View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

O f Credit and Business Conditions









No. 5

In April money market developments followed the pattern
of previous months in which there were no War Loan drives
or Federal income tax dates. Treasury receipts substantially
exceeded disbursements, and reserve requirements rose as the
Treasury disbursed funds withdrawn from reserve-free War
Loan accounts and private deposit accounts were built up;
money in circulation continued to expand; a further loss of
gold to foreign countries took place; and Federal Reserve Bank
credit outstanding expanded rapidly as the commercial banks
took action to maintain their reserves at required levels. Mem­
ber bank excess reserves, which usually diminish in periods
preceding War Loan drives, were reduced by about 100 mil­
lion dollars in April to roughly 800 million. This typical war­
time pattern o f money market developments was altered
somewhat at the beginning of the month by shifts of funds
from one part of the country to another, which were related
in part to the temporary contraction of deposits in Chicago
over the Cook County, Illinois, personal property tax date.
Treasury operations were the most important factor affect­
ing the reserve position of member banks during April. In­
come tax receipts were unusually high in the early part o f the
month and amounted to 1.1 billion dollars in the first three
weeks, reflecting the carryover o f collections o f many tax
returns filed in March. However, it is doubtful whether total
receipts for the full month will exceed those at the end of
April 1944. It will be recalled that the first quarter payments
on 1944 individual incomes in excess o f amounts withheld or
to be withheld at the source were postponed from March to
April last year, and a large part of the payments were col­
lected in the latter part of that month.
Despite the high level of tax receipts, the Treasury accel­
erated its calls on War Loan deposits in order to meet war
disbursements, which continued at the high level of recent
months, and to replenish its balances with the Reserve Banks.
These balances had been reduced to unusually low levels dur­
ing the March tax period, but were built up steadily thereafter
and rose to a total of 650 million dollars on April 25. In
addition to the drain on bank reserves brought about by the
accumulation of Treasury funds on deposit with the Reserve
Banks, Treasury operations were primarily responsible for a

growth o f nearly 500 million dollars in reserve requirements
in this four-week period, as Government disbursements caused
a shift o f deposits from War Loan accounts to private accounts
against which the banks must carry reserves.
Public demands for currency were larger during April than
in March when the growth in circulation was held down
because of cash payments of income taxes. Preliminary esti­
mates indicate an increase o f 300 million dollars in circulation
during the month, compared with about 140 million in March.
However, the increase appears to have been considerably
smaller than in April 1944, when the outflow of currency
amounted to about 440 million dollars. Larger sales of Savings
bonds during the month under review, together with a decline
in the rate of increase (or an actual decline) in the circulation
of large denomination bills may have been responsible for the
smaller increase in currency em ulation this April. In the
first four months o f 1945, approximately 880 million dollars
of currency went into circulation, about 230 million less than
in the similar period for 1944. Heavier individual income
tax payments owing mainly to changes in tax payment dates
appear to be the principal factor in the smaller currency in­
crease this year, however, and it still is not clear that the rise
in circulation is diminishing materially.
In order to meet the drain on their resources, member banks
as a whole continuously expanded their use of Federal Reserve
credit throughout April. They sold Treasury bills in large
amounts and increased their borrowings from the Reserve
Banks by 290 million in the four weeks ended April 25 to
508 million dollars, highest with but one exception since
March 29, 1933. In addition some banks sold Treasury cer­
tificates in the market to adjust their reserve positions. Reserve
Bank holdings of Treasury bills increased by almost 1,200
million dollars, of which at least 800 million represented net
purchases from member banks. Total Reserve Bank credit
continued to make new high records and exceeded 21.3 billion
dollars on April 25.
In the first statement week of the month (ended April 4 ),
Chicago banks drew upon the Reserve Bank for large amounts
of credit, but New York City banks substantially reduced
their use of Federal Reserve credit. This situation was re­



versed in the following week, when the New York banks
found it necessary to obtain large amounts of Federal Reserve
credit, while Chicago banks were retiring Reserve credit. In
the following two weeks, the demand for Federal Reserve
funds originated largely among New York City banks.
Behind the inverse fluctuations in outstanding Federal
Reserve credit in New York and Chicago during the first two
weeks of the month, were the efforts of taxpayers to reduce
their assets subject to the levy on personal property in Cook
County, Illinois, as of April 1. Depositors in Chicago made
temporary purchases of Treasury bills or transferred their
funds to New York and other centers. The reserves o f the
Chicago banks were subject to heavy drains as the result of
these transactions, while those of New York City banks
(which received funds from other parts of the country as
well as from Chicago) were increased. In the week ended
April 4, the New York banks were therefore able to purchase
substantial amounts of the new Treasury bill issue in excess
of maturities, as well as to repurchase outstanding bills from
the New York Reserve Bank and to reduce their borrowings.
Chicago banks, on the other hand, maintained their reserves
at the required level by selling bills to the Reserve Bank and
certificates in the open market.
In the following week, the return flow of funds to Chicago
took the form largely of an outflow of funds from New York
on Treasury account. The New York market took a large
amount of the new issue of Treasury bills in excess of its
holdings of maturing bills, and the Treasury used these funds
to redeem for cash a substantial amount of maturing bills
held in Chicago. Thus, the reserve positions of the New
York banks were under strain, and they found it necessary to
sell large amounts of bills to the Reserve Bank and also to
expand their borrowings. Some of the funds transferred to
Chicago by the Treasury returned to the New York money
market during the week, but this inflow was largely absorbed
by sales of Treasury certificates by the Federal Reserve Banks
in the New York market in response to heavy demands, par­
ticularly from Chicago banks with surplus funds, and so failed
to relieve the reserve positions of the New York banks.
Further drains on the reserves of the New York City banks
occurred in the following two weeks ended April 25, as Treas­
ury receipts from tax collections, War Loan withdrawals, and
net sales of bills in the New York money market exceeded
disbursements by almost 360 million dollars. In addition,
reserve requirements increased. An inflow of funds from
other sections of the country tended to reduce to some extent
the banks’ needs for Federal Reserve Bank credit, which never­
theless were substantial.
M ember

Ba n k

C r e d it

The growth of private (adjusted) demand deposits in
member banks, which is characteristic of interdrive months,
was retarded early in April by the temporary contraction of
deposits in Chicago. Although part of this contraction re­

flected merely a transfer of deposits to banks in other parts
of the country, a substantial portion represented the temporary
conversion of deposits of customers of Chicago banks into
Treasury bills over the April 1 tax date. Adjusted demand
deposits of the weekly reporting member banks in Chicago
declined 601 million dollars in the two weeks ended April 4,
and then rose 608 million in the following week, while de­
posits in the rest of the country increased steadily in this
For the entire four weeks ended April 18, demand balances
at weekly reporting member banks in 101 cities increased
about one billion dollars, approximately half the reduction
in Government deposits. The failure of the expansion of
private demand balances in reporting banks to equal the con­
traction of Government deposits may be attributed to several
factors, including the building up of Treasury balances with
the Reserve Banks, the depositing in nonreporting banks of
Government checks issued against funds withdrawn from the
reporting banks, the increase in currency circulation, an
increase in time deposits of 106 million dollars, and finally
a 230 million dollar decline in loans which caused a decline
of a similar amount of private demand deposits.
Commercial, industrial, and agricultural loans of all weekly
reporting member banks continued to decline seasonally, and
on April 18 were 197 million less than four weeks earlier and
560 million lower than at the seasonal peak toward the end
of December. Furthermore, business loans were 193 million
below the level of April 19, 1944, probably owing to a con­
traction of guaranteed war production ("V ” ) loans outstand­
Liquidation of loans on Government securities, especially
by security dealers, was not as rapid following the Sixth War
Loan as after the Fifth, as illustrated in the accompanying
chart. The strength of the Government security market apparLoans for Purchasing or Carrying U. S. Government Securities
by Weekly Reporting Member Banks in 101 Cities



ently delayed selling of securities, acquired chiefly during the
Sixth War Loan, in the hope of realizing higher prices. H ow­
ever, liquidation of brokers’ and dealers’ loans on Government
obligations seems to have been completed by April 4 when
such loans totaled 749 million dollars, only 39 million above
the low point following the Fifth drive. In the following two
weeks ended April 18, loans to brokers and dealers rose 169
million to 918 million dollars, probably reflecting largely
purchases of securities soon to be exchanged for new issues.
Loans to others on Government securities declined another
130 million dollars in the four weeks ended April 18, but still
remained considerably above the low point following the Fifth
War Loan. The trend of such loans seems to be upward, as
the low point prior to the beginning of each drive has been
successively higher ever since the Fourth War Loan.
G o v e r n m e n t Se c u r i t y M a r k e t

The weekly reporting member banks were net sellers of
Treasury certificates of indebtedness and notes (as well as
bills), and net purchasers of Treasury bonds (303 million)
in the four weeks ended April 18. There was evidently a
transfer of bonds from nonbank investors to commercial
banks in exchange for shorter term securities, many of which
will probably be disposed of during the Seventh drive to
enable the holders to increase their subscriptions to the new
War Loan issues. Demand for certificates and notes by others
than banks exceeded the amounts offered by commercial banks,
and the Reserve Banks sold such securities during the first
three weeks of April. All sections of the Government security
market were strong during that part of the month, but in the
week ended April 25 some sections of the market turned a
little easier, and the Federal Reserve Banks acquired a moder­
ate amount of certificates, relieving a temporary situation of
oversupply, caused primarily by bank selling to adjust reserve
positions, coupled with a less active demand.

period has amounted to approximately 90 per cent. However,
unless the preceding substantial decline during the early years
of the war is taken into account, a somewhat distorted impres­
sion is given by such comparisons. Stock prices in general,
after an initial rise immediately after the outbreak of the war,
followed a generally downward trend for nearly 2 Vi years,
and reached their lowest points of the war period in the spring
of 1942, when Axis armies were threatening Egypt, had
penetrated deeply into Russia, were making wide gains
in the Orient, and the war cutlook generally was at its blackest.
Comparisons with prewar levels, therefore, provide a better
basis for judging current security price levels.
On April 25, 1945, stock prices, measured by Standard and
Poor’s weekly composite index of 402 individual issues,
reached their highest level in several years — a level 32 per
cent higher than at the end of August 1939, though still 16
per cent below the high point reached in 1937. As 88 per
cent of the 402 stocks are industrials, the composite index is
heavily weighted by such stocks which have risen 34 per cent
during the war period, while little influence is accorded to the
111 per cent rise in value of the 20 railroad stocks included
in the index, or to the almost negligible net gain in utility
stock prices. The accompanying table shows for various groups
of stocks the percentage declines from prewar prices to the
lowest prices reached during the war period, the subsequent
advances to the highs of 1945, and the net change for the
war period as a whole.
Percentage Changes in Stock Prices during the War*


Prewar f
to war

W ar
low to

to recent
h ig h j

At the end of March 1945, the market value of stocks listed
on the New York Stock Exchange was 57 billion dollars, or
16 billion above the corresponding figure for the end of
August 1939- During the same period, listed bonds (includ­
ing Government’s) increased in value from 47 billion dollars
to 115 billion. Making allowance for changes in issues listed,
which were relatively small in the case of stocks but quite
substantial for bonds, average values of listed stocks and bonds
rose by 31 per cent and 13 per cent, respectively, after the
outbreak of the European war. Prices, especially of stocks,
have fluctuated widely during the war period, and the various
industry groups have shown important differences in price
St o c k M a r k e t

Since the spring of 1942, stock prices have risen steadily
and substantially, with only one major interruption — in the
latter part of 1943. On the average, the rise during this

-3 2
-3 0
- 9
-4 6

+ 93
+ 91
+ 13 2
+ 88

+ 32
+ 34

69 Peace stock s ....................................
35 W ar stock s.......................................


Standard and P oor’s:
402 S tocks.....................................
354 Industrials.................................
20 Railroads....................................
28 U tilities......................................

-3 9
-3 5

+ 10 8
+ 60

+ 27

Barron’s 30 low priced stock s...............
Dow-Jones 65 stock s ...............................

-1 9
-2 9

+ 31 0
+ 94

+ 23 2
+ 37

* Based on weekly prices.
f Last week in August 1939, except peace and war stocks for which first week in
September 1939 was used.
t About third week of April 1945.

As these figures indicate, railroad stocks showed the small'
est decline of any of the three major groups from August
1939 to the 1942 low point, and have subsequently made the
greatest gains. At the outbreak of the war, railroad stocks
were not far above the lowest levels reached during the entire
depression period, and after the initial rise immediately after
the outbreak of the war, receded to levels only moderately
lower than in August 1939. Their striking advance since
1942 undoubtedly reflects the great increase in traffic volume
and the very substantial improvement in the earning power
and financial condition of the railroads during the war. Public
utility stocks, on the other hand, were not at such low levels,
relatively, at the outbreak of the war, and after showing the



largest declines to the spring of 1942, have subsequently
shown somewhat less than average gains. Rising costs of
operation, inflexible charges for services, heavy tax burdens,
and possibly, uncertainty as to the effects of partial dissolution
of some holding companies on the market for public utility
securities, all tended to have a depressing influence on the
utility stocks. Nevertheless, capacity operations during the
past three years have tended to offset the unfavorable aspects
of their position and their recovery has been very substantial.
Industrial stocks, because of their heavy weighting numeri­
cally, naturally have shown movements quite similar to the
composite index. Within this general category, however,
there have been wide differences between the price movements
of "war stocks” and "peace stocks,” as shown in the accom­
panying diagram. War stocks, such as those of aircraft and
shipbuilding companies, reached their peak in the fall of
1939, and after declining quite as drastically as peace stocks
to the spring of 1942, have subsequently shown recoveries
which, although substantial, have not regained all of the
earlier losses. On the other hand, peace stocks— securities of
companies supplying primarily consumers’ goods and services
— continued to rise until the spring of 1940, and after partici­
pating in the subsequent decline, have shown gains of such
magnitude as to carry them well above their 1940 peaks. The
more rapid advance in prices of peace stocks since 1942
undoubtedly reflects the prevalent view that their postwar
prospects are considerably more favorable than those of war
Another group which has attracted particular attention
has been low priced stocks which, as the second chart indicates,
have shown much greater gains since 1942 than the general
average of stock prices. On a weekly basis, Barron’s composite
of 30 stocks which sold below $5 a share in April 1938
declined 19 per cent from August 1939 to the low point
reached in the first week of June 1940, whereas the DowPrices of W ar and Peace Stocks*
(September 6, 1939=100 per cent)
Per cent

Barron’s Average of 30 Low Priced Stocks and
Dow-Jones Average of 65 Stocks*






194 4


* M onthly averages o f weekly prices converted to an index by Federal

Reserve Bank of New York.

Jones average of 65 stocks (generally higher priced stocks)
declined 29 per cent to the low point reached approximately
two years later. After the summer of 1942, low priced stocks
began to forge ahead more rapidly than the general market
average, and at their peak in March 1945 were more than
four times as high as the 1940 low and 232 per cent above
their prewar level, while the average of 65 stocks rose 94
per cent from the 1942 low to its April high and was only 37
per cent above the prewar level. Low priced shares usually
fluctuate much more widely than the market as a whole,
probably reflecting the marginal character of many of the
companies represented; the position of such companies
improves rapidly in periods of high activity, but in the past
has worsened equally rapidly in periods of serious business
recession. The great divergence between such shares and the
general average during the past three years is believed, how­
ever, to have been influenced partly by the operations of
speculators who are particularly attracted to low priced issues
because such stocks are more easily within their means, or
because in the past they have moved more rapidly.
C redit Em plo yed


M ar g in R eq u ir e m e n t s

O n March 5, 1945 the New York Stock Exchange raised
from $5 to $10 the minimum price of stocks for which
immediate payment in full is required, and established an
initial margin requirement of 10 points on stocks selling over

$10 a share.

Also beginning on that date a minimum equity

of $1,000 was required on all margin accounts, whereas prior
to that date no such requirement existed.

The effects of these

restrictions on speculative activity in low priced shares are not
yet clear; the recession in such shares from the March peak
___ ___ I___ 1
___ ___ L
6 0 L - J ___ I___ I___ ___ 1 I___ 1

19 3 9







* Monthly averages o f weekly prices.
§o u rce : Standard and P oor’s Corporation.













1 94 5



was somewhat greater than in the general stock averages, but
that is in accord with the past tendency of low priced stocks
to fluctuate more widely than higher priced stocks.


The amount of credit employed in trading in corporate
securities, while still far below the levels of earlier years,
increased fairly substantially in 1943 and 1944. Direct com­
parisons between the amount of outstanding loans on corpo­
rate securities now and prior to the war are not possible
because the earlier figures combined loans on such securities
with loans on United States Government securities. The
latter, however, were not in large volume prior to the war
financing. Debit balances of customers of member firms of
the New York Stock Exchange declined from about 900 mil­
lion dollars at the end of 1939 to about 500 million at the
middle of 1942, accompanying the downward trend in prices
and volume of trading, but thereafter rose fairly steadily to
approximately 1,100 million dollars at the end o f January
1945. Because of an accompanying rise in customers* credit
balances, however, borrowings of member firms of the Stock
Exchange increased only about two-thirds as much as the
increase in customers’ debit balances— from about 300 mil­
lion dollars in June 1942 to somewhat over 700 million at
the end of January 1945.
On February 5, 1945 margin requirements for extensions
of credit by brokers and dealers, and also by banks, on listed
securities were raised from 40 per cent (which had been in
effect since November 1, 1937) to 50 per cent of market
value by amendment to Regulations T and U of the Board
of Governors of the Federal Reserve System. It was recog­
nized, however, that such action could only be of limited
effectiveness in view of the huge increase in liquid resources
of individuals during the war period and the fact that a large
part of the transactions on the securities exchanges are on a
cash basis. It was not unexpected, therefore, that no great
effect of the increase in margin requirements was noted in
the security markets.
Co rpo rate Bo n d M ar k e t

Throughout the war period the corporate bond market
has been strong except during a few short periods when
adverse war developments depressed prices temporarily. For
the month of March 1945 the daily average price of 15
high grade bonds, as measured by Standard and Poor’s index,
was approximately 7 per cent above the level of August 1939,
while the average of 50 medium grade bonds showed an
advance of 31 per cent, and prices of 15 defaulted bonds rose
465 per cent. (Municipal bonds were 18 per cent higher in
March 1945 than in August 1939.) Reactions in the bond
market to war developments occurred in September 1939,
May and June 1940, and in December 1941, but the losses
in those periods were quickly erased in subsequent months.
Over the period of about 5 Vi years, the average yield of
Aaa bonds computed by Moody’s declined from 2.93 per
cent to an all-time low of 2.61 per cent, while the average
yield of Baa bonds fell from 4.85 to 3.36 per cent, also an
all-time low. Thus the ratio of yields of highest grade bonds
to yields of medium grade bonds (sometimes referred to as


an index of business confidence) has risen considerably during
the war period. Maintenance of low interest rates on Gov­
ernment securities to facilitate war financing, the great war­
time accumulation of savings, the limited volume of new
corporate bond issues, and the strengthened financial position
of railroads especially, all have contributed to the unusual
strength of the corporate bond market during the war.
C o r p o r a t e Se c u r i t y I s s u e s

As shown in the accompanying chart, the volume of cor­
porate security issues floated in recent months has been the
greatest in a number of years. Security issues to raise new
capital increased considerably in 1940 and 1941 over the 1939
volume, and continued in substantial volume during the
first half of 1942. Such issues declined rapidly thereafter,
however, and as there was an earlier substantial shrinkage in
refunding operations, the total volume of corporate financing
in 1942 and 1943 was the smallest since 1934. On a quarterly
basis, the low point occurred in the first quarter o f 1943, when
total corporate financing averaged only 39 million dollars a
month, compared with an average of 176 million during 1939.
Flotations of new securities, especially for refunding purposes,
but also for new capital, began to rise late in 1943, and by
the fourth quarter of 1944 total security issues reached a
volume that has rarely been equaled in the past 15 years.
Refunding operations were stimulated by the low level of
interest rates and facilitated by an unusual degree of stability
in the corporate bond market. For the entire year 1944 the
total amount of new securities issued was slightly over 3 billion
dollars, the greatest amount for any year since 1936.
During the past two years investment bankers have con­
centrated their marketing of new corporate securities in the
periods between War Loan drives. This practice has resulted
in unusually heavy volume of new financing in some inter­
drive months; during October 1944 the total volume of new
issues, at 740 million dollars, surpassed that of any month in
Monthly Average Volume of Domestic Corporate Security
Issues for Refunding and for New Capital



more than 14 years. Refinancing activity declined somewhat
in the first quarter of 1945, but continued above the average
for 1944.
A large part of the refunding operations in 1944 were
conducted by public utility companies, although railroad
refinancing also attained large volume for the first time in
several years, and in fact reached a total that has been exceeded
only once (in 1936) in a number of years. In the early part
of 1945, refunding of railroad long term debt at lower interest
rates was the dominant factor in the new issues market.
Security issues to raise new capital have, on the whole, been
quite small since this country entered the war, despite an
extraordinarily high level of business activity. This low level
of new capital issues is, of course, explained by the fact that
a large part of the cost of constructing and equipping war
plants has been financed by the Government, and capital
expenditures by corporations have been largely limited to
those required for war production. A considerable volume
of corporation expenditures on deferred maintenance and
reconversion of plants is expected in the early postwar period,
but in view of the large accumulation of liquid assets by many
corporations, it is not clear to what extent such expenditures
will be financed by an expansion of new capital issues.

since 1939 has been due to larger physical volume and what
to price increases and shifts to higher qualities.
Detailed statistics on the composition of total retail trade
by merchandise classifications are available only for census
years. Department store sales by departmental classifications
are, however, indicative of changes that have taken place
since 1939-1 The accompanying table shows the estimated
total dollar volume of sales for selected departments in the
fiscal year 1944 which ended January 31, 1945. Sales for
Department Store Sales by Type of Merchandise, 1929-44,
Second Federal Reserve District*
Percentage change in sales

Sales in
dollars, t







Type of merchandise



-3 3

+ 18


+ 23

2 9.0



-3 6
-3 9
-2 6
-2 7
-3 0
-2 4
-3 5
-3 6
-2 4
-3 4
-3 2
-2 6
-3 3


+ 1
+ 7
+ 9

+ 6
+ 8
- 1
+ 4
+ 9
+ 16
+ 17



+ 15

-3 2
-2 7
-3 3

+ 24
+ 14

+ 13
+ 9

+ 9
+ 46

3 .4



-3 9
-3 5
-3 6
-3 5
-2 0
- 1
-7 4

+ 20
+ 13
+ 1
+ 20
+ 44

+ 16
+ 39

+ 40
- 89
- 51

5 .5
3 .6
3 .3

- 29
4- 28
+ 12
+ 38
+ 60
+ 2
+ 39
- 28

-4 5
-3 4
-1 7
-3 3
- 4
-4 0
-2 9
-3 8
-5 0
-1 7
-2 8

- 32
+ 7
+ 8
+ 14
+ 12
+ 47
+ 5
+ 29
+ 9
+ 45
+ 51

+ 3
+ 49
+ 32
+ 19
+ 16
+ 8

+ 85
+ 14
+ 11
+ 14
+ 58
+ 47
+ 13
- 17
+ 48
+ 11 6

W o m e n ’s and misses' wear

Coats, suits.............................
Juniors’ and girls’ wear . . . .
Blouses, skirts, sportswear. .
Neckwear, sca rfs...................

Corsets, brassieres.................
Infants’ wr a r ..........................


M e n 's and boys' wear


M en’s clothing.......................
M en’s furnishing...................
B oys’ w ear..............................
H omefurnishings

The composition of department store sales is largely deter­
mined by changes in consumers’ incomes and by style trends,
but has been greatly affected since the outbreak of the war
by restrictions of production, depletion of stocks, and increases
in both income and excise taxes.
The needs of war have led to rationing control, material
shortages, and stoppage in the production of many durable
goods. Changes in the sex composition of the civilian popula­
tion, and especially of the gainfully employed have deeply
influenced the volume of sales in the most important depart­
ments. Budget studies show that, on the average, gainfully
employed women spend more on clothing than housewives.
The increase in the number of women holding war jobs has
affected not only the dollar amount of women’s wear sales,
but also the type of merchandise in demand. The transfer
of millions of men from civilian life to the armed forces has
curtailed mens wear sales. Disruption of family life has
probably retarded the normal expansion in demand for homefurnishings, but the shortages of many consumers’ durable
goods and the restrictions on residential building have also
influenced sales of this class of merchandise. The marked
rise in the birth rate has been followed by a rapid expansion
in sales of infants’ wear.
Increased purchasing power has stimulated the demand for
luxury items. In many cases consumers’ shifts to higher
priced lines have resulted from the inability to obtain lower
priced goods. Unfortunately there is no reliable way of
determining what portion of the increase of sales volume

F urniture................................
Domestic floor coverings. . .
Draperies, upholstery..........
China, glassware...................
M ajor household appliances.
Musical instruments.............
A ll other

Yard good s.............................
Linens, tow els........................
Sheets, pillow cases...............
Blankets, spreads..................
Toilet articles, drug sundries
Sporting good s.......................
Groceries, m eats....................
Wines, liqu ors........................




* All figures are for fiscal years ended January 31, the following year,
t Estimated by Federal Reserve Bank of New York.
Includes types of merchandise not shown separately.
Department opened in December 1933.

the major departmental groups since 1925 are given in chart
form. This analysis is based on data supplied by stores report­
ing sales by departments, total sales of which are approxi­
mately 65 per cent of all department store sales in this
Although total department store sales last year were 17 per
cent above the 1929 peak, of the principal departmental groups
only women’s wear sales exceeded the predepression high.
Men’s wear sales approximately equaled the 1929 level, but
1Allowance must be made for merchandise handled mainly by other
retail stores, as well as for shifts during this period in the proportion of
department store sales of specific types of merchandise. An analysis of
department store type merchandise sold in department stores was pre­
sented in the January 1945 Review.

Department Store Sales by Principal Departmental Groups,
Second Federal Reserve District
Indexes from 1925 to 1944 (1935-39 a verage=100 per cen t),
and Distribution of Sales for 1944*

* A ll figures are for fiscal years ended January 31, the following year.

homefurnishings fell substantially below. A comparison of
sales in 1929 and 1944 shows considerable variation among
the individual departments. In the womens wear group,
increases ranging from 50 to 80 per cent were reported for
juniors’ and girls’ wear, sportswear, furs, neckwear and scarfs,
and infants’ wear. With the exception of furs, sales for these
departments last year were at an all-time high. The increase
in the excise tax was a factor causing fur sales to drop below
the 1943 peak. The record increase for juniors’ and girls’
wear may be attributed to the merchandising policy of stocking
in those departments larger sizes in styles desired by younger
women. Sportswear has become increasingly popular.
Declines from the 1929 peak were reported for millinery
and handbags. The fashion trend toward reduced use of hats
and replacement of hats with scarfs has sharply curtailed
millinery sales. Handbag sales in 1944 showed only a small
increase over the preceding year, the excise tax undoubtedly
discouraging expensive purchases. Sales of shoes and hosiery
have increased since 1939 in spite of shoe rationing and the
disappearance of silk and nylon stockings. Lingerie sales,
influenced to a considerable extent by the great number of
war marriages, have increased sharply since 1941.
In the men’s wear group the decline from the 1929 peak
for men’s clothing was offset by the increase in boys’ wear.
Sales of men’s furnishings, the largest department in this
group, were practically unchanged.
In the homefurnishings group, only draperies and upholstery
and housewares have exceeded the 1929 high. There has
been an increasing tendency to reupholster furniture because
of curtailed production. Housewares have exceeded the 1929
level although they are currently below the 1942 all-time high,
largely because of metal shortages. Sales of major household


appliances and musical instruments were affected by conver­
sion of producers to war goods and experienced the largest
decline from 1929- Musical instrument sales (including
radios) have never regained the peak reached in 1925. Major
household appliances reached a peak in 1941 chiefly because
of large electrical refrigerator sales and have declined drasti­
cally in subsequent years.
Outside the three major groups, two departments have
shown unusual wartime increases. Yard goods were at a
low level in 1940, because of the competition with readyto-wear clothes, but since that year sales have about doubled,
because of the rise in prices of ready-to-wear merchandise
and the fear of impending shortages. However, sales are still
substantially below those in 1929 and approximately one-half
the dollar volume at the 1925 peak. W ine and liquor sales
are another exception; sales last year of the stores with wine
and liquor departments were almost three times the 1939
dollar volume. Part of this increase, however, is due to the
fact that the higher liquor taxes paid are included in sales
figures, contrary to the practice in the case of excise taxes on
furs, jewelry, silverware, cosmetics, handbags, and luggage
which are added to and kept separate from the retail price
of the article.
Jewelry sales in department stores, bolstered by the popular­
ity of the more expensive costume jewelry, have increased
steadily since the depression low; last year the increase over
the 1929 level was 60 per cent. Luggage sales were substan­
tially below those in 1929; sales for this group increased
sharply in 1941 and 1942, but showed little change in 1943
and a small decline last year owing to shortages and the
excise tax. Sales of silverware followed a similar pattern,
except that last year’s volume approximately equaled that for
1929. Excise taxes had apparently little effect on toilet articles
and drug sundries. Sales of linens, domestics, and blankets
have varied markedly. Linens are still gaining, and sales last
year were close to the 1929 volume. Domestics (sheets and
pillow cases) have shown little change since 1941 because
of shortages, but 1944 sales were substantially above 1929- In
spite of wool shortages, blanket sales have moved upward
since 1942 to a level moderately above 1929. Because of an
increasing tendency to purchase groceries and meats in depart­
ment stores, sales for this group last year were more than
double those in 1929.1
Basement stores have been created to allow customers from
lower income groups to buy closely marked basic merchandise,
generally of lower priced lines but nevertheless of good
quality. Early in the depression many stores not previously
operating basements decided to sell lower priced merchandise
in the basement, and in 1930 and 1931 basement store sales
ran counter to main store sales which were falling sharply.
1 Indexes of sales for individual departments from 1925 through
1944 and the distribution of department store sales by departmental
classifications from 1939 through 1944 are available upon request.



Department Store Sales for Main and Basement Stores,
Second Federal Reserve District
Indexes from 1925 to 1944 (1935-39 a vera ge= 1 0 0 per cen t),
and Distribution of Sales for 1944*

little during the month and was slightly above that for one
year earlier. Outstanding orders for merchandise not yet
delivered to the stores at the end of March were slightly below
the all-time high reached a month earlier.
Department and Apparel Store Sales and Stocks, Second Federal
Reserve District, Percentage Change from the Preceding Year
Net Sales
March 1945
Department stores, Second D istrict. . .

Stocks on
Jan. through Mar. 31, 1945
March 1945



+ 1

+ 17
+ 17
+ 21
+ 23
+ 12

+ 1
+ 8
+ 8
- 8
-1 2
- 8

Niagara F a lls....................................
R ochester...........................................

+ 41
+ 32

Apparel stores (chiefly New Y ork City)




New Y ork C it y ....................................
Northern New Jersey.........................
Westchester and Fairfield C ou n ties..
B ridgeport.........................................
Lower Hudson River V a lle y.............
Upper Hudson River V a lle y .............
Central New York S ta te....................
Mohawk River V a lle y ....................
Northern New York S ta te................
Southern New York S ta te .................
B ingham ton......................................
Western New Y ork S ta te..................
* A ll figures are for fiscal years ended January 31, the following year.

Subsequently, however, basement sales closely followed the
pattern of the main store through 1942. In 1943 fewer
people patronized the downstairs store, and the dollar volume
of basement sales declined, but in 1944 the patronage of base­
ment stores increased again, perhaps reflecting the impact
of steeply increased income taxes.
The relation of main to basement store sales for this
District is shown in the accompanying chart. This special
compilation has been prepared through the cooperation of a
representative group of stores, and supplements the depart­
mental records that have been compiled during the past
twenty years. In this District basement store sales represent
approximately 10 per cent of the total department store
volume, approximately the same ratio as that for the United
States. However, some of the larger stores in this District
do not operate basements, and for the group operating both
main and basement stores the ratio is 15 per cent, which is
close to the percentage found in many large cities.

Department store sales in this District during April were
approximately 10 per cent above those one year earlier. After
adjustment for seasonal changes and the earlier date of Easter,
sales last month declined sharply from the all-time peak for
March and were slightly below the level for February. This
lower dollar volume of sales was partly due to the closing of
stores in New York City and Newark on Saturday, April 14,
following the death of President Roosevelt, and the closing of
stores in other cities for at least part of the day.
Although sales in March were of record proportion for that
month, they were less than the amount of merchandise
received. The dollar volume of stocks on hand increased a




- 5
+ 1
-1 0

+ 6
-1 5

-1 1
+ 3

Indexes of Department Store Sales and Stocks
Second Federal Reserve District
(1935-39 average = 100 per cent)






Sales (average daily), unadjusted................
Sales (average daily), seasonally a d ju ste d ..





Stocks, unadjusted...........................................
Stocks, seasonally a djusted...........................













r Revised.

Indexes of Business


Industrial production*, 1935-39 = 100.........
( Board o f Governors, Federal Reserve
Electric power output*, 1935-39=100........
(Federal Reserve Bank o f New York)
Ton-miles of railway freight*, 1935-39 =100
(Federal Reserve Bank o f New York)
Sales of all retail stores*, 1935-39 = 1 0 0 f . . .
(Department o f Commerce)
F actory employment
United States, 1939= 1001 ........................
(Bureau o f Labor Statistics)
New Y ork State, 1935-39 = 1 0 0 ................
(N ew York State Dept, o f Labor)
Factory payrolls
United States, 1939 = 1 0 0 t ........................
(Bureau o f Labor Statistics)
New Y ork State, 1935-39 = 1 0 0 ................
(N ew York State Dept, o f Labor)
Income payments*, 1935-39 = 1 0 0 £ ..............
(Department o f Commerce)
W age rates, 1 92 6 = 1 0 0 ....................................
(Federal Reserve Bank o f New York)
Cost of living, 1935-39 = 1 0 0 ..........................
( Bureau o f Labor Statistics)
Velocity of demand deposits*, 1935-39 =100
(Federal Reserve Bank o f New York)
New Y ork C it y .............................................
Outside New Y ork C ity ..............................




































* Adjusted for seasonal variation.
p Preliminary.
t Series revised beginning January 1940.
j Series revised beginning January 1942.

r Revised,




General Business and Financial Conditions


(Summarized by the Board of Governors of the Federal Reserve System)


INDUSTRIAL activity was maintained at a high level in March.
at a record for this season of the year.


Value of retail sales was

In d u s t r ia l Pr o d u c t io n

Output at factories and mines was maintained in March at the level of the preceding
month, which was 236 per cent of the 1935-39 average, according to the Board’s seasonally
adjusted index.

Index of Physical Volume of Industrial Production,
Adjusted for Seasonal Variation, 1935-39 Average
= 100 Per Cent (Groups shown are expressed
in terms of points in the total index)

At iron and steel mills production continued to rise and was at about the same level
as a year ago. Production of most nonferrous metals also continued to increase in March
in response to military needs; zinc shipments rose to a new record level. Lumber pro­
duction, however, was 12 per cent smaller in March than in the same month last year.
Output of stone, clay, and glass products was maintained at the February level. In the
machinery industries activity showed little change in March. Output of transportation
equipment continued to decline owing to further curtailment of operations at shipyards.
Aircraft production was maintained at the February rate.
In most nondurable goods industries output showed little change from February to
March and was at about the same level as in March 1944. Owing to increased military
purchases in recent months, however, supplies available for civilians of such goods as food,
textile, leather, and paper products were at the lowest level for the war period. The short­
age of carbon black has continued to limit production of essential military and civilian
tires and rubber products, but manufacturing facilities are being expanded for output of
this critical material. In the chemical industry, production of explosives and small arms
ammunition showed less increase than in recent months and output at other chemical
plants was maintained at about the February level.
Production of bituminous coal was at a slightly lower rate in March and declined
further in the first week of April when wage contract negotiations interrupted mine opera­
tions. Output of anthracite increased in March and the early part of April and crude
petroleum production was maintained in record volume.

Indexes of Value of Department Store Sales and
Stocks, Adjusted for Seasoned Variation
(1935-39 average = 100 per cent)




V ~
. V*

Freight carloadings continued to rise in March and the early part of April, reflecting
increased shipments of most groups of commodities except coal. In recent weeks, as a
result of special efforts to move last year’s record wheat crop to market before the 1945
harvest, grain loadings have been in much larger volume than in the same period a year
ago. Shipments of ore have also been much greater owing to an early opening of the
Lake shipping season.

Y------------- \



t r ,J

C o m m o d it y Prices

" A ha/



D is t r ib u t io n

Department store sales in March showed a further sharp increase and the Board’s
seasonally adjusted index rose to 224 per cent of the 1935-39 average as compared with
212 in February and 200 in January. In the first half of April sales continued large, after
allowance for the usual post-Easter decline.





Prices of cotton, livestock, and some other farm products were higher in the third
week of April than during March. Wholesale prices of industrial commodities, as a
group, have continued to show slight increases in recent weeks.

Indexes of Wholesale Prices Compiled by Bureau
of Labor Statistics (1926 averagers 100 per cent;
latest figures are for week ended April 21)

B a n k C redit

Banking developments during the latter half of March and early April, while following
the usual interdrive pattern, were considerably influenced by the large volume of Treasury
receipts associated with the March 15 tax date. Adjusted demand deposits at banks in
leading cities and currency in circulation both decreased in the latter part of March but
resumed their growth in April. The slackened rate of expansion in both deposits and
currency was due primarily to tax payments by businesses and individuals.
Required reserves of member banks increased by around 300 million dollars during
the five-week period ended April 18. Excess reserves, which were at a temporarily high
level in mid-March largely as a result of the reduction of Treasury deposits at the Reserve
Banks in anticipation of tax collections, subsequently declined again to less than a billion
dollars. An increase in Treasury and other deposits at Federal Reserve Banks in the latter
part of March and early April and resumption of the currency outflow caused a drain on
reserve funds which was offset by a further increase of nearly 600 million dollars in
Reserve Bank holdings of Government securities.

Member Banks in Leading Cities. Demand Deposits
(Adjusted) Exclude U. S. Government and
Interbank Deposits and Collection Items.
Government Securities Include Direct and
Guaranteed Issues (Latest figures
are for April 18)

At banks in 101 leading cities, Government security holdings declined during the five
weeks ended April 18 by 660 million dollars. Bill holdings were reduced sharply, reflect­
ing to a considerable extent declines in the holdings of Chicago banks associated with the
Illinois tax date. Certificate holdings declined generally while bond holdings continued
to rise. Loans to others than dealers for purchasing and carrying Government securities
were reduced by 180 million dollars and commercial loans declined by 230 million dollars.