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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 -/ ' v\ PRICES \ f \ " " V , i f \ r -M lLL PTION, « CONSUM | " V v It '] / _____0 u COPPER COTTON i Pl<? IROf 5T) ! ......... -2(0 V l PRK ^ / Yyi I10 i Ko 192.0 192.1 1922 1923 V ■ t r :ES/ ’X / PRIC n li/ V \ p*ICES \ jrw |-SL AU G H TERED A ........ . .5 HOG-5 * f 192.0 W WHEATP CEMEN1 TO noim PROBUCTK>N ■ A ^PRODUCTION 50 0 150 PW \PRODUCTI , r \V ^ / p ^rice3 50 R0DUCTI0N \ J■ \\ PRICES /■ 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.”
@FedFRASER