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MONTHLY REVIEW of Credit and Business Conditions S e c o n d V ol. F e d e r a l 25 M A Y 1, R e s e r v e D is t r ic t 1943 No. 5 MONEY MARKET IN APRIL W hile figures for the final days of the campaign are not yet securities to nonbanking investors, although some of the securi available, the Second W ar Loan drive, launched April 12 with ties sold to others than banks will undoubtedly be resold a minimum objective of $13,000,000,000, has substantially to banks over a period of time. exceeded that total. Reserve District, sales to nonbanking investors reached over Thus, the second drive clearly out In the Second Federal stripped the first, held last December, when the goal was $4,000,000,000 by the end of April, exceeding the minimum $9,000,000,000 and the realization $12,900,000,000. $3,000,000,000 objective for sales in the District to these Indeed, it may be that the April drive will yield an amount not very classes of investors by a wide margin. far short of the $17,000,000,000 total raised during all of the substantial sales to brokers and dealers in securities some part first four Liberty Loan campaigns of the first W orld W ar. of which can definitely be included in sales to nonbank in The results of the new drive reflected the high level of national in come, the large volume of idle In addition, there were vestors although a considerable BILLIONS OF DOLLARS 20 i--------- amount will find its way into b a n k h o ld in g s . M o r e o v e r , funds, and the joint efforts of nearly $300,000,000 (net) of the W ar Savings Staff and Vic sales were allotted to other dis tory Fund Committee organiza tricts at the request of sub tions, and their coordination scribers (chiefly corporations) under the recently appointed who were asked by sales organi W ar Finance Committee. Com zations in those districts to mercial banks heavily oversub credit them with part of their scribed the limited amounts of security purchases, even though securities offered to them; in the subscriptions were actually surance companies, savings obtained in this District and banks, and other "institutional” payments for the securities were made out of funds located here. investors purchased large blocks, especially of the 2 l/z per cent l ib e r t y loan d r iv e s F IR S T W O R L D w ar W AR loan SECOND d r iv e s W O RLD W AR porations were large buyers of certificates of indebtedness and The successful results in this District were accounted for not and 2 per cent bonds; other cor Results of Two War Loan Drives in the Present World War, Com pared with Liberty Loam Drives of the First World War (Total for Second War Loan drive partly estimated) only by the energetic sales ef forts of the local W ar Savings and Victory Fund organizations, Tax Savings notes; and individ uals, making an extra effort to help in financing the war, pur but also by the especially active participation of insurance chased Government bonds of all types in the largest volume companies whose head offices are located in this District, and thus far attained. of corporations whose principal banking accounts are carried The amount of funds raised directly from banks, approxi here. Second District insurance companies, which supple mately $5,000,000,000, was largely predetermined, since their mented their purchasing capacity by reducing holdings of purchases were limited to $2,000,000,000 or thereabouts of the partially tax-exempt and other already outstanding issues, 7 /s per cent certificates of indebtedness, and a corresponding bought more than $1,300,000,000 in total of the three "market” amount of the 2 per cent Treasury bonds of 1950-52, in addi offerings during the drive. tion to Treasury bills, the supply of which was increased Despite the negligible amounts of excess reserves held by The surpassing of the over the N ew York City banks at the beginning of the campaign, all goal, was therefore largely the result of sales of Government commercial banks in this area entered heavy subscriptions for $800,000,000 during the month. M O N T H L Y R E V I E W , M A Y 1, 1943 34 totaled only $1,019,000,000, as compared with $2,089,000,000 BILLIONS OF DOLLARS 12 during the first half. Credits to W ar Loan accounts during April, representing payments for Government securities, ap proximated $10,500,000,000, and it is estimated that the bal ance in these accounts, which amounted to $2,694,000,000 at the end of March exceeded $10,000,000,000 on April 30. Heavy additional credits to W ar Loan account deposits are expected on May 10 when payments are due on the allotments to banks of 2 per cent bonds. In the Second Federal Reserve District the proportion of book credit payments on sales of the three market issues— the IV z per cent bonds, the 2 per cent bonds, and the Vs per cent certificates of indebtedness— ran upwards of 95 per cent; in other districts slightly less than 80 per cent. The correspond J F M A M J J ing figures for the December drive were 83 per cent and 46 A 1942 War Loan Deposits in Special Depositaries for Account of Sales of Government Securities, and Credits to and Withdrawals from. Such Accounts per cent, respectively. The greater use of the book credit method of payment was an indication of the fact that banks were becoming increasingly conscious of its advantages to them the two market issues available to them, and at the same time (especially in light of the enactment of the Wagner-Steagall continued to enter substantial tenders each week for Treasury bill), and of its vital role in making possible Government bills. As in December, the financing was accomplished with out strain upon bank reserve positions. For this, credit was financing operations of unprecedented size with a minimum of disturbance to bank reserve positions. Between the end of due to the W ar Loan deposit account mechanism, modified December and April 24, the number of qualified W a r Loan April 13 by approval of the Wagner-Steagall amendment to depositaries increased from 660 to 908 in the Second Federal the Federal Reserve Act suspending reserve requirements Reserve District and from approximately 5,200 to about 8,500 against such deposits.* Aside from Treasury bills, for which in the country as a whole. Besides the qualification of many book credit payments were not permitted, payments by credits additional depositaries, the limits on maximum W ar Loan to W ar Loan deposit accounts on the books of banks were account deposits have been increased in numerous cases. employed to such a preponderant extent that there were rela tively few days over the course of the campaign when cash M em ber B a n k R eserve Po sitio n s receipts by the Treasury from the sale of new issues were large During the first two weeks of April excess reserves of all enough to create a substantial increase in Treasury deposits member banks in the United States rose $630,000,000, or from with the Federal Reserve Banks and a consequent loss of reserve $1,520,000,000 to $2,150,000,000. funds to the banks. The principal factor tend In fact, the Treasury made a limited num ing to enlarge excess reserves over this period was an increase ber of calls on the W ar Loan accounts during the drive, in order of $785,000,000 in Government security holdings of the Federal to supplement cash receipts from the sale of securities and tax Reserve Banks, reflecting for the most part purchases of bills revenues. Calls during the second half of the month, however, under the Ys per cent buying rate from banks requiring * By the same m easure Federal D eposit Insurance C orporation assessments against the W ar Loan accounts were also suspended. additional funds in the adjustment of their reserve positions. Reserve requirements declined $245,000,000 during the first two weeks of the month, also tending to create excess reserves, Money Rates in New York but there were opposing factors which limited the rise— prin April 30, 1942 Mar. 31, 1943 April 29,1943 Stock Exchange call loans.................... Stock Exchange 90 day loans................ Prime commercial paper-4 to 6 months. Bills— 90 day unindorsed..................... Average yield on tax exempt Treasury bonds (not callable within 12 years). Average yield ontaxable Treasury bonds (not callable within 12 years)............ Average rate on latest Treasury bill sale 91 day issue............................... Reserve Bank discount rates: On advances to member banks se cured by Government obligations callable or maturing in one year or less................................................... On other advances to member banks secured by Government obliga tions, and on rediscounts.............. Reserve Bank buying rate for 90 day indorsed bills....................................... * Nominal 1 *1% *A 7A 2.05 1 other Federal Reserve accounts, a $172,000,000 rise in currency 1 *1H H -H A 2.07 cipally a $207,000,000 increase in nonmember deposits and A7 A -H 5 1.99 2.38 2.32 2.32 0.335 0.374 0.372 circulation, a $75,000,000 decline in the gold stock, and a $73,000,000 increase in Treasury deposits with the Federal Reserve Banks. The decrease in reserve requirements was largely accounted for by the suspension of reserve requirements against W ar Loan account deposits, effective April 13. H X During the follow ing week, ended Wednesday, April 21, the new law had an even more important effect when, through heavy sales of securi 1 1 1 y2 ties to nonbanking investors, approximately $6,000,000,000 y2 was shifted from other classes of deposits (against which reserves are required) to W ar Loan account deposits (against FEDERAL RESERVE B AN K OF NEW YO R K 35 The resultant higher under the new provisions of the law than they would decline in reserve requirements of all member banks was esti have been under the former provisions, and ordinarily the level mated at approximately $1,000,000,000, although, inasmuch of reserve requirements will be considerably lower. which reserve requirements were suspended). as there was a drop at the same time of $826,000,000 in reserve balances, the further increase in excess reserves was limited to $180,000,000. The decline in reserve balances during the week ended April 21 was largely accounted for by a $376,000,000 decline in Federal Reserve Banks’ Government security hold ings, a $343,000,000 increase in Treasury deposits with the Federal Reserve Banks, and a further $76,000,000 expansion in currency circulation. The reduction in Federal Reserve Bank holdings of Government securities was largely concen trated in Treasury bills, and reflected reacquisition by banks of bills previously sold to the Reserve Banks under repurchase option. M E M B E R B A N K C R E D IT During the three weeks ended April 21 the weekly reporting member banks in 101 leading cities added $1,781,000,000 of Government securities to their investment portfolios, of which $1,018,000,000 were Treasury bills and the rest principally certificates of indebtedness and Treasury bonds. (Bank pur chases of the Second W ar Loan drive issues of 7/s per cent certificates and 2 per cent bonds will not be reflected in the weekly reporting member bank figures until the reports for the weeks ended April 28 and May 12, respectively.) In the last week of March, these banks had sold $697,000,000 of bills, In N ew York City reserve positions of the central reserve city banks oscillated within rather wide limits during April; temporary deficiencies occurred on a few days while at other times reserves of these banks ran substantially more than $100,000,000 in excess of their requirements. As in Febru largely reflecting operations of New York and Chicago banks in meeting losses of reserve funds. In Chicago, banks were called upon to meet large temporary deposit withdrawals at the end of March in anticipation of the April 1 assessment date for personal property taxes. ary and March, the N ew York City banks checked tendencies In New York City, the reporting member banks did not of their excess reserves to rise by adding to their Government resume purchasing bills until the week ended April 21, al security holdings, and met losses of reserve funds by selling though they continued to make net purchases of other types Government securities. Option account transactions in Treas of Government securities throughout the four weeks’ period ury bills with the Federal Reserve Bank played a predominant from March 24 to April 21. role in the day-to-day adjustment of reserve positions by the made during the last week, total holdings of Government securi N ew York City banks. Mainly as a result of purchases ties of these banks on April 21 were $561,000,000 above the The N ew York banks lost reserve funds during the early figure for December 30, 1942, at the close of the first W ar part of April through Treasury transactions, as calls on W ar Loan drive. Loan deposit accounts together with other payments to the made substantial purchases of Treasury bills during the first Outside New York, the reporting member banks Treasury substantially more than offset the volume of Govern three weeks of April and smaller purchases of other issues. ment checks placed on deposit here. W ith the inauguration By April 21 total Government securities of these banks had of the new W ar Loan drive April 12, there was a large outflow reached a point $2,091,000,000 above the level of December 30. of funds to other parts of the country, as deposits with the Through April 21 the effect of the Second W ar Loan drive New York banks were drawn upon to pay for subscriptions on the various items on the statements of the weekly reporting entered elsewhere. The suspension of reserve requirements member banks was particularly evident in the changes that against W ar Loan account deposits, effective April 13, how occurred in the volume of security loans and in the composi ever, not only enabled the banks to meet this outflow but also tion of deposits. permitted them to enlarge their holdings of Government dealers, mainly to finance the purchase of Government securi securities through repurchases of bills from the Reserve Bank ties during the Second W ar Loan drive, rose $597,000,000 to and market purchases of various classes of securities. The decline in member bank reserve requirements, which has resulted from the shift of deposits from private accounts to W ar Loan accounts during the Second W a r Loan drive, will be reversed following the drive. Then, the transfer, through In N ew York City, loans to brokers and $1,262,000,000 during the week ended April 21. The high point reached during the December drive was $952,000,000, on December 23. As banks made heavy use of the book credit method of payment in connection with sales of new Government securi Government expenditures, of deposits from W ar Loan accounts ties to nonbanking investors during the Second W ar Loan to deposits of individuals and business firms will cause an drive, there was a large shift of funds from customers’ deposits increase in reserve requirements. to Government deposits. New patterns thus have During the week ended April 21, been introduced into the movement of member bank reserve adjusted demand deposits of the weekly reporting member requirements— reserve requirements falling during periods of banks in 101 cities were drawn down $2,682,000,000, while heavy sales of Government securities to nonbanking investors, Government deposits of these banks rose $4,355,000,000. and rising at other times as drafts are made on the W ar Loan the same time, deposits due to domestic banks were reduced accounts. $460,000,000. Nevertheless, reserve requirements will never be At 36 MONTHLY REVIEW, M A Y 1, 1943 W A R F IN A N C IN G on an 18 per cent basis. During April, Treasury financing was high-lighted by the Allotments in this District of $665,000,000 constituted 31 per cent of the total as compared Second W ar Loan drive to raise at least $13,000,000,000 from with 35 per cent in December. the sale of Government securities, a goal that was surpassed per cent Treasury bonds were open to commercial banks for by a substantial margin. three days beginning April 28, with payment due on May 10. As a result of this intensive campaign, Subscription books on the 2 no financing of similar scope will be required before August. Results of this offering are not yet available. The excess of expenditures over tax receipts during this period banking sources also absorbed the bulk of the $800,000,000 Commerical can be largely met by continued sales of Savings bonds and "new money” raised through the four weekly Treasury bill Tax notes in addition to drawing upon the large balance offerings during the month. accumulated offerings were stepped up from $800,000,000 to $900,000,000 in W a r Loan deposit accounts through the On April 21, the weekly when maturities increased from $600,000,000 to $700,000,000. April drive. Subscription books on the three new issues offered during the drive— 2 Vi per cent Treasury bonds, of 1964-69, 2 per cent Treasury bonds of 1950-52, and % per cent certificates of indebtedness due April 1, 1944— were open to investors other than commercial banks for the duration of the drive from April 12 through May 1. On the basis of the latest available figures through April 27, it would appear that sales to such investors of the three new issues exceeded $8,000,000,000. In addition, N ot included in the Second W ar Loan campaign was an offer ing on April 20 of % per cent one-year certificates of indebted ness dated May 1, 1943 in exchange for $1,506,000,000 certifi cates of indebtedness and $289,000,000 Commodity Credit Corporation notes maturing on May 1. A total amount of $1,655,000,000 was actually exchanged, leaving $140,000,000 to be redeemed. S E C U R IT Y M A R K E T S nonbanking sources purchased over the month as a whole an Despite the offering of three new market issues in the Second estimated $1,250,000,000 of Savings bonds and an even larger W ar Loan drive, demand for previously outstanding Govern amount of Tax notes. ment securities continued to be strong during April. The total of Savings bonds included in the drive will be somewhat higher since Secretary Morgenthau Com mercial banks, allotments to which were limited in the drive, has announced that sales processed through May 8 will be added to their holdings of bonds and short term obligations, included in the final figures in order to give credit for sub acquired in many cases from insurance companies and others scriptions received near the close of April which would not who reinvested the proceeds in the new issues offered in the be reflected otherwise because of the time required to process drive. them. declined from 2.07 per cent at the beginning of the month to Of the approximately $11,000,000,000 purchased by Average yields on long term partially tax exempt bonds a new low for the year of 1.99 per cent, and yields on long term nonbanking investors throughout the country, more than taxable bonds also tended to decline. $4,000,000,000 was credited to the Second Federal Reserve for short term issues and intermediate maturities, which had District. been less active during the early part of the month, was stimu Purchases of the three market issues, principally by insurance companies, savings banks, and other corpora tions, may have exceeded $3,500,000,000, as compared with Demand from banks lated during the second half by suspension of reserve require ments on W ar Loan account deposits. Sales of Tax notes Stock prices, which had been rising with occasional inter were about the same as the December total of $440,000,000, ruptions over the preceding eleven months, on April 6 reached $3,200,000,000 in the December drive. while sales of Savings bonds reached a total in this District of the highest level since May, 1940, according to Standard and more than $200,000,000 (considerably more than in Decem Poors 90 stock index. ber), principally through substantial purchases by individuals tive order directing stabilization of prices and wages, the index of Series E bonds. The April drive also brought about increases dropped about 4 per cent to the months low on April 9. Following announcement of the execu in the volume of payroll deductions for the purchase of these Subsequently, however, an irregular recovery erased most of bonds which will show up in sales figures for future months. the loss. The number of shares traded on the N ew York Commercial banks were limited to allotments of about Stock Exchange in April was maintained near last month’s $2,000,000,000 on the % per cent certificates of indebtedness high level, owing particularly to accelerated activity during and a similar amount on the 2 per cent Treasury bonds of the first nine days of the month. 1950-52, in addition to purchases of the weekly Treasury bill toward the end of the month. issues. Market activity diminished Subscription books on the certificates of indebtedness Domestic corporate bond prices were again generally steady were open to commercial banks for three days beginning during April, accompanying a continued high rate of market April 12, with payment due on April 22. Subscriptions totaled $9,782,000,000, far exceeding the $3,496,000,000 entered for a similar issue in the December drive. Total allotments activity. The decline in the average yield on Baa bonds as computed by Moody’s Investors Service was extended to a new low of 3.94 per cent. On April 28, judging by Standard amounted to $2,138,000,000; subscriptions of $100,000 or and Poor’s yield index, prices of prime municipal bonds less ($401,000,000) were allotted in full and the remainder reached the highest level since early in December, 1941. 37 FEDERAL RESERVE B AN K OF N EW YO R K that prevailing at the end of March. N E W S E C U R I T Y IS S U E S Corporate and municipal new security offerings during April amounted to about $105,000,000, somewhat lower than the total of the previous month owing to a drop in municipal financing. Corporate issues totaled $86,000,000, nearly all of the proceeds of which were to be used for refunding pur Among the other ex changes traded in the N ew York market, the "free” Swiss franc showed a net increase of about 1 cent for the month, to be quoted at somewhat above $0.2900. EM PLOYM ENT AN D PAYROLLS poses. Municipal awards aggregated only about $19,000,000, Working forces in N ew York State factories increased IV 2 as compared with around $50,000,000 in each of the previous per cent from February to March and factory payrolls increased 4 per cent in the same period, according to the N ew York three months. The largest corporate flotation was that of $52,000,000 State Department of Labor. W ar industries generally reported Puget Sound Power and Light Company first mortgage 4*4 increased employment, and apparel, furniture, and chemical per cent bonds due in 1972, offered at a price of 104*4 to plants also increased their working forces. yield 4.00 per cent. in the apparel industry in N ew York City as well as hirings This offering, the proceeds of which will Seasonal factors be used for refunding purposes, was the largest to reach the by local shipyards and instrument plants caused expansions in market in several months. payrolls and employment in the City greater than those in the Another large refunding issue during April was that of $20,000,000 W ilson and Company, State as a whole. Inc., first mortgage 3 per cent bonds due in 1958, offered at showed a greater increase in employment and payrolls than par. N o large municipal awards were made during the month. For the fifth consecutive month, Syracuse any other industrial area in the State; it is now classified by the W ar Manpower Commission as an area of labor stringency (Group I I ). F O R E IG N E X C H A N G E S Interest in the foreign exchanges in the New York market The civilian labor force of the nation in March is estimated during April centered largely in the free Argentine peso. by the Department of Commerce at 52,000,000 persons, a The gradual appreciation in this exchange, which began last decline of 300,000 from February. January, was accelerated toward the end of March and by ment in the country declined from 1,400,000 in February to mid-April the New York free rate had reached a level somewhat above $0.2500. This quotation was the highest The volume of unemploy 1.000.000 in March, a figure which the Department estimates to be close to the irreducible minimum. Civil nonagricultural in several years and exceeded by more than 1 cent the level employment was nearly 275,000 greater in March than in which was reported to have been maintained previously as a February; working forces in construction and mining con Following the recent appreciation in the free rate, tracted to some extent, but there was a considerable expan the Argentine central bank on April 19 changed its buying sion in the number of civil government employees and factory maximum. rate for dollars derived from *'nonregular” exports to 397.02 workers. pesos per $100, or equivalent to about $0.2519 per peso; ployment increased by 2,100,000 persons, bringing the total previously this rate had been equal to about $0.2370. of wage and salary workers in manufacturing industry to An indi cation of one of the factors causing the strength in the Argentine peso was provided on the following day, when an Argentine executive decree was issued empowering the In the year ended March, 1943 manufacturing em 15.960.000. The necessity for the effective mobilization of the nation’s manpower resources led to three significant developments in Ministry of Finance to control, through the central bank, move the employment field this month. ments of funds with foreign countries. This measure was the line” executive order of April 8, transferred discretionary The President, in his "hold designed not to prevent the inflow of capital to Argentina power over wage increases from the W ar Labor Board to the for permanent investment in productive activities, but rather Director of Economic Stabilization, and forbade general wage to prevent, for the time being, the entry of new funds seeking increases beyond those allowed under the "Little Steel” formula only temporary refuge in Argentina. There was little activity unless such increases should be necessary to correct substandard in the N ew York market pending clarification of this decree living conditions. and the reopening of the Argentine market after the Easter suant to a provision of the executive order which limited wage holidays. The W ar Manpower Commission, pur W ith the reopening of the Buenos Aires market on increases and job changing, set forth on April 17 regulations April 26, the peso rate for the dollar rose rather substantially providing that workers would not be allowed to shift from and the dollar equivalent near the end of the month was essential to nonessential industries or from one essential in around $0.2490. In N ew York, the free Argentine peso closed dustry to another at increased wage and salary rates, and in the month at about $0.2500. connection with this order revised its previous list of essential There was some fluctuation in the unofficial Canadian dollar late in April, when the rate rose to a new high of $0.9050 on industries. The Commission also changed its Selective Service classifications so as to facilitate induction of married men with April 22, subsequently declined to $0.9000, but closed the out children and to defer as long as possible married men with month at about $0.9013*4. children. The last rate is about the same as 38 MONTHLY REVIEW, M AY 1, 1943 C O NSU M ER SH O R T TE R M D EB T Between September 30, 1941, when its peak was reached, total instalment debt arising from the sale of automobiles, and the end of February, 1943, the total volume of con 70 per cent in the credit extended by household appliance sumer short term debt outstanding declined more than stores, and about 45 per cent in the case of furniture stores. $4,000,000,000 to about $5,500,000,000. In 1942 alone the liquidation amounted to about $3,300,000,000. Although this The net contraction in instalment cash loans amounted to over figure is small in comparison with the figure of the Depart apply to charge accounts, such debts continued to rise follow ment of Commerce for total income payments in 1942— ing the period of active retail trade during the last half of 40 per cent. As the first consumer credit regulations did not $115,500,000,000— it does, however, represent some easing 1941. of the inflationary pressure of rising incomes on the diminish W was broadened to cover such accounts, the amount of out ing supply of goods for civilian consumption. a more significant portion of the estimated $27,000,000,000 standing charge account debt fell off rather sharply. Although it rose again during the Christmas shopping season, the total in net individual savings over the same period. charge account debt outstanding at the end of February, 1943 It comprises The accompanying chart, based on estimates prepared by However, beginning in May, 1942, when Regulation was about one-fifth below the amount on the corresponding the Department of Commerce and the Board of Governors date of 1942. It is estimated that open credit cash loan debt, of the Federal Reserve System, indicates that individuals ran which includes single payment loans of commercial banks, up their short term debt from about $3,500,000,000 early fell off about 13 per cent during the year ended February 28, in 1934 to $9,700,000,000 by the end of September, 1941. 1943. On the other hand, it is estimated that service debt, such as unpaid doctor and hospital bills, has increased slightly over the period. Most of this increase was accounted for by the rapid expansion of instalment sales credit, and by the growth of instalment cash loans, particularly through commercial banks and small loan companies. With the adoption of consumer credit regu lations (Regulation W of the Board of Governors of the D epartment an d Furniture Stores in the Second D istrict Federal Reserve System), which went into effect on Septem The accompanying tables show the changes that have ber 1, 1941, and the limitations on the production of many occurred in the credit business of representative groups of types of consumer durable goods such as automobiles, which department and furniture stores in this Federal Reserve Dis began during the last months of 1941, the volume of short trict. For both types of stores there have been increases in the term consumer debt outstanding was sharply curtailed. proportions of total sales made for cash. In Between March, 1942 passenger car production was entirely halted, supplies 1941 and March, 1942 there were only minor changes in the of electrical appliances, radios, and a number of other classes relative amounts of goods sold for cash or credit for both of consumer durable goods were sharply curtailed, and con sumer credit regulations extended and tightened. department and furniture stores, but between March, 1942 and March, 1943 a fairly substantial increase in the portion of total sales made for cash took place. The rate at which out By the end of February, 1943 the instalment sale debt total had fallen to less than one third of the September 30, 1941 volume. There was a liquidation of over 80 per cent of the standing accounts are collected has also been accelerated, particularly in the case of department store charge accounts. Both the increased percentages of cash sales and faster collec tions have had the effect of bringing down the outstanding accounts receivable of retail merchants. The amount owing BILLIONS OFDOLLARS Second District department stores by their customers dropped 32 per cent during the year ended March 31, 1943; consumer TO TA L* indebtedness to Second District furniture stores declined 39 per cent over the same period. S ER V IC E D E B T ^ : :; p Commercial Ban ks in the Second D istrict W | & y ..c «e c In the Second Federal Reserve District the volume of out \ CH A R G E A C C O U f J T S J \ ----------------1 U W ^ a l m e n T C A S rtJ / H i l l ! / 31, 1943. \ 1 J _ l. might be expected, retail automotive loans, which include 1935 193.6 1937 1938 1939 1940 1941 1942 1943 Estimated Short Term Consumer Debt Outstanding at End of Each Month, Classified by Principal Types of Debt (Sources: U. S. Department o f Commerce and Board of Governors of the Federal Reserve System ) This decline was approximately of the same order as that estimated for all commercial banks in the country. f lN S T A L N rfENT SALI E D E B T X j 1934 standing consumer instalment loans of 38 reporting member banks declined 55 per cent during the year ended March As direct loans as well as automotive paper purchased by banks from other sources, showed the sharpest curtailment— over 75 per cent. Loans for the purchase of other types of con- FEDERAL RESERVE BANK OF NEW Y ORK 39 Department and Furniture Stores in the Second Federal Reserve District Percentage Breakdown, Cash and Credit Sales Mar. 1943 Mar. 1941 Mar. 1942 Department stores Net sales— total........................................ Cash sales................................................ Open book credit sales......................... Instalment credit sales......................... 100 100 100 68 26 6 Furniture stores Net sales— total........................................ Cash sales................................................ Credit sales*........................................... 100 11 100 12 88 100 61 30 9 60 32 8 89 19 81 Percentage of February 28 Accounts Collected during March Mar. 1942 Mar. 1943 Department stores Open accounts.......................................................................... Instalment accounts............................................................... 42 20 52 30 Furniture stores Total accounts*...................................................................... 11 14 Percentage Change in Outstanding Accounts Receivable March 31, 1942 to March 31, 1943 1939 1940 1941 1942 1943 M erch ant V e s s e ls D elivered b y A m erican Shipyards (F ig u res for 1 9 3 9 -4 1 as published b y A m erican B ureau o f Sh ip ping; data for 1 9 4 2 -4 3 as reported by U . S . M aritim e C om m ission ) 128. The decline was attributable almost entirely to a sharp Open book credit Instalment credit Total accounts receivable drop in retail trade from the exceptionally high level of — 29 * — 36 * — 32 — 39* January, 1943 and 11 points higher than in March last year. Department stores.................................... Furniture stores........................................ * Separate data not generally available; predominantly instalment credit. February. However, the over-all index was one point above Production was maintained at about the February level during March, as sizable contraseasonal declines in construc Consumer Instalment Credit Outstanding 38 Member Banks in the Second District (Dollar figures in thousands) Type of loan Retail automotive............... Other retail............................ Repair and modernization. Personal cash loan.............. T otal.......................... March 31, 1942 $30,174 65,915 35,844 65,813 $197,746 tion, both residential and nonresidential, tended to offset gains in other lines. March 31, 1943 Percentage change $ 7,197 26,885 19,372 36,332 — 76 — 59 — 46 — 45 $89,786 — 55 During March, a total of 7,670,000 tons of steel was produced, equivalent to 100 per cent of capacity and the highest monthly tonnage on record. Output of steel plate, essential to the shipbuilding program, also reached a new high in March. Steel plate is now the steel industry’s largest tonnage product, approximately 20 per cent of the ingot output being used for this purpose. War plants con tinued to increase their output, and American merchant ship Restrictions on yards attained a rate of nearly five ships a day during March, residential building as well as on the amount of credit exten sumers’ goods fell off about 60 per cent. when 146 vessels totaling 1,516,000 deadweight tons were delivered. The record-breaking production of recent months has resulted in a greater number of ships being delivered sion resulted in the curtailment of instalment loans for repair and modernization of real estate by over 45 per cent; about the same relative decline was shown in the case of personal instalment cash loans. PR ODU CTION A N D T R A D E During the month of April industrial activity was main tained at a high level. during the first quarter of 1943 than during the first eight months of last year. Production of nondurable goods was, on the whole, little changed in March. Output of bituminous coal mines was the greatest in sixteen years, and electric power production, which Steel mill operations were scheduled usually declines in March, was maintained near the February at practically full rated capacity, and the daily rate of steel rate. The daily rate of cotton consumption, however, decreased production probably equaled the record set in March. Donald somewhat from the high level of the preceding month. Nelson, Chairman of the War Production Board, announced The index of distribution to consumer dropped 11 points that aircraft production in April would be close to 7,000 in March following the buying wave which raised February planes. sales to unusually high levels. The output of crude petroleum increased somewhat during April, but electric power production and bituminous coal mining declined slightly. During March the seasonally adjusted index of production The recession in department store sales was especially marked; although there is usually a sizable increase in sales in March, this year there was a reduction of about 8 per cent from February. Sales by mail and trade computed at this bank receded to 125 per cent of order houses and variety chains also declined sharply on a estimated long term trend from the record February figure of seasonally adjusted basis. MONTHLY REVIEW, M AY 1, 1943 40 DEPARTMENT STORE TRADE PER CENT During the four weeks ended April 24, sales of reporting department stores in this District were about 9 per cent greater than in the corresponding period last year. In 1942, however, Easter fell on April 5, and much of the pre-Easter buying was concentrated in March, whereas this year Easter was three weeks later. On a seasonally adjusted basis, sales in April were apparently somewhat below the level of March. In March department store sales in this District were only 1 per cent greater than in March, 1942, when, as indicated above, sales were enlarged by the earlier date of Easter. During March, the daily rate of sales declined 7 per cent from the high level of February; in most years there is an increase between these two months. Stocks on hand of department stores in this District at the Indexes o f Production and Distribution to Consumer (Federal Reserve Bank o f New York indexes, expressed as percentages o f long term trends, and adjusted for seasonal variation) end of March were 20 per cent lower at retail valuations than in March of last year, and the seasonally adjusted index of stocks reached the lowest level since August, 1941. As may be seen from the accompanying chart, production has shown a persistent rise since the spring of 1940, while the physical volume of retail trade, as measured by the index of distribution to consumer, has fluctuated rather widely. During Returns from a limited number of department stores in this District show that at the end of March outstanding orders for mer chandise purchased by the stores but not yet delivered to them were 5 per cent below March, 1942, but 12 per cent higher than at the end of February, 1943. the first two years of the war, trade shared in the boom caused by increasing production and incomes and reached its peak with the buying wave of August, 1941. irregular decline has been apparent. Percentage changes from a year earlier Since that date an The curtailment in sales has been most especially marked in the consumers’ durable goods field, but as manufacturers’ and merchants’ stocks are depleted and rationing programs are extended, the decline in Net Sales Department Stores March, 1943 New York City........................................ Northern New Jersey.............................. Westchester and Fairfield Counties. . . sales tends to become more general. Lower Hudson River Valley................. Poughkeepsie........................................ Upper Hudson River Valley................. 1943 1942 Schenectady.......................................... Central New York State....................... Mohawk River Valley........................ 100 ( =estimated long term trend) Index of Production and Trade............... Producers’ goods— total..................... Producers’ durable goods............... Producers’ nondurable goods........ 125p Northern New York State..................... Southern New York State..................... Binghamton.......................................... 120 135 136p 136p Western New York State....................... 145 162 125 172 206 133 174p 207p 136p 173p 206p 135p Niagara Falls........................................ 88p p 39p 104p Durable goods— total......................... Nondurable goods— total................... 129 113 157 115 158p 117p 157p 117p Primary distribution............................... Distribution to consumer....................... Miscellaneous services............................ 128 93 114 139 88 147 147p 97p 150p 147p p 149p 114 121 121 133 147 148p Wage Rates (100— 1926 average).................................... 88 86 p Preliminary. 60 90 67 78 * Adjusted for seasonal variation. 69 75 1 1 62 78 —12 —12 — 11 — — 5 — — 8 —21 — 5 — 25 — — — — — 6 6 —11 8 8 2 8 12 1 —11 2 —22 —20 — 5 — 6 2 — 9 +16 ♦Separate figure for Utica available for the first time. Indexes of Department Store Sales and Stocks, Second Federal Reserve District (1923-25 average =100) 1943 1942 Velocity of Demand Deposits* (100=1935-39 average) New York C ity............................................. Outside New York City.............................. +14 128p 41 p 104p (100— 1935-39 average).............................. Apparel stores.............................. 124 87 40 103 Cost of Living, Bureau of Labor Statistics + 114 90 49 104 — 16 — 23 — 5 + 3 + + 4 + — 5 — 3 — + March Consumers’ goods— total................... Consumers’ durable goods............ Consumers’ nondurable goods----- —10 — 3 + 1 All department stores................. Feb. — 23 — 25 — 25 8 6 8 0 — 12 —21 0 + 7 + 3 +18 + Jan. Stocks on hand, March 31, 1943 + 4 — — — 7 — — 3 4 —11 — 9 — 9 + 7 + 9 + — — 4 + 7 + — + + 9 +28 + March Indexes of Production and Trade* + Jan.through March, 1943 March Jan. Feb. March Sales (average daily), unadjusted................. Sales (average daily), seasonally adjusted.. 106r 120 97 123 112 138 104 127 Stocks, unadjusted........................................... Stocks, seasonally adjusted............................ 137 136r 108 118 105 HOr 107 106 r Revised. FEDERAL RESERVE BANK OF NEW YORK MONTHLY REVIEW, MAY 1, 1943 G en eral Business and F in a n cia l Conditions in the U nited States (Summarized by the Board of Governors of the Federal Reserve System) activity increased slightly in March and prices of commodities advanced further. Retail trade in March and the first half of April was in large volume, although reduced from the February peak. N D U S T R IA L I In Index o f Physical Volume of Industrial Produc tion, Adjusted for Seasonal Variation, 1935-39 Average = 1 0 0 Per Cent (Subgroups shown are expressed in terms of points in the total index) d u s t r ia l D Construction Contracts Awarded in 37 States. Total Construction Includes State and Local Government and Private Nonresidential Building not Shown Separately (F . W . Dodge Corporation data) is t r ib u t io n o m m o d it y P r ic e s Wholesale commodity prices averaged higher in March and the early part of April reflecting advances in prices of farm products, foods, and a number of industrial commodities. Prices in retail markets also increased further from February to March, with relatively sharp advances in food prices. On April 8 an Executive Order was issued directing that ceiling prices be placed on all commodities affecting the cost of living, that further increases in ceilings be prevented except to the minimum extent required by law, and that excessively high prices be reduced. Follow ing this and announcements of particular Federal actions to safeguard the stabilization of prices, including an order reducing railroad freight rates, wholesale prices of some com modities declined and on April 16 were lower than at the beginning of the month. B Member Banks in Leading Cities. Demand De posits (A djusted) Exclude U. S. Government and Interbank Deposits and Collection Items. Government Securities Include Direct and Guaranteed Issues (Latest figures are for April 14) r o d u c t io n Retail sales, which generally increase from February to March, showed little change this year, following the buying wave that swept the country in February. At department stores, where increases in February had been particularly marked, sales declined in March and the Board’s seasonally adjusted index dropped from 167 to 135 per cent of the 1923-25 average. Despite this decline, the index continued above the high level that prevailed in the latter part of last year. In the first half of April department store sales increased by about the usual seasonal amount, making allowance for the late date of Easter this year. Total carloadings of revenue freight in March remained at the February level and other transportation activity was also maintained in large volume. C Member Bank Reserves and Related Items (Latest figures are for April 14) P The Board’s seasonally adjusted index of industrial production advanced from 202 per cent of the 1935-39 average in February to 203 in March. The rise in total output con tinued to reflect chiefly increased production in the machinery and transportation equipment industries producing armaments. At merchant shipyards 146 ships were delivered in March. Completions totaled 1,516,000 deadweight tons, an annual rate of more than 18,000,000 tons. Steel mills operated at peak levels. Production of lumber, however, increased less than usual in March, continuing the gradual downward trend of production which began a year ago. Output of fuels reached a new peak in March. Bituminous coal production rose further. Crude petroleum output likewise exceeded the February level as new pipeline facilities for transport of petroleum products to the East Coast were completed. Output of important nondurable manufactures was maintained in March. In most branches of the wool textile industry production increased to new high levels in February and March following a Federal order allowing an increase in wool consumption for the manufacture of civilian fabrics. The value of construction contracts awarded in March, according to figures of the •F. W . Dodge Corporation, continued at a level considerably lower than that for the year 1942, reflecting chiefly the fact that the construction phase of the war program has been largely completed. Awards for residential building declined for the third consecutive month, while contracts for public works were higher than in February. a n k C r e d it Excess reserves at all member banks, which decreased during the latter half of March from 2.2 billion dollars to 1.5 billion, subsequently rose to 2.6 billion on April 19. In the first week of April, the increase resulted largely from substantial Reserve Bank purchases of Government securities; subsequently excess reserves were made available by a decline of a billion dollars in required reserves, which resulted primarily from large payments to war loan accounts for Government securities sold to bank customers. This caused a shift from customers’ deposits, subject to required reserves, to Government deposits which have recently been exempted from such requirements. Government security holdings at reporting banks in 101 leading cities increased substan tially during the first two weeks of April following declines in the latter part of March, which had resulted mainly from bill sales by banks in New York and Chicago. Holdings of certificates, notes, and bonds increased over the 4-week period ended April 14. Commercial loans at all reporting banks declined by about 210 million over the 4-week period. At New York City banks loans to brokers and dealers increased steadily over the period, especially in the week of the 14th at the beginning of the War Loan Drive. Deposits, other than those of the United States Government, increased further in March and the early part of April, but were drawn down sharply around the middle of April to make payments for purchases of new Government securities.
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