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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

Federal R eserve Bank, New York

M o n e y M a r k e t in A pril
The downward trend in the volume of excess reserves
of member banks, which since February had been offset
by Government disbursements from Treasury balances in
excess of receipts, reappeared in the latter part of April.
On April 22 total excess reserves of all member banks
were reduced to $2,750,000,000, the smallest amount since
September 21, 1938, and excess reserves of the central
reserve New York City banks fell to $640,000,000, the
smallest amount since April 6, 1938. Fifteen months
ago the total for all member banks was around
$6,800,000,000, and excess reserves of the New York City
banks were about $3,500,000,000.
Furthermore, excess reserves are not evenly distributed
among individual banks, and, for the first time in
several years, there have been occasional instances in
recent weeks of borrowings of “ Federal funds” by large
New York City banks (that is, day-to-day borrowings of
reserve funds by banks that are short of
reserves from banks that still hold large
amounts of excess reserves). Money mar­
ket conditions, nevertheless, have re­
mained reasonably easy, and only a slight
rise in short term money rates occurred
in April.
Member bank reserve positions during
April continued to be dominated by trans­
actions of the United States Treasury.
During the four weeks ended April 22,
the Treasury received— in addition to rev­
enue collections— $775,000,000 from the
banks through cash payments for an
offering of certificates of indebtedness,
$300,000,000 through sales of two Treas­
ury bill issues on dates when there
were no maturities, and approximately
$800,000,000 through withdrawals of de­
posits previously accumulated at commer­
cial banks that had used the “ book credit”
method of payment for new issues of
Treasury obligations. On the other hand,

R e s e r v e

D is tr ic t

May 1,1942
the return flow of funds to member banks, through drafts
upon the Treasury’s checking accounts with Federal Re­
serve Bftitki tor cover Government disbursements, pro­
ceeded rapidly War expenditures, constantly mounting,
ran in excess of $100,000,000 a day. In fact, the Treasury
drew down its deposits with the Federal Reserve Banks
to the extent of $230,000,000 in the four weeks ended
April 22| although $200,000,000 of this amount was
placed to the credit of the Chinese Government on the
books of the Federal Reserve Banks and thus did not
reach the money market.
In addition to the small net flow of funds into the
money market as a result of Treasury operations, member
bank reserve balances were increased by net purchases of
$52,000,000 of Government securities (chiefly Treasury
bills) by the System Open Market Account. However,
a further rise in currency circulation of $180,000,000
more than offset these factors of gain, and member
bank reserve balances showed a net decline of $57,000,000.
Deposit expansion, accompanying a con­
tinued growth in bank investments, re­
sulted in an increase in reserve require­
ments over the four week period and, as
a result of the combination of enlarged
reserve requirements and diminished re­
serve balances, member bank excess re­
serves showed a net decline of $100,000,000
between March 25 and April 22.
The brunt of the decline in excess re­
serves fell on central reserve New York
City banks. This was the result, by and
large, of purchases by them and their
customers of Government securities and
heavy withdrawals from them of Govern­
ment deposits, which together were sub­
stantially in excess of the volume of funds
reaching the New York money market
through Treasury expenditures. In fact,
member bank excess reserves outside New
York City were greater on April 22 than
they had been on March 25. Reserve bal­
ances of the central reserve New York



tend to be diminished) as a result of the accompanying
expansion of total bank deposits.
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1 941
E x cess R eserves H eld b y M em ber B anks



City banks declined $240,000,000 during the four weeks
and their excess reserves dropped an equivalent amount.
These banks, as a group, gained reserves through an
inflow of funds from other parts of the country to
New York, as well as through disbursements from foreign
accounts with the Reserve Banks and purchases of
Government securities by the System Open Market
Account. But Treasury withdrawals from the New York
banks were unusually heavy. Certificates of indebtedness
were allotted in the Second District to the extent of
$833,000,000, and cash payments for them withdrew over
$300,000,000 from the New York money market. In
addition, sales of Treasury bills in New York exceeded
maturities here by nearly $300,000,000, largely because
holdings of such bills in Chicago over the Cook County
tax date were not replaced by purchases of new issues
after April 1. Withdrawals from “ special depositaries”
in New York— from bank deposits accumulated to the
credit of the United States Treasury through past pur­
chases of Government obligations that were paid for by
the “ book credit” method— were in the neighborhood
of $550,000,000.
With member bank excess reserves at reduced levels,
there are indications that banks are tending to utilize the
“ book credit” method of payment to an increasing ex­
tent in acquiring newly-offered Government securities.
For example, on the April 15 offering of certificates of
indebtedness, 59 per cent of allotments in the Second
Federal Reserve District were paid for by “ book
credits” ; outside the Second District, where bank reserve
positions were generally easier, payments through “ book
credit” amounted to 35 per cent of allotments.
Treasury special deposits with commercial banks on
account of sales of Government securities, currently run­
ning at around $2,000,000,000, provide a “ backlog” of
funds on which the Treasury can draw for meeting
current expenditures between dates of major financing
operations. To the extent that withdrawals from these
accounts are matched by current expenditures of the
Treasury, bank reserve positions, in the aggregate, are
unaffected. Likewise, member bank reserve balances are
unaffected when Government securities are bought and
paid for by the “ book credit” method, although reserve
requirements do tend to increase (and excess reserves

April was marked by the offering of $1,500,000,000
one-half per cent Treasury certificates of indebtedness,
the first time that securities of this type have been avail­
able to investors in eight years. Certificates of indebted­
ness were first used by the United States Treasury in
1917, and during the period April 25, 1917-October 31,
1919 about $25,000,000,000 of such securities (exclusive
of certain special issues) were sold. These securities were
then employed as a supplement to the Liberty Loans and
taxation in financing the war and as an aid in stabilizing
money market conditions, their maturities being geared
to the dates of payments for Liberty bonds and dates
when income taxes came due. The amount outstanding
at any one time fluctuated widely; a peak of more than
$6,000,000,000 was reached shortly before sale of the
Victory notes in May, 1919. The Treasury continued to
utilize certificates of indebtedness in its financing until
1934 when Treasury bills, first issued in December, 1929,
became the sole medium of market financing by the
Treasury for periods up to a year.
Certificates of indebtedness, unlike Treasury bills
which are sold on a discount basis, carry coupons. Their
maturity cannot exceed one year from date of issuance.
The issue offered during April was dated April 15, to
mature November 1, 1942. Despite the absence of offer­
ings of this type for eight years, and resultant un­
familiarity with them, the certificates were well received,
subscriptions totaling $3,062,000,000. Subscriptions of
$25,000 or less, which totaled about $66,000,000, were
allotted in fu ll; 48 per cent allotments were made on
the larger subscriptions. Of the $1,500,000,000 allotted,
$270,000,000 went to New York City banks, $80,000,000
to Chicago banks, $250,000,000 to weekly reporting mem­
ber banks elsewhere, and $900,000,000 to others, includ­
ing banks outside the weekly reporting group, insurance
companies and other corporations, and private investors.
Market quotations immediately rose to a slight premium
and subsequently fluctuated only slightly, the yield at
the end of the month being 0.49 per cent bid; trading
has been inactive.
After fluctuating within a narrow range during the
first half of April, prices of Treasury bonds moved some­
what lower after the 18th to levels prevailing in the early
part of March. Near the end of April the average yields
on long term Treasury bonds were 2.06 per cent for the
partially tax exempt bonds and 2.38 for the taxable
issues. The average yields were 2.02 per cent and 2.33
per cent, respectively, on March 31.
Prices of Treasury notes also eased slightly, and the
average yield on three to five year taxable Treasury notes
rose from 0.94 per cent on March 31 to 1.03 per cent on
April 28, the highest level since December 27, 1941. The
yield on the tax exempt % per cent Treasury note due
March 15, 1945 moved irregularly in a limited range;
near the end of the month the yield was 0.44 per cent.
Accepted bids on the five weekly issues of Treasury
bills during April were tendered on average interest
bases rising from 0.221 per cent on the April 1 issue to
0.335 per cent, the highest rate since the October 20, 1937
issue (which was $50,000,000 of 273 day bills), on the


April 29 issue. Each of the five issues was in the amount
of $150,000,000, and, since only $450,000,000 of Treasury
bills matured during April, a total of $300,000,000 of
“ new money’ ’ was put at the Treasury’s disposal from
this source. The April 1 issue was of 78 day term and
the issue of the 8th of 72 day term; these issues conse­
quently will mature during the next quarterly income
tax collection period in June. The three later Treasury
bill issues in April were of 91 day term.
The advance during April in the average interest rate
at which new issues of Treasury bills were taken up is
explained in part by the passing of the April 1 tax date
in Chicago and the accompanying drop in demand for
Treasury bills in that district. As another factor, the sale
of the $1,500,000,000 Treasury certificates of indebted­
ness contributed substantially toward filling the demand
for short term investments, which might otherwise have
sought Treasury bills. The System Open Market Ac­
count exercised a stabilizing influence on the Treasury
bill market in the latter part of April by net purchases
of $89,000,000, which represented absorption of the float­
ing supply.
Money Rates in New York
Apr. 30,1941 M ar. 31, 1942 Apr. 29, 1942
Stock Exchange call loans..........................
Stock Exchange 90 day loans...................
Prime commercial paper— 4 to 6 months
Bills— 90 day unindorsed..........................
Yield on % per cent Treasury note due
March 15, 1945 (tax exem pt)..............
Average yield on taxable Treasury notes
(3-5 years)....................................................
Average yield on tax exempt Treasury
bonds (not callable within 12 years). .
Average yield on taxable Treasury bonds
(not callable within 12 years)..............
Average rate on latest Treasury bill sale
91 day issue.................................................
Federal Reserve Bank of New York dis­
count r a t e ...................................................
Federal Reserve Bank of New York buy­
ing rate for 90 day indorsed bills . . . .
* Nominal.



X -H





0 .5 3

0 .4 3

0 .4 4

0 .7 3

0 .9 4

1 .0 3

2 .0 0

2 .0 2

2 .0 6


0 .0 9 7

2 .3 3

2 .3 8

0 .2 0 3 f

0 .3 3 5





f 83 day issue.

M e m b e r B a n k C r e d it

During the four weeks ended April 22, total loans and
investments of the weekly reporting member banks in­
creased $612,000,000 further to $31,393,000,000. The rise
was concentrated entirely in investments and was ac­
counted for principally by purchases by these banks
of the new certificates of indebtedness; the volume of
outstanding loans, in fact, showed a reduction of
$160,000,000 over this period.
Treasury bill holdings of the weekly reporting member
banks declined $243,000,000 in the week ended April 1,
despite an increase of $150,000,000 during that week in
the amount of outstanding Treasury bills, owing to a
temporary demand on the part of corporations and indi­
viduals for tax avoidance purposes in the Chicago Dis­
trict. Bill holdings of the weekly reporting group rose
$365,000,000 in the following week, however, as banks,
particularly those in Chicago, reacquired bills from other
investors or were allotted portions of the $150,000,000 of
“ new money” bills issued by the Treasury during the
week. For the entire four week period, bill holdings in­
creased $180,000,000, Treasury bonds and notes were
$37,000,000 higher, and acquisitions of certificates of
indebtedness amounted to $609,000,000, while obligations
guaranteed by the United States, together with holdings


of other securities, declined $54,000,000. The volume of
commercial, industrial, and agricultural loans, which had
reached a peak of $7,035,000,000 on March 18, receded
$134,000,000 further to $6,874,000,000 during the four
weeks ended April 22.
Adjusted demand deposits, following the decline in the
previous month attributable to withdrawals for payment
of income taxes, showed a net rise of $571,000,000 be­
tween March 25 and April 22 for the weekly reporting
banks as a whole, although for New York City banks
there was a decline of $19,000,000.
Security M a rk e ts
Unfavorable foreign news and domestic uncertainties
affected the stock market adversely during April. The
Standard 90 stock price index continued downward in
a movement now extending over almost four months.
On April 28 the index was 18 per cent below the 1942
high and at the lowest level in nine years. The net de­
cline for April amounted to about 4 per cent. Trading
on the New York Stock Exchange continued to be light.
Steadiness in domestic corporate bond prices again
contrasted with declining stock quotations in April. The
average price of high grade corporate bonds, measured
by the Aaa index of Moody’s Investors Service, showed
little change in level during the month. The Aaa bonds
at the end of April averaged about % of a point below
the 1942 high. Medium grade corporate bonds, classified
as Baa by Moody’s, likewise moved within narrow limits.
On April 7 the Baa price index equaled the 1941 high
set last November. The average price of prime municipal
bonds continued to edge upward during the first three
weeks of April but weakened following the President’s
recommendation in his recent message to Congress that
interest on such issues should be made subject at least to
surtaxes. Standard’s average yield on prime municipal
bonds stood at 2.46 per cent on April 29, in comparison
with 2.52 on March 25, 1942.
Following news toward the end of the month that gaso­
line rationing will be imposed during May in many
Eastern States, highway, bridge, and port authority
bonds were subjected to severe pressure.
R ev ised B u d g e t E stim a te s
Revised budget estimates for the current and next
fiscal year, issued April 24 by the Bureau of the Budget,
reflect the expansion in the scope of the war program
which has occurred since the previous forecasts were
submitted to the Congress by the President last January.
W ar expenditures (now running at an annual rate of
close to $40,000,000,000) are now expected to reach
$28,000,000,000 for the current fiscal year ending June
30, as against the earlier estimate of $26,000,000,000;
and for the year ending June 30, 1943, the estimate of
expenditures under this classification has been revised
to $70,000,000,000, an amount 25 per cent greater than
the $55,800,000,000 forecast in January. No revisions
were made in the estimates for other expenditures, which
are expected to amount to $6,600,000,000 this fiscal
year and $6,100,000,000 in the following year. Esti­
mates of net receipts (without giving effect to additional
tax proposals now before Congress) were raised



slightly to $12,700,000,000 for the current year and
$16,900,000,000 for the next fiscal year.
The growing magnitude of the war program will, of
course, involve an increasing volume of Treasury financ­
ing. Secretary of the Treasury Morgenthau announced
April 27 that the Treasury would borrow in the open mar­
ket $2,000,000,000 in May and another $2,000,000,000
in June.

plants, employing about 20,000,000 persons, have adopted
voluntary payroll deduction plans. In New York State
alone, over 9,000 firms, employing about 4,600,000
persons, are participating. As the program develops,
more and more emphasis will be needed on increasing
rates of subscription out of current income, indeed to a
point where genuine and general self-sacrifice is involved.
In the Treasury’s campaign— just now being launched
— the public is urged to set aside at least 10 per cent of
income for the purchase of War Savings Bonds. Na­
tional, State, and county quotas have been prepared,
the aim of which is to effect sales by midsummer of
about $1,000,000,000 a month, or more than double the
average monthly rate during the first year these bonds
were on sale.
The goal for New York State has been set at
$125,000,000 for the month of May. This represents
about 21 per cent of the National quota of $600,000,000
for May, or approximately the same ratio as obtained
during the period July, 1941, through January, 1942,
when New York State sales averaged $93,000,000 a
month and country-wide sales $438,000,000. Quotas for
subsequent months are to be higher.
On April 6, the Treasury Department announced that
henceforward Defense Savings Bonds and Stamps would
be known as W ar Savings Bonds and Stamps. For a
few months, however, until present supplies are ex­
hausted, new bonds sold will bear the word “ defense” ,
but the securities in other respects are identical.

W a r Savings B o n d s

W a r C o n tra ct F inancing

Incomplete data based upon the Daily Statement of
the United States Treasury of April 27 indicate that
aggregate sales of United States Savings Bonds for the
country as a whole declined slightly from March to April,
but were close to the $529,000,000 figure for December,
1941, and continued to run substantially ahead of the
rate prevailing prior to this country’s entrance into the
war. Defense Savings Bonds— presently to be called
W ar Savings Bonds— have now been on sale for a full
year, during which time a total of approximately
$5,400,000,000 has been sold.
In the Second Federal Reserve District, total sales of
all series of Savings Bonds, by agencies other than post
offices, amounted to approximately $100,000,000 during
April. This volume was less than in the preceding four
months, but prior to that period was exceeded only in
May, 1941, the month when Defense Savings Bonds first
went on sale. Sales of the Series E bonds accounted for
about $50,000,000 of the Second District total for April,
or close to the amount sold in March.
Among the factors responsible for the recent decline
in sales may be mentioned the waning of the type of
buying which in recent months led some persons to with­
draw deposits from savings institutions for investment
in Savings Bonds; uncertainties with respect to personal
budgets for the coming year caused by rising prices and
taxes; and perhaps a tendency for some to delay enlarged
purchases until the start of the Treasury’s intensified
campaign. As the program for financing the war and
avoiding inflation unfolds, these influences should be
overcome and a renewed expansion in sales should set
in. Secretary Morgenthau has reported that 59,000

On April 11, 1942, the Board of Governors of the
Federal Reserve System announced the adoption of
Regulation “ V ” to carry out the President’s Execu­
tive Order of March 26, 1942, for the purpose of
facilitating and expediting the financing of war pro­
duction. Such purpose will be accomplished by ar­
ranging for the financing of contractors, subcontrac­
tors, and others engaged in businesses or operations,
deemed by the armed services and the United States
Maritime Commission to be necessary for the prosecu­
tion of the war, even though the amount of credit re­
quired might not, under ordinary circumstances, appear
to be warranted by the financial condition of the
Under the Executive Order, the War Department, the
Navy Department, and the Maritime Commission are
authorized to guarantee commercial banks, Federal Re­
serve Banks, the Reconstruction Finance Corporation,
or other financial institutions against loss on loans made
to concerns to finance the performance of war orders.
The Board’s regulation authorizes the Federal Reserve
Banks, acting in accordance with the provisions of the
President’s Executive Order and the instructions of the
three military procurement agencies, to arrange loans
and guarantees thereof wherever it is believed that they
will contribute to the obtaining of maximum war pro­
duction expeditiously.
To assist in carrying out the provisions of the Presi­
dent’s Executive Order and to aid in decentralizing
operations under it as fully as possible, the War Depart­
ment plans to have a liaison officer stationed at each
Federal Reserve Bank. Generally speaking the liaison









U . S. G overn m ent Expen ditu res (F o r fiscal years ended June 3 0 ;
1 9 4 2 and 1 9 4 3 estim ated)


officer will certify to the Reserve Bank that an appli­
cant for financing is qualified from the technical or pro­
duction standpoint to carry out a contract, subcontract,
or order for war supplies or equipment.
It is expected that any applicant will first take up
his credit needs with his commercial bank or other
financing institution. When the necessary credit cannot
be arranged by the financing institution without pro­
tection against undue risk of loss, the financing institu­
tion will apply to the Federal Eeserve Bank for a guar­
antee of a part or all of the proposed financing. It will
be the Reserve Bank’s function to analyze the financial
aspects of the application and determine the type of
financing best suited to meet the situation, and after
obtaining certification as to the necessary character of
the production involved, to arrange such guarantee as
may be required.
The Federal Reserve Bank of New York has been
designated by the Secretary of the Treasury to act as
a fiscal agent of the United States pursuant to the
President’s Executive Order. The cooperation of all
banks, both members and nonmembers of the Federal
Reserve System, and of all other financing institutions
in the Second Federal Reserve District is requested for
the purpose of facilitating the financing of war pro­
Copies of the President’s Executive Order of March 26
and Regulation “ V ” have been distributed widely and
additional copies are available upon application to this
bank or its Buffalo Branch. Inquiries arising in this
District regarding this war financing program should
be addressed to this bank or its Buffalo Branch.
N e w Financing
The outstanding event in the market for new cor­
porate security issues during April was the public
offering on April 24, at par, of $100,000,000 American
Tobacco Company 20 year 3 per cent debentures, which
attracted a substantial demand, especially from institu­
tional investors. This issue was responsible for raising
the month’s total of corporate and municipal financing,
exclusive of short term issues, to $182,000,000 from what
would otherwise have been close to the lowest level
reached in almost seven years. Corporate flotations
totaled $118,000,000, of which $105,000,000 (including
$87,000,000 of the American Tobacco Company issue
which will be used to retire bank loans) was classified
as new capital.
The only other corporate offering worthy of note was
$10,000,000 Union Electric Company of Missouri first
mortgage 3 % per cent bonds of 1971, priced at 109%
to yield 2.87 per cent. As a result of a War Production
Board order of April 7, placing certain restrictions on
the delivery of new railroad equipment, scheduled offer­
ings of a total of $15,600,000 of equipment trust certifi­
cates by two railroad companies were canceled. Two
sizable municipal issues were offered during the month:
$17,500,000 City of Cleveland, Ohio, 3% per cent trans­
portation system revenue bonds, maturing from 1943
to 1962, priced to yield from 1.00 to 3.50 per cent, and
$16,800,000 City of Detroit, Michigan, 2 1/4, 2% , and 3y 2
per cent bonds, maturing from 1943 to 1963, priced to
yield from 0.60 to 2.70 per cent.


Foreign E xchanges
In a foreign exchange market which continued quiet
and inactive during April, some improvement was shown
in the Canadian dollar, the unofficial discount on which
narrowed i y 2 points to close the month at 11 11/16 per
cent. This gain, which offset most of the previous
month’s loss, appears to have reflected in large part
some demand for Canadian exchange in anticipation
of the approaching tourist season. Accompanying a small
volume of dealings, which has been typical of trading
in all exchanges in recent months, the free rate for the
Venezuelan bolivar continued its advance, rising to a
new high of around $0.2870 during the month and there­
by extending the appreciation so far this year to approxi­
mately eight per cent. The Cuban peso advanced to
a premium of about y± per cent in terms of the dollar
during the month, but later returned to about par.
With the supply limited, a renewed demand in this
market for so-called free Swiss francs was reflected in a
rise of nearly two cents to $0.2700 in the rate for this
exchange. This rate compares with $0.2331, the equiva­
lent of the rate at which Swiss commercial banks will
supply Swiss francs against dollars for certain specified
P roduction and T ra d e
Further progress toward the attainment of maximum
production of war goods was made during April. As a
result of the rapid acceleration of the war effort, the
President intimated late in April that the war produc­
tion goals would be raised and the Director of the Budget
announced sharp upward revisions of projected war ex­
penditures for the remainder of the present fiscal year
and for the fiscal year ending June 30, 1943. The Chair­
man of the War Production Board stated that the con­
version of industry to full war production had proceeded
much more rapidly than had been expected and that
restrictions on the output of consumers’ durable goods
would be broadened to include practically the entire field
within the next two or three months.
Industrial conditions in April were similar to those
which characterized recent months. Declining produc­
tion of consumers’ durable goods was again offset by
further gains in the output of war materials, with the
result that the general level of productive activity re­
mained high. The record rate of steel production reached
in March appears to have been maintained in April and
the output of bituminous coal continued in large volume.
Electric power production was maintained at the high
rate of the three preceding months, seasonal factors con­
sidered. Incomplete figures indicate a pronounced con­
traseasonal increase in the movement of bulk freight over
the railroads; loadings of merchandise and miscellaneous
freight, however, appear to have declined slightly. Owing
to continued transportation difficulties, output of crude
petroleum was further curtailed in April, when the Texas
Railroad Commission issued a proration order shutting
down most of the Texas oil wells for 18 days during the
month. Additional restrictions were placed on deliveries
of gasoline to service stations in the Eastern Seaboard
and Pacific Northwest areas.
Owing to the present and potential difficulties in ob-



The output of war goods mounted higher in March,
and conversion of the automobile and other industries
formerly producing consumers’ durable goods proceeded
at a rapid rate. The component index of output of pro­
ducers’ durable goods, which includes important war in­
dustries such as steel, aircraft, shipbuilding, and
machinery, again advanced, while the index of produc­
tion of consumers ’ durable goods fell further. The sharp
divergence between these two types of industrial activity
since last summer is portrayed in the accompanying
After seasonal adjustments, the output of nondurable
goods in the aggregate declined slightly between Febru­
ary and March, reflecting a pronounced curtailment in
the production of crude petroleum (owing to transporta­
tion difficulties), and some slackening in the rate of cotton
consumption from the record attained in February.
C o m m o d ity Prices

D urable Goods (Fed eral R eserve B ank of N ew Y o rk indexes,
expressed as percentages of long term trends, and adjusted
for seasonal variation)

taining adequate supplies of burlap from India, the
W . P. B. on April 20 ordered the cotton textile industry
to convert within two months a substantial portion of the
looms still making civilian fabrics to the production of
materials for bagging and other war uses. According to
plans now being worked out, adequate supplies of essen­
tial civilian fabrics will be assured and it is expected that
total production of cotton goods for all purposes will be
increased considerably.
P roduction and T rade in M arch
In March the seasonally adjusted index of production
and trade computed at this bank declined one point
further to 111 per cent of estimated long term trend. The
figure a year earlier was 105. The decline in the index
in March, like that in February, resulted primarily from
the fact that retail trade, on the whole, failed to show the
usual seasonal increase. Productive activity in general
continued at a record level.




Indexes of Production and Trade*
(100 = estimated long term trend)
Index of Production and Trade...................



112 p





120 p


Producers’ goods— to ta l.......................
Producers’ durable goods................
Producers’ nondurable goods.........





Consumers’ goods— to t a l.....................
Consumers’ durable goods..............
Consumers’ nondurable goods. . . .




49 p
106 p

Durable goods— to ta l............................
Nondurable goods— total.....................




128 p
113 p

Primary distribution...................................
Distribution to consumer..........................
Miscellaneous services..............................




109 p
91 p
112 p












Cost of Living, Bureau of Labor Statistics
(100 = 1935-39 a v e ra g e)..............................

Wage Rates
(100 = 1926 average).....................................

Velocity of Demand Deposits *
(100 = 1935-39 average)
New York C i t y .................................................
Outside New York C it y .................................

p Preliminary.

*Adjusted for seasonal variation.


Anticipation of the early adoption of over-all price ceil­
ings apparently served as a restraining influence upon
commodity price advances during most of April, although
the general tendency was again toward higher price
levels. Failure of selective price fixing policies to check
persistent increases in a broad list of wholesale com­
modity prices, and the resulting impetus given to
advances in retail prices and living costs, led to the
formulation of a program of more inclusive price control.
The Office of Price Administration announced on April
28 a General Maximum Price Regulation, freezing prices
of the major items affecting living costs. The new com­
prehensive program places general ceilings at the highest
levels prevailing in March, 1942, not only upon wholesale
commodity prices previously uncontrolled but also upon
retail prices, and upon certain service charges. The
order becomes effective on prices of manufacturers and
of wholesalers, May 11; on retail prices, May 18; and on
service charges, July 1. Certain items, however, are
exempted from control under the new regulations, among
which are prices on farm products calling for parity
treatment, and food prices subject to wide seasonal varia­
tions. Supplementing the general order, ceilings were an­
nounced on residential rents in many newly designated
areas (including a large number in the Second Federal
Reserve District).
During April the Office of Price Administration issued
a general program of price control over all commodities
sold for export, effective April 30, to supersede all previ­
ous regulations; maximum prices for certain fuels,
machinery, and a number of other items, to supplement
the general price freezing order, were announced to be­
come effective during May.
According to the Bureau of Labor Statistics compre­
hensive weekly index, wholesale commodity prices on
April 25 reached the highest point since 1928, showing
an increase of 7 per cent since we entered the war last
December and of 19 per cent from April 26, 1941. The
largest price advances over a year earlier were concen­
trated in raw materials; prices of manufactured products
as a whole were about 5 per cent above December 6 and
15 per cent higher than a year earlier. Important in this
group of commodities are processed foods and textiles,
prices for which have moved sharply upward over the


past twelve months, accompanying advances in the prices
of raw materials.
In order to make equitable disposition of available
supplies of commodities which have become scarce,
largely because of transportation difficulties, the O.P.A.
during April announced that rationing would become
effective in May, covering consumer purchases of sugar
and also gasoline to be used in noncommercial passenger
cars. Sugar rationing is to be country-wide. The gaso­
line rationing order applies only in 17 Eastern States
and the District of Columbia and, in effect, will result in
a further curtailment of the deliveries previously allowed
to filling stations in this area.
E m p lo y m e n t and P ayrolls
President Roosevelt, on April 18, established a War
Manpower Commission charged with the formulation of
plans and establishment of basic policies to assure the
most effective mobilization and utilization of the.nation’s
manpower in the prosecution of the war. Among its other
functions, the commission will estimate labor require­
ments of industry, review and coordinate all other esti­
mates of needs for military and civilian manpower, and
direct Government agencies (including the Selective
Service System) as to the proper allocation of available
manpower. The chairman of the commission, Paul V.
McNutt, indicated that, although most of the 13,000,000
war production workers who, it is estimated, will be
hired in the next year will come from those employed at
present in civilian industries, several million must be
added to the labor force from the ranks of women, young
people, self-employed persons, and retired workers.
During March, the number employed in civil non­
agricultural occupations in the United States as a whole
increased 370,000 to a total of 40,300,000 persons, accord­
ing to estimates made by the Bureau of Labor Statistics.
The largest gain during the month occurred among
civilian government employees; factories and construc­
tion firms also added substantially to their working
forces. Total civil nonagricultural employment in March
was more than 2,500,000 above the March, 1941 level,
and over half of this gain occurred in manufacturing


United States factory employment during March rose
about 1 per cent above the February level, and payrolls
increased 2 per cent. Industries producing war goods
continued to hire additional workers, more than offsetting
the temporary layoffs due to conversion to war produc­
tion of automobile factories and other consumers ’ durable
goods plants. In nondurable goods industries there was,
on the whole, little change in employment during the
month. Compared with March, 1941, factory working
forces were 12 per cent greater and payrolls were 39 per
cent larger.
In New York State, manufacturing employment in­
creased 1 % per cent during March, and payroll disburse­
ments rose 3 per cent further, according to the State De­
partment of Labor. More persons were at work in most
of the war industries, but these gains were partially offset
by curtailed production in plants manufacturing type­
writers, cans, heating apparatus, and other nondefense
products requiring the use of metals. The apparel in­
dustry increased its working forces somewhat over
February, but woolen mills and the carpet industry
reduced employment. As a whole, factory employment
was 16 per cent above the March, 1941 level, and payrolls
were 43 per cent greater.
B u ilding
The decline in the volume of nondefense construction,
which has been going on since the middle of last year,
will apparently be accelerated by the order of the War
Production Board, dated April 9, drastically curtailing
nonessential building. Last October the Supply Priori­
ties and Allocations Board announced that projects
requiring the use of certain critical materials and not
required for defense or for public health and safety
would not receive priority assistance. Under the new
order, however, while ordinary maintenance and repair
work may continue without restriction, no new construc­
tion, except on small projects or those essential to the
war effort or to public health and safety, may be started
without the specific permission of the W .P.B. The order
also states that construction now under way may be
halted if the materials used are needed for war projects.

2 4 -0 0 1




















Value o f Construction Contracts Awarded in 37 States, Classified by
Type of Ownership (F . W . Dodge Corporation data)



However severe this order may be, the W .P.B. expects
that the total volume of new construction in 1942 will
exceed the total for 1941, owing to the upward trend in
the volume of awards for military projects.
The effect of the war on the relationship between
private and public construction is indicated in the
preceding chart which presents quarterly data on con­
struction contract awards in 37 Eastern States, based on
F. W . Dodge Corporation figures. The expansion in the
volume of awards for private construction from the
second quarter of 1940 (at the start of the defense pro­
gram) to the high point in 1941 was relatively slight,
compared with the marked increase in public construc­
tion. In the first quarter of 1942 private construction
accounted for only about one quarter of all contracts
awarded in the 37 States, compared with about one half
in the corresponding period in 1941. This comparison
is all the more striking inasmuch as a portion of private
construction includes projects essential to the war pro­
gram. The W .P.B. order referred to above indicates
that private construction will be further curtailed during
the remainder of 1942.
In New York State and Northern New Jersey the vol­
ume of construction contracts awarded during the first
quarter of 1942 was slightly below the corresponding
period last year. Awards for private projects in the
first three months of this year amounted to only half
the volume recorded during the first quarter of 1941,
but awards for public construction more than doubled
between the two periods.

this District were about 22 per cent higher than in
March, 1941, and the average daily rate of sales in­
creased more than usual over February. Substantial
year-to-year gains continued to be reported during March
in sales of radios, women’s and misses’ coats and suits,
and men’s and boys’ clothing. Considerable gains also
were reported in sales of sporting goods, while sizable
reductions were reported in the sales of mechanical
During March retail stocks of merchandise on hand
in department stores continued to expand. A t the end
of March stocks were about 57 per cent higher than
in March, 1941 and this bank’s seasonally adjusted index
of department store stocks rose further to 135 per cent
of the 1923-25 average, a new peak. The indexes of
department store sales and stocks adjusted for seasonal
variation are shown for the Second District in the ac­
companying chart. Both sales and stocks have tended
upward since the beginning of 1939, but during the
past year the increase in stocks has become especially
marked, while sales have shown wide fluctuations. The
behavior of these indexes over the latter period reflects
advancing prices as well as increasing physical stocks
and fluctuating physical volumes of sales.
Returns from a limited number of department stores
in this District indicate that at the end of March out­
standing orders for merchandise purchased by the stores,
but not yet delivered, continued to be about 2 % times
as large as those at the end of the corresponding month
in 1941.

D e p a r tm e n t Store T rad e
In April sales of the reporting department stores in
the Second District fell off from the level of March,
contrary to the usual seasonal tendency. The rate of
sales ordinarily expands between March and April even
when, as this year, Easter is early and Easter buying
largely concentrated in March. For the four weeks
ended April 25, total sales of the reporting department
stores in this District are estimated to have increased
by about 4 per cent over the corresponding 1941 period.
In March, sales of the reporting department stores in

Percentage changes from a, year earlier
Net Sales

Department Stores

Stock on hand
Jan. through end of month,
March, 1942 March, 1942




Westchester and Fairfield Counties . . .
Lower Hudson River V a lle y ...................
Upper Hudson River V a lle y ...................




New York C it y ............................................
Northern New Jersey.................................




Central New York S t a t e .........................
Mohawk River V a lley..........................
Northern New York State.......................
Southern New York State.......................
Bingham ton...............................................
Western New York State..........................
Niagara F alls............................................
All department stores...................


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

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

Indexes of Sales and Stocks of Reporting Department Stores in
Second Federal Reserve District, A djusted for Seasonal Varia­
tion (1923-25 average= 1 0 0 per cent)

r Revised.






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












General Business and Financial Conditions in the United States
(Summarized by the Board of Governors of the Federal Reserve System)
N D U S T R IA L activity continued at a high rate in March and the first half of A pril.
D istribution of commodities to consumers was maintained in large volume and
commodity prices advanced further.


P roduction

Index o f P h ysical V o lu m e of Industrial P roduc­
tion, A d ju ste d for Seasonal V ariation
( 1 9 3 5 -1 9 3 9 average = 1 0 0 per cen t)

Indexes o f V alu e o f D epartm en t Store Sales and
Stock s, A d ju ste d for Seasonal Variation
( 1 9 2 3 -1 9 2 5 a v e r a g e s 100' per cen t)

Volume of industrial production increased seasonally in March and the Board’s
adjusted index remained at 172 per cent of the 1935-39 average. Output of durable
manufactured products, now mostly war materials, continued to advance, reflecting
mainly increased activity in the iron and steel, machinery, aviation, and shipbuild­
ing industries. Production of lumber and cement, which had been maintained at un­
usually high levels during the winter months, increased less than seasonally in March.
In most industries manufacturing nondurable goods activity was sustained at
earlier high levels. In some, however, notably wool textiles and petroleum refining,
there were declines owing -to restrictions on production for civilian use and, in the
case of petroleum products, to transportation difficulties. Mineral production declined
in March and the first half of A pril, reflecting sharp curtailment in output o f crude
petroleum. Coal production, which usually declines at this season, was maintained in
large volume. The Great Lakes shipping season opened in the latter part of March
and the first boatload o f iron ore reached lower Lake ports 12 days earlier than the
record set last year. Shipments during the coming season are expected to exceed con­
siderably the total of 80 m illion gross tons brought down the Lakes last year.
Value of construction contract awards continued to increase in March, according
to figures of the F. W. Dodge Corporation, and the level of the first quarter of 1942
was the highest in recent years, being some 30 per cent above that of the correspond­
ing period last year. Awards for public work amounted to close to 80 per cent of the
total and in the residential field accounted fo r 52 per cent of the value of all projects.
Publicly-financed contracts fo r factory construction showed a sharp increase, partly
offset in the total by a decline in private factory construction.
On A p ril 9 the War Production Board issued an order which required explicit
permission of the Government for in itiation of all new private construction involving
expenditures in excess of specified small amounts and not covered by specific p rio rity
D istribution
Value of retail trade in March continued at the high level of other recent months,
making allowance fo r customary seasonal changes. Sales at department and variety
stores increased by somewhat less than the usual seasonal amount while sales by mail­
order houses rose more than seasonally.
On the railroads total loadings of revenue freight were maintained in large vol­
ume in March and the first half of A pril. Shipments of coal and coke declined less
than seasonally and ore loadings increased sharply, while grain shipments declined
further from the peak reached in January. Loadings of miscellaneous merchandise,
which had been unusually large in the preceding three months, increased less than

Commodity Prices

W ed n esd a y F igu res for R eporting M em ber B anks
in 101 Leading Cities (L a te s t figures
are for A p ril 8 )





"I— "
a/ '






B an k Credit



W ed n esd a y F igu res of T o ta l M em ber B ank R e­
serve Balances at Federal R eserve B an ks, w ith
E stim a tes of Required and E x cess R eserves

The general level of wholesale commodity prices advanced l 1/ ^ per cent further
from the middle of March to the middle of A p ril. Among manufactured products,
finished consumers’ goods, such as foods, clothing, and shoes, continued to show the
largest price increases. Prices of most raw materials were unchanged or showed
increases, which in a number of cases reflected the raising of Federal maximum price
levels. There were declines in prices of wheat and of a few other commodities,
including gasoline at Gulf ports and turpentine.
In retail markets maximum prices were fixed in this period fo r a number of
electrical products, most of which w ill no longer be produced for civilian use after
May 31. Prices of many other commodities and services advanced further.

During the four weeks ended A p ril 15 holdings of Government securities at banks
in leading cities increased by nearly 700 m illion dollars, while commercial loans
declined somewhat, following a rise in previous weeks. Changes in member bank
reserves and deposits reflected principally the temporary effects of Treasury opera­
tions in connection with income tax collection and the sale of certificates of indebted­
ness. Money in circulation continued to increase.
U nited States Government Security P rices
Following an advance from the mid-February low, prices of U. S. Government
bonds remained relatively steady in the first half of A pril.