Expressed as Percentages of Average Prices in 1913 For the third successive month the Bureau of Labor Statistics index number for wholesale commodity prices, which is the best index of the general level of prices in this country, has shown a rate of decline less precipitate than in the preceding month. The index number for March is 162, 3 per cent, below the February figure. Of the 327 commodities, the prices of which go into the index, 173 declined in March, 89 remained stationary, and 64 advanced. I n d i c e s o f W h o l e s a l e P r ic e s Base of 1913 = 100 per cent, unless otherwise noted Per <2!ent. Change Dtiring Country Latest Quotation January United States: 12 basic commodities1................. Department of Labor.................. Dun’s ............................................ Bradstreet’s .................................. Great Britain: Economist.................................... Statist........................................... 25 basic commodities1.................. France............................................... Italy.................................................. Japan................................................ Canada............................................. Sweden2............................................ Australia3......................................... Calcutta4........................................... Norway............................................. Germany5.......................................... Denmark6......................................... 110.5 (Apr. 23) 162 (Mar. av.) 144.3 (Apr. 1) 123.5 (Apr. 1) - 189.3 (Apr. 208.1 (Apr. 169.7 (Apr. 356.4 (Apr. 622.8 (Feb. 191 .Op (Mar. 199.3 (Feb. 237 (Mar. 192 (Feb. (Mar. 174 278.4 (Apr. (Apr. 130 (Mar. 280 - 5.2 - 4.8 -1 0 .6 - 6.5 - 2.0 - 2.2 - 3.2 -1 0 .7 .5 - 1.1 -1 6 .4 - 9.3 -1 5 .0 1) 1) 23) 1) 1) av.) 15) 15) av.) 1) 1) 1) 1) 4.5 6.3 6.5 2.3 February March Date of High -1 2 .8 - 5.6 - 2.1 - 4.1 - 5.5 3.0 4.1 4.1 54.4 40.4 33.7 45.5 May May May Feb. 17, 1920 1920 1, 1920 1, 1920 - 7.9 7.2 7.6 7.6 - 1.5 3.2 8.2 5.2 3.0 4.0 6.4 2.0 2.2 9.1 3.7 3.4 - 2.0 - 5.2 - 0.9 0.8 Apr. May Mar. May May Mar. May Dec. Aug. Feb. Oct. May Nov. 1, 1, 12, 1, 1, - 39.0 33.4 50.9 39.3 8.3 40.6 24.3 36.3 18.6 20.2 35.7 17.2 30.5 Computed by this bank. 2July 1, 1913, to June 30, 1914 = 100. 3July, 1914 = 100.4 End of July, 1914 = 100. 1912, to June, 1914 = 100. J>Preliminary. Per Cent. Decline from High 15, 15, 5January 1, 1920 = 100. 1, 1, 1, 1, 1920 1920 1920 1920 1920 1920 1920 1918 1920 1920 1920 1920 1920 6July, FEDERAL RESERVE AGENT AT N EW YORK The recent levels of the index and the percentages of decline each month since the high point was reached, have been as follows: Month Index Number (1913 Average = 100 Per Cent.) Per Cent. Decline from Preceding Month 272 269 262 250 242 225 207 189 177 167 162 1.1 2.6 4.6 3.2 7.0 8.0 8.7 6.3 5.6 3.0 May, 1920........................................ June, 1920........................................ July, 1920 ....................................... August, 1920.................................... September, 1920 ............................ October, 1920 ................................. November, 1920 ............................. December, 1920 ............................. January, 1921................................. February, 1921............................... March, 1921................................... The recent movement of the various groups making up the index number is shown in the following table. The groups in which prices have fallen nearest to 1913 levels are those containing largely raw materials and affected least b y increased labor costs, such as farm prod ucts, food, and metals. The movements of these groups have been not unlike those of such indices as Bradstreet’s index and this bank’s index of 12 basic commodities. The groups farthest above 1913 levels are still house furnishings and building materials. Commodity Group Maximum Index March Index Per Cent. Decline from Maximum Decline During Month Farm Products......... Metals....................... Food, etc................... Chemicals, etc.......... Cloths and Clothing . Fuel and Lighting. . . Building Materials... House Furnishings.. . Miscellaneous........... All Items................... 246 195 287 222 356 284 341 371 247 272 125 139 150 171 192 207 212 275 167 162 49 29 48 23 46 27 38 26 32 40 3.1 4.8 0.0 3.9 3.0 5.0 4.5 0.7 7.2 3.0 C o s t o f L iv in g Index figures for those retail prices which make up the cost of living compiled b y the National Industrial Con ference Board show practically no downward movement during March. The index number for April 1 is less than 1 per cent, below the M arch 1 figure, at a point 68 per cent, above the 1914 level and down 18 per cent, from peak. The movement of the past two months reverses the position of the wholesale and retail price indices. For many months wholesale prices were further above their 1913 average than were retail prices, but the two lines have now crossed. This is illustrated in the follow ing diagram which shows the Department of Labor index number for wholesale prices and the National Industrial Conference Board index number for the cost of living. Im m ig r a tio n The number of immigrants arriving at the port of N ew Y ork in March was slightly larger than in February. 7 PER CENT. 500 -------- r - 1916 1917 1918 1919 1920 (9£l Wholesale Prices and the Cost of Living Expressed as Percentages of Figures for July, 1914 Precautions taken at points of departure have been effec tive in preventing the recurrence of infectious diseases. As a consequence, the diversion of vessels to other ports has ceased and there has been less delay in admitting those arriving. The following table compares immigration figures for this port for the past three months. Month Average, 1910 to 1914.. January, 1921............... February, 1921............. March, 1921................. Arrivals Departures Net Increase 63,316 56,465 34,595 43,114 18,082 37,442 22,404 22,140 45,234 19,023 12,191 20,974 High passenger fares probably deter many aliens from coming to America. Steerage fares from Italy, for example, are now about 2,000 lire as compared with between 175 and 200 lire before the war, or converted to dollars at current exchange rates $92, as compared with $35 to $40 before the war. W a g e s an d E m p lo y m e n t In order to secure a more comprehensive view of the present wage situation the twelve Federal Reserve Banks during April sent to concerns in all parts of the country a brief list of questions concerning number of employees, amount of pay-roll, and changes in wage rates, and re ceived replies from concerns employing in the aggregate more than 1,300,000 persons. Those which reported were sufficiently representative of different industries to fur nish a good indication of the present situation as to employment and wage rates. In the New Y ork district, out of 277 firms addressed, reports were received from 156, which employed on April 1, 1921, a total of 415,000 persons as compared with 498,000 on April 1, 1920, a reduction of about 17 per cent. MONTHLY REVIEW 8 Similar figures for each industry are given in the table at the foot of this page. The greatest reductions were in iron and steel, ship-building, and machinery. In only one industry, paper and paper products, was the number of employees larg this year than last. The decrease of 17 per cent, in the total number em ployed is less than the decrease reported recently by the New York State Industrial Commission. The difference is largely accounted for by the fact that the reports of the Industrial Commission include only factory workers, while the inquiry of this bank covered railroads and public utilities as well. Some reduction in hourly or daily rates of pay has been made by more than half of the concerns sending in returns. The reductions range from 5 to 25 per cent, and average in the neighborhood of 12 per cent. The way in which they are grouped is illustrated in the fol lowing diagram, which shows how many firms made average reductions of between 1 and 5 per cent., between 6 and 10 per cent., etc. Percentage Reduction 1 TO 5 Number of Concerns I 6 T 0 10 Number of Concerns Making Reductions Indicated in Rates of Pay of Workers Nearly 80 per cent, of the firms making reductions did so on a uniform basis for nearly all employees throughout E m p lo y m e n t and W ages their plants. When a differentiation was made, the greatest reductions usually occurred among unskilled workers whose wages had risen most during the war period. Other bases for determining rates of reduction were length of service, type of operation performed, or the extent to which the worker was affected by part time arrangements. The office force was frequently not included in wage reductions. The table at the foot of the page shows the number of concerns in different industries making reductions in wage rates and the average reduction effected. It is notable that the industries which have reduced the num bers of their employees most have as a rule made consid erable reductions in wage rates. Although there have been extensive reductions in wage rates, the average weekly earnings per employee as com puted from aggregate pay-roll figures show almost no change from April 1, 1920, to April 1, 1921. On both dates average earnings were slightly over $30 a week. The fact that the earnings do not show any reduction is due in the main to the inclusion of large numbers of em ployees on railroads, in public utility companies, and in the printing trades, in which there have been practically no reductions in rates of pay. Another factor has been the tendency of employers to discharge the least compe tent and the most poorly paid workers first when reducing the number of employees. In the Boston and Dallas districts there has been about the same percentage of decrease in employment as in the New York district, and on the western coast there was a smaller decrease. All the other districts report greater decreases. Similarly the New York district has been affected less than most of the other districts in the matter of reductions in average earnings. The figures showing the changes in the number employed and in average earn ings between April 1,1920, and April 1,1921, are as follows; in t h e S e c o n d F ed eral R ese rv e Number of Workers Employed Industry Number of Firms Reporting April, 1920 April, 1921 D is tr ic t Average Weekly Earnings Rates of Pay Per Cent. Average Firms Per Cent. Showing Showing Per Cent. Change Reduction Reduction Reduction April, 1920 April, 1921 Per Cent. Change $30.49 33.21 29.68 32.83 24.56 23.76 25.98 24.49 36.13 21.82 40.73 31.67 27.95 19.71 33.01 21.29 -3 1 .2 + 4.4 - 8.1 + 1 3 .7 -1 1 .8 - 9.5 - 7.2 + 0.8 + 6.2 -1 2 .2 + 6.3 + 0.8 - 6.0 - 5.8 + 6.0 - 9.6 $30.27 0.0 Iron and Steel........................................ Shipbuilding........................................... Machinery.............................................. Automobiles........................................... Miscellaneous Metal............................. Munitions, etc....................................... Boots and Shoes.................................... Clothing................................................. Railroads................................................ Textiles................................................... Printing.................................................. Electrical Goods.................................... Food....................................................... Paper...................................................... Public Utilities...................................... Miscellaneous..................... ................... 7 6 16 5 21 6 9 11 4 13 9 9 10 5 8 17 7,579 12,982 34,678 12,879 55,570 10,426 30,885 11,926 67,291 18,214 10,746 117,653 14,318 4,340 41,869 46,333 3,148 €,645 23,044 8,763 38,892 7,348 26,105 10,154 58,081 15,774 10,005 115,335 14,106 4,353 42,191 31,634 -5 8 .5 -4 8 .8 -3 3 .6 -3 2 .0 - 3 0 .0 - 2 9 .5 -1 5 .5 -1 4 .9 - 1 3 .7 -1 3 .4 - 6.9 — 2.0 - 1.5 + 0.3 + 0.8 -3 1 .7 5 4 11 3 16 6 0 2 0 9 1 8 9 3 1 12 71.4 67.0 69.0 60.0 76.0 100.0 0.0 18.0 0.0 69.0 11.0 89.0 90.0 60.0 12.5 70.0 18.0 11.0 12.0 10.0 12.0 15.0 i i .6 12.0 12.0 12.0 9.0 9.0 H .o $44.32 31.81 32.30 28.87 27.83 26.24 28.00 24.29 34.03 24.84 38.31 31.42 29.74 20.92 31.14 23.55 Total............................................... 156 497,689 415,034 - 1 6 .6 90 57.7 12.0 $30.28 9.0 FEDERAL RESERVE AGENT AT NEW YORK District 1—Bosto n 2—New York. . . 3—Philadelphia. . 4— Cleveland 5—Richmond 6—Atlant.............a 7— Chicag o 8—St..Louis........ 9—Minneapolis. . 10—Kansas City. . 11— Dalla.............. s 12— San Francisco Total.............. Per Cent. Change in Number Employed Per Cent. Change in Average Weekly Earnings -17.5 -16.6 -23.2 -43.8 - 6.2 0.0 -21.2 -35.7 -32.9 -21.9 -29.7 -26.0 -16.8 - 1 4 .2 - 1 8 .2 -1 3 .2 -2 4 .1 - 5.4 - 5.1 - 5.8 +11.6 - 6.2 + 6.4 + 12.3 -23.8 - 5.9 R e ta il T r a d e March sales of thirty-seven department stores that report to this bank were 4.6 per cent, below the sales of March, 1920, as will be seen from the table at the bottom of this page. Merchants inform us that sales during the first three weeks in April were somewhat behind sales in April last year, which were especially large. When price changes are taken into consideration it is evident that the volume of merchandise distributed each month continues to be greater than in the corresponding period last year. March reports show an increase of about 12 per cent, in the number of transactions. The average amount of each transaction was $3.07 as compared with $3.52 in March, 1920, a decline of 13 per cent. Stocks on April 1 were 22 per cent, below those of the corresponding date last year, due largely to lower prices. Stocks increased between M arch 1 and April 1 because of the receipt of the usual purchases of spring and summer merchandise. Because of the continued large sales, coupled with the decreased value of stocks, the ratio of stocks to sales is smaller. Merchants continue to maintain annual profits by the more frequent turn-over of stocks. The amount of outstanding orders on April 1 was greater than for several months past, due to the fact that many of the stores are placing orders for fall goods. In some cases retailers have shown a greater willingness to Sales and Selling Value of Stocks on Hand of 25 Department Stores Expressed as Percentages of Average Sales for 1919 place advance orders. Hand-to-mouth buying continues in those primary markets in which retailers believe the process of readjustment has not been completed. The accompanying diagram, compiled from figures sub mitted in dollar values by twenty-five stores, shows the fluctuations in sales and stocks during the years 1919,1920, and thus far in 1921. B u s i n e s s F a il u r e s In March as in February the number of business failures in the United States showed a decrease from the figures for the preceding month. The decrease, however, was but little greater than the normal seasonal decrease. In the first three weeks in April the number of failures was at a slightly higher rate. B u s in e s s o f D e p a r tm e n t S to re s New York Elsewhere City and in Second Brooklyn District Number of firms reporting.............................................................................................................................................. Per cent, change in net sales during March, 1921 compared with net sales during March, 1920.......................... Per cent, change in number of transactions during March, 1921 compared with number of transactions during March, 1920 (17 firms reporting)............................................................................................................................... Per cent, change in net sales from January 1 to March 31, 1921 compared with net sales during corresponding period in 1920............................................................................................................................................................... Per cent, change in stocks at close of March, 1921 compared with stocks at close of March, 1920..................... Per cent, change in stocks at close of March, 1921 compared with stocks at close of February, 1921................. Percentage of average stocks at close of January, February and March, 1921 to net sales during those months Percentage of outstanding orders at close of March, 1921 to total purchases during calendar year, 1920 ........ - 14 5.8 - 23 0.3 Second District - 37 4.6 + 1 3 .3 + 10.0 + 12.4 - 4.5 -2 3 .2 + 8.3 310.1 7.1 + 0.7 -1 7 .9 + 9.0 407.7 5.7 - 3.4 -2 2 0 + 8.5 330.6 6.7 10 M ONTHLY REVIEW Liabilities involved in M arch and February failures were larger than in January because of heavy liabilities of a number of firms failing in this district. The following figures are from D un’s reports for this district and for the entire country. Liabilities Number of Failures Month December. . . . January.......... February........ March............ Second Federal Reserve District Entire United States Second Federal Reserve District Entire United States 338 390 222 248 1,525 1,895 1,641 1,336 $21,538,235 9,808,623 26,836,505 30,836,852 $58,871,539 52,136,631 60,852,449 67,408,909 V o lu m e o f P r o d u c tio n The following table compares for a number of impor tant commodities the volume of production in the first three months of this year with averages of 1919 and 1920 figures for corresponding months. In most of the items listed 1921 production is considerably less than in 1919 and 1920. While M arch figures show improvement in some cases as compared with those for February, there is as yet no consistent gain. Production in 1921 (Average for 1919 and 1920 in Corresponding Month = 100) Commodity January February Anthracite Coal Mined.......................... Bituminous Coal Mined........................ Cement Production................................ Cotton Consumption............................. Pig Iron Production............................... Steel Ingot Production.......................... Sugar Meltings....................................... Tin Deliveries......................................... Wheat Flour Milled............................... Locomotive Output................................ 103 88 88 64 77 73 56 54 76 103 137 85 92 83 66 63 73 41 82 83 March 122 75 115 87 49 53 117 47 95 66 C o tto n and C o tto n G o od s The price of raw cotton fluctuated narrowly during the past month, governed largely b y developments abroad and foreign exchange rates. Acreage curtailment in cotton-growing States was a factor in maintaining prices. In the cotton goods market there was a good demand for some fabrics, especially ginghams, and one of the largest mills announced recently that its fall production had been sold and its lines withdrawn. The improvement failed to extend over the entire market and there were no important price changes. The consumption of cotton in March was 438,000 bales compared with 386,000 bales in February. The difference between the figures is accounted for by the difference in the number of working days in the two months. April factory operations are on about the same scale as in the preceding two months, a scale about 25 per cent, below normal. Wool, Woolen Goods, and Clothing B y the middle of April all of the woolen mills had shown their new fabrics for the fall season, and in many cases they have now received all the orders they are pre pared to accept. As a result of cancelation experiences last year, manufacturers are refusing to accept orders in excess of what they believe to be the needs of the buyers. According to the figures prepared by the Department of Commerce 51 per cent, of the looms in weaving mills were idle on M arch 1, as compared with 61 per cent, on February 1 and with 58 per cent, on January 1. In the spinning mills on M arch 1 only 38 per cent, of the worsted spindles and 51 per cent, of woolen spindles were idle. Between 65 and 70 per cent, of the spindles were idle during January. Current estimates indicate that opera tions in both weaving and spinning mills were on a larger scale in April than in March. Partly as a result of in creased mill activity and partly in anticipation of tariff legislation, large imports of raw wool are coming to this country from England, Australia, and South America. In the clothing industry the effect is now being felt of the unwillingness of merchants to place orders for future delivery and the reluctance of manufacturers to make up goods before receiving orders. There is an actual shortage of high-grade men’s spring clothing for immediate delivery. Clothing manufacturers are being delayed in their offering of fall garments by the delay of the mills in delivering fabrics for sample suits. The men’s clothing industry in New Y ork C ity is also still hampered b y labor troubles. In Rochester the output is normal, and wages have not been reduced. M anu facturers of women’s clothing in New Y ork City have notified the unions of a reduction in wages before the fall season and have stated that the reduction would be reflected in lower prices for the consumer. S i lk Retailers, garment manufacturers, and jobbers placed large orders for silk goods during the past month. These orders for the most part were for early delivery and re sulted in a continued increase in manufacturing activity. In Paterson, N . J., and adjacent towns the industry is now operating at 60 per cent, of its maximum capacity. The figures in the following table indicate the rapid re covery which has taken place during the past few months. Month Per Cent, of Operations to Maximum Capacity Bales in New York Warehouses at End of Month Bales Imported November, 1920........... December, 1920........... January, 1921.............. February, 1921............. March, 1921................. April, 1921.................... 18 21 25 37 49 60 48,357 44,563 31,859 27,928 16,386 9,285 6,341 9,499 14,361 14,043 There have been small advances in the price of raw silk during the past few weeks. Current quotations are slightly above the minimum price fixed and maintained by the Japanese syndicate with the assistance of the Japanese Government. FEDERAL RESERVE AGENT AT N EW YORK 11 Building Costs Iro n a n d S te e l This bank has received from a number of contractors and architects computations showing the cost of erecting different types of buildings in Greater New Y ork in 1914, at the period of highest prices in the late summer of 1920, and at the present time. The results are presented in the following table. Because of rapid fluctuations in the prices of materials during the past year, and because of particular arrangements which individual builders have been able to make, quotations from different sources show wide variations. The figures in the table are therefore shown in round numbers and are measures of general tendencies only. In every case, however, the percentages are computed from actual bids for similar buildings. The percentage decline in costs in the past six months is remarkably uniform for different types of construction, and ranges from 19 to 27 per cent. Costs, in 1920 and 1921 are shown in the tables as percentages of 1914 ccsts. Increased production b y some of the independent steel companies during the past month was more than offset by further reductions in the operations of the United States Steel Corporation. B y the middle of April the rate of operation of the steel industry as a whole was probably not much in excess of 30 per cent, of capacity, as compared with an average rate of 40 per cent, in March. Plants of the Corporation were operating at not more than 40 per cent, capacity and those of the independents at rates averaging under 30 per cent. Type of Building Highest Costs 1920 April Costs 1921 (1914 Costs = 100 P<jr Cent.) High Class Elevator Apartment........... Medium Class Non-elevator Apartment Suburban Residence............................... High Class Office Building..................... Office and Loft Building........................ City Public School................................. 275 230 375 225 220 350 210 180 275 170 165 285 Per Cent. Decline 1920 High to April,1921 24 22 27 24 25 19 The average cost of building materials is down nearly 40 per cent, from the high point, with the greatest decline in lumber. Builders also report a notable increase in the efficiency of labor in the past few months. A number estimate that the increase in the daily output per man is as high as 20 per cent. V o lu m e o f B u ild in g Building contract awards in New Y ork State and northern New Jersey in M arch aggregated $29,846,000 in value, according to the F. W . Dodge Company reports, an increase of 40 per cent, over February. The number of projects increased 63 per cent., indicating a greater proportion of small undertakings. Residential buildings, which averaged only 22 per cent, of the contract awards for the year 1920, were 48 per cent, of the February total and 59 per cent, of the March total. The increase in residential construction has been con fined almost entirely to the least expensive apartments and small houses. Tax-exemption legislation has been an important influence in recent increased residential con struction in Greater New York. The present law allows a 10-year exemption from taxation of $1,000 per room in houses and apartments costing up to $5,000 constructed in the next two years. Loft and office-building construc tion is proceeding at a slower rate than at any time in more than a year, as the supply of office space is now re ported to be practically equal to the demand in all parts of the city. Announcement was made by the United States Steel Corporation on April 13 of reductions in the prices of most of its products. The new prices range from 4 to 17 per cent, below the prices quoted since M arch 22, 1919. While the effect of this reduction has not yet been felt in the volume of new business, the changes have tended to stabilize the steel market. Independent com panies which had been quoting prices below those now quoted b y the Corporation have in most cases brought their prices up to the Corporation level. Unfilled orders on the books of the Steel Corporation on M arch 31 totaled 6,285,000 tons, a decrease of 650,000 tons as compared with the figure for February 28. This decrease is about the same as has occurred for several months. C r o p C o n d itio n s Crop growth in this district is reported b y the Depart ment of Agriculture to be two to three weeks ahead of normal as a result of mild weather. Fruit trees in the southern part of the district were brought to full bloom prematurely b y the warm weather in M arch and in some areas suffered damage from freezing early in April. Peach and cherry trees in particular were seriously frosted. In the main fruit belt close to Lake Ontario, apples have apparently not been injured and early prospects are for a heavy crop. Winter grain crops in both New Y ork and northern New Jersey on April 1 were estimated b y the Bureau of Crop Estimates at 12 per cent, ahead of last year and 8 per cent, ahead of the average condition on that date. Winter wheat is everywhere in good condition and was not appreciably damaged b y several periods of freezing temperature. Some damage was caused to rye fields in the upper Hudson valley, but elsewhere in the district this crop also is in better than average condition. A recent survey by the Agricultural Statistician for the State of New Y ork showed that the number of people on farms in the State on February 1 was 2 per cent, less than on February 1, 1920. During the previous year the decrease was 3 per cent, and during the year ended February 1, 1918, it had been 4 per cent. This survey also indicated that about 40,000 men and boys left the farms to go to other work last year, while 16,000 left other work to go to farming. There are now about 22,000 vacant habitable houses on New Y ork farms. On the farms reporting this year, 11 per cent, of the habitable houses were vacant as compared with 10 per cent, vacant last year. The Federal Reserve Banks and the Currency O R the half century prior to 1914 the United States suffered from an inelastic currency. A t times there was too much currency and at other times too little. When there was too much currency for the needs of business there was no way of reducing it, interest rates fell very low and speculation was encouraged. On the other hand, almost every autumn when large amounts of currency were needed for the harvests there was difficulty in getting together enough currency; the same was true in the cities at the Christmas shopping seasons. This scarcity of cur rency at such seasons generally brought about very high interest rates, and when times of real apprehension oc curred, as in the autumn of 1907, every bank and many individuals began to hoard currency, which instead of helping the situation only accentuated its difficulties. F After the panic of 1907 Congress determined to put an end to the inelasticity of our currency and to provide a currency which would expand and contract in accordance with the needs of industry, commerce and agriculture. Without disturbing the existing forms of currency, namely: gold, gold certificates, silver, silver certificates, legaltender notes and National bank notes, and without dis turbing the rights, powers and functions of existing National banks, State banks and trust companies, Congress created twelve Federal Reserve Banks to hold the banking reserves of the country and to issue an elastic currency, responsive to the needs of the country. The gold, which is the basis of bank credit and banking power, was transferred from the thousands of banks and trust companies and placed in these twelve great reservoirs to serve as the basis for such additional credit as the country might need, whether in the form of additional deposits or additional currency. The amount of gold now held by the Federal Reserve Banks is $2,300,000,000. When this gold was scattered about in the hands of the people and in the twenty-five thousand banks of the country there was no common reservoir to which they could turn and each bank feared lest its supply should run out. But now that the reservoir is formed and is available to all member banks in accordance with their needs no such fear exists. For any member bank, by discounting with its Federal Reserve Bank the paper of its industrial, commercial or agricultural customers, or paper secured by Government war obligations, may get credit from the Federal Reserve Bank either in the form of a deposit with the bank or in the form of Federal Reserve notes. W e pay our bills in two ways, either by drawing checks against our deposit account in our bank, or by means of hand-to-hand currency. Experience shows that for every five or six dollars of bank deposits a dollar of handto-hand currency is necessary in order that we may pay for things in our accustomed manner. During the war bank deposits increased very greatly. This increase in bank deposits would not have occurred unless it had been possible to increase hand-to-hand currency proportion ately. Consequently the member banks had to come to the Federal Reserve Banks and discount with them a very large volume of their paper in order to secure the hand-tohand currency, in the form of Federal Reserve notes, which their customers required. The war, the greatest emergency the world has known, tested the note-issuing powers of the Federal Reserve Banks and found them thoroughly responsive to the increasing needs of the coun try. The following diagram, giving graphically the prin cipal figures of the twelve Federal Reserve Banks, shows both how notes increased in and after the war and how they have now begun to decrease. The reduction in the volume of notes outstanding now amounts to a little more than 16 per cent. Earning Assets, Federal Reserve Note Circulation and Member Bank Reserve Deposits, All Federal Reserve Banks Each Federal Reserve Bank keeps on hand at all times an immense supply of unissued Federal Reserve notes, aggregating for the entire Federal Reserve system over a billion dollars. These Federal Reserve notes are called into circulation as the member banks need them. They get notes by drawing checks on their deposit accounts and cashing them in Reserve notes or other currency, just as an individual would do at his own bank. Each member bank carries on hand such currency as it finds the demands of its customers require. It knows that at any time it can get additional currency promptly from its Reserve Bank, consequently when it accumulates more currency than it needs it sends the excess in to the Reserve Bank. The Reserve Bank pays shipping costs on currency both to and from out of town member banks. This greatly facilitates the prompt reduction of the volume of currency as soon as it is not needed and economizes the use of currency, since with the element of cost removed member banks carry only what is absolutely required. When notes are returned to the Reserve Bank they are automatically withdrawn from circulation until called for again by some member bank. The volume of notes handled by the Reserve Banks is very great. In the New York bank about 300 clerks are constantly sorting, counting, and shipping currency. On the average about 2,500,000 notes are handled by the money counters every day.
@FedFRASER