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o f C r e d it a n d B u s in e s s C o n d it io n s

F e d e ra l

R e se rv e

D is tric t

M o n e y M a r k e t in O c to b e r
There was considerable interest during October in
present and prospective increases in bank loans, arising
from improvement in general business conditions and
due in part to the National defense program. On Octo­
ber 9, the “ Assignment of Claims Act of 1940” became
law, and thereby the making of bank loans to finance the
expansion of plant and equipment and production of
materials for National defense purposes was facilitated.
This Act makes it possible for contractors having con­
tracts for Government work to assign their claims for
paym ent by the Government (in amounts of $1000 or
more) to a bank, trust company, or other financing
institution (including any Federal lending agency),
which assignments can be used as security for loans
granted by such lenders. In many cases, banks would
have been willing to grant loans to businesses having
Government contracts, without the added security of the
assignment of claims for paym ent under these contracts,
but the provision for obtaining the assignment of such
claims, thereby making the contracts “ bankable,” un­
doubtedly widens the field of potential participation of
the banks in the financing of the defense program, and to
that extent reduces the aid which might otherwise have
been needed from Government loan agencies.
The overall net increase in the commercial, industrial,
and agricultural loans of the weekly reporting banks in
principal cities amounted to $171,000,000 in the four
weeks ended October 23. Despite the October increase,
however, and a sizable increase in the second week of
September which included a large term loan of a refund­
ing character, the rise this year from the seasonal low
point of the end of May has been less than the rise which
occurred in the corresponding period a year ago, as the
accompanying diagram indicates. Last year there was
a very sharp advance in loans, beginning at about the
time of the outbreak of the w ar which caused a number
of businesses to accumulate inventories, thereby increas­
ing their needs for funds. On the current rise, “ commer­
cial loans” , while well above the level of a year ago, have
not yet reached the peak of October, 1937; despite the
inclusion in the reported figures of a considerable known
volume of “ term ” loans, some of which represent refund­
ing operations, the total on October 23 remained about
$120,000,000 below the 1937 high. Aggregate commercial
loans of reporting banks outside New York are about at
the 1937 peak, but such loans made by New York City
banks remain lower.

In addition to the increase in commercial loans, the
weekly reporting banks also increased their holdings of
United States Government securities by $155,000,000
during the four weeks ended October 23, with the result
that, after allowing for minor changes in other earning
assets, the total of their loans and investments rose
$323,000,000 to $24,489,000,000, or approximately
$60,000,000 above the previous peak reached in October,
1929. Of the rise in United States Government securi­
ties, $83,000,000 represented an increase in Treasury bill
holdings, which had been reduced in the previous two
months; $31,000,000 represented a net rise in Govern­
ment bond holdings in excess of the reduction which
occurred in Treasury note holdings accompanying the
exchange by the Treasury of Treasury notes m aturing
December 15, 1940, for 2 per cent Treasury bonds of
1953-55, which was carried out during the week ended
October 9; and $41,000,000 represented an increase in
holdings of fully guaranteed obligations of the United
E xcess R eserves
F u rth er increases in excess reserves of all member
banks occurred during October, and on the October 23
statement date the total broke through the previous high
of $6,880,000,000 reached on July 17, advancing to
$6,940,000,000. The rise in October was at a somewhat
faster rate than had prevailed in the preceding advance

3.5 L^v_______ ___________________________________________ :____ -A-vi












Commercial Industrial, and Agricultural Loans of Weekly Reporting
Banks in 101 Leading Cities (Latest figure is for October 23)



from the tem porary low of $6,330,000,000 to which excess
reserves had been reduced in early August by the cash
payments for new Government security issues. The
principal factors in the rise in member bank excess
reserves during the four weeks ended October 23 were
heavy disbursements by the Treasury from its previously
accumulated cash holdings and balances with the Reserve
Banks, totaling $475,000,000, and a further rise in the
gold stock of $262,000,000. Meanwhile, a p art of the
resulting addition to reserve funds was absorbed by a
continued rise in the amount of currency outstanding
to a new high, sales of $82,000,000 of Government securi­
ties from the Reserve System ’s holdings, an increase in
foreign and other nonmember deposits at the Reserve
Banks, and a sizable increase in member bank reserve
requirements, which accompanied increases in adjusted
demand and interbank deposits to new high levels.
M oney R ates
Short term money rates were unchanged during
October, except for further reduction in the rates on
weekly issues of Treasury bills to a point where, for the
last four issues floated in October, no yield was obtain­
able on part of the issues, and negative yields prevailed
for the remaining parts of these issues. Yields on Treas­
ury notes of 3 to 5 year term showed further declines for
the month, and yields on high grade bonds likewise
tended lower.
Money Rates in New York
Oct. 31, 1939 Sept. 30, 1940 Oct. 30,1940
Stock Exchange call loans.....................
Stock Exchange 90 day loans................
Prime commercial paper 4-6 months...
Bills—90 day unindorsed.......................
Average yield on Treasury notes (3-5
Average yield on Treasury bonds (not
callable within 12 years)....................
Average rate on latest Treasury bill sale
91 day issue.........................................
Federal Reserve Bank of New York dis­
count rate............................................
Federal Reserve Bank of New York
buying rate for 90 day indorsed bills.
* Nominal


*1 X


* IW

X rX



















t Negative yield

G overnment S ecurities
D uring October Government security prices generally
showed continued firmness. Price fluctuations were nar­
row; the price range for long term Treasury bonds
amounted to only % of a point on the average and for
intermediate term Treasury bonds to less than % of a
point. The average price of long term Treasury bonds
advanced irregularly early in the month until on Octo­
ber 7 it was within a small fraction of a point of the 1940
high attained in April, and not far from the record high
for this class of bond reached in June, 1939. However,
the average price declined a total of % a point by Octo­
ber 11, following reports of the movement of German
troops into Rumania. Somewhat higher levels were
reached later in the month but no consistent tendency
was apparent.
Treasury note prices advanced slightly through Octo­
ber 7. In succeeding sessions and during the middle of

the month they lost part of this gain, but the advance was
resumed on October 19. The average yield on 3 to 5
year Treasury notes, after an irregular decline during
much of October, stood on October 30 at 0.40 per cent.
Treasury bill financing during October was composed
of five weekly issues, each in the amount of approximately
$100,000,000 and each a replacement of similar m aturi­
ties. The bills dated October 2 were all awarded on par
bids, and accepted bids for the following four issues were
at prices slightly above par and at par.
On October 24, the Treasury, on behalf of the United
States Housing Authority, offered for subscription at par
and accrued interest, $100,000,000 of *4 per cent one
year notes of the Authority, dated November 1. This
issue, fully guaranteed by the United States, was heavily
C ommercial P aper and B ills
Commercial paper rates remained virtually unchanged
during October; average grade prime 4 to 6 month com­
mercial paper moved at both y 2 and % per cent, and
the choicest grade of material, when available, was sold
at % per cent. The continued strong bank investment
demand absorbed without delay the moderate quantity
of new notes that dealers were in position to offer for
sale in the open market. A t the end of September com­
mercial paper concerns had paper outstanding in the ag­
gregate sum of $250,700,000, the largest amount since
May, 1938. The September 30 figure was about 3 per
cent larger than a month previous and 20 per cent larger
than a year ago.
The bill m arket remained very inactive, owing prim ar­
ily to the tendency of acceptors to keep new bills for
their own account. D ealers’ quoted rates for bankers
acceptances held largely nominal at previously quoted
levels. The total of bankers acceptances outstanding on
September 30, at only $177,000,000—a new low for at
least 20 years—was about 3 per cent smaller than a
month previous and 18 per cent under the figure for a
year ago. Decreases in outstanding bills drawn to
finance exports and in those based on goods stored in or
shipped between foreign countries accounted for the
larger portion of the decline from a year ago.
S e c u rity M a rk e ts
Price fluctuations in the security markets in October
were narrow and indecisive. In general, domestic bond
quotations were firmer than share prices. The volume of
trading activity last month averaged higher than in
The average price of common stocks in the Standard
Statistics 90 stock index showed an irregular decline of
almost 4 per cent between October 3 and 9 on disturbing
news from the Balkans and the F ar East. D uring the
remainder of the month stocks advanced irregularly and
at the end of October stock prices reached the highest
level since early in May.
Prices of medium grade domestic corporation bonds
varied little, on balance, in the first half of October, but
firmer tendencies prevailed later in the month. On
October 31 Moody’s Investors Service average price of


Baa issues was at the highest point since February, 1937.
Prim e corporate bonds, those classified as Aaa by Moody,
remained at September record highs during much of the
first half of October. The average price moved up ^4 of
a point further on October 16 and m aintained that level
during most of the remainder of the month. High grade
municipal bond prices continued their September
advance into new high ground.
N e w F in a n c in g
The volume of corporate and m unicipal new security
issues floated during October rose sharply to $525,000,000, the highest level in almost a year and a half. Both
classifications of securities participated in the advance.
Corporate flotations amounted to $362,000,000, the
greatest total for any month since June, 1937. The
increase was accounted for by refunding operations; the
volume of funds sought for corporate new capital pu r­
poses amounted to only $40,000,000, or substantially less
than in either of the two previous months.
On October 9, public offering was made of $108,000,000
Southern California Edison Company, Ltd., refunding
bonds m aturing in 1965. This issue represented the
largest corporate offering since August, 1939. By
October 24, underw riters for the offering were able to
announce that subscription books had been closed and
price restrictions removed. Details of this and other
m ajor new security issues marketed during the month
appear in the following table.

$108,000,000 Southern California Edison Company, Ltd., 3 per
cent first and refunding mortgage bonds o f 1965,
priced at 104 to yield 2.78 per cent, for refunding
45.000.000 Youngstown Sheet and Tube Company 3 % per cent
first mortgage bonds due in 1960, priced at 103
to yield 3.05 per cent, for refunding
29.000.000 Columbus and Southern Ohio Electric Company 3*4
per cent first mortgage bonds o f 1970, priced at
107 to yield 2.90 per cent, for refunding
27.333.000 New York Connecting Railroad Company 3% per
cent first mortgage bonds o f 1965, priced at 102
to yield 3.38 per cent, for refunding
20.000.000 Great Northern Railway Company 4 per cent col­
lateral trust bonds consisting o f $7,000,000 serial
bonds maturing from 1941 to 1951, priced to
yield 0.50 per cent to 3.60 per cent; and
$13,000,000 term bonds o f 1952, priced at 103 to
yield 3.69 per cent; for refunding
18.100.000 Central Maine Power Company 3 y2 per cent first
and general mortgage bonds o f 1970, priced at
1 0 7^ to yield 3.11 per cent, chiefly for refunding


Not included in the $525,000,000 aggregate of new
financing was $140,000,000 of short term securities, the
bulk of which was accounted for by $100,000,000 State
of New York 0.20 per cent notes due in May, 1941, and
$28,000,000 of Federal Interm ediate Credit bank 0.75
per cent nine and twelve month debentures sold at prices
to yield 0.30 per cent and 0.35 per cent, respectively.
Forthcoming issues indicated by public announcements
include approximately $99,000,000 of Detroit Edison
Company refunding bonds, an issue of around $75,000,000
under a refinancing program of the United Gas Corpora­
tion, and about $53,000,000 of Boston Edison Company
refunding bonds. In addition t ) these, a somewhat longer
and more diversified list of stock issues than usual is
pending for offering to stockholders or to the public.
G o ld M o v e m e n t
D uring October the volume of imports of gold into
the United States declined further from the peak reached
last June, and at the same time the amount of gold held
under earmark at the Federal Eeserve Banks for foreign
account increased about $115,000,000 to a total of approx­
imately $1,775,000,000. Consequently, the increase of
about $255,000,000 in the gold stock of the United States
which occurred during the month was the smallest for
any month since March of this year, as the accom­
panying diagram indicates.
Following imports of $78,400,000 in the week ended
September 25, of which $50,400,000 came from Canada,
receipts during the four weeks ended October 23, as re­
ported by the D epartm ent of Commerce, totaled $307,600,000, of which $221,500,000 came from Canada, $17,800.000 from Portugal, $16,500,000 from Argentina, $14,900.000 from Japan, $14,800,000 from Australia, $5,700,000 from Russia, $5,000,000 from South Africa, $2,200,000 from the Philippines, $1,700,000 from Spain, $1,300,000 from the United Kingdom, and $1,100,000 from





M u n ic ip a l

$60,000,000 New Y oik City 3 per cent serial water bonds,
maturing from 1941 to 1970, awarded at a net
interest cost o f 2.97 per cent and reoffered to
yield from 0.30 per cent to 3.10 per cent, for new
capital purposes
42.592.000 City o f Los Angeles Department o f Water and
Power revenue bonds, consisting o f $20,592,000
o f 2 V2 per cent and 2% per cent bonds, due
serially from 1941 to 1976, reoffered at prices
to yield 0.25 per cent to 2.85 per cent; and
$22,000,000 o f 3 per cent bonds due in 1976,
priced at 102.75 to yield 2.88 per cent to matur­
ity ; for refunding.


-5 0







Monthly Changes in United States Gold Stock (October, 1940, estimated)



areductiononSeptember12by theNational Bankof
Rumaniafrom3%percent (prevailingsinceMay, 1938)
Possiblythemostsignificantdevelopmentinanother­ to3percent.
wiseverydull foreignexchangemarketduringthepast
monthwasthemovement of certainforeignfundsfrom
thiscountryasaresultoffearsthatthesituationabroad, F o re ig n T ra d e
particularlyintheBalkans, might leadtoextensionof During September both merchandise exports and
theUnitedStates’ “freezing” regulationstoadditional importsofthis countrydeclinedsharplyfromthelevels
ofthepreviousmonthandexportsof agricultural prod­
SwissexchangecontinuedindemandduringOctober, u
ctswereatthelowest level, for September, inat least
accompanyingafurthersubstantialrepatriationoffunds tw
enty-fiveyears. Exports, atatotalvalueof$295,000,fromthismarkettoSwitzerland. TheratefortheSwiss 000, were $55,000,000 less thanin August—despite a
francwaspermittedtoappreciategraduallyfrom$0.2296 sonaltendencytowardexpansionatthistimeofyear—
to $0.2323, alevel 81 points above that prevailing in saenad
the smallest for any monthsince last November.
mid-June andthehighest sinceMarch, 1938, prior to Importsdeclined$26,000,000fromtheAugust figureto
the Germanabsorptionof Austria. The free rate for $195,000,000, thesmallest value for imports since Sep­
theArgentinepeso, afterhavingreactedtemporarilyto tember, 1939. Bothexports andimports, however, re­
$0.2285duringthepreviousmonth,recoveredtoashigh mainedsomewhathigherthanayearago. Shipmentsto
as $0.2386 duringthefirst half of October, reportedly theUnitedKingdom,Canada, Japan, andanumberof
stimulatedby the transfer of European capital from othercountrieswerereportedtohavebeensmallerthan
NewYorktoArgentina. Bytheendofthemonth,how­ inAugust. Theexportbalanceof $100,000,000wasless
ever, the rate had receded to $0.2320. The Mexican than that of either the previous month or Septem­
peso, whichopenedthemonthat about $0.2032, firmed ber, 1939.
toabout$0.2062andheldnearthislevel throughoutthe ThelargestsinglefactorinthedeclineduringSeptem­
secondhalf ofthemonth. ThestrengthinMexicanex­ berintotal exportswasareduction of $14,500,000in
change is reportedtohave reflectedprimarily anim­ shipmentsabroadof aircraft, whichwerevaluedat$37,provedoutlookforpolitical stabilityinMexico. Among 000,000inAugust. Exportsofcoppershowedanexcep­
theotherLatinAmericancurrencies, thediscountonthe tionallyheavydecline, fromthepeakof $13,000,000in
Cubanpeso narrowedto 7% per cent on October 7, thepreviousmonthtolessthan$3,000,000inSeptember,
accompanyingreports of negotiations for asizableEx­ andwereabout one-thirdthevalue ayear ago. Ina
port-Import Bank credit to the CubanRepublic, but smaller degree reductions from the August levels
subsequentlywidenedtoaround9percentfortheremain­ extended to a wide variety of exports, including
especiallysemimanufactures of ironandsteel, lubricat­
TheChinesedollaradvancedsubstantiallyagainstboth ing oil, certaintypes of machinery, woodpulp, paper
thepoundsterlingandtheUnitedStatesdollarduring products, andtobacco. However, shipments of chem­
October. Whiletheannouncement onOctober8of the icals, metal-working machinery, and automobiles were
BritishintentiontoreopentheBurmaRoadapparently upsomewhatfromthepreviousmonth. Exportsof raw
lentconsiderablestrengthtoChineseexchange,theaccen­ cotton,valuedat $5,000,000, showedmuchless thanthe
e customarygainatthisseason,andwere$30,000,000less
accumulationof Chinesecurrencyforfearthat Chinese thaninSeptember, 1939. Infact, exportsofall agricul­
funds held abroad might become unavailable. The tural products, combined, in September of this year
Shanghai dollarwas quotedat slightlyover6cents at equaledonlytwothirdsofthevalueofcottonexportsin
theendofthemonth,asagainst5%centsamonthearlier. Septemberof last year. Onthe otherhand, atenfold
Indesultorytrading, littlechangeoccurredinthefree increaseoverthesmall figuresof September, 1939was
rateforthepound,thefluctuationsofwhichheldwithin recorded in exports of firearms and explosives; ship­
anarrowrange of $4.02%-$4.04%. The unofficial dis­ ments of aircraft, ironandsteel products, andmetal­
countontheCanadiandollaralsoshowedrelativelylittle workingmachinerywerefromtwotothreetimesaslarge
Withrespecttoimports, material gainsoverboththe
previous month and September, 1939, were confined
C e n tra l B a n k R a te C h a n g e s
chieflytosuchcommodities asburlap, rubber, tin, and
OnSeptember 16 the discount rate of the National copper. Receipts of unmanufacturedwool andof dis­
BankofBulgariawasloweredto5%from6percent, the tilledspiritswerealsolargerthaninthepreviousmonth,
latterratehavingbeenineffectsinceAugust, 1935, and but werebelowthefigures of ayear ago. Imports of
onOctober22theNational Bankof Hungaryreduced crudepetroleumandcocoa, although smaller than in
itsrateto3from4per cent, whichratehadprevailed August, showedsizableincreases over ayear previous.
sinceAugust, 1935.
Sugar andsilkreceipts wereconsiderablyless thanin
Accordingtoapressreport, thediscount rateof the August andshowedexceptionallylargereductionscom­
National Bankof Denmarkhasbeenloweredfrom4% paredwithSeptemberoflastyear. Themajorityofthe
to4percent,apparentlyeffectiveasofOctober16.Recent remainingimportsregisteredeitheronlyslight changes
publications report a reduction onAugust 1 by the ordecreasescomparedwiththepreviousmonthandwith
Central ReserveBankof Peruofits discountratefrom September, 1939.
6 to5percent (thefirst changesinceM
ay, 1932), and Forthefirstyearofthewar, exportsfromtheUnited

F o r e ig n E x c h a n g e s


States to the British Em pire countries amounted to
$1,775,000,000, or 44 per cent of the aggregate value of
exports to all countries. (In July and August the pro­
portion of exports to the British Em pire rose to about
two thirds of the total.) One half of the increase over the
1934-38 average in the value of shipments to all countries
was due to larger exports to the British Empire, as is
indicated in the accompanying table, although Latin
American purchases from this country showed an even
larger percentage increase. Im ports into the United
States from the British Em pire in the first year of the
war were valued at $1,051,000,000, which represented a
33 per cent increase over the 1934-38 average, and
imports from Latin America showed a 25 per cent
increase. Im ports from all other countries were frac­
tionally less than in 1934-38. Compared with the 1926-30
averages, both exports and imports with all three groups
of countries were lower.
United States MerchandiseTTradi»',with the British^Empire, Latin America,
and AH Other Countries
(In millions of dollars)
First year of the war (Sept., 1939-Aue., 1940 incl.)
compared with averages for years 1926-30 (incl.)
and 1934-38 (incl.)
Dollar change from

Percentagechange from

Value first
year of war 1934-38 av. 1926-30 av. 1934-38 av 1926-30 av.
Exports to

British Empire. . . .
Latin America........
All other countries.



— 61


— 12
— 7

All countries.......





— 16

British Empire.......
Latin America........
All other countries .


- +261
— 2

— 303
— 356
— 749



All countries.......



— 1,408



Imports from

E m p lo y m e n t a n d P a y ro lls
During September, working forces and wage payments
in New York State factories increased more than season­
ally and reached the highest levels since November, 1929.
The gains over August of 4% per cent in employment
and 6 per cent in payrolls were attributed to the con­
tinued stimulus of the National defense program in
addition to the usual autum n acceleration of activity.
Gains were widely distributed; all industrial districts in
the State and all industrial groups showed increases in
employment, in payrolls, or in both. The im portant
metals and machinery group added to working forces for
the fifth consecutive m onth; the largest gains occurred
at shipyards and at aircraft and automotive plants.
Canneries, textile plants, and women’s apparel firms
reported seasonal increases in employment, but up-State
m en’s clothing concerns, which had already passed the
peak of their fall season, employed fewer persons during
September. Factory employment as a whole was 11
per cent above the September, 1939 level, and payrolls
were 19 per cent greater.
More than 600,000 persons were added to working
forces in nonagricultural occupations throughout the



Employment in Durable and Nondurable Goods Industries, Adjusted
for Seasonal Variation (1923-25 average=100 per cent)

United States in September, according to estimates of the
Bureau of Labor Statistics. Together with the August
gain, this represents an increase of over 1,000,000 work­
ers in two months. The gain in the summer and early
autum n this year was one of the largest ever recorded.
All m ajor fields of employment showed increases, but
the largest p art of the September gain occurred in
m anufacturing and in retail and wholesale trade.
United States factory employment increased during
September for the fourth consecutive month, rising 3%
per cent to the highest level since October, 1937. Factory
payrolls were 5 y 2 per cent greater than in August, and
nearly equal to the 1937 peak. As the accompanying
diagram indicates, employment in durable goods m anu­
facturing has benefited much more from the current
upswing in business than has employment in nondurable
goods industries. W hile the number of workers in the
durable goods classification was 17 per cent greater than
in September, 1939, nondurable goods working forces
were at approximately the same level as they were during
the first month of the war. Most of the industries
stimulated by the w ar and the National defense program
are in the durable goods category; the aircraft, machine
tool, engine, and shipbuilding industries have all reported
sizable employment gains month after month. Found­
ries, sawmills, electrical m anufacturing plants, and steel
mills have also added considerably to their working
forces in recent months. In addition there were seasonal
increases in employment in September in the m anu­
facture of automobiles, cotton textiles, confectionery, and
women’s clothing. Compared with September, 1939,
total factory employment in the United States was 7 per
cent higher and payrolls were 16^o per cent larger.
P ro d u c tio n a n d T ra d e
Prelim inary evidence suggests that the acceleration
of National defense preparations in October resulted in a
further advance in the general level of business activity.
Steel mills were increasingly active during the month and
by the final week operations were proceeding at 951/2 per
cent of capacity, or at a higher rate than at any time




was largely accounted for by the exceptional speed with
which new model passenger car production reached large
(A djusted fo r seasonal variations and estim ated long te rm tre n d ;
series reported in dollars are also adjusted fo r price changes)


since 1929. Owing to the increased capacity of the indus­
try, actual producion of steel ingots is larger now than
in the earlier year. Automobile assemblies continued to
mount in October, as is shown in the accompanying dia­
gram. The steady rise in automobile production from
the low point for the year had continued for eleven weeks
by October 26, whereas the comparable advance last year
ran for seven weeks, and in 1937 the upturn was of only
five weeks’ duration. Reflecting the influence of National
defense orders and increased civilian demand, mill sales
of textile goods continued in heavy volume in October;
sales of cotton gray goods were reported in excess of out­
put, and many woolen mills were said to have operated
at near capacity rates. Railroad loadings of m erchan­
dise and miscellaneous freight increased more than usual
during the four weeks ended October 26, but the move­
ment of bulk freight declined owing to a reduction in
coal shipments. Electric power production gained over
The upw ard movement in the general level of business
activity continued in September, although the advance
in this bank's index of production and trade was some­
what less pronounced than in the preceding month be­
cause of a rather sharp decline in foreign trade and the
failure of countrywide retail trade to expand as much
as usual following the sharp rise in August. The index
for September is placed at 94 per cent of estimated long
term trend, as compared with 93 in August, 89 in Sep­
tember, 1939, and 95 at the peak reached in December,
In production, the most pronounced gains were again
evident in durable goods industries which continued to
benefit from the stimulation of w ar and National defense
orders; activity at shipyards, airplane factories, and
machine tool plants expanded still further, and steel mill
operations averaged over 90 per cent of capacity. Among
nondurable goods lines, wool consumption expanded sub­
stantially further to the highest rate since early 1937,
reflecting business placed by the m ilitary services, but
cotton mill activity, although at a high level, failed to
increase as much as usual for this time of the year. The
rise in the index of consumers ’ durable goods production



93 p



94 p
99 p

96 p



73 p
93 p

95 p



90 p
96 p

87 p
95 p




95 p
89 p





J u ly

Index of Production and Trade
P roduction of:
Producers’ durable goods.......................
Producers’ nondurable goods.................


Consumers’ durable goods.....................
Consumers’ nondurable goods...............
P rim a ry d is trib u tio n ....................................
D is trib u tio n to consum er............................
Industrial Production

Weekly Automobile Production in the United States and Canada
(Based on Ward's Automotive Reports)



Autom obiles r ................................................
B itu m in o u s coal............................................
C rude p e tro le u m ...........................................
E le ctric p ow e r...............................................
C otto n co nsum ption....................................
W ool co nsu m p tio n .......................................
M e at p ackin g .................................................
Tobacco products.........................................
Manufacturing Employment
E m p lo y m e n t..................................................
M an-hours of e m plo ym e nt.........................
R esidential b u ild in g contracts...................
N onresidential b u ild in g and engineering













Distribution to Consumer
D epartm ent store sales (U. S .) .................
G rocery chain store sales............................
V a rie ty chain store sales r ..........................
M a il order house sales.................................
New passenger car sales..............................





Velocity of Deposits*
V elo city of demand deposits, outside New
Y o rk C ity (1919-25 average— 1 00 )..
V e lo city of demand deposits, New Y o rk
C ity (1919-25 average = 100)..............









Cost of Living and Wages*
Co«t of liv in g (1935-39 average = 100)r.
Wage rates (1926 average = 100)...........





Prim ary Distribution
R y . fre igh t car loadings, mdse, and misc. r
R y. fre ig h t car loadings, o th e r..................

p P re lim in a ry

r Revised

* N o t adjusted fo r tre n d

B u ild in g
D uring September the total value of construction con­
tract awards in the 37 States covered by the F. W. Dodge
Corporation survey was 16 per cent below the y ear’s high
reached in August, owing to a sharp decline in construc­
tion awards for National defense purposes. Contracts
for other classes of construction showed little change
from the preceding month. In the first half of October,
however, there was some increase in construction con­
tracts awarded.
The accompanying chart shows the value of total con­
tract awards monthly since January, 1939, with a segre­
gation of projects for National defense in the June to
September period of this year. (In previous months
contracts for National defense purposes presumably did
not bulk large.) The expansion in construction awards


this summer, which in Ju ly and August reached the
highest monthly totals since 1930, was due prim arily to
the stim ulating effect of the defense program. In August
—the peak so far this year in the volume of defense con­
struction—awards for this purpose accounted for over
one quarter of total construction contracts.
On a daily average basis the value of awards in Sep­
tember was 10 per cent below August, but was 8 per cent
above the corresponding month of 1939. Daily average
awards for heavy engineering projects were 29 per cent
below the August average, owing to a 46 per cent decline
in public works contracts, chiefly for projects connected
with the defense program.
Owing to a decline in public purpose building, the
daily rate of awards for nonresidential building declined
8 per cent from the August average. Compared with
September, 1939, however, the latter type of building was
up 23 per cent, the most significant increase being in
awards for industrial building, which were 83 per cent
above the rate in the same month of last year. D uring
the four months from June through September almost
one third of all building of this type represented new
plant construction and alteration of existing plants to
handle defense orders.
The only m ajor category to show an increase in the
daily rate of awards during September was residential
building, which was 8 per cent above the average of the
preceding month and the highest for any September since
1928. Compared with September, 1939, the rate of resi­
dential building awards was up 18 per cent. Over 40
per cent of this gain represents an increase in housing
projects connected with m ilitary establishments.
D uring September the daily rate of construction con­
tract awards in New York and N orthern New Jersey was
about unchanged from the August average, but 13 per
cent below the same month of last year. Daily average
awards in September for residential building were off 5
per cent from the previous month and 31 per cent lower
than in September, 1939. Nonresidential building also
declined from August, but was up almost one-third over
a year ago. The chief factor contributing to this gain
was awards for industrial building, which were made at
two and a half times the rate of September, 1939. Off­
setting the August to September declines in residential
and nonresidential building, the daily rate of heavy engi­
neering construction was about one-third higher during
September than in the previous month, owing to the in­
clusion in the utility classification of a large contract for
a portion of a rapid transit railroad in Brooklyn. Com­
pared with September, 1939, heavy engineering projects
were off 5 per cent.
F or the first two weeks of October the daily rate of
construction contract awards in 37 States was almost 7
per cent higher than in September. The gain reflected
increases of 27 per cent in nonresidential building and
16 per cent in heavy engineering. As a partial offset,
residential building awards declined 12 per cent. Con­
struction awards of all classes were 31 per cent above the
daily rate in the corresponding two week period of last
year, as sizable increases in the nonresidential and heavy
engineering categories overbalanced a slight decline in
residential building.



Total Construction Contracts in 37 States, Showing Amounts for
National Defense Purposes Beginning in June, 1940
(F. W . Dodge Corporation data)

C o m m o d ity P ric e s
Prices of most basic commodities tended to show
strength during October. The Bureau of Labor Statis­
tics daily index of 28 basic commodities rose 2% per
cent further during the month to 113.3 per cent of the
prew ar (August, 1939) level, or about 7% per cent above
the low point reached during the past summer.
Reflecting continued light offerings in the “ free
market, ’ ’ spring wheat in Minneapolis advanced sharply
to 89 cents a bushel on October 23—the highest price
since the middle of May—but liquidation later led to a
downward reaction and the net gain for the month as a
whole was only fractional. Fluctuations in prices of
winter wheat in Kansas City and of corn in Chicago
followed a roughly similar course. Livestock quotations,
after advancing sharply in the first half of October,
weakened considerably. Hog prices, owing to heavy
receipts in the past two weeks, closed the month at $5.97

Daily Indexes of Wholesale Commodity Prices, Computed by Bureau
of Labor Statistics (August, 1939=100 per cent)



a hundredweight, 28 cents lower than at the end of Sep­
tember, although steers at $11.75 a hundredweight
showed a net advance of 75 cents.
Although cotton prices showed some response to for­
eign developments during October, the Government loan
program continued to exert a stabilizing influence on
the market. The average price for spot cotton in 10
Southern markets, at 9.16 cents a pound on October 30,
was down only slightly for the month. Wool tops
advanced progressively from an initial price of $1.23 to
$1.37 a pound at the end of October. Silk prices, after
rising abruptly in the middle of the month, reflecting
developments in the F a r East, subsequently returned to
approximately the end of September level. Hides were
especially strong, and showed an aggregate gain of 2
cents for the month to 15 cents a pound, the highest
price this year. Sugar quotations recovered 13 points
further to 2.88 cents a pound, and rubber was up some­
The metal markets on the whole remained firm through­
out October. Lead advanced 50 points further to 5.50
cents a pound—the highest level since January. Scrap
steel at Pittsburgh was up 25 cents to $21.50 a ton.
The recent upw ard movement of industrial raw
m aterial prices has carried this subgroup of the Bureau
of Labor Statistics daily index to the highest level since
early in February, as is indicated in the accompanying
chart. This increase, no doubt stim ulated in large
measure by the defense program, has been the dominant
influence in the general advance in the combined index
of 28 basic commodities since the middle of September.
Foodstuffs as a group, while considerably above the
low level reached in August, showed a less pronounced
gain during October than industrial materials.
D e p a rtm e n t S to re T ra d e
F or the four weeks ended October 26, total sales of the
reporting departm ent stores in this D istrict were about
4% per cent higher than in the corresponding 1939
period. The daily rate of sales for this portion of
October failed to show the usual seasonal gain over
September, but improved as the month advanced.
Total September sales of the reporting departm ent
stores in this D istrict were approximately 4 per cent
higher than a year ago. A fter allowing for differences
in the number of shopping days between this year and
last, the year-to-year increase in average daily sales
amounted to about 10 per cent, and a further gain in
the volume of retail trade, even considering seasonal
factors, was indicated. Sales of the leading apparel
stores in this D istrict were approximately 2 y 2 per cent
lower than in September, 1939, but on an average daily
basis were about 3 y 2 per cent higher than last year.
The relation of merchandise stocks held by departm ent
stores to the volume of their sales is shown in the accom­
panying diagram on a seasonally adjusted basis. From
a peak reached in the spring of 1938 the ratio of stocks
to sales moved irregularly lower through 1939, owing
partly to a moderate reduction in stocks, but more


Ratio of ^ Merchandise Stocks to Sales of Reporting Department
Stores in the Second Federal Reserve District, Adjusted for
Seasonal Variation (3 month moving averages of monthly data;
19 23-25 average = 1 0 0 per cent)

largely to a gradual rise in sales. The advance in the
ratio in the early part of this year was occasioned by a
substantial decline in sales, stocks rem aining fairly
steady. The current steep decline in the ratio reflects
the sharp advance experienced in departm ent store sales,
accompanied by a much less pronounced rise in stocks.
The present position of the ratio indicates that stocks of
merchandise in departm ent stores in the Second Federal
Reserve D istrict are now as low relative to the current
volume of sales as at any time in recent years.
September, 1940
compared with
September, 1939

New York and Brooklyn..............................
Northern New Jersey...................................
Northern New York State.......................
Southern New York State........................
Central New York State..........................
Hudson River Valley District..................
Westchester and Stamford.......................
Niagara Falls.............................................

+ 3.2
+ 3.2
+ 0.9
+ 5.3
+ 10.4
+ 1.4
— 0.4
+ 4.4
+ 1.9
+ 9.9
— 4.4
— 2.0
— 8.1

Per cent of
August 31
collected in

on hand
end of



+ 3.4
+ 7.4
+ 11.4
+ 3.9
+ 1.4



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

+ 3.9

+ 5.2



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

— 2.3

— 1.1



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






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





Stocks, unadjusted........................................






Business Conditions in the U nited States
(Summarized by the Board of Governors o f the Federal Reserve System)
OLUME of industrial production increased sharply in September, owing
mainly to a continued rise in output of durable manufactured products, and
this month a further increase is indicated. Prices o f basic industrial materials
advanced in September and the first half o f October.


P roduction

Index of Physical Volume of Industrial Production,
Adjusted for Seasonal Variation (1935-1939
averages 100 per cent; durable manufactures,
nondurable manufactures, and minerals ex­
pressed in terms of points in total index)


United States Department of Commerce Estimates
of the Amount of Income Payments to Indi­
viduals, Adjusted for Seasonal Variation

The Board's seasonally adjusted index o f industrial production, which for
three months had been at a level o f 121 per cent o f the 1935-39 average,
advanced to about 125 per cent in September. In the durable goods industries
increases in output were general. Steel production rose to 93 per cent of
capacity, and in the first half o f October the rate was slightly higher as new
orders continued in large volume both from domestic and foreign sources.
Steel exports amounted to about 20 per cent o f ingot producing capacity in
August, the latest month for which data are available, with nearly three
quarters o f these shipments going to the United Kingdom and Canada. Activity
in the machinery, aircraft, and ship-building industries advanced further in
September following considerable increases in August, and automobile output
increased sharply as volume production o f new model cars was rapidly attained.
Plants producing railroad cars and locomotives also showed an expansion in
activity. Lumber production continued to rise under the impetus o f a growing
volume of demand for defense program purposes.
Changes in output o f nondurable manufactured goods and minerals in
September were mixed. A t wool textile mills activity advanced sharply further
to near the peak reached last autumn, reflecting in part expanding production
on Government orders. A t cotton mills, however, activity showed less than the
usual seasonal rise, following a sharp increase in August, and rayon deliveries
declined somewhat owing partly to a strike at plants o f one large producer.
Shoe production also declined in September. Paper production remained in
reduced volume following a high rate o f output during the early summer
accompanying some inventory accumulation at that time. Output o f most metals
continued large during September. Crude petroleum production, which had
been curtailed sharply during the summer, rose considerably, but coal produc­
tion, which for several months had been maintained at high levels, showed a
smaller increase than is usual at this season.
Value o f new construction work started in September was lower than in
July and August, according to reports o f the F. W . Dodge Corporation and
the San Francisco Federal Reserve Bank. The decline occurred chiefly in
contracts for defense projects which had been large in the previous two months.
Awards for private residential building showed little change from recent high
levels. Awards for other private work declined somewhat but continued con­
siderably above the level o f a year ago.
D istribu tio n

Federal Reserve Groupings of Wholesale Prices
of Industrial Materials and Foodstuffs, Com­
puted from Bureau of Labor Statistics
Data (1926=100 per cent)

In September and the early part o f October department store sales showed
somewhat less than the usual seasonal increase from the exceptionally high
level reached in August.
Freight car loadings rose somewhat more than seasonally in September,
reflecting to a large extent increased shipments o f miscellaneous freight.
Loadings o f coal, which have been large in recent months, showed less than
the usual seasonal rise.
Co m m o d it y P rices

Prices o f most industrial materials, particularly lumber, steel scrap, nonferrous metals, hides, and wool, continued to advance from the middle of
September to the middle o f October, and there were also increases in some
manufactured products, notably cotton and woolen goods. Wheat prices were
higher while prices o f most other foodstuffs showed little change.
B a n k Credit

Commercial loans at reporting member banks in New York and 100 other
leading cities continued to increase during the four weeks ended October 9,
reflecting in part seasonal demands. Holdings o f United States Government
obligations decreased further with the result that total loans and investments
o f these banks showed little change.
U n ited S tates G over n m ent S ecurity P rices

Wednesday Figures for Reporting Member Banks
in 101 Leading Cities (Latest figures
are for October 9)

Prices o f United States Government securities advanced in the second half
o f September and the first week in October, rising close to the high level of
the year reached early last April.