The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
MONTHLY REVIEW o f C r e d it a n d S e c o n d Federal Reserve Agent B u s in e s s F e d e r a l R e s e r v e D is t r ic t Federal Reserve Bank, New York M o n e y M a r k e t in O c t o b e r Total reserves o f member banks have risen more than $400,000,000 further during the past month to a new high level at about $5,650,000,000. This compares with about $ 4 ,000 ,000,000 a year ago and about $2,600,000,000 at the end of October 1933. Two years ago the Eeserve Banks had nearly completed their purchases of Govern ment securities in the open market, and excess reserves of member banks were in the neighborhood o f $800,000,000. Since that time reserve requirements o f member banks have risen, accom panying the rapid expansion of deposits, by an amount sufficient to absorb all o f the excess reserves which member banks then held. Despite this large increase in reserve requirements, however, member banks now have approxim ately $ 3 ,000 ,000,000 of excess reserves, which represent entirely additional funds acquired during the past two years. The principal source o f this large volume o f additional reserves is indicated in the accom panying diagram, which compares the growth in member bank reserves with the growth o f the monetary gold stock of the United States since the devaluation o f the dollar at the end o f January 1934. As this diagram indicates, the growth o f member bank reserves and of the gold stock have been almost identical, although reserves have shown com para tively wide fluctuations from time to time which may be attributed chiefly to Government transactions and changes in the volume o f currency in circulation. A part o f the increase in member bank reserves in October was due to Government disbursements o f funds accumulated in the Treasury and in the Eeserve Banks during September, but the principal factor, as in the preceding two years, was the inflow o f gold to this country. Gold imports during October amounted to approximately $305,000,000, which, with receipts o f nearly $150,000,000 in September and some further amounts due to arrive early in November, makes a total fo r the current movement o f about $480,000,000. F or the year to date, the increase in the monetary gold stock of the United States has amounted to approximately $1,460,000,000, an even larger increase than occurred in 1934, and much the largest fo r any single year in the history o f the country, whether measured in value or weight. C o n d itio n s November 1, 1935 The additional funds received by member banks dur ing October were offset to a small extent by seasonal currency requirements, which in the two weeks ended October 9 caused an increase o f $72,000,000 in the amount o f currency outstanding, and there was also some further increase in reserve requirements during the month. Since the seasonal low point o f July 24, the amount of currency outstanding has increased by about $ 2 0 0 ,000 ,000 , an amount somewhat larger than the average seasonal increase in previous years, and during the past year the amount o f currency nominally in circulation has shown an increase o f approxim ately $250,000,000. It appears likely, however, that not all o f the increase in the amount o f currency outstanding represents an actual increase in the amount of currency in active circulation. Banks having large excess reserves have not had the same incentive to deposit unneeded currency prom ptly in the Eeserve Banks fo r credit to their reserve balances, and in some cases large depositors such as States and municipalities are reported to have chosen to hold part o f their funds in cash, rather than in deposits, in view o f the fact that they no longer obtain interest on demand deposits and are unable to arrange fo r the acceptance o f funds as time deposits. Inactive currency holdings o f that kind are probably responsible fo r the renewed increase within the past year in the amount o f bills o f $50 to $10,000 denominations outstanding. RESERVES B IL L IO N S O F D O L L A R S MCJNETARY GOL-D STO CIK T _ £>% j ... ;■ ......... v G O LD STOCK OF D O LLA R S B IL L IO N S v / r A * .... */ . J ■ 4 J t ✓ i V M B E R B>\ N K R E S ER VE S _ _ i .... I .....1 1 1 1934 1 1 1 _ . . l. 1 ..... 1 . .. 1 ----- 1 ------L a a 1935 Growth of Member Bank Reserve Balances Compared with Increase in the Monetary Gold Stock (Latest figures are for October 23) 82 MONTHLY REVIEW, NOVEMBER 1, 1935 M ember B ank Credit Reports from member banks in New Y ork City and other principal cities throughout the country still give no evidence of the development of any large demand fo r short term bank credit. Loans other than security loans, in fact, showed a small reduction in the latter part of October, follow ing an increase of $231,000,000 between the end of July and the middle of October. The reduction, however, occurred in New Y ork City, and apparently was due largely to the use of some of the proceeds o f new security issues to repay bank loans. In cities other than New Y ork there was a further grad ual increase in loans other than security loans during October. Loans on securities by the reporting member banks also showed some reduction in October, which carried the total volume of such loans to a level only slightly above the previous low point fo r recent years, which was reached near the end o f August. Most of the reduction was in loans to security brokers and dealers in New Y ork City, which may have been related, at least in part, to the completion of Government refinancing operations started in Septem ber; there was little change in loans on securities to other customers. On October 23 total loans of the reporting banks to brokers and dealers in New Y ork City were approximately $100,000,000 above the low point o f the year, which was reached early in February, while loans on securities to other customers were $180,000,000 below the early February level. Government security holdings of the reporting banks showed a net reduction of $ 10 0 ,000,000 during the fou r weeks ended October 23, but this reduction followed an increase of more than $300,000,000 in the preceding month, and was probably due in part to the retirement on October 15 of the last part o f the Fourth Liberty Loan bonds. Furthermore, it is not unusual after a Government issue fo r a part of the amount originally taken by banks to be gradually distributed to others. H oldings of Government guaranteed securities showed a further increase o f $31,000,000 during the fou r week period, while investments in other securities, after irregu lar fluctuations, showed a small net reduction. The expansion in deposits of the reporting banks con tinued during the past month. Net demand deposits, exclusive o f Government deposits, showed an increase o f $223,000,000 to a new high level in the fou r weeks ended October 23, and time deposits showed an increase o f $90,000,000. The data currently reported on net de mand deposits are not entirely comparable with those published prior to the enactment of the Banking A ct o f 1935, due to required changes in the method o f com puting net demand deposits, but figures fo r 44adjusted demand deposits ” indicate that, after deduction o f inter bank deposits and Government deposits, demand deposits are continuing to show an increase o f more than 20 per cent over a year ago. M oney R ates Effective October 25, the New Y ork Clearing House Association increased from % to % per cent the charge to be made by its members fo r placing and servicing loans on securities fo r other banks. This action was fo l lowed on October 29 and 30 by an advance in the rate charged by New Y ork banks on call loans to security brokers and dealers from ^ per cent to % per cent. The rates quoted on Stock Exchange time money were also advanced, 90 day loans being quoted on October 30 at 1 per cent. Yields on Government securities declined somewhat during October, and other money rates re mained unchanged. M oney Rates at New York Oct. 31, 1934 Sept. 30,1935 Oct. 30, 1935 Stock Exchange call loans....................... Stock Exchange 90 day loans................. Prime commercial paper— 4 to 6 months Bills— 90 day unindorsed......................... Customers’ rates on commercial loans.. (Average rate of leading banks at middle of month) Treasury securities: Maturing June (y ie ld )......................... Maturing February 1937 (yi el d) . . . . Average yield on Treasury notes 1 * X -1 H -l X X H X X *1 X X 1.67 1.67 N o yield 0 .0 2 0 .2 1 N o yield 0 .1 3 1.46 Average yield on Treasury bonds (more than 5 years to earliest call d a te). . . Average rate on latest Treasury bill sales 182 day issue.......................................... 273 day issue.......................................... Federal Reserve Bank of New Y ork re discount ra te ........................................... Federal Reserve Bank of New York buying rate for 90 day indorsed bills 2.13 0.96 0 .8 0 2.96 2.67 2.59 0 .19 0.23 o ’. i 7 iy 2 1/4 IX x y X * Nominal G overnment S ecurities Further recovery in the prices o f United States Gov ernment securities occurred during the first three weeks o f October, and quotations reached the highest points since late A ugust and early September. The average yield on Treasury bonds declined to 2.56 per cent, which compares with the tem porary high o f 2.71 per cent reached on September 21 and a low point o f about 2.40 per cent early in the summer. Likewise the average yield on Treasury notes o f 1 to 5 year maturity receded to 0.77 per cent, as against the September high of 1.03 per cent and the June-July low o f about 0.50 per cent. Thus, it appears that approxim ately one-half o f the late sum mer price decline was recovered between September 21 and October 21. In the closing week o f October, how ever, quotations on Government securities fluctuated ir regularly with a slight downward tendency o f prices, so that average yields rose about 0.03 per cent. Treasury financing operations during October in cluded the exchange o f Fourth Liberty Loan bonds for new Treasury bonds, which continued through October 11, and the redemption o f unexchanged Fourth Loan bonds beginning on October 15. A bout $150,000,000 out of approximately $245,000,000 o f Fourth Liberty Loan bonds outstanding were presented fo r payment by Octo ber 29. There was also an increased volume of Treasury bill financing in October, new issues exceeding maturities by $250,000,000. In replacement of five $50,000,000 weekly maturities o f 133 day bills, the Treasury put out five $50,000,000 issues o f 273 day bills, and five $50,000,000 issues o f bills ranging from 166 to 138 days, all of which will mature on M arch 16, 1936, the quarterly tax date. Y ields on new issues, as on outstanding issues, moved downward, the October 30 issue o f 273 day bills being sold at an average rate o f 0.17 per cent, as com pared with 0.25 per cent on the issue dated October 2. FEDERAL RESERVE AGENT AT NEW YORK B ills and Commercial Paper Nothing occurred during October to alter the very quiet conditions that have prevailed fo r some time in the bill market. D ealers’ portfolios remained small and rates were steady at Ys per cent fo r practically all of the bills sold by the dealers. The total o f bills outstanding rose $6,000,000 further during September to $327,800,000, reflecting prim arily an additional increase of $15,000,000 in domestic warehouse credits, partially offset by con tinued declines in export bills and in bills based on goods stored in or shipped between foreign countries. Com pared with a year ago, the volume of bills outstanding again showed a large reduction. A ccepting banks and bankers continued to hold more than 90 per cent o f all bills outstanding. Commercial and industrial concerns continued to bor row moderate amounts of funds through the commercial paper market during October, but the total amount of new notes drawn remained far below the volume for which bank investors inquired. The rate for prime com mercial paper was steady at % per cent. A t the end of September commercial paper concerns had $183,100,000 of paper outstanding, as compared with $176,800,000 at the end of August. Despite this increase, however, the September outstandings were still about 5 per cent below the level of a year ago. L ib e r ty L o a n R e fu n d in g ; P re se n t F o r m o f th e N a tio n a l D e b t W ith the redemption of the remaining bonds o f the Fourth Liberty Loan still outstanding, which began on October 15, the refunding of the war debt is being brought to a close. W ithin two years the largest of the war loans — the Fourth Liberty Loan — amount ing to more than six billion dollars, and also the First Liberty Loan, amounting to nearly two billion dollars, have been retired, either through exchanges fo r new securities, or through redemptions in cash obtained from the sale o f new securities. The accom panying table sum marizes the operations by which this volume of Liberty Loan bonds has been retired. The completion o f these operations leaves no further maturities of Government bonds to be met within the next five years. The earliest callable issue now outstand- United States Interest Bearing Debt (A s of June and December of each year except 1935 for which latest figures are for October 31) ing is the com paratively small issue o f 3 % per cent bonds o f 1940-1943. Most o f the Government bonds now out standing mature in more than eight years, and many are not callable within the next ten years. Treasury financ ing fo r some time, therefore, w ill consist o f raising the funds required to finance Government expenditures fo r recovery and relief purposes, and the refunding from time to time o f recurring maturities o f Treasury bills and Treasury notes. A large part o f the increase in the national debt during the past five years has been in the form of Treasury notes m aturing within five years, and to a smaller extent in Treasury bills which mature within one year. A s the accom panying diagram shows, the in crease in the interest-bearing debt o f the United States from the low point at the end o f 1930 has been $12,600,000,000, o f which $10,700,000,000 has been in the form of securities m aturing within five years. The table indicates that approxim ately 62 per cent o f the Liberty Loan bonds refunded within the past two years were exchanged fo r new issues o f Treasury bonds, while 23 per cent were exchanged fo r Treasury notes, and about 15 per cent have been or will be redeemed in cash. Although these refunding operations tended to reduce somewhat the amount o f long term bonds outstanding, Liberty Loan Refunding Operations, October 1933 to October 1935 (In millions of dollars) Exchanged for new bonds Exchanged for new notes Redeemed or to be redeemed for cash Amount Called Amount Per cent 1,880 25* 1,250 1,870 1,243 1,704 25 457 1,560 569 90.6 0 0 176 9 .4 3 6 .5 83 .4 4 5.8 '596 4 7.7 0 0 429 3 4.5 ‘ i97 310 245 i s ’. 8 16.6 19.7 6,268 4,315 6 8 .8 1,025 16.4 928 14.8 1,933 Call Issued On 744 38.5 864 4 4 .7 325 16.8 8 ,2 0 1 5,059 61.7 1,889 2 3.0 1,253 15.3 Amount Per cent Amount Per cent Fourth Liberty Loan October 12, 1933.................................. October 12, 1934.................................. T o ta l............................................... First Liberty Loan Grand T o ta l.................................. * Represents uncalled Fourth’s exchanged for new bonds. 84 MONTHLY REVIEW, NOVEMBER 1, 1935 additional issues of bonds were sold fo r cash during this period, or offered in exchange fo r maturing short term obligations; so that the total volume of Government bonds outstanding has shown a moderate increase. Coincident with the rise in the public debt, the hold ings of direct Government obligations by member banks rose from $4,125,000,000 in December 1930 to $9,871,000,000 at the end o f June 1935. In this case, also, the greater part of the increase was in holdings of Treasury notes m aturing within five years, the increase in such holdings amounting to $3,800,000,000. H oldings o f Treasury bills, which mature within one year, on June 29 of this year showed an increase of $700,000,000 over the amount of Treasury bills and certificates held at the end of 1930, while bond holdings showed an increase of $1,200,000,000. Since June 29, however, a substantial amount o f Consols and Panama Canal bonds, which pre viously were used largely as security fo r National bank note circulation, have been retired. A t the present time, therefore, it is probable that around 60 per cent of all Government securities held by member banks mature within five years, and a substantial proportion o f these securities are of much less than five years maturity. S e c u r it y M a r k e t s E xcept for a temporary sharp decline in share prices on October 1 and 2, attributed to the beginning o f actual Italo-Ethiopian hostilities, the stock market pursued an upw ard course throughout October. Trading became somewhat more active, and the turnover in the week ended October 26 was the largest since February 1934. Industrial stocks showed an average rise o f about 9 per cent and by the 26th of the month reached new highs since A p ril 1931, according to representative price averages. Public utility shares had an equally large per centage advance, but did not reach as high levels as were attained fo r a short time in August. Railroad stocks showed virtually no net advance fo r the month o f October. Relative to the lows of this year reached in March, since which time stocks have been advancing rather steadily, industrial share prices show a rise o f more than 50 per cent, utility stocks an advance o f about 10 0 per cent, and railroad stocks an increase of about 30 per cent. Prices of bank stocks displayed a moderate upw ard tendency in October, follow ing declines in the second half o f A ugust and in September. Prices of domestic corporation bonds showed no marked change during October. Follow ing an initial decline in the opening days o f the month, prices held steady until the third week when quotations generally rose to levels slightly above those prevailing at the end of September, and not fa r below the highest levels o f the year. On the whole, prices of industrial and public utility bonds near the end of October made more favor able comparisons with quotations a month earlier than did railroad issues. Foreign bonds moved irregularly in October. N e w F in a n c in g Public offerings of new securities, other than United States Government issues, came into the market in fairly large volume during October, though the aggregate, ju d gin g from prelim inary data, was not up to the totals fo r other recent months. Domestic corporation issues were around $235,000,000, as com pared with about $275,000,000 in September, $210^,000,000 in August, and nearly $550,000,000 in July. A very large part o f the proceeds o f these corporate issues continued to be fo r use in refunding outstanding security issues or in the repay ment o f bank loans. In the form er category the prin cipal issues were $45,000,000 Illinois Bell Telephone Company 3 % per cent 35 year bonds priced at 102% , $37,500,000 V irginia E lectric and Power Company 4 per cent 20 year bonds priced at lO l1 $26,000,000 Colum /^, bus Railway, Power and Light Company 4 per cent 30 year bonds priced at 101% , and $20,000,000 Dayton Power and Light Company 3 % per cent 25 year bonds priced at 99% . The $55,000,000 Anaconda Copper M in ing Company 4 % per cent 15 year issue priced at 98% was fo r the purpose o f repaying bank loans. The m onth’s corporate financing also included an issue o f approxi mately $24,200,000 o f $4.50 preferred stock o f the Cleve land E lectric Illum inating Company. The larger part of the proceeds o f this issue will be used fo r the redemption at 1 1 0 o f outstanding $6 preferred stock, but a part of the proceeds will also go to the parent com pany which had previously acquired the stock and to that extent the issue represents new capital. State and m unicipal security issues publicly offered were o f limited volume. The State o f New Y ork bor rowed $60,000,000 until next June at the record low rate of 0.30 per cent, but these notes were placed with 77 financial institutions and com paratively little reoffered fo r public subscription. In addition, the Federal Inter mediate Credit Banks marketed about $23,500,000 of short term debentures in partial replacement o f October maturities o f about $38,750,000. F o r e ig n E x c h a n g e s The fear that the Italian-Ethiopian situation might have serious European repercussions and the concurrent growth o f confidence in the progress of recovery in the United States have promoted an extremely heavy move ment o f funds to this country from abroad, and have been the principal influences operating in the foreign exchange market since the latter part o f September. The movement reached its largest proportions late in Sep tember and in the early part o f October, fallin g off somewhat thereafter. Since September, the movement of gold to this country, including gold now en route, has amounted to about $480,000,000, and this movement has been almost exclusively a reflection o f the inflow of capital. A large part o f the funds which flowed to New Y ork during this period were transferred from London, and as a result the pound was subjected to exceedingly strong pressure. A lthough the British authorities undoubtedly drew heavily upon their gold holdings in order to sup port sterling, the rate receded moderately to a low o f $4.88% on October 4, as com pared with a high o f $4.98% on A ugust 14. Subsequently, however, some recovery occurred, and the pound showed no substantial net change for the month o f October. The French franc continued to be quoted at or below the gold shipping point from Paris to New Y ork during FEDERAL RESERVE AGENT A T NEW YORK most of October, with the result that over $200,000,000 of gold was sent from France to this country from Sep tember 9 onward. This drain on the gold holdings o f the Bank o f France was offset, however, by gold received from other countries, principally England and Italy. It seems likely, therefore, that the weakness of the franc during this period, while due partly to internal factors, was due chiefly to the position of the Paris exchange market as the principal international gold clearing center through which operations in support o f other m ajor currencies now are carried on. A m ong the other currencies of the European gold bloc, the guilder recovered from $0.6769 to a high o f $0.6792 on October 28, a level well above the lower gold point, while Swiss exchange receded somewhat in the latter part of the month, although it still remained above its lower gold point. The Chinese exchanges showed marked weakness dur ing October. The Shanghai dollar, which had remained fairly stable fo r several months in the neighborhood o f 37 or 38 cents, dropped to a low of 31% cents on October 30. Closing Cable Rates at New York Exchange on Oct. 31, 1934 Sept. 30, 1935 Oct. 30, 1935 Belgium ........................................ Denmark......................................... England ...................................... France ......................................... ............................... Germany H olland........................................... Italy .............................................. Norway ......................................... Spain................................................ Sweden............................................ Switzerland.................................... $ .2333 .2225 4.9800 .06593 .4026 .6767 .0856 .2504 .1366 .2570 .3258 Canada............................................ Argentina........................................ B razil............................................... Uruguay.......................................... 1.0263 .3320 .0825 .8000 .9888 .3273 .0863 .8050 .9888 .3279 .0863 .8050 Japan............................................... In d ia ................................................ Shanghai......................................... .2902 .3755 .3331 .2882 .3715 .3831 .2875 .3719 .3138 $ .1690 .2193 4.9100 .06590 .4024 .6769 .0815 .2467 .1366 .2530 .3254 $ .1684 .2197 4.9188 .06591 .4024 .6790 .0812 .2472 .1367 .2536 .3252 G o ld M o v e m e n t The influx of gold from abroad which began in Sep tember continued in October, and during the course of the month imports o f $155,700,000 were received from France, $108,100,000 from England, $18,300,000 from the Netherlands, $10,900,000 from India, $8,700,000 from Canada, $1,100,000 from China, and $500,000 from Ecuador. The gold stock of the United States was further augmented by the deposit of newly mined domes tic gold and scrap gold at the mints and assay offices and by a net release o f $500,000 of gold held under earmark at the Reserve Bank, and consequently the total rose approxim ately $330,000,000 during the month. Gold amounting to $ 2 ,20 0 ,0 0 0 received from Central and South Am erican countries was immediately placed under ear mark here and therefore had no effect on the gold stock. from 5 to 4 per cent, and on the 21st the Bank of Danzig lowered its rate from 6 to 5 per cent. E m p l o y m e n t a n d P a y r o lls From the middle o f A ugust to the middle o f Septem ber data on employment and payrolls in representative New Y ork State factories, adjusted fo r seasonal varia tion, increased for the third consecutive month, bringing the employment index to a level 7 per cent above a year ago and the payroll index to a point 14 per cent higher. A ll o f the m ajor groups participated in the employment gains registered from m id-August to mid-September with the exception o f the stone, clay, and glass group of in dustries, The most substantial gains occurred in the clothing and food industries which customarily increase the number o f employees at this time of the year. F or the country as a whole, the Secretary o f Labor estimated the gain in private employment during Sep tember at more than a third o f a million workers and the increase in weekly payrolls at over $12,000,000. E m ploy ment in m anufacturing industries showed a relatively small increase after allowance fo r the usual seasonal advance, as large gains in many o f the important indus trial groups were offset to a considerable extent by tem porary contraction of labor forces at automobile plants preparatory to the early introduction o f new models. The increase in factory payrolls was more marked than that in employment, this ban k ’s seasonally adjusted index advancing nearly 3 per cent in September to the highest level since M ay 1931. A m ong nonm anufacturing industries, material in creases in the number o f workers employed in Septem ber were reported in retail trade, anthracite and bitumin ous coal mining, and in private building construction. The increase in employment in private building con struction in September marked the seventh consecutive month in which gains have occurred, as the accom pany ing diagram shows. This rise has been paralleled during the current year by employment gains in a group o f six industries producing important construction materials, such as structural steel, cement, and millwork. E m ploy ment in the building material industries, however, is at a higher level relative to 1932 than is employment in priPER CENT C en tra l B a n k R a t e C h an ges The Netherlands Bank lowered its discount rate from 6 to 5 per cent on October 17 and again to 4 % per cent on the 2 2 nd, follow ing a strengthening o f guilder ex change and a cessation o f the gold outflow from Holland. Effective October 1 the Bank of Estonia rate was reduced 8 5 Employment in Private Building Construction and in the Manufacture of Important Building Materials (1932 average = 100 per cent) 86 MONTHLY REVIEW, NOVEMBER 1, 1935 vate building construction because of the influence of the demand fo r materials arising out of public works projects. C o m m o d i t y P r ic e s The principal basic commodities continued to advance during the first week of October, but subsequently prices moved irregularly with something of a downward ten dency developing toward the end o f the month. Silk again showed the most pronounced gain ; during the course of the month the price of the raw product rose to the highest level since 1931, and despite some recession closed the month with a substantial advance over the end o f September. The recent rise is reported to have been due in part to damage to the new crop in Japan, where the Japanese Government now estimates that the summer and fa ll cocoon crop w ill be at least 30 per cent below last y e a r’s level. The price of rubber rose to the highest level since early this year, and net gains occurred also in the prices of hides, wool, and cotton. W heat prices, on the other hand, showed a net decline for October as a further advance in the first part of the month was fo l lowed by a recession subsequently. H og prices also de clined, largely as a result of seasonal factors, and corn prices dropped sharply in the last few days of October, after having shown earlier advances. A m ong the metals, the domestic price of copper rose % cent on October 7 to 9.25 cents a pound, the highest price in over four years. Substantial price advances in tin during the first half of October raised the spot quo tation to the highest level since May 1934, and despite a subsequent decline there was a slight net advance fo r the month as a whole. Other metal prices were relatively steady during October. B u il d i n g In the M etropolitan New Y ork and Upstate New Y ork area total construction contracts awarded during Sep tember were more than 30 per cent higher than in August and more than twice as large as in September 1934. The increase over August was confined to nonresidential con struction and engineering projects, residential building declining approximately 7 per cent. F or the first nine months of 1935, however, contracts for residential work were approxim ately 75 per cent, or $35,000,000, higher than in the corresponding period of 1934. Public works and utility projects showed an increase of $7,000,000 over 1934, but other nonresidential construction work was approxim ately $3,000,000 less than a year ago. Altogether, total construction contracts amounted to $245,000,000, or about $40,000,000 more than in the first nine months of last year. F or the 37 States covered by the F . W . Dodge Corpo ration report continued expansion in residential build ing was the outstanding development during September. The recovery in residential building during the current year from the extremely low level of the previous three years is shown in the accom panying diagram, which is based on monthly data o f average daily residential con tracts, adjusted fo r recurring seasonal movements. D u r ing the first two weeks of October the average daily volume o f residential contracts passed the $ 2 ,000,000 mark fo r the first time in fou r years, and fo r the first Average Daily Value of Residential Building Contracts, Adjusted for Seasonal Variation (Based on F. W . Dodge Corporation data for 37 States— latest figure is for first half of October) nine months of 1935 the total o f residential contracts in the 37 States was 80 per cent above the corresponding period o f 1934. This increase in residential contracts, however, has been accom panied by declines in other m ajor types o f construction, so that the total volume of contracts fo r the first three quarters o f this year re mained slightly below a year ago. P r o d u c tio n Statistical evidence so far available indicates that there was some further increase in the general level o f indus trial activity in October. Steel production increased slightly, averaging approximately 52 per cent o f capacity as com pared with 51 per cent o f capacity in Septem ber; automobile assemblies rose sharply, in contrast with the movement between September and October in previous years; cotton mills were reported to have accelerated operations to a greater than usual d egree; and bitumin ous coal output also increased more rapidly than in most other years. E lectric power production gained seasonally during October. In September the volume o f industrial production in creased for the second successive month, the B o a rd ’s seasonally adjusted index rising from 87 to 88 per cent of the 1923-25 average. There was a more than seasonal gain in manufactures, and the sub-index o f mineral p ro duction rose from 81 to 86 as a result o f a sharp recovery in output of anthracite coal. The rate of steel production rose 5 per cent over the August figure, and attained the highest level fo r any September since 1929. Expansion o f greater than seasonal proportions in activity at cotton textile mills was evidenced by an 18 per cent rise in the rate o f consumption o f cotton, and there were also in creases in deliveries of sugar, and in output of wheat flour, cement, zinc, and newsprint paper. On the other hand the transition to new models, accomplished this year two or three months earlier than usual, brought about a sharp curtailment in automobile assembly opera tions. There were also declines in activity at wool mills and lead refineries, and output of bituminous coal gained less than seasonally as a result o f the strike in the last week o f September. 87 FEDERAL RESERVE AGENT A T NEW YORK (Adjusted for seasonal variations and usual year to year growth) 19 3 5 1934 Sept. July Aug. Sept. 28 33 45 51 45 56 50 53 69 50 67 56 72 48 39 92 15 p 53 p M etals Pig iro n ........................................................... Steel in g ots..................................................... L ea d ................................................................. Z in c .................................................................. 68 68 Autom obiles Passenger ca rs............................................... M otor trucks................................................. 34 78 10 1 59 67 72 67 64 70 60 67 69 69 75 63 43 60 p 68 68 68 p 75 p 7 5p 72 72 127 70 116 98 p 79 113p 71p 114p 91p Fuels Bituminous coal............................................. Anthracite coal.............................................. Petroleum, cru d e.......................................... Petroleum products...................................... Electric p ow er............................................... 7 8p Textiles and Leather Products Cotton consum ption.................................... W ool mill a ctiv ity ........................................ Silk mill a ctiv ity ........................................... R ayon deliveries*......................................... Shoes................................................................ 55 r 45 43 76 83 12 1 60 105 105 Foods and Tobacco Products Meat packing................................................. Wheat flour r ................................................. Refined sugar deliveries.............................. T obacco products......................................... 146 87 r 73 80 86 42 54 75 34 42 51 69 106 72 79r 62 81 78 68 r 86 r 65 81 82 p 80 36 59 39 68 74p 73 Miscellaneous C em ent............................................................ T ires................................................................. Newsprint paper........................................... Machine to o ls ................................................ V Preliminary r Revised 99 * For quarter ended F o r e ig n T r a d e D uring September exports o f merchandise from the United States increased somewhat over the preceding month, while imports declined slightly, both movements being in the direction o f the usual seasonal changes. Exports, amounting to $198,000,000, were 4 per cent above the level o f a year ago, and in fact were larger than in any September since 1930. Imports, at $162,000,000, showed an increase o f 23 per cent over a year ago and were larger than in September o f any year since 1931. Shipments abroad of raw cotton during September showed a large seasonal increase and for the first time in eighteen months were substantially above a year previous in quantity, but they continued to be somewhat smaller in value than in 1934 owing to the lower price o f cotton. Exports o f unmanufactured tobacco, on the other hand, were in about the same volume as a year ago, but were slightly larger in value. The number of passenger auto mobiles and motor trucks shipped abroad was less than in September 1934, while exports of other finished manu factures and likewise o f crude foodstuffs, notably apples, showed substantial gains. A m ong the imports, large in creases over a year ago occurred in receipts of wool, tin, copper, and nickel. There were moderate gains also in imports of burlap, newsprint paper, wood pulp, and crude rubber. Receipts of raw silk, however, were some what smaller in volume, although they continued to be larger in value than in 1934, due to materially higher prices. Sugar imports, owing to the exhaustion o f our Cuban quota in August, were small and amounted to only a fraction o f the exceptionally large figure o f a year ago. A n estimate of this cou n try’s international balance o f payments for the first half o f 1935 has recently been issued by the Department o f Commerce. A ccordin g to these data the surplus o f receipts due to this country on account o f current transactions in merchandise, services, and interest disappeared this year, a deficit of $ 1 0 ,000,000 being shown fo r the first half year as contrasted with a surplus o f $466,000,000 fo r the fu ll year 1934. This change has been due chiefly to the falling off in our excess o f merchandise exports over imports, which amounted to only $65,000,000 in the first nine months of 1935, as against $319,000,000 in the corresponding period o f last year. The decline which has occurred in agricul tural exports has approxim ately offset an increase in sales abroad o f Am erican m anufactured and industrial products, with the result that the total value o f our exports has remained at about the same level as a year ago. Meanwhile, expanding industrial requirements for imported raw materials and increased imports of food stuffs have brought about a substantial increase in mer chandise imports. Despite the fact that ordinary current transactions with the world were approxim ately in balance and despite large silver purchases abroad by the Treasury, the United States has received exceptionally heavy ship ments of gold from other countries since the beginning o f the year, due to a large inward movement of capital to this country. A ccordin g to the figures released by the Department o f Commerce covering the first half year, the inflow o f capital chiefly took the form o f a transfer o f short term banking balances, although there was also considerable foreign buying o f securities in this market. I n d e x e s o f B u s in e s s A c t i v i t y D uring the first three weeks o f October, the railroad movement of merchandise and miscellaneous freight con tinued to increase by more than seasonal proportions, so that this type o f traffic was at the highest level for the season since 1931, as is indicated in the accom panying diagram. Furthermore, unusually large gains in certain types o f bulk freight car loadings caused an unseasonal rise in the movement o f heavy freight. Less than the average seasonal rise, however, was indicated in sa le s of department stores in the Metropolitan area o f New Y ork during the first half o f the month, but trade reports from 2 0 0 ---------------------------------------------------------------------------100 ---------------------------------------------------------------------------- O l____I . J F I I I I M A M J I I J A I I I ______ _ S O N D Car Loadings o f Merchandise and Miscellaneous Freight (Four week moving averages of actual reported data) 88 MONTHLY REVIEW, NOVEMBER 1, 1935 outside New Y ork indicate a somewhat more favorable experience in other parts of the country. Distribution of goods and general business activity during September compared favorably with the previous month. Retail trade showed an advance, more than the average seasonal gains occurring in the sales o f mail order houses, department store sales in this district, and sales of chain stores. A pronounced rise was also shown in railroad freight shipments, and about the usual gain was indicated in the volume of check transactions. Reces sions occurred, however, in the seasonally adjusted in dexes of advertising and sales o f new passenger cars. previous few months, and sales o f the Hudson R iver Valley D istrict department stores were lower than last year follow ing an advance in the previous month. Sales o f the leading apparel stores in this district were 18% per cent higher than last year, the most substantial increase since March 1934. Stocks o f merchandise on hand, at retail valuation, continued lower than last year in the department stores, and moderately higher in the apparel stores. Percentage change September 1935 compared with September 1934 [(A djusted for seasonaFvariations, for usual year to year growth, and where necessary for price changes) 1934 Per cent of accounts outstanding August 31 collected in September Locality 19 3 5 July Aug. 55 58 51 57 58 52 52 80 93 58 57 48 76 79 70 58 82 71 60 58 p 74 79 74 61 83 76 58 48p Stock on hand end of month 1934 1935 + 1 1 .4 + 1 4 .6 + 1 4 .1 + 2 3 .1 + 6 .6 + 8 .4 + 3 .7 + 0 .9 + 5.3 — 0 .8 + 7.1 + 3 .2 — — + — — — — 4 3.4 4 6.5 4 0 .3 3 1.0 3 6.4 3 3.0 24.7 4 5 .7 4 4 .7 4 2.2 3 4 .0 3 8.5 36.1 27.6 All department stores............................. + 1 0 .8 — 2 .7 3 9.7 4 1.9 Apparel stores........................................... Sept. + 1 8 .5 + 4 .8 35.9 3 8.3 Net sales Sept. P rim a ry Distribution Car loadings, merchandise and misc........ Car loadings, oth er....................................... Im ports........................................................... Wholesale tra d e............................................. 86 66 93 59 60 53p 68 p 87 New Y o r k ........................................................... Syracuse.............................................................. Northern New Jersey...................................... Bridgeport........................................................... Distribution to Consum er Department store sales, U. S ..................... Department store sales, 2nd D ist............. Chain grocery sales...................................... Other chain store sales................................ M ail order house sales................................. Advertising..................................................... New passenger car registrations............... Gasoline consumption.................................. 74 71 65 86 75 56 47 68 66 59 78 71 58 62 70 Northern New Y ork State......................... Southern New York S ta te.......................... Hudson River Valley D istrict................... Capital D istrict............................................. Westchester and Stam ford......................... 2 .7 3 .4 1.9 8 .8 0 .6 0 .3 7 .0 General B usin ess Activity Bank debits, outside New Y ork C it y .. . . Bank debits, New York C ity ..................... Velocity of demand deposits, outside New York C it y ................................................... Velocity of demand deposits, New York C ity . ............................................................ New life insurance sales.............................. Factory employment, United States........ Business failures............................................ Building contracts........................................ New corporations form ed in N . Y . State General price level* ..................................... Composite index of w ages*........................ Cost of livin g *............................................... p Preliminary 60 41 66 50 65 46 65p 45 66 68 67 68 45 60 75 42 59 49 56 82 42 26 60 45 55 83 42 29 59 44 57 83p 41 29p 63 139 179 139 145 186 140 146 187 142 147p 187p 143 20 * 1913 average = 1 0 0 D e p a r tm e n t S tore T r a d e D uring the first half o f October, total sales o f the reporting department stores in the M etropolitan area of New Y ork were 0.3 per cent below the corresponding period a year ago. Somewhat less than the usual seasonal expansion from September appeared to have occurred in this period of October, which was attended by unsea sonably warm weather and the incidence this year of the Columbus Day holiday on a Saturday. D uring September, total sales o f the reporting depart ment stores in this district showed more than the usual seasonal rise and were 10 .8 per cent ahead o f last year, the largest advance recorded since March 1934. Sales of the Buffalo, Rochester, Syracuse, and New Y ork City stores showed the most favorable comparisons with a year previous since March 1934, considering differences in the number of shopping days, and B ridgeport, Capital District, Northern New Jersey, and Westchester and Stam ford stores reported the most favorable in several months. Sales of the reporting Southern New Y ork State stores showed the same moderate increase as was indicated last month, while sales of the Northern New Y ork State stores showed a smaller increase than in the W h o le s a le T r a d e In September total sales o f the reporting wholesale firms in this district averaged 13.1 per cent higher than last year, which with the exception o f the increase in July was the most substantial advance recorded this year. Sales of cotton goods and diamonds made the most favorable comparisons with a year previous since the spring o f 1934, yardage sales o f silk goods showed the most substantial advance since the fall o f 1934, and sales of hardware and stationery were above a year ago by the largest percentages in 7 to 9 months. The in creases reported by the grocery, shoe, drug, paper, and jew elry concerns were larger than in the previous month, and sales o f m en ’s clothing were ahead o f a year ago by almost as large a percentage as in August. Percentage change September 1935 compared with September 1934 Com m odity Net sales M en’s clothing ............................................ Weighted average..................................... + 2 .2 + 2 1.0 + 2 4 .4 + 2 6 .1 * + 4 .7 + 8 .6 + 9 .2 + 7 .4 + 1 6 .0 + 8 6 .4 + 2 0 .8 + 1 3 .1 Stock on hand end of month — 5 .5 + 1 6 .8 * — 7 .5 + 1 .2 + 1 5 .7 — 8 .0 Per cent of accounts outstanding August 31 collected in September 1934 1935 9 3.2 4 0 .8 38.1 5 7.9 37.1 3 7.3 4 4.3 4 0.6 4 5.8 8 7.4 4 7 .5 4 0.0 56.3 35.1 23.2 4 6.8 5 2.8 4 3.2 } 2 1 .8 } 2 4.9 5 5.6 5 4.8 * Quantity figures reported by the National Federation of Textiles, Incorporated, not included in weighted average for total wholesale trade. FEDERAL RESERVE BANK OF NEW YORK MONTHLY REVIEW, NOVEMBER 1, 1935 B u s in e s s C o n d it i o n s in t h e U n i t e d S t a t e s (Summarized by the Board of Governors of the Federal Reserve System) NDUSTRIAL production and employment increased in September and distribution of commodities to consumers was in larger volume, reflecting in part seasonal influences. The general level of wholesale prices showed little change. I P r o d u c tio n a n d E m p l o y m e n t Index Number o f Production of Manufactures and Minerals Combined, Adjusted for Seasonal Variation (1923-25 average = 100 per cent) Output at factories and mines, as measured by the Board’s seasonally adjusted index of industrial production, advanced from 87 per cent of the 19231925 average in August to 88 per cent in September, reflecting chiefly increases in the output of iron and steel, lumber, cotton and silk textiles, and anthracite, offset in part in the total by declines in the production of automobiles and woolen textiles. At steel mills activity increased from 49 per cent of capacity in August to 51 per cent in September, and during the first three weeks of October continued at about the September level. At automobile factories a sharp decline in output during September, as preparations were made for new models, was followed in the early part of October by a rapid advance. Lumber production continued to increase in September. In the cotton textile industry, where output had been at a relatively low level since April, activity showed a marked increase in September and there was also an increase in output at silk mills, while at woolen mills, where activity had been at an exceptionally high level for several months, there was a decline. Factory employment showed a seasonal increase between the middle of August and the middle of September. The number employed at foundries and in the lumber, nonferrous metals, and machinery industries increased substantially, while in the automobile industry there was a considerable decline. At cotton mills employment showed a seasonal increase and at silk and rayon mills there was an increase of more than the usual seasonal amount, while employment at woolen mills and shoe factories declined. Index o f Factory Employment with Adjustm ent for Seasonal Variation (1923-25 average = 100 per cent) The value of construction contracts awarded, as reported by the F. W. Dodge Corporation, was about the same in the six weeks ended October 15 as in the previous six weeks, reflecting an increase in residential building, partly of a seasonal character, and a slight decline in other types of construction. D is t r ib u t io n Freight car loadings showed an increase of more than the usual seasonal amount in September and increased further in the first half of October. Department store sales also increased by more than the estimated seasonal amount in September, and for the third quarter the average of the Board’s seasonally adjusted index was 80 per cent of the 1923-1925 average as compared with 75 per cent a year ago. C o m m o d it y P r ic e s Indexes o f Daily Average Value o f Department Store Sales (1923-25 average = 100 per cent) The general level of wholesale commodity prices, as measured by the index of the Bureau of Labor Statistics, showed little change during September and the first three weeks of October. Prices of grains decreased in the middle of October, following a considerable advance, while prices of silk, hides, and copper increased throughout the period. PER CENT 120 - B a n k C r e d it i Reserves of member banks continued to increase during the five weeks ended October 23, reflecting chiefly imports of gold from abroad. At the end of the period reserves in excess of legal requirements at $2,930,000,000 were at the highest level on record. 100 >ODS COMIM O O IT IE S ____ 80 h SO U K 40 r” At weekly reporting member banks in 91 leading cities adjusted demand deposits increased by $40,000,000 during the four weeks ended October 16, while United States Government deposits declined and inter-bank balances rose to a new high level. Loans on securities decreased by $40,000,000, while other loans, including commercial credits, increased by $80,000,000. 01 V p * f ^ / v ~ FA R M PR<DDUCT5 V r 20 1 329 1930 193! 1932 1933 1 93 4 193 5 G roup Price Indexes of the B ureau of Labor Statistics (1926 average = 100 per cent) Yields on both short term and long term Government obligations increased from the last week in August to the first part of October and subsequently declined. Other short term open market money rates remained at previous low levels.
@FedFRASER