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The article on the last page describes the Relation of Credit to Business.

MONTHLY REVIEW
o f C r e d it a n d B u s in e s s C o n d it io n s
Second Federal Reserve District
Federal Reserve Agent

Federal Reserve Bank, New York

Business Conditions in the United States
U R T H E R increases in the production o f basic
commodities, in wholesale prices, employment,
wage rates, and wholesale and retail trade, took
place in March.
P roduction

F

Production in basic industries, according to the F ed ­
eral Reserve B oa rd ’s index, increased 4 per cent, in
March to a level 8 per cent, higher than at the 1920 peak
and 67 per cent, above the low point o f 1921. The out­
put o f pig iron, steel ingots, automobiles, and crude
petroleum, and the mill consumption o f cotton exceeded
all previously reported monthly totals. B uilding opera­
tions showed a further large expansion and the value of
contracts let for residences in March was the highest on
record. Railroad freight shipments have been larger
every week this year than in the corresponding weeks of
the past four years. Car shortage has been reduced to
the lowest point since September as a result chiefly of
the addition o f new equipment, a decrease in the number
of bad order locomotives and cars, and a concerted effort
to increase the average loadings.
Employment in the building trades and in many lines
o f m anufacturing continued to increase in the eastern
States. The surplus o f unskilled labor in the W est re­
ported in earlier months is being gradually absorbed by
the seasonal increase in farm work. A number o f lead­
PERCENT.

Index of Production in Basic Industries— Combination of 22 Indi­
vidual Series Corrected for Seasonal Variation (1919 average =
100 per cent.)




May 1, 1923

ing textile mills, steel mills, and packing plants an­
nounced general wage advances ranging between 11 and
1 2 ^ per cent., and numerous wage advances in other in­
dustries also were reported.
T rade
March sales by department stores reporting to Federal
Reserve Banks were 22 per cent, above those o f March a
year ago, partly because Easter purchases were made in
March this year, whereas last year such purchases were
largely deferred until A pril. Stocks o f goods held by
department stores were 6 per cent, larger than those held
a year ago but this increase was not so large as the in­
crease in sales and hence the rate o f stock turnover has
been somewhat more rapid. Sales by mail order houses
were larger than for any month since November 1920,
and 35 per cent, larger than in March 1922. Wholesale
trade in all reporting lines was larger than in March a
year ago.
W holesale P rices
Wholesale prices as measured by the Bureau o f Labor
Statistics index advanced 1.2 per cent, during March,
and were 15 per cent, above the low point o f January
1922. As in recent months the prices o f metals and
building materials showed the greatest increases, while
fuel prices showed a further decline from recent high
levels. Compared with a year ago, metals were 37 per
PERCENT.

Index of Wholesale Prices, IT. S. Bureau of Labor Statistics
(1913 average = 100 per cent.)

2

MONTHLY REVIEW, MAY 1, 1923

Z ILLIO N S
OF DOLLARS

BILLIONS
OF DOLLARS

Bank Credit—800 Member Banks in Leading Cities

Bank Credit— AU Federal Reserve Banks

cent, and building materials 28 per cent, higher. The
cost o f living increased slightly more than 1 per cent,
during March to a level o f 3 per cent, higher than a year
ago.
B an k C redit

slight increase in holdings o f bills bought in the open
market was more than offset by a decrease in Govern­
ment issues purchased, and total earning assets declined
to $210,000,000, the lowest since January, a year ago.
The article on the last page o f this m onth’s R eview
deals with the relation between credit capacity and p ro­
ductive capacity.

D uring the month prior to A p ril 11 a more moderate
growth in the demand fo r credit from member banks in
leading cities resulted in an increase o f about $48,000,000
in their loans made largely for commercial purposes, as
compared with an increase o f $235,000,000 in the pre­
ceding month. Through withdrawal of funds from in­
vestments and a further inflow o f gold, member banks
have been able to meet demands o f their customers for
increased credit and currency independently o f the Re­
serve Banks.
Consequently, the total volume o f Federal Reserve
Bank credit, measured by total earning assets, has re­
mained relatively constant during the past month, and in
fact since the seasonal liquidation at the turn o f the year.
The volume o f Federal Reserve notes in circulation has
also changed but little as the larger demand fo r hand to
hand money has been met chiefly by an increase in other
forms o f money in circulation.
There has been little change in money rates from those
prevailing in March.

Banking Conditions
The more moderate rate o f expansion o f commer­
cial borrow ing noted for the country as a whole between
March 14 and A p ril 11 was paralleled in this district by
an advance o f only $19,000,000 in member bank loans
largely fo r commercial purposes, between March 14 and
A p ril 11, compared with an advance o f $123,000,000 be­
tween February 14 and March 14. There was, however,
a slight increase in security holdings and loans on stocks
and bonds, so that total loans and investments o f all
classes increased moderately, compared with a slight
decline the previous month.
Notwithstanding these further slight increases in
member bank loans, rediscounts and advances o f the
Federal Reserve Bank o f New Y ork declined $55,000,000 between March 14 and A p ril 25 to $154,000,0(K), or
within $19,000,000 o f the lowest reached this year. A




Money Rates
A fte r the first o f A p ril there was a pause in the u p ­
ward movement o f money rates, and in some quarters
evidence o f a slight easing developed. This easing ac­
companied a decline in stock market requirements and a
lessened commercial demand for funds usual in A p ril
when early spring agricultural needs have been filled,
spring goods have been delivered to merchants, and
many commercial accounts are settled.
Commercial paper rates remained unchanged during
April at 5 to 5% per cent, in a quiet market confined
mostly to the smaller banks and limited by light supplies
o f paper. The market fo r Treasury short-term issues,
however, was slightly easier, and there was a distinct
relaxation in the collateral loan market. Stock E x ­
change call money ruled at 5 per cent, or lower, as com­
pared with frequent advances above that level in March,
while time money on stock market collateral eased to 5
to 5J4 per cent, fo r maturities up to 90 days and to 5%
to 5y2 per cent, thereafter, compared with a range o f
5y 2 to 524 per cent, fo r a short period at the first o f the
month.
In the bill market where rates had remained practi­
cally unchanged since last fall, dealers' buying rates for
bills maturing within 90 days advanced from 4H to a
range o f 4^4 to 4 ^ per cent., according to maturities,
and their offering rates advanced from 4 to 4H and 4%
per cent. A t these rates a good demand developed
which, coupled with a light supply o f bills, caused bills
to tend to react slightly.
Follow ing is the usual diagram carrying forw ard to
March 31 the record o f outstanding commercial paper
o f the dealers who report to this bank. A continued rise
in the volume o f paper outstanding during March accom­
panied gradual expansion in the volume o f commercial
borrowing at banks.

FEDERAL RESERVE AGENT AT NEW YORK

6

for prepayment on June 15 last the entire amount o f
the 3 % per cent. V ictory notes then outstanding,
amounting to $255,000,000, and on December 15 that
portion o f the 4J4 per cent, series bearing the designat­
ing letters A through F , amounting to $700,000,000.
The follow ing table, showing the volume o f V ictory
notes outstanding on each March 31 since the date of
issue, indicates the progress o f retirement each year.
Amount
Outstanding

Year
1920
.....................................
1921......................................................
1922....................................................
1923.
...........................................

Commercial Paper Outstanding— Twenty-Six Dealers

Security Markets
In both stock and bond markets A p ril was a month o f
somewhat less definite price tendencies than March.
Stock trading diminished to moderate proportions, and
prices fluctuated irregularly several points below the
high levels reached in March.
In the bond market, somewhat easier money rates con­
tributed to a firmer tone during the early part o f the
month.
Corporation and United States Government
issues recovered about a point in a dull market, but later
in the month showed some tendency to ease off from the
higher prices.
Foreign bonds were more conspicuously strong than
other types of issues, reflecting steadier exchange rates
and a more hopeful attitude towards European con­
ditions. French, Belgian, and certain o f the Central
European issues which were sharply depressed earlier in
the year, reached new high prices since 1922, in some
cases 12 to 15 points above the recent low points.
Dulness in outstanding bonds tended to keep new
financing within moderate proportions. One important
issue o f the period was $75,000,000 Federal Land Bank
4% s, offered at 100% , partly to provide funds to redeem
$55,000,000 5 per cent, bonds called fo r prepayment
May 1. In general, however, there was a tendency to
withhold new offerings.

Victory Note Redemption
On May 20 approxim ately $775,000,000 o f V ictory
notes, bearing the distinguishing letters G, H , I, J, K,
or L, fall due and will be paid as they are presented
fo r redemption at the Treasury or through the Federal
Reserve Banks. The Secretary o f the Treasury has,
however, authorized the immediate payment o f these
notes if the holder desires it, and redemptions under this
authority have been proceeding at the rate o f about
$1,000,000 a day in recent weeks. A fte r M ay 20 all
interest upon the V ictory loan will cease.
The redemption o f these notes will mark the final
retirement o f the V ictory issue, which amounted orig­
inally to $4,500,000,000. The greater part o f the re­
demption o f the issue has occurred since M ay 1921, when
the Treasury announced its comprehensive program fo r
debt redemption and refunding. The Treasury called




$4,422,781,000
4,100,438,000
2,621,413,000
801,259,000

Foreign Exchange
Further reaction in sterling exchange in A p ril
carried the rate down to $4.63, or 9 cents below the high
point reached last February. This reversal o f the pre­
vious trend accompanies a more marked upward tend­
ency in British prices as well as approach o f the period
when first payments by the British Government under
the new debt reduction plan fall due. French and Bel­
gian exchanges were firmer at approximately 6% and
524 cents respectively.
Principal changes in other rates included a sudden
break in German marks from about 21,000 to the dollar
to 30,000, after having held close to the higher figure for
two months in the face o f continued expansion in the
note circulation. Brazilian exchange declined early in
A p ril to a new low point while Canadian exchange
again fell below 98 cents fo r the second time this year.

Gold Movement
During March imports o f gold amounted to $15,951,000, o f which nearly $14,000,000 was received from The
Netherlands, Canada, and France.
E xports o f gold
totaled $10,392,000, nearly $7,000,000 o f which went to
India and about $2,500,000 to France. The follow ing
table shows imports and exports by quarters since Janu­
ary 1922.

1922
1st quarter..................................
2nd quarter................................
3rd quarter.................................
4th quarter.................................
1923

Imports

Exports

Net Imports

$88,798,547
34,214,148
86,543,170
65,613,920

$3,558,190
6,586,279
2,998,174
23,732,251

$85,240,357
27.627.869
83,544,996
41,881,669

57,154,256

20,263,387

36.890.869

Foreign Trade
Exports during March were valued at $350,000,000, as
compared with $307,106,000 in February and with $330,000,000 in March a year ago. This increase in value is
probably due to advances in price o f both basic and man­
ufactured products.
January imports recently announced were valued at
$319,000,000, leaving an excess o f exports o f only about
$17,000,000, the smallest excess since the early months
o f the war with the single exception o f last September.

MONTHLY REVIEW, MAY 1, 1923
(Estimated normal = 100 per cent.)

P r o d u c t i o n in B a s i c I n d u s t r ie s

D uring the month o f March production o f pig iron,
steel ingots, cotton goods, petroleum, and automobiles
reached new high figures exceeding any month in the
past. The follow ing table shows the March production
figures in these five commodities compared with the
highest previous months.

Commodity

Unit

March
Output

Pig iron, ..................
Steel ingots.. . . . . . .
Cotton codsumption
Automobiles. . . . . . .
Petroleum...............

Thous. gr. tons
Thoue, gr. tons
Thous. bales
Thousands
Thous. bbls.

3,521
3,402
623
353
56,132

Previous
Date of
High Figure Prev. High
3,509
3,352
615
289
51,467

Oct.
Oct.
May
June
Jan.

1916
1918
1917
1922
1923

1922

Low
1921-22
Anthracite coal......................
Bituminous coal.....................
Pig iron r ................................

741
561
30
29
25
15
75
55
77
67
64
64
55
77
86
73
26

Tin deliveries.........................
Copper, U. S. mine...............
Sugar meltings, U. S. Ports. .
Meat slaughtered...................
Wood pulp.............................
Paper, total*............. . . . . .
Cotton consumption.............
Wool consumption* e ........ .
Tobacco consumption...........
Cement r................................
Steel ingots r ..........................

1923

Nov.

Dec.

Jan.

99
81
92
75
110
86
111
147
98
91
108
106
140
94
136
100
87

103
85
101
80
95
85
93
136
94
93
103
95
129
87
135
94
85

108
83
103
81
128
94
93
115
104
100
109
103
138
96
158
101
97

Mar.

Feb.
112
81
105
74
109
89 p
109
121
103
101
108
126
88
160
lOOr
95

112p
80/;
110
85
110
91 p

107
146
99

* Seasonal variation not allowed for.
+ Strike period nob included.
e Estimated.
p Preliminary.
r Revised.

The output o f automobiles was at a rate indicating a
productive capacity o f 4,000,000 cars and trucks a year,
compared with an actual output of 2,600,000 in 1922,
heretofore the year of largest production.
Reflecting the exceptional output o f these com ­
modities and increased production in certain others also,
the production index prepared by the Federal Reserve
Board reached a new high figure at 125 (1919 average
being taken as 100 per cent.)* This compares with a
revised index o f 120 for February, and is 67 per cent,
above the lowest point o f production in the midsummer
o f 1921.
The follow ing table shows the index numbers com­
puted by this bank for production in different industries.
In each case production for the current month is com­
pared with an estimated normal production taking into
consideration the usual seasonal fluctuations and year to
year growth.
__-----cQC
^
•

A\

T
\

Production indices fo r eight different commodities are
illustrated in the diagrams at the foot o f this page.

Commodity Prices
During the past few weeks prices o f certain o f the
basic commodities continued to increase, and cotton, corn,
silk, lumber, copper, lead, and sugar reached the highest
levels since late 1920. P ig iron prices advanced to the
highest point since October. The manner in which price
advances in basic commodities have accompanied in­
creased production is illustrated in the diagrams at the
foot o f this page. A s far as it is possible to do so, price
figures are compared with production figures fo r the
same commodities. W ith a few exceptions, movements of
prices and production have been similar.
The Department o f Labor index number o f wholesale
prices rose 1.2 per cent, in M arch— the first considerable
increase since last November. There were advances in
T3
PC
£EN
PO
T--

.........

----------2.00

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PRICES
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CONSUM

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COPPER

COTTON
i

Pl<? IROf

5T)

!
.........

-2(0

V

l PRK

^

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Yyi

I10

i

Ko

192.0

192.1

1922

1923

V

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:ES/ ’X /
PRIC

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|-SL
AU
G
H
TERED

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192.0

W

WHEATP

CEMEN1

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PROBUCTK>N

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^PRODUCTION
50

0

150

PW
\PRODUCTI , r

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R0DUCTI0N

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nC

19£1

1922

1923

1920

192.1

1922

1923

m o

19 21

1922

1923

Monthly Changes in Production and Prices of Basic Commodities. Production Figures are shown as Percentages of the Output Normally
to be Expected when Seasonal Variations and Year to Y^ar Growth are taken into Consideration




FEDERAL

RESERVE

AGENT AT N EW

all o f the groups making up the index with the exception
of fuel and lighting, which is now at the lowest point
since A p ril 1922. The follow ing table shows recent
changes in the price groups making up the Department
o f Labor index.

Commodity groups

March
Index

February

March

Per cent,
increase
from recent
low

Metals..............................
Building materials...........
Farm products.................
Cloths and clothing.. . .
Fuel and lighting..............
Chemicals.......................
Foods..........................
House furnishings............
Miscellaneous...................

149
198
143
201
206
135
143
185
127

-4-4.5
+2.1
-0 .7
+ 1.5
- 2 .8
+ 0 ,8
0.0
0.0
+ 1 .6

+ 7 .2
+3.1
+ 0.7
+ 1.0
-2 .8
+ 2 .3
+ 1.4
+ 0 .5
+ 0 .8

36 .7
27.7
25.4
17.5
13.8
11.6
9.2
6.9
11.4

All groups.....................

159

+ 0 .6

+ 1.2

15.2

Per cent, change during

A fter showing little net change fo r many months, the
National Industrial Conference B oard's estimate o f the
cost o f living advanced 1.1 per cent, in March, the larg­
est increase in any one month since September 1921. The
increase was caused by advancing prices o f clothing,
shelter, and sundries. The total index is now 59 per cent,
above the 1914 level and 22 per cent, below the high point
recorded in the summer o f 1920.

YO R K

5

20 basic commodities, also compiled by this bank. These
two indices show the changes which have taken place in
recent years in the m ajor costs o f many industrial
operations.

Wages of Unskilled Labor compared with Prices of Basic Com­
modities (1913 average — 100 per cent.)

Wages

Employment

Increased industrial production during March was
accompanied by an exceptionally large number o f wage
increases. A report by the National Industrial Confer­
ence Board showed more wage increases between March
15 and A pril 14 than in the preceding six months com­
bined, with no single instance of a wage reduction re­
ported. The following table shows the wage increases
and reductions reported by the National Industrial Con­
ference Board for each month in the past year and indi­
cates the change which has taken place from a down­
ward to an upward tendency in wages.

An increase of more than 2 per cent, during March in
the number o f workers employed in factories was re­
ported by the New Y ork State Department o f Labor for
New Y ork State, and by the United States Bureau of
Labor Statistics fo r the United States as a whole. In
New Y ork State it was reported that over 35,000 workers
were added to factory payrolls during the month. Pres­
ent employment figures show a gain o f 28 per cent, over
the low point o f August 1921.
In spite of recent increases in employment, the num­
ber o f workers in representative factories both in New
Y ork State and throughout the United States is still be­
tween 10 and 15 per cent, less than the number on the
payrolls in the early part o f 1920, while, in marked con­
trast, factory output appears to be greater than the out­
put early in 1920. This relationship is illustrated in the
accom panying diagram. The index used fo r production
is the index com piled by the Federal Reserve Board
from reports for 22 basic industries, and that fo r em­
ployment is the compilation by the New Y ork State D e­
partment o f Labor. W hile these two indices do not
cover the same establishments, it is probable that they
are fairly representative o f the general course o f pro­
duction and factory employment in the United States.
The spread betwen the two lines in this diagram in
1922 and 1923 appears to indicate a considerably higher
rate o f output per man employed, and gives support to
reports o f greater efficiency by many individual concerns.
In the year 1920 labor shortages and high wages were
accompanied by reports o f relatively low efficiency. On
the other hand, during the past year a much higher rate
o f labor efficiency has been achieved by better manage­
ment, labor saving devices, and greater efforts toward
efficiency on the part o f the individual worker.

Month
Beginning

Reduc­
tions

April 15
May 15
June 15
July 15
Aug. 15
Sept. 15

54
23
25
7
4
4

In­
Total
creases Changes
9
26
21
8
119
65

63
49
46
15
123
69

Month
Beginning
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.

15
15
15
15
15
15

In­
Reduc­
Total
tions creases Cha nges
1
1
1
0
1
0

36
12
23
42
37
229

37
13
24
42
38
229

The index number fo r wages o f unskilled labor, pre­
pared by this bank, shows an increase since January
from 42 to 44 cents per hour. This index is now 22
per cent, above the low point of A pril 1922, but is still
15 per cent, below the maximum wage rates reached in
1920. The wages o f unskilled labor, being subject to
highly competitive conditions in the open markets, are
among the first to reflect changes in business conditions.
Average weekly earnings o f employees in representative
industrial establishments in New Y ork State were
$26.92 in March, and were $1.05 higher than in F ebru­
ary. The March figure is 11 per cent, higher than the
low point which was reached in A pril 1922.
In 'the follow ing diagram this bank’s index o f wages
o f unskilled labor is compared with an index o f prices o f




M O N TH LY R E V IE W , M A Y 1, 1923

6

A partial explanation fo r the present shortage o f labor
in view o f the fact that the nmmber o f factory employees
is still considerably below the 1920 high point, may be
found in the extraordinarily large demands fo r workers
on building construction. Further explanation may
perhaps be found in social factors such as the con­
tinuance o f young people in school for a longer period,
a result o f which might be expected to follow a period
o f unemployment.
PERCENT.

F or the construction o f this index it was first neces­
sary to arrive at a current quotation fo r building costs.
This was done by combining the Department o f Labor
index o f the cost o f building materials and an index o f
wages in the building trades. These two indices, to­
gether with a computation fo r the total cost o f building,
are shown in the follow ing diagram. The cost o f build­
ing is now at a point just less than twice the 1913 cost
and has risen about 18 per cent, since a year ago. These
figures take no account o f extra costs which may be due
to the paym ent o f special bonuses to labor or payments
fo r material above the market price.

Volume of Production in 22 Basic Industries compared with tjie
Number of Employees in New York State Factories— (1919 aver­
age = 100 per cent). In both Lines Allowance has been made for
the usual Seasonal Changes

An Index of Building Activity
During the month o f March the value o f permits
granted for building construction in representative cities
throughout the United States was larger than in any
previous month. F or 158 cities the total value o f such
permits was $369,414,000. This high value o f construc­
tion reflects in part the present high prices o f building
material and high wages.
In order to secure some measure o f the actual volume
of building, this bank has prepared an index o f the vol­
ume o f construction making allowance for price changes
and also fo r seasonal variations and the usual year to
year increase, which may be ascribed largely to the
growth o f population.
MILLIONS

OF DOLLARS

Changes in Wages of Building Workers, the Cost of Building
Material, and the Total Cost or Building. (1913 average = 100
per cent.)

The diagram to the left at the foot o f this page shows
the actual value o f the building permits granted in 158
cities fo r each month during the past six years. The
diagram at the right shows the same figures after they
have been adjusted to make allowance for price changes,
fo r seasonal fluctuation, and fo r year to year growth.
The figure fo r each month is expressed as a percentage
o f normal, normal being taken to mean the amount o f
building which might be anticipated if building con­
struction kept pace with the growth o f population with­
out fluctuations from year to year, or from month to
month.
’per

______________________________

cm

tr
*E f *M ltS IN %
OF NORMAL

NORMAL

V

/

r

i

1

i
19 IT

Value of Building Permits granted each Month in 158 Cities




191,&

>
w

1919

1920

192.1

1922

1923

Value of Building Permits in 158 cities compared with the Value
normally to be Expected each Month when Seasonal Variations
and Year to Year Growth are taken into Consideration

7

FEDERAL RESERVE AGENT AT NEW YORK

This diagram shows that in 19 20 , when building costs
approached a prohibitive level, the volume o f construc­
tion w as about 50 per cent, of w h at m ight norm ally be
expected. A s costs began to be reduced in 1 9 2 1 , construc­
tion picked up rap id ly, crossed the estimated normal
line in the early fa ll o f 1 9 2 1 , and at present is more than
80 per cent, above normal.
D u rin g the years from 1 9 1 7 , through the early p art of
1 9 2 1 , building construction w as considerably less than
the estimated amount required fo r business and fo r the
comfortable housing o f the population. A computation
on the basis of the foregoing figures shows that the short­
age of construction resulting from restricted building
during these years amounted fo r 1 5 8 cities to ap pro xi­
m ately two billion d o llars’ worth of construction at 1 9 1 3
prices. Th is shortage has been reduced about one-fourth
by the h eavy building of the past y e a r and a half.

Sales of Representative Wholesale Dealers in the Second District
and throughout the United States (1919 average = 100 per cent^)

Department Store Business

Wholesale Trade
M arch sales b y representative wholesale dealers in this
district m aintained the high level o f Ja n u a r y and F e b ­
ru a r y and were 2 2 per cent, larger than sales in M arch
19 2 2 . F o r the entire first quarter sales b y these dealers
were also 2 2 per cent, larger than in the first quarter of

1922*

M arch sales of machine tools, which reflect activity in
industrial plants, were three and a h a lf times as large as
those of M arch a ye a r ago. Diam ond and je w e lry sales
also showed v e ry m aterial advances. D etailed figures
are shown in the follow ing table.

DOLLAR SALES DURING MARCH
(In percentages)
Commodity
1919

1920

1921

1922

1923

Machine tools.. . ................
Jewelry........ .......................
Diamonds..........................
Dry Goods........ ................
Clothing......................
(d) Men’s .........
........
(b) Women’s.......... . . . .
Hardware............................
Shoes...................................
Drugs..................................
Stationery...........................
Groceries.............................

435
173
290
71
100
87
109
114
112
87
100
108

596
294
371
157
135
143
130
147
222
118
144
151

166
115
96
112
103
93
109
102
119
00
115
100

100
100
100
100
100
100
100
100
100
100
100
100

354
173
156
129
129
152
113
120
117
116
113
109

Total (weighted)................

100

154

105

100

122

Sales b y wholesale dealers in this district and the
country as a whole have fluctuated in a closely sim ilar
manner during the past fo u r years, but the recovery in
trade in the past few months has been considerably more
pronounced in this district. The F e d e ral R eserve B o ard
has compiled a weighted index of wholesale business of
700 dealers throughout the cou ntry sim ilar to that m ain­
tained b y this bank fo r 1 2 2 dealers in the Second D is­
trict. The following diagram compares the fluctuations
in these two indices. N o allowance has been made for
price changes or seasonal variations. Seasonal fluctua­
tions are more pronounced in the N ew Y o rk district than
in the country as a whole due largely to the im portance
of the clothing ind ustry in N ew Y o rk . In this in d ustry
a large p a rt o f the y e a r ’s sales is made in F e b ru a ry and
M arch and in A u g u st and September.




PER CENT

M arch sales b y departm ent stores in this district were
1 3 per cent, above those of a y e a r ago and were larger
than in an y previous M arch. Increases occurred in all
cities of the district and were especially large in B rid g e ­
port.
Due to the early date of E a ste r this year, E a ste r p u r­
chases were made in M arch, whereas last y e a r m any such
purchases were not made until A p ril. The volume of
E a ste r sales was p a rticu la rly evident in apparel stores,
which reported M arch sales 2 1 per c e n t larger than in
M arch a y ea r ago.
Stocks of departm ent stores computed at the selling
price show an increase of only 2 per cent, over those held
on the same date last year. A s sales in the first quarter
of 1 9 2 3 have increased n early 10 per cent., a more rap id
turnover of stock has resulted.
The follow ing table
shows the rate of stock turnover b y quarters du ring the
past fou r years.
Annual Rate of Stock Turnover (times per year)
It

1919

1920

1921

1922

1923

First Quarter.....................
Second Quarter..................
Third Quarter....................
Fourth Quarter..................

3.4
4.2
2.9
4.5

3.1
3.4
2.5
4.3

3.7
3.8

3 6

2 .7 I

4.7

3.3
4.0
•3.0
5.0

Entire Year....................

3.8

3.3

3.8

3.8

M ail order sales were 3 5 per cent, larger in M arch than
a y e a r ago, the same percentage of increase which was
reported last month.
D etailed figures are shown in the follow ing table.
MARCH SALES
(In Percentages)

STOCK ON HAND APR. 1
(In Percentages)

1919 1920 1921 1922 1923 1919 1920 1921 1922 1923
All Dept. Stores..
New York........
Rochester........
Syracuse..........
Bridgeport.......
Elsewhere in 2nd
District............
Apparel Stores. . .
Mailorder Houses

75
77
85
64
80
76
89

112
116
118
96
106
115
135

108
107
116
96
119
113
129

100
100
100
100
100
100
100

113
111
117
109
117
111
132

74
74
84
74
79
90
80

118
118
124
131
134
137
119

95
94
111
95
117
110
95

100
100
100
100
100
100
100

102
100
103
106
106
96
99

84
69
97

112
99
155

106
114
114

100
100
100

108
121
135

78
59
**

101
97
**

87
85
**

100
100
**

104
106
**

R e la tio n

o f

C r e d it

H E follow ing extract from the recent report of
Secretary H oover’s Committee on Business
Cycles and Unemployment will be o f interest to
anyone who is analyzing the present business and credit
situation:

T

“ Expansion o f bank credit is a necessary condition
o f expansion o f business operations. # * # But an
overexpansion of credit may so increase the purchasing
power o f business men that it will merely result in enab­
ling them to bid against one another fo r limited supplies
o f goods and materials so as to force prices above what
consumers are willing and able to pay. Bank credit
often expands so rapidly that it lifts the buying or in­
vestment power o f business men out of line with the gen­
eral buying power o f the community. Because o f their
strategic position the banks have an unusual duty and an
exceptional opportunity to give sound inform ation and
counsel to business men. # * *
“ W hile the relationship between the volume o f credit
and the volume of. business and the movement o f prices
is not always simple to interpret, it appears to be suffi­
ciently close to make it a matter o f first importance that
the volume and the flow o f credit should at all times be
tested by the contribution which additions to the volume
o f credit make to the total o f economic production.
Additions to credits which can not be economically
validated by a commensurate effect in actual produc­
tion are speculative, and as such should be subjected to
control, so that business and industry can be maintained
in a healthy state.”
The foregoing is a statement o f principle by a com­
mittee o f leading business men. Facts are presented be­
low which relate to the three divisions referred to, v iz .:
the volume of business, prices, and the volume o f credit.
T he V olume

of

B u sin e ss

In the follow ing summary, comparisons are made be­
tween those months when low points were reached and
the month of March 1923.
I ndustry— Production, measured by the index of
output in 22 basic industries, has increased
since July 1921......................................... 67 per cent.
Employment, measured by the number of
workers employed in New York State fac­
tories (fairly representative of industrial em­
ployment in the country as a whole), has
increased since August 1921.................28 per cent.
T rade— W holesale trade, measured by the sales
reported by about 700 firms representing
practically all sections of the country (with
allowance made for seasonal changes), has
increased since July 1921.......................23 per cent.
Retail trade, measured by the sales reported
by about 300 department stores in principal
cities throughout the country (with allow­
ance made for seasonal changes), has in­
creased since September 1921 ...........15 per cent.

The growth in the physical volume o f production indi­
cates a rate o f industrial recovery almost without parallel
in Am erican business, and the volume o f goods produced
and passed into consumption during the first quarter o f
1923 probably exceeds that o f any similar period in the
history o f the country.
P rices

and

W

ages

Changes in prices and wages from the low points may
be summarized as fo llo w s:




to

B u s in e s s

Prices— The Bureau of Labor Statistics index of
wholesale prices increased from January
1922 to March 1923................................. 15 per cent.
W ages— The hiring rate of wages for unskilled
labor in Eastern industrial centers increased
from April 1922 to April 15, 1923 ____ 22 per cent.
Average weekly earnings of workers in New
York State factories (fairly representative of
industrial earnings in the country as a
\vhole) increased from April 1922 to March
15, 1923 ....................................................... l i per cent.
T he V olume

of

C redit

The high industrial activity has involved a great in­
crease in the volume o f bank credit in use. Comparisons
are made below between those dates when low points
were reached and A p ril 11, 1923:
Member B anks in L eading Cities— Total loans
and investments have increased $1,974,000,000
since March 8, 1922, or........................... 14 per cent.
Commercial loans have increased $783,000,000
since August 30, 1922, or....................... 11 per cent.
Demand and time deposits have increased
$2,453,000,000 since September 21, 1921, or
19 per cent.

Since the first o f the year the growth o f total loans
and investments has been due entirely to the rapid in­
crease in commercial loans; loans on stocks and bonds
and the investment holdings o f these banks have declined.
This shift in the form o f bank credit is in response to
the increasing demand for credit for commercial and in­
dustrial purposes.
The use o f Reserve Bank credit, particularly in the
industrial sections o f the country, has also increased
from the low point o f last summer, as fo llo w s:
A ll

F ederal R eserve Ban k s — Earning assets
have increased $138,000,000 since August 9,
1922, or ..................................................... 14 per cent.
Loans to member banks have increased $263,000,000 since July 26, 1922, or...............69 per cent.

Included in earning assets are the Government securi­
ties and acceptances held by the Reserve Banks, as well
as their loans to member banks. As the volume of securi­
ties and acceptances owned has decreased, the volume of
loans to member banks has risen by somewhat larger
amounts, and the earning assets consequently have risen.
The lending power o f the Reserve Banks remains very
large, as is apparent in the high reserve ratio, the result
mainly o f the heavy inflow o f gold.
R e l atio n

of

C redit C a p a c it y

to

P roduction C a p a c it y

The relation o f this great supply o f credit, still held in
reserve, to the productive capacity o f the country, is
referred to as follows in the current issue o f the Federal
Reserve B u lletin:
“ The present lending capacity o f the cou n try’s bank­
ing system in view o f the great growth o f the reserves
at the Reserve Banks is now far in excess o f the credit
needs o f the cou n try’s productive capacity. In such a
situation it is the available supplies o f labor and equip­
ment and not the potential supply o f credit that in the
end must fix the limit which may be attained by aggre­
gate national production. As these limits are approached
credit policy must be increasingly influenced by careful
consideration o f the continued effectiveness o f further
additions to the total volume o f credit in contributing
to increased p rodu ctivity.”