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MONTHLY REVIEW
o Ce it a dB s e sCn it n
f r d n uin s o d io s
S e c o n d

F e d e r a l

F ederal R eserve Bank, N ew Y ork

M o n e y M a r k e t in A pril
Interest in the money market during April continued
to center on Treasury transactions and upon the further
unfolding of the Treasury’s fiscal program^ both with
respect to borrowing and to taxation.
The sale of $644,000,000 of Reconstruction Finance Cor­
poration % and 1 Ys per cent notes caused a large inflow
of funds into Treasury deposits in the Federal Reserve
Banks on April 17 when payment for these notes was due,
and a corresponding drain on member bank reserve bal­
ances. Excess reserves of the member banks on the follow­
ing statement date, April 23, were down to $5,760,000,000,
the smallest figure since March of last year. Since
January 15 of this year when they amounted to
$6,900,000,000, or virtually the same as at the peak
reached in October, 1940, excess reserves have been
reduced by $1,140,000,000. This decrease has taken
place despite additions to the gold stock of $416,000,000,
and is due principally to a rise of $814,000,000 in
Treasury cash and deposits in the Federal Reserve
Banks, an increase of $450,000,000 in the amount
of money in circulation, and an increase of approxi­
mately $230,000,000 in reserves required to be main­
tained against rising deposits. More than a year ago
the volume of excess reserves had reached such high
levels that further additions of surplus funds had only a
limited effect on interest rates, and conversely the recent
absorption of some of the superfluous supply of funds
has been equally without effect. It should be pointed
out, however, that in the case of the reductions in re­
serves which have come about as a result of Treasury
transactions, it is recognized that part of the losses are
probably of a temporary nature and will be offset as the
funds are paid out of Treasury deposits in the Reserve
Banks in meeting the costs of the ordinary operations of
the Government and the defense program.
The Treasury’s plans for the issuance of new United
States Savings Bonds and Stamps, the sale of which
begins May 1, were brought to completion in April with
the establishment of arrangements for the sale and issu­
ance of the Series E Defense Savings Bonds by qualified
agencies, including member and nonmember commercial
banks, savings banks, savings and loan associations
and other members of the Federal Home Loan Bank
System, as well as Federal Reserve Banks and branches,
and post offices, throughout the entire country. The
Series F and G Savings Bonds (intended for investors
having larger funds at their disposal than the purchasers
of Series E bonds) will be issued only by the Federal




R e s e r v e

D is tr ic t

M ay

1 ,1 9 4 1

Reserve Banks and the Treasury, though banks generally
may handle applications for their customers. Defense
Postal Savings Stamps will be sold by the post offices,
but it is expected that many of the issuing agencies for
Defense Savings Bonds will purchase supplies of the
stamps from their post offices and have them on hand for
resale to customers and others.
The establishment of these widespread agencies for the
sale of various types of Government savings obligations
will facilitate their purchase by individuals, corpora­
tions, and investors generally, to the end that all may
have an opportunity to aid in the financing of the
National defense effort, by lending their dollars to the
Government. From the economic standpoint, the financ­
ing of the defense program by the sale of Government
securities to individuals, corporations, trust accounts,
and other non-bank investors rather than by expan­
sion of bank credit, which is involved when commercial
banks buy Government securities, has several advan­
tages. In the first place, it will tend to limit further
increases in the already redundant money supply of the
country. As the accompanying diagram indicates, the
total money supply of the country, at $71,000,000,000,
is far larger than at any time in the period covered by
the chart— since 1919— and, in fact, is larger than at
any time in the past. The principal increase in the
money supply since 1929 has been in demand deposits, an
increase which has resulted from the inflow of funds
from abroad, and the deficit financing program of the
Government, involving, as it did, large purchases of

Total Deposits and Currency in the U
nited States

34

MONTHLY REVIEW, MAY 1, 1941

Government securities by the banks. Currency held out­
side banks and time deposits, the other two components
of the money supply, in the broad sense, have also risen
in recent years. In addition to providing an outlet for
existing idle funds, Savings Bonds will furnish a medium
for the investment of new savings as they develop.
Secondly, the utilization of current income and existing
idle funds in the direct financing of the Government’s
defense program will tend to limit the volume of funds
which individuals can spend on durable consumers’
goods, such as automobiles, refrigerators, and residential
housing, the production of which may be difficult to
expand further, in the face of the huge requirements of
the defense program. Already, the automobile com­
panies have announced a 20 per cent reduction, from
1941 production, in the number of cars to be produced
during the 1942 model year, in order to conserve facili­
ties and materials for defense goods production, and
one producer has announced that no new models will be
introduced for 1943, thus releasing tooling facilities for
defense work. With productive facilities, such as the
automobile plants, being progressively allocated to de­
fense goods, investment of current income and idle funds
in Savings Bonds will tend to alleviate one condition
making for higher prices. Furthermore, to the extent
that income is used by individuals to purchase Savings
Bonds, rather than being currently spent, a backlog of
savings will be built up, which can be used to cushion
the effect of a recession in business activity at some time
in the future. Accumulated savings in this form, avail­
able for spending when business activity declines, would
have important benefits, both from the viewpoint of the
individual and of the economy as a whole.
M

em ber

B

an k

C r e d it

A further large increase in total loans and invest­
ments of the weekly reporting member banks in 101 cities
occurred during the four weeks ended April 23. Com­
mercial loans rose $110,000,000 further in the three
weeks ended April 16, thereby extending the rise in such
loans during the period since the outbreak of the war
to $1,534,000,000, but in the week ended April 23 com­
mercial loans receded $21,000,000, the first weekly decline
since last September. Holdings of United States Govern­
ment direct obligations rose $227,000,000 in the four
weeks ended April 23, principally as the net result of
an increase of $382,000,000 in Treasury bond holdings,
and a decline of $169,000,000 in Treasury note holdings.
During this period the $504,000,000 Treasury note issue
maturing June 15, 1941, was exchanged, under a Treas­
ury offering, for a new issue of Treasury bonds and to
a limited extent for new Treasury notes, and there was
an additional $526,000,000 of the new Treasury bonds,
which were sold for cash.
The reporting banks’
holdings of Government guaranteed securities rose
$350,000,000, accompanying the issuance of $644,000,000
of Reconstruction Finance Corporation notes during
the period.
Adjusted demand deposits of the reporting banks
rose $503,000,000 further during the four weeks to
reach a new high figure of $23,762,000,000, which is
$4,000,000,000 larger than the figure a year ago. In
the week in which the Reconstruction Finance Corpo­
ration notes were paid for, however, interbank deposits




held by the reporting banks decreased $355,000,000,
possibly reflecting in part withdrawals of such deposits
by correspondent banks to be used for the purchase
of the notes.
M oney Plates in New York
Apr. 30, 1940 Mar. 31, 1941 Apr. 30, 1941
Stock Exchange call loans......................
Stock Exchange 90 day loans................
Prime commercial paper 4-6 m onths. .
Bills— 90 day unindorsed........................
Average yield on Treasury notes (3-5
years)t.....................................................
Average yield on Treasury bonds (not
callable within 1 2 years) t .................
Average rate on latest Treasury bill
sale, 91 day issue..................................
Federal Reserve Bank of New Y ork
discount rate..........................................
Federal Reserve Bank of New York
buying rate for 90 day indorsed bills

1

1

1
*1H
A
X -° A

*1 K
Vl- A

%

K

0 .44

0.5 0

0.49

2 .2 4

2.09

2 .0 0

0.004

0.065

0.097

1

1

1

A
X

A
X

*Nominal. f “ Tax exem pt” issues only.

G o v e r n m e n t S e c u r it ie s

Prices of both tax exempt and taxable Treasury bonds
showed further net gains for the month of April as a
whole. Between March 28 and April 10 the price average
for the longest term tax exempt Treasury bonds declined
about % point. Subsequently, however, prices of tax
exempt bonds advanced about 1 % points to reach on
April 21 a new high for 1941, only % of a point below
the record high of December 10, 1940. The heaviest
gains during this advance coincided with the announce­
ment of the Treasury’s proposals for new taxes which
gave rise to expectations that Government borrowing
would not be so large as had previously been anticipated.
The taxable 2 % per cent Treasury bonds of 1952-54
showed a net gain of 1% points for the month of April,
and the taxable 2 ’s of 1948-50 advanced about l 1 points.
/^
Spreads between the yields of taxable and tax exempt
Treasury bonds of comparable maturity widened to ap­
proximately one half of one per cent during the early
discussion of the new tax program (April 17-22). How­
ever, the spreads later narrowed to about four tenths of
a per cent, apparently reflecting the point of view that
increases in corporate income taxes would take a form
which would tax income from the partially tax exempt
Treasury bonds.
During the first half of April the average yield on 3
to 5 year tax exempt Treasury notes rose 0.05 per cent
to 0.55 per cent, but in the latter part of the month this
gain was canceled. During the course of the month, yields
on the taxable % per cent National Defense note issues
of 1944 and 1945 declined, on the average, by 0.12 per
cent to 0.70 per cent for the 1944 issue and 0.75 per cent
on the 1945 issue.
Accepted bids on the five weekly issues of taxable
Treasury bills during April were tendered at declining
prices. The accepted bids for the issue dated April 2
were awarded at an interest equivalent of 0.055 per cent
and those for the issue dated April 30 were awarded at
0.097 per cent. Each of the weekly issues was in the
amount of $100,000,000 and each replaced similar
maturities.
On April 9, the Treasury, on behalf of the Recon­
struction Finance Corporation, offered for siibscription
at par and accrued interest taxable Reconstruction

FEDERAL RESERVE BANK OF NEW YORK
Finance Corporation notes in two series, each in the
amount of $300,000,000: % per cent Series U notes
dated April 17, 1941 and maturing October 15, 1942,
and 1 Ys per cent Series V notes dated April 17, 1941
and maturing July 15, 1943. These issues, fully guar­
anteed by the United States, were heavily oversub­
scribed.
Subscriptions for the Series U notes were
allotted 12 per cent, or $319,895,000, and for the Series V
notes 9 per cent, or $324,397,000. At the end of the
month, the 1 % per cent notes were quoted at 100% and
the 7 Per eent notes at 100%.
/s

35

S TO C K
P R IC ES

BOKJO
P R IC E S

Security M a rk e ts
In a limited volume of trading, stock prices declined
during April to the lowest level since early June of
last year. Encouraging news from the Mediterranean
and favorable domestic business prospects were the domi­
nating influences as the month of April opened. The
average price of common stocks included in Standard’s
90 stock index on April 3 reached a high mark since
February 8 but was still some 6% per cent below the
1941 high. However, accompanying the invasion of
Yugoslavia and Greece, and succeeding Allied setbacks,
the stock price average declined irregularly until by
April 22 the lowest level of last June was approximated,
as the accompanying chart indicates. During this reces­
sion, share prices dropped about 8 per cent. The slight
recovery on April 23 and on following days was appar­
ently technical, since war dispatches on those days and
discussion of higher domestic tax rates in Congress were
not conducive to firmer stock quotations, and at the
end of the month the stock price average dipped again
to the April 22 low.
Prices of domestic corporation bonds moved within
a relatively narrow range in April. Medium grade
bonds of this type, classified as Baa by Moody’s Invest­
ors Service, continued their price advance of the pre­
vious month and a half to a new record high on April 4.
In the ensuing four sessions % of a point was lost but
by the end of the month most of this loss was regained.
The firmness shown by the Baa bonds in recent months
contrasts strongly with the weakness apparent in stock
prices since early November, as can be seen in the chart.
The principal reason for this divergence appears to lie
in the tax situation. Interest on corporate bonds is a
charge against income before deduction of taxes, while
dividends on stocks are paid out of net income after
deduction of taxes. Thus, the current high corporate
taxes and anticipations of still higher rates have reacted
against stock prices while prospects of active business
and substantial profits before taxes have tended to
strengthen prices of medium grade bonds.
The price average of Moody’s list of high grade
(Aaa) corporate bonds moved within a range of only
% of a point during April and showed no particular
trend. Meanwhile, prices of prime municipal bonds
(the income from which is not taxable by the Federal
Government) moved somewhat higher, continuing the
irregular advance in progress since late in February.
The volume of bond trading on the New York Stock
Exchange during April was at about the same level as
in March.




M on th ly R an ge o f P rice s o f S to ck s and M edium G rade B ond s (S ta n d ­
ard and P o o r’ s C orp oration 9 0 s to ck index and M o o d y ’ s
I n v e sto rs S e rv ice a vera g e p rice o f Baa co rp o ra te b o n d s)

N e w F inancing
Owing chiefly to a sharp decline in corporate financing
during April, the total of corporate and municipal new
security issues, at $261,000,000, was the smallest for
any month since September, 1940. Of the $134,000,000
of new corporate issues, also the smallest monthly amount
since September, 1940, less than $40,000,000 represented
funds to be used for new capital purposes.
A few sizable corporate offerings were made during
the first half of the month and moved satisfactorily but
during the latter half the market for new issues was
relatively inactive. An unusual feature of the month
was the successful public offering of United Gas Im­
provement Company’s entire holdings, 701,000 shares
valued at about $29,800,000, of the common stock of
the Connecticut Light and Power Company; however,
this flotation was not considered to represent new financ­
ing and therefore is not included in the totals.
The principal issues included in the new financing
totals for April are as follows:
Co rporate

$30,000,000

Koppers Company securities consisting of $22,000,000 first mortgage 3% per cent bonds of 1961,
priced at 102 to yield 3.36 per cent and
$8,000,000 of 2 per cent serial notes matnring
from 1941 to 1947, priced at par; chiefly for
refunding purposes

25,000,000

S w ift and Company securities consisting of
$12,500,000 of 2 % per cent debentures of 1961,
priced at 99% to yield 2.78 per cent and
$12,500,000 serial debentures maturing from
1942 to 1951, priced at par to yield 0.35 to 2.05
per cent; fo r refunding purposes

16,500,000

Republic Steel Corporation 2 per cent serial notes
maturing from 1941 to 1948, sold privately; for
refunding purposes

$22,000,000

Consumers Public Power D istrict of Nebraska
2% per cent to 3% per cent revenue bonds con­
sisting of $15,000,000 serial bonds maturing
from 1942 to 1970, priced to yield 1.00 to 3.50
per cent and $7,000,000 term bonds due in 1971,
priced at 100% to yield 3.47 per cent; fo r new
capital purposes

M

u n ic ip a l

36

MONTHLY REVIEW, MAY 1, 1941

Temporary financing, not included in the totals men­
tioned above, amounted to $116,000,000 and included
$48,800,000 of short term obligations of 17 local housing
authorities, with maturities ranging from September,
1941 to March, 1942 and sold at rates ranging from 0.33
to 0.45 per cent. In addition, the Federal Intermediate
Credit Banks sold $31,000,000 of 0.75 per cent consoli­
dated debentures due in six and twelve months, on a
basis of 0.35 and 0.45 per cent, respectively.
Indications are that a number of public utility com­
panies are making plans to float new issues of rather
substantial size, either for refunding purposes or to
carry out integration provisions imposed by the Securi­
ties and Exchange Commission.
The following are
among those issues reported to be under discussion:
$120,000,000 Columbia Gas and Electric Corporation
debentures, $95,900,000 Alabama Power Company bonds,
$45,000,000 bonds and preferred stock of the New York
State Electric and Gas Corporation, $36,500,000 Virginia
Public Service Company bonds and debentures, and
$20,000,000 of 5 per cent preferred stock of the Louis­
ville Gas and Electric Company. It is reported that
the American Telephone and Telegraph Company is
considering the issuance of approximately $150,000,000
of new securities of which about $50,000,000 would
represent new capital. Forthcoming municipal issues
may include $136,000,000 City of Philadelphia and
$51,200,000 City of Detroit refunding bonds.
G o ld M o v e m e n ts
Imports of gold into the United States during April,
aside from one large shipment from South Africa, were
in very small volume. Gold held under earmark for
foreign account at the Federal Reserve Banks rose about
$10,000,000 during April to a new high figure of approxi­
mately $1,915,000,000. The gold stock of the United
States increased about $140,000,000 during the month,
or by about the same amount as in the previous month.
In the five weeks ended April 23, the Department of
Commerce reported the receipt of $177,100,000 of gold
in the following principal amounts: $132,200,000 from
South Africa, $16,800,000 from Canada, $11,000,000 from
Australia, $5,200,000 from Colombia, $4,100,000 from
the Philippines, $1,200,000 from Mexico, $1,100,000 from
Peru, $600,000 from the United Kingdom, and $600,000
from Hong Kong.
C entral B a n k R a te C h ange
According to a recently received bulletin of the
Central Bank of Bolivia, the Bolivian bank rate was
reduced to 6 per cent on November 8, 1940, from the
6 % per cent rate which had ruled since August 9, 1938.
Foreign E xch anges
Although the volume of trading in the New York
exchange market continued to be on a small scale, the
past month witnessed a number of new developments,
including the extension on April 28 of the United States
Treasury’s “ freezing” regulations to cover all Greek
property situated in this country and the elimination




of the drachma from the list of those currencies still
traded in in New York.
In the early part of the month interest centered in the
Canadian dollar, which received considerable strength
from market rumors that some arrangement might soon
be made to bring the Canadian dollar to par with the
United States dollar. As a result, the unofficial discount
on Canadian exchange narrowed from 15% per cent
on March 29 to 12 3/16 per cent on April 1. Later
official information on these rumors resulted in a tem­
porary reaction in the rate, but by April 15 the unofficial
discount had further narrowed to 11% per cent, the
best rate since November, 1939. The announcement on
April 20 of the economic agreement between the United
States and Canada together with the approaching sea­
sonal tourist demand for the Canadian dollar probably
helped to hold the unofficial discount near this level dur­
ing the remainder of the month.
The past month’s trading in foreign exchange was
also featured by a noticeable, though short-lived, reac­
tion in the Swiss franc. After holding firm at around
$0.2322 for some time, the dollar rate for the Swiss franc
turned downward on April 17 and on the following day
reached a low of $0.2316, accompanying offerings from
Continental and Far Eastern sources. The fact that
this reaction more or less coincided with an increased
demand for Argentine exchange in this market sug­
gested the possibility of a movement of funds from
Switzerland to Argentina through the medium; of the
dollar, as direct conversion of Swiss francs into pesos
may have been limited by the thinness of the Swiss
market for the Argentine peso. On April 21, however,
some Continental and South American demand devel­
oped for the Swiss franc, with the result that the New
York rate soon recovered to $0.2321, or close to the level
prevailing before the reaction. The New York free rate
for the Argentine peso, on the other hand, subsequently
receded to close the month at $0.2350, as against a high
of $0.2374 reached on April 16.
After holding around $4.03 since August, 1940, the
New York unofficial rate for sterling reacted in midApril in an extremely thin market to reach a low of
$4.00% on April 18. By the end of the month, however,
quotations had returned to $4.03%. The discount on
the Cuban peso against the dollar widened rather sub­
stantially to 5 % per cent in the early part of the month
and although it subsequently narrowed again to end the
month at 3 % per cent, it nevertheless remained wider
than the 3 % per cent level reached on March 28.
With respect to the Far East, a stabilization agree­
ment between the United States and China, involving
the purchase of Chinese yuan by the United States
stabilization fund in the amount of 50,000,000 United
States dollars, was signed on April 25. A t the same
time, negotiations were completed for a similar agree­
ment between China and Britain, under which a total
of £5,000,000 is provided for currency stabilization in
addition to the existing Sino-British fund which was
set up in 1939. In the Shanghai market, the currency of
the Chungking Government continued to hold steady in
terms of both the United States dollar and the pound
sterling, closing April at about 5 3/16 cents and 3 3/16
pence, respectively.

FEDERAL RESERVE BANK OF NEW YORK

37

F oreign T ra d e
United States foreign merchandise trade during March
showed considerable expansion in both exports and im­
ports over the average levels of recent months. Reflect­
ing in some measure shipments made under the lendlease arrangement, exports of United States merchandise
increased to $351,000,000, the largest volume since Janu­
ary, 1940, exceeding the relatively high figure of March,
1940, by $8,000,000. Influenced by accelerated purchases
of foreign materials for the defense program, imports
for consumption rose to $255,000,000, which was
$48,000,000 more than in the comparable month of last
year and the largest value for any month in nearly four
years. The excess of exports, though somewhat above
that of February, was considerably smaller than that
of a year ago.
Large gains over a year ago were recorded in March
exports of finished manufactures, the value of which was
increased to $254,000,000 (or 72 per cent of all exports)
from a value of $197,000,000 (or 58 per cent of the
total) in March, 1940. The chief factors in this expan­
sion were heavy shipments abroad of war material; the
value of exports of aircraft and parts rose to $50,000,000
compared with $20,000,000 in March last year, and
shipments of firearms and ammunition increased to
$14,000,000, compared with $1,000,000 a year previous.
On the other hand, considerable declines from the levels
of March, 1940, occurred in exports of copper and a
number of other semimanufactured products. Exports
of the majority of crude materials and of agricultural
commodities generally continued far below those of a
year ago. At a value of $29,000,000 shipments abroad
of agricultural products comprised only 8 per cent of
total exports, and were less than half the value in March,
1940; cotton exports alone declined to $6,000,000 from
a value of $26,000,000 a year earlier.
Increases over a year ago occurred in a wide variety
of imports during March, and were especially marked in
the cases of crude rubber, wool, coffee, sugar, copper,
and tin. Imports of diamonds, vegetable oils, and of
finished goods taken as a whole, however, were materially
reduced from the levels in March, 1940.
Since the outbreak of the present European war this
country’s foreign merchandise trade has undergone con­
spicuous changes, as is indicated in the accompanying
chart. Shifts in exports from the United States have
resulted partly from the progressive cutting off of Con­
tinental Europe from outside markets and partly from
increased British Empire purchases of materials in this
country. With respect to imports into the United States,
the expansion since August, 1939, has been concen­
trated largely in strategic or critical materials for
defense purposes.
During the twelve months immediately preceding the
war, monthly average exports from the United States
amounted to $245,000,000, of which $100,000,000, or
41 per cent, was destined for British Empire coun­
tries. During the first war year the monthly average
value of United States exports increased to $335,000,000
and of this $148,000,000, or 44 per cent, went to the
British Empire. The monthly rate of United States ex­
ports during the following six months was reduced




SE R ’3 8 - 5 E R *3 9- S £ R ’4 0 A U G '39 AUG/40 FEB/41

M on th ly A v e ra g e U nited S tates E xp orts and^ Im ports o f
M erchand ise, b y G roups o f C ountries

somewhat— to $320,000,000— but purchases of American
products by the British Empire were further increased
to a monthly average value of $203,000,000, so that
these constituted nearly two thirds of the total for the
September, 1940-February, 1941, period. While the
dollar volume of United States shipments to Latin
America has also expanded since the outbreak of war,
the Latin American share of our total exports has
remained approximately unchanged, at about 20 per
cent. Meanwhile, the proportion of United States exports
to all other countries (other than countries of the British
Empire and Latin America) declined from 40 per cent of
the aggregate in the twelve months before the war to 17
per cent in the first six months of the second war year.
While United States imports have not been charac­
terized by as marked changes as occurred in exports
since the beginning of the war, total receipts of foreign
products have risen appreciably, from a monthly aver­
age prewar value of $178,000,000 to $224,000,000 in the
six months ended February of this year. The expan­
sion in imports was concentrated in considerable measure
in strategic materials, many of them obtained from
British Empire countries, for example, rubber and tin
from British Malaya and nickel from Canada. The
United States has also increased its purchases from
Latin America, to represent 27 per cent of the total
in the period from September, 1940, to February, 1941,
compared with about 24 per cent in the twelve months
preceding the war. These advances reflect among other
things larger imports into this country of South Ameri­
can copper, hides, and wool.

P rodu ction and T ra d e
Available statistical data for April indicate some
slackening in the rate of business activity after adjust­
ment for usual seasonal changes. A strike reduced
automobile production to an appreciable extent, and
the range of the effect of the bituminous coal shut­
down was extended as the month progressed.

Nearly 90 per cent of the country’s bituminous coal

38

MONTHLY REVIEW, MAY 1, 1941

mining capacity was idle practically to the end of April,
when resumption of operations began under the terms
of an agreement reached on April 28. At the time when
work was resumed a number of industries were feeling
the pinch of coal shortages. Owing to actual or immi­
nent shortages of coke, a number of blast furnaces were
banked during April and the steel mill operating rate
was reduced from an average of 100 per cent of calculated
capacity in March to about 94% per cent at the end of
April. The threat of a strike in the steel industry
was averted around the middle of the month when
major producers granted wage increases of 10 cents an
hour. Automobile production was reduced because of
a strike which closed plants of the Ford Motor Company
for two weeks, and towards the end of the month strikes
were threatened at plants of the General Motors Corpo­
ration. A t the request of the Office of Production Man­
agement, the automobile industry agreed to an initial
reduction of 20 per cent in its production schedules for
the model year beginning next August, in order to release
materials and productive capacity for defense needs.
The cotton gray goods market was relatively inactive
during most of April, but the mills were said to be still
booked far ahead. The stoppage of work at the bitu­
minous coal mines accounted for a sharp reduction in
the movement of bulk freight over the railroads, but
loadings of merchandise and miscellaneous freight ap­
pear to have been well maintained. Incomplete figures
indicate that electric power production declined more
than usual in April.
In March, this bank’s seasonally adjusted index of
production and trade was unchanged from the February
level of 104 per cent of estimated long term trend. This
figure compares with 88 in March, 1940. While activity
in most lines covered in the index continued to rise dur­
ing March, in a number of cases increases failed to equal
typical rates of gain between February and March of
other years.
Operations in key defense industries, many of them
in the producers’ durable goods category, continued to
mount during March, especially in lines where pressure
for increased output is greatest and where productive
facilities have been and are being considerably enlarged.
Plants producing aircraft, engines, and machine tools
reached new peaks of activity, and there were also
further gains at shipyards, foundries and machine shops,
and plants producing electrical apparatus. On the other
hand, production of pig iron, cement, and lumber, while
at high levels, failed to increase as much as usual over
February, and agricultural implement manufacturers
were less active than in February, owing to labor
difficulties.
Among industries classified as producers’ nondur­
able, record-breaking rates of operation were attained
by cotton and woolen textile mills. Bituminous coal pro­
duction, in reflection of stocking up prior to the expira­
tion of the wage agreement on March 31, reached the
highest level in four years.
Irregular changes occurred in consumers’ goods indus­
tries, after adjustment for usual seasonal movements.
While operations of furniture and radio manufacturing
plants were somewhat increased, the expansion in resi­




dential building contract awards was smaller than usual
between February and March and daily average pas­
senger automobile production fell off slightly instead of
advancing as in most other years. A decline of three
points in the distribution to consumer index resulted
from a much smaller than usual gain in new passenger
car sales over the exceptionally high levels of preceding
months; in other lines of retail trade activity appears to
have been maintained at about the February level, sea­
sonal factors considered.
(Adjusted for seasonal variations and estimated long term trend;
series reported in dollars are also adjusted for price changes)
1941

1940
Jan.

Feb.

Mar.

103

10 ip

104?)

Production of:
Producers’ durable good s.......................
Producers’ nondurable goods.................

88

77
93r

117
106

115p
108p

Consumers’ durable go o d s.....................
Consumers’ nondurable goods...............

73 r
95

89
99

89 p
99 p

114p
112p
87
100p

82
93

95
104

97 p
108p

99 p
105p

73
90

127
101
92

119
115
99

118
106

107p
132
159p
116p

94

100
97

109p
136
186p
114p
108p
99

106
105

107
106

107p
107p

64

Mar.
In d ex o f Production and Trade .......................

Primary distribution....................................
Distribution to consumer...........................
Industrial Production

Steel.................................................................
A utom obiles..................................................
Bituminous coal............................................
Crude petroleum ..........................................
Electric pow er...............................................
Cotton consum ption....................................
W ool consumption.......................................
Meat packing................................................
Tobacco products.........................................

SQr

95
97

102
94
97r
103

88

87
106
127
150r

120
96

86

p

120p
p
85

M anufacturing Em ploym ent

Em ploym ent..................................................
Man-hours of em ploym ent.........................

93
87

Construction

Residential building contracts...................
Nonresidential building and engineering

42

55

46

69

81

100
88
95

P rim a ry Distribution

R y. freight car loadings, mdse, and misc.
R y. freight car loadings, other..................

80r
101
70

Distribution to Consumer

Department store sales (U. S .) .................
Variety chain store sales.............................
Mail order house sales................................
New passenger car sales..............................

87

98r
100
93
86

81

100
100
102
101
125

68
100
90
98
84

100
107

103

47
94
99
100
104p
90p

102
lO lp

105
142

105
104
113

Velocity o f D ep osits *

Velocity of demand deposits, outside New
York City (1919-25 average = 100).. .
Velocity of demand deposits, New York
City (1919-25 average = 100)...............

59

57

57

60

27r

23

24

25

105
116

105
116

105p
117p

Cost o f Living and W a ges *

Cost of living (1935-39 average = 100)..
Wage rates (1926 average = 100)............
p Preliminary

r

Revised

103
113

* N ot adjusted for trend

B u ild ing
During the first three months of 1941 the total value
of construction contract awards in the 37 States covered
by the F. W . Dodge Corporation reports reached the
largest first quarter total since 1930, 58 per cent above
the figure for the corresponding months of 1940. Gov­
ernment contracts for defense construction accounted
for slightly less than one half of this gain over the
first quarter of last year.
While awards for both residential building and heavy

FEDERAL RESERVE BANK OF NEW YORK
engineering projects during the first quarter of the
current year were more than one-third greater than in
the corresponding period of last year, the most sub­
stantial increase was in the field of factory building,
awards for which were more than four times as great as
in the first quarter of 1940. The volume of factory build­
ing awards in the first three months of this year was
the largest for any quarter since the Dodge records
became available in 1925 and exceeded that in the first
quarter of 1929 by 48 per cent. Of total contracts
awarded by the Government in connection with the de­
fense construction program during the first quarter this
year, 28 per cent was for plant construction and expan­
sion, as compared with 23 per cent for public works,
and 15 per cent for residential building.
While the total value of construction contracts awarded
in 37 States showed a large increase during the first
quarter of 1941 compared with the same quarter of
1940, in New York and Northern New Jersey there was
little change between the two periods. The fact that
only about 1 per cent of all Government defense con­
struction awards during the first quarter of the current
year was for projects in this district accounts primarily
for the less favorable comparison. Awards for residen­
tial building were 9 per cent higher than in the 1940
quarter, while heavy engineering projects were off 10
per cent. The only large increase in this district was
for manufacturing building, which was more than double
the volume in the first quarter of 1940.
E m p lo y m e n t and P ayrolls
During March factory employment in New York State
rose 2 % per cent and payrolls increased 5 per cent.
These gains were shared generally by plants throughout
the State and were not restricted to firms with defense
orders; every major industrial group and industrial
area of the State showed increases in working forces.
Particularly large gains in employment were shown in
the firearms, shipbuilding, airplane, and machinery in­
dustries. Compared with a year ago, working forces
were 20 per cent higher and payrolls were 33 per cent
greater. Average weekly earnings of wage-earners em­
ployed by reporting firms rose during March to $31.32,
about 11 per cent above March, 1940, and the highest
figure ever reported by the State Department of Labor.
Increases in both working hours and wage rates con­
tributed to this rise.
Total nonagricultural employment in the United States
as a whole increased by almost 300,000 persons during
March, reaching a total of 37,200,000 according to the
revised estimates of the Bureau of Labor Statistics.
During the twelve months ended with March, nonagricultural employment rose about 2,400,000. In the same
period there was an increase of almost 900,000 in military
and naval personnel, not included in the figures for
nonagricultural employment.
Over one half of the gain in nonagricultural employ­
ment during March was accounted for by a further in­
crease in working forces at manufacturing establish­
ments. Factory employment rose 2 per cent and pay­
rolls 3 per cent, both gains being larger than usual for
this time of year. Employment increases were numerous




39

PE R C E N T

M a n -H ou rs o f E m p loy m en t in C ertain In d u stries P ro d u cin g D efen se
G ood s, and in A ll M a n u fa ctu rin g Ind ustries (1 9 3 5 -3 9
avera g e — 100 p er c e n t; data d erived from
B ureau o f L a b o r S ta tistics fig u re s)

among nondurable goods industries although durable
goods lines generally continued to show larger gains.
Durable goods industries stimulated by defense orders—
particularly foundries and machine shops, electrical
apparatus, shipbuilding, and aircraft— continued to take
011 additional workers in substantial numbers. Employ­
ment in the agricultural implements industry decreased
considerably because of strikes. Compared with March,
1940, total factory working forces were 15 per cent
larger and payrolls 31 per cent greater.
The accompanying diagram showing man-hours
worked in certain industries reflects the effect of the
continued stimulation of the National defense program
on the production of aircraft, ships, machine tools, and
electrical apparatus, compared with manufacturing as a
whole. These increases in man-hours of employment
represent not only greatly enlarged working forces but
also longer working hours. Latest reports of the Bureau
of Labor Statistics indicate that in all manufacturing
industries combined working hours averaged 40 hours
per week, and in the defense industries shown the aver­
age is considerably higher, workers in machine tool
plants, for example, averaging approximately 52 hours
per week. While man-hours worked in all manufacturing
have increased about 40 per cent in the period shown,
in the electrical industry the figure for man-hours has
more than doubled since January, 1939, in shipbuilding
and the manufacture of machine tools it has tripled,
and at aircraft factories man-hours of employment were
6V2 times as great as in January, 1939.
C o m m o d ity Prices
Price advances in wholesale commodity markets were
less pronounced in April than in March, owing in con­
siderable measure to the depressing effect of war news.
The rise in raw industrial prices shown in the two pre­
ceding months was arrested. The Bureau of Labor
Statistics comprehensive weekly index of wholesale prices
rose at a somewhat slower rate than in March to reach,
on April 19, a new high since November, 1937.

40

MONTHLY REVIEW, MAY 1, 1941

During the first part of the month advances were
concentrated in foodstuffs, which reflected the Senate’s
addition of $450,000,000 to the Agricultural Appropria­
tions bill passed by the House and the announcement of
a Surplus Marketing Administration program to pur­
chase livestock, poultry, and dairy products until the
quotations for these commodities are raised to specified
levels. Subsequent rejection by the House of the Senate’s
addition to the appropriations bill, however, was followed
by a downward price reaction.
The average price of hogs in Chicago advanced to
$8.81 a hundredweight on April 10, the highest level
since September, 1939, and at $8.48 on April 30 showed
a net gain of 80 cents for the month as a whole. A rise
also occurred in lard and cottonseed oil prices. About
the middle of the month, cash corn and wheat quotations
reached new highs for the last eleven months but later
declined. Spring wheat at Minneapolis closed the month
at 92% cents a bushel, little changed from the level
prevailing at the end of March. The Department of
Agriculture announced that up to the middle of April
20,000,000 bushels of wheat under the 1940 loan had
been repossessed but that 257,000,000 bushels still re­
mained under seal. Rates of parity payments to farmers
who plant within their 1941 acreage allotments were
announced on April 17 by the Department of Agricul­
ture. The rate for wheat is 10 cents a bushel; for corn,
5 cents a bushel; and for cotton, 1.38 cents a pound.
In addition, cooperating farmers will receive payments
for soil conservation.
Prices of textile fibers showed mixed changes during
April. Average quotations for cotton in ten Southern
markets rose 24 points to 11.35 cents a pound, the highest
level since 1937. Wool prices showed little change
while raw silk in New York, following the movement
in primary markets, showed a net decline of 14 cents
to $2.81 a pound. There was a downward reaction of
nine points to 3.31 cents a pound in sugar, while rubber
quotations rose 1 cent to 23% cents a pound, the highest
level since May, 1940.
As a result of the establishment of the Office of Price
Administration and Civilian Supply on April 11, price
stabilization, the control of prices, and the protection
of consumer interests will for the most part be centered
in one agency. Price control and priority measures
adopted during April by this or other Government agen­
cies were concentrated largely upon minerals. Price ceil­
ings were established for iron and steel, and iron and steel
scrap, while bituminous coal prices were pegged at levels
prevailing on March 28, and nickel steel became the
seventh item to be placed under an industry-wide priority
system. Producers of lead and farm machinery were
requested not to raise their prices. The allocation to a
defense pool of 17 per cent of zinc output was ordered
for May, as compared with 5 per cent in April, and a tin
conservation program was developed which may effect
a 15 per cent reduction in the amount of tin used by
can manufacturers. April allocations of copper from
the stock pile of the Metals Reserve Company were




placed at 55,000 tons. This Government agency bought
over 20,000 tons of copper sold to France before the
capitulation, but not delivered.
D e p a rtm e n t Store T ra d e
For the four weeks ended April 26, sales of the report­
ing department stores in this District were about 20 per
cent higher than in the corresponding weeks of 1940,
which period, however, was entirely after Easter. Never­
theless, the daily rate of sales for this portion of April
appears to have increased more than usual over the
March level, the changing date of Easter and other
seasonal factors considered.
Total March sales of the reporting department stores
were about 5 per cent higher than in March, 1940, and
advanced about as expected over the February average.
March sales of housefurnishings, including linens and
domestics, were again substantially higher than a year
ago, while large declines were reported in various lines
of women’s ready-to-wear accessories and men’s and
boys’ wear, doubtless reflecting the later Easter trade
this year.
Retail stocks of merchandise on hand in the depart­
ment stores at the end of March were 6 per cent higher
than a year ago, and this bank’s seasonally adjusted
index of department store stocks in this District advanced
one point further to 86 per cent of the 1923-25 monthly
average.
Percentage changes from a year ago
Net sales

Stock on hand
end of month

Department stores
Mar.
1941
New Y ork City (includes Brooklyn) . .
Northern New Jersey..............................
Westchester and Fairfield C ounties. . .
Lower Hudson River V alley..................
Poughkeepsie................... .....................
Upper Hudson River V alley..................
Central New Y ork S tate........................
Mohawk River V alley.........................
Northern New Y ork State.....................
Southern New Y ork S ta te.....................
Bingham ton..........................................

Jan. through
Mar. 1941

Mar.
1941

+ 2
+ 6
+ 4

+ 5
+ 7
+ 6

+ 11

+ 11

+ 7
+ 8
+ 8
+15
+14
— 3
—
+ 2

+ 17
— 1
+ 2
+14
+ 11

+ 19
+28
+17
—
+23

+15
+ 4
+ 7
+13
+ 8
+ 17
+24
+16

+ 9
+ 10

+ 9

Niagara F alls........................................

+45
+18
+26
— 4
+ 12

+ 17
+16
+ 37
+13
+19
— 1
+ 9

All department stores.....................

+ 5

+ 7

+ 6

Apparel stores...........................................

+ 1

+ 2

0

Western New Y ork State.......................

+21

0

—
—
+ 3
+ 4
+ 9
+ 2

Indexes of Department Store Sales and Stocks, Second Federal Reserve District
(1923-25 average=100)
1941

1940
Mar.

Jan.

Feb.

Mar.

Sales (average daily), unadjusted.................
Sales (average daily), seasonally adjusted.

81r
88 r

78
99

79
97

84
98

Stocks, unadjusted...........................................
Stocks, seasonally adjusted............................

Sir
81r

73
81

80
85

87

rR
evised.

86

FEDERAL RESERVE BANK OF NEW YORK
M O NTH LY REVIEW , M AY 1, 1941

Business Conditions in the United States
(Summarized by the Board o f Governors of the Federal Eeserve System)
N D U S T R IA L activity increased further in March but declined somewhat in
I
the first half of A p ril owing to temporary reductions in output of bitum i­
nous coal and automobiles. Wholesale prices of many commodities advanced
considerably and the Government took steps to lim it price advances of some
additional industrial materials.
P r o d u c t io n

Index o f P h y sica l V olu m e o f Industrial P ro d u ction , A d ju s te d fo r S easonal V aria tion (1 9 3 5 1939 a v e r a g e s 100 p er ce n t)

Indexes o f V alu e o f D epartm ent S tore Sales and
S tock s, A d ju s te d fo r S easonal V aria tion
(1 9 2 3 -1 9 2 5 a v e r a g e = 1 0 0 p er ce n t)

Volume of industrial output continued to increase in March and the Board’s
seasonally adjusted index rose from 141 to 143 per cent of the 1935-39 average.
A c tiv ity increased further in most durable goods industries, particularly in
those producing machinery, aircraft, ships, and armament. Steel production
increased to about 100 per cent of rated capacity.
Automobile production, which usually increases considerably in March,
showed little change from the high rate reached in February. In the first half
of A p ril output was reduced considerably owing to a shutdown at plants of the
Ford Motor Company during an industrial dispute which was settled about the
middle of the month. Retail sales of new and used cars advanced to new peak
levels in March and dealers’ stocks at the beginning of A p ril amounted to about
a month’s supply at the current rate of sales. Output of lumber, which had
been sustained at unusually high levels during the winter months, rose less than
seasonally.
A c tiv ity in the textile and shoe industries increased further in March.
Cotton consumption rose to a record level of 854,000 bales and there was also
an increase in rayon deliveries. A t wool textile mills activity was sustained at
the peak rate reached in February, not showing the usual large seasonal decline,
and in the chemical and rubber industries further advances were reported.
Bituminous coal production rose considerably, while output of crude petro­
leum was maintained in March at about the rate that had prevailed in the four
preceding months. In the first ha lf of A p ril coal production declined sharply,
however, as most mines were closed pending conclusion of contract negotiations
between mine operators and the miners’ union. Production of nonferrous
metals continued in large volume in March and deliveries of refined copper
showed a sharp rise as domestic production was supplemented by supplies
received from South America.
Construction contract awards rose sharply in March and were larger than
in any month since the middle of 1930, according to the F. W. Dodge Corpora­
tion data. The rise was chiefly in awards fo r publicly financed work, which had
been reduced considerably in January and February, and in private nonresi­
dential projects, particularly factory construction. Awards fo r private resi­
dential building, which had been unusually large during the winter months,
showed less than the customary seasonal rise in March.
D is t r ib u t io n

In March distribution of commodities to consumers was sustained at the
high level reached in February. Sales at mail order houses and department
stores increased seasonally and variety store sales showed more than the usual
seasonal rise.
Freight car loadings increased by about the usual seasonal amount. Load­
ings of coal and grain rose considerably, while shipments of miscellaneous
freight, which in previous months had risen steadily, on a seasonally adjusted
basis, showed a smaller increase than is usual at this time of year.
C o m m o d it y P r ic e s

Ind exes o f W h olesa le P rice s C om piled b y U n ited
S ta tes B ureau o f L a b or S ta tistics
(1 9 2 6 a v e r a g e s 100 p er ce n t)

Prices of basic commodities continued to advance sharply from the middle
of March to the middle of A p ril. There were substantial increases in prices
of domestic foodstuffs and further advances in burlap, cotton, rubber, and lead.
Increases were also reported in wholesale prices of a number of manufactured
products and the general index of the Bureau of Labor Statistics rose two
points to 83 per cent of the 1926 average.
Inform al action was taken by the Government to discourage price increases
of some additional industrial materials and maximum price schedules were
established fo r steel, bituminous coal, secondary and scrap aluminum and zinc,
and iron and steel scrap. Sharp reductions in prices of some kinds of nonferrous metal scrap resulted. Announcement of an expanded Federal purchase
program fo r hog, dairy, and poultry products was followed by price increases
fo r these and related products.
B a n k Cr e d it

Total loans and investments at reporting member banks in 101 cities
increased during March and the first two weeks of A p ril. Commercial loans
continued to rise substantially, and holdings of United States Government
securities increased further, reflecting purchases of new Treasury offerings.
U n it e d S t a t e s G o v e r n m e n t S e c u r it y P r ic e s

W
ednesday Figures for Reporting M ber Banks
em
in 101 Leading C
ities (Latest figures
are for April 9)




Prices of United States Government securities declined irregularly from
March 15 to A p ril 9 but subsequently rose slightly. The 1960-65 bonds showed
a net loss of about % of 1 point on A p ril 15, following a rise of about 3 %
points in the previous month. The yield on this issue on A p ril 15 was 2.14
per cent, compared w ith 2.03 per cent at the all-time peak in prices on Decem­
ber 10, and 2.30 per cent at the recent low in prices on February 15.