View original document

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

MONTHLY REVIEW
O f Credit and Business Conditions

F E D E R A L

V o l.

25

R E S E R V E

B A N K

N OVE M B ER

M O N E Y

M A R K E T

1,

IN

O F

N E W

Y O R K

1943

No. 11

O C TO B ER

Through the intensive sales efforts of the reconstituted War

Federal Reserve District in connection with the War Loan

Finance Committee organization, building upon experience

drives has not declined in the degree indicated by the reduc­

gained during the campaigns of December and April, the

tion in the percentage of sales credited to the District.
The proportion of Government securities taken by com­

Third War Loan, which officially came to an end October 2,
attained a new high mark for the major loan drives. Sales
of bonds and other securities to nonbanking investors ( exclud­
ing Federal agencies which acquired $630,000,000) reached
$18,313,000,000 in comparison with the objective of $15,000,000,000 and a corresponding total for the Second War Loan
drive of $13,085,000,000. The results of the Third drive are
summarized and compared with those of the first two in a
separate article in this Review.
The total sales credited to the Second Federal Reserve Dis­
trict under the Third War Loan drive, $6,334,000,000, made
up 35 per cent of the aggregate sales to nonbanking investors
exclusive of purchases for Government trust accounts. The
corresponding totals and proportions were $5,295,000,000 and

mercial banks in this District, on offerings made to banks,
has shown no definite tendency to decline. Allotments to
banks in this District of classes of Government securities
other than Treasury bills generally amount to 30 to 35 per
cent of the allotments to banks throughout the country.
As a result of the Third War Loan drive and the subse­
quent sales of securities to commercial banks, it is estimated
that the Treasury will have sufficient resources to cover its
expenditures, other than for redemption of maturing obliga­
tions, until the early part of 1944. The Governments require­
ments for cash from borrowing have shown a definite tendency
to flatten out in recent months, as a result of at least a tem­
porary cessation of the sharp month-to-month increases in war

40 per cent for the Second War Loan drive, and $3,814,000,000
and 50 per cent for the First drive. The fall, from one War
Loan drive to the next, in the proportion of sales credited to

expenditures and enlarged tax receipts under the Current Tax

the Second District is not, however, an accurate measurement

expectations, it appears that the maximum rate of need for
Treasury borrowing may have been reached.
The payments for the securities sold under the Third War
Loan were made in predominant part by means of credits to
War Loan deposit accounts on the books of qualified deposi­
tary institutions. From $3,691,000,000 on September 8, War
Loan account deposits were brought up to a record total of
$19,349,000,000 on October 16.

of a lessened relative degree of reliance upon the Second Dis­
trict in Government war financing, for two reasons:
net
transfers to other districts of credits for subscriptions entered
and paid for here have increased sharply from one drive to
the next; and the net outflow of commercial and financial funds
from New York City prior to and during the course of the
Third drive, apparently associated in considerable part with
transfers of funds to other localities for the purpose of enter­

Payment Act. Unless there is a further considerable rise in
expenditures, or unless tax revenues fail to come up to present

ing subscriptions elsewhere, was far greater than the outflows

Total credits to the War Loan accounts, including book
credit payments on October 15 for the 2 per cent bonds and

occurring in connection with either the First or Second War

per cent certificates of indebtedness offered to commer­

Loan drives.

Net withdrawals of commercial and financial

cial banks outside of the drive, reached $17,250,000,000 over

funds from New York City between August 18, three weeks

this period.

prior to the opening of the Third War Loan, and October

amounted to only about $1,600,000,000 between September 8

Repayments from the War

Loan accounts

6, a few days after its close, amounted to approximately

and October 16, inasmuch as the need for withdrawals was

$1,400,000,000.

limited by quarterly income tax collections, cash payments for

Taking these factors into account— transfers

of credits and transfers of funds— it is fair to say that, while

securities sold under the drive (payments continued to flow

a definite improvement in the geographical distribution of

to the Treasury up to the middle of October), and cash pay­

Government security sales has occurred, the proportion of

ments on the October 15 offerings to banks.

nonbanking investors’ funds actually coming out of the Second

on the War Loan deposit accounts were resumed October 18




Regular calls

82

MONTHLY REVIEW, NOVEMBER 1, 1943
Need for Cash from Public Borrowings
(In billions of dollars)

Period
1942
st quarter
nd “
3rd
“
4th
“

1
2

1943

1st quarter
2nd “

3rd

“

While it would appear likely that banks in New York City
will show further net losses of funds through Treasury opera­

Decrease in Treas­
Withdrawals from
Net cash pay­
ury deposits with
War Loan deposit ments for Govern­ Federal Reserve
accounts
ment securities
Banks*

Total

tions over the next few months, an inflow of commercial and
financial funds began toward the end of October, apparently

4 .2
9 .4

securities purchased by dealers in the City during the War

0 .7
4 .2
5 .5
4 .8

6.8

12.6

0 .4
0 .1

10.8
6.1

9 .7
8 .9

associated with the sale to investors in other localities of

0.6
0

2 .9
5.2
7 .5

15.5

0 .7

5.9
4 .6

13.6
15.2
13.2

0 .4
0 .8

Loan drive and a replenishment by insurance companies and
other corporations of their New York deposit balances, which
were sharply drawn down for the purpose of purchasing
Government securities during the War Loan drive.

^Figures in italics represent increases in Treasury deposits.

and at the end of the month the balance in these accounts
amounted to approximately $17,300,000,000.+
Of the total of $19,349,000,000 in the War Loan deposit
accounts on October 16, $8,360,000,000, or 43 per cent,
was on deposit in the Second Federal Reserve District, and
$7,413,000,000, or 38 per cent, was on deposit in New York
City. As indicated in an accompanying table, the propor­
tion of War Loan account deposits in New York City was
somewhat smaller on October 16 than it had been at the
close of the Second War Loan drive and considerably smaller
than at the close of the first, but the proportion is still high
enough to indicate that the New York money market will
continue to be faced with substantial losses of funds to other
localities through receipts by the Treasury (including War
Loan account withdrawals) from the New York City banks
and their customers in excess of the volume of Treasury checks
placed on deposit with these banks.

The lessened proportion

Distribution o f W ar Loan A ccount Deposits at Close of W ar Loan Drives
First drive
January , 1943*

6

Second drive
May 15, 1943*

Third drive
October 16, 1943*

Millions Per cent of Millions Per cent of Millions Per cent of
of dollars U, S. total of dollars U. S. tota of dollars U. S. total
7,413
947

47.1
52.9

8,360
10,989

43.2
56.8

100.0

19,349

$1,110,000,000 on August 25 to $2,050,000,000 September 15,
and which still amounted to $1,810,000,000 on September 29,
dropped back during October and on the 27th were down to
$1,060,000,000. The principal factors tending to reduce mem­
ber bank excess reserves during the four weeks ended October
27 were an increase of approximately $700,000,000 in reserve
requirements and a $272,000,000 further rise in currency
circulation.

Federal Reserve Banks’ holdings of Govern­

ment securities showed a net increase of $123,000,000 over
the four weeks’ period. Holdings of certificates of indebted­
ness by the Reserve Banks were enlarged to the extent of
$224,000,000 as the Federal Reserve Open Market Account
operated to correct a condition of temporary oversupply of
certificates nearing maturity. Treasury bill holdings, fluctuat­
ing irregularly from week to week as banks adjusted their
reserve positions through bill purchases and sales, were reduced
$115,000,000 net between September 29 and October 27.
During the first half of October the central reserve city
banks of New York continued to lose reserve balances through
an outward movement of commercial and financial funds, but
Changes in Holdings of Government Securities
by the W eekly Reporting Member Banks
(In millions of dollars)

38.3
4.9

100.0

New York C ity...............
Other Second District.. .

4,417
384

53.8
4 .7

5,321
705

41.6
5 .5

Second Federal Reserved
District.........................
Other Districts................

4,801
3,405

58.5
41.5

6,026
6,764

8,206

100.0

12,790

Total.............................

-1

M em ber B a n k R eserve Po sit io n s

Excess reserves of all member banks, which had risen from

Week ended

8

— 98
— 15
+332
+ 43
— 63

of War Loan account deposits held in New York City is
partly the effect of some improvement in the geographical
of a more general use of book credit payments, and a lessened

Certificates

Notes

Oct. 13...............
Oct.
...............

20

—
+ 13
+206
—
— 5

— 37
+177
+235

_ _

21

21

—
+ 14
+ 18*
— 9
+

+
—
+
+
+

+
—

+ 17
+
+254**

5

— 42
+ 365**




Guaranteed

Total

2
0
6
4

31

12

98
25
43

+
4
+
9
+
9
+ 24
+ 17

— 92
+
9
+663
+ 62
—

+

3

—
+ 163
+849

22

1
1
0
1
1
1
0

—
+
+
+
+

—

0
1

6
22

100 Other Cities

use of cash payments, in other sections of the country.
t On October 18 it was announced that the Treasury Department had
decided to continue the method of making calls upon War Loan
depositaries as established May 10 at the close of the Second War
Loan drive. For "Group A ” depositaries, those having War Loan
balances of $300,000 or less at the close of business October 15, a
schedule of repayments running through January 5, 1944 has been
issued, calling for six repayments of approximately equal size spaced
at two week intervals. Calls on depositaries having War Loan bal­
ances of more than $300,000 at the close of business October 15,
classed in "Group B”, would be issued in the same manner as
heretofore.

Bonds

New York City

* Dates used are those when War Loan account deposits reached their maximum
following the official close of the drive.

distribution of Government security sales, and partly the effect

Bills

Sept.

22...............

Oct. 13...............
Oct.
...............

20

10

— 56
+ 61
+ 365
+ 44
+ 69

+
+
9
+247
+ 159
+ 125

—
112

+ 54
+ 32
+546**

+197
+ 60

+ 24
+ 25

7*

_

+ 14
+ 17
+
+

8
0

3

6
8

+
+
+ 103
+ 85
+ 59

+ 76
+
+534**

8
8

—
+
—
—
+
—

5

17
104
708
301
269

+
27
+ 320
+1135

* On September 15, $279,000,000 of 1 per cent Treasury notes matured and were
paid off.
** Reflects the allotment to commercial banks of new issues of A per cent certifi"
7
cates of indebtedness and per cent bonds on October 15.

2

83

FEDERAL RESERVE BANK OF NEW YO R K

the rate of outflow was much diminished and during the second
half of the month there was a moderate inward movement.
Meanwhile, the limited withdrawals from War Loan account
deposits, together with other receipts, fell considerably short
of the volume of Treasury checks placed on deposit with the

their bill portfolios $312,000,000 and purchased about
$80,000,000 of outstanding Treasury bonds and $19,000,000
of guaranteed obligations, but were net sellers of about
$50,000,000 of outstanding certificates of indebtedness. Re­
porting banks in other cities augmented their Treasury bill

New York banks, and the banks gained funds which enabled
them to build up their holdings of Treasury bills until October
20, after which a moderate reduction occurred. Treasury bill

holdings by $214,000,000, and made net market purchases of
certificates and bonds amounting in each case to more than

holdings of the weekly reporting member banks of New

$200,000,000.
Total loans of

York City rose from $1,229,000,000 on September 29 to

$640,000,000, net, during the four weeks ended October 20.

$1,604,000,000 on October 20, but fell back a week later to

The expansion in loans was to a large extent associated with

$1,539,000,000.

the increase during the Third War Loan drive in the volume

reporting member banks

rose almost

of loans for purchasing or carrying securities, as shown on
M E M B E R B A N K CREDIT

the accompanying charts.

From September 8 to October 6,

Total loans and investments of the weekly reporting mem­

such loans of reporting banks in New York City rose

ber banks in 101 leading cities rose $3,334,000,000 between
September 22 and October 20. Since September 8, just prior

during the Second War Loan drive (April 14 to May 5 ).

$1,045,000,000, compared with an increase of $850,000,000

to the opening of the Third War Loan drive, the increase

Outside New York also, the increase during the Third War

has

Loan drive in loans to finance the purchase of securities was
much larger than during the Second drive. Between Sep­

amounted

to

$6,600,000,000,

even

more

than

the

$5,400,000,000 expansion which had occurred between the
About one third

tember 8 and October 6 the rise amounted to $621,000,000,

of the increase after September 8 represented a rise in loans,

while between April 14 and May 5 an expansion of only

while in the earlier period total loans showed a net decline.

$185,000,000 occurred.
At the same time, commercial, industrial, and agricultural
loans, which have been increasing gradually since June,

end of 1942 and September 8 of this year.

Considerably more than half of the increase in investments
for the four weeks’ period ended October 20 represented bank
purchases on October 15 of the new offering of Vs per cent

accelerated their rise.

certificates of indebtedness and the reopened 2 per cent bonds
of the Third War Loan drive. Reporting member banks in
New York City took roughly $600,000,000 of these new

October 20 such loans for the weekly reporting banks in 100
cities outside New York rose $567,000,000, recovering nearly
half the decline which had occurred between March, 1942,

issues, of which about $350,000,000 were certificates, while

and June of this year; for New York banks the increase from

banks in the

the low level of last June and July, amounting to about

100

other cities purchased approximately

$1,080,000,000, fairly evenly divided between certificates and
bonds. The reporting banks in New York and the other
centers also continued to add to their Treasury bill holdings,
and to make market purchases of already outstanding Gov­
ernment securities. The New York City banks increased
BL I N
I LO S
O DLA S
F OL R
------------------------------------------------------------------------------------10|

From June 30, the low of the year, to

$250,000,000, was equivalent to a recovery of one third of
the previous decline. The recent expansion of commercial,
industrial, and agricultural loans has been due to a variety
of factors. Part of the increase, during the Third War Loan
drive, reflected seasonal loans to finance the movement and
BL I N
I LO S
O DLA S
F OL R

8 -------------------------------------------------------------------------------------

1941

1942

1943

Loans and Investments Other Thau U. S. Government Securities
of Weekly Reporting Member Banks
in New York City




Loans and Investments Other Than U. S. Government Securities of
Weekly Reporting Member Banks in IOO Leading
Cities Outside New York City

84

MONTHLY REVIEW, NOVEMBER 1, 1943

storage of crops, part apparently has been due to further bor­
rowings by war contractors, and part may have been due to

to $5,852,000,000, or $3,392,000,000 over the June 16-September 8 period. At the same time, banks outside the weekly

unsecured loans to corporations to finance subscriptions to new
Treasury securities.

reporting member bank group and other investors added

Reflecting payments by customers for the new securities
sold during the War Loan drive, adjusted demand deposits
continued to decline through the statement week ended Octo­

$433,000,000 net to their holdings, largely reflecting tempo­
rary investments in Treasury bills in anticipation of the Third
War Loan drive.

Although some recovery occurred after October 6,

Associated with the reduction in bank reserve requirements
which occurred during the drive, the weekly reporting member

largely as a result of Government disbursements, such deposits

banks enlarged their holdings of Treasury bills by about

ber 6.

on October 20 were about $4,900,000,000 below the pre­

$1,300,000,000 between September 8 and October 20.

drive peak of September 8. Government deposits of the
weekly reporting member banks continued to expand during

bills were acquired, directly or indirectly, from Federal Reserve

the four weeks ended October 20 as a result of book credit
payments for new issues of Government securities sold to
nonbanking investors during the Third War Loan drive and
to commercial banks on October 15. For the reporting banks
in 101 leading cities Government deposits rose $3,306,000,000

These

Bank holdings to the extent of $663,000,000 and from banks
outside the weekly reporting group and other investors to the
extent of $638,000,000.

The total volume of Treasury bills

outstanding has remained unchanged at $13,000,000,000 since
September 8.

to $13,470,000,000 during the four weeks’ period.

S E C U R IT Y M A R K E TS

D IS T R IB U T IO N OF T R E A S U R Y BILLS

Trading in Government securities diminished in October
with the close of the Third War Loan drive and with the

Treasury bill holdings of the weekly reporting member
banks of New

York

City

reached their maximum,

of

reduction in selling by investors to obtain additional funds
for investment in new issues offered in the drive.

Prices and

$2,373,000,000, on June 16 of this year as indicated in an
accompanying chart, and holdings by all other banks and

yields remained firm during the first week of the month, but
prices declined slightly in the following week when announce­

investors (exclusive of Federal Reserve Banks) were also at

ment of allotments to commercial banks was made and trading
in the new issues offered during the drive began. All three

a maximum, $6,626,000,000, on June 16.

Between June 16

and September 8, just prior to the opening of the Third War
Loan drive, bill holdings of the weekly reporting member

of the new issues were immediately quoted at fractional pre­
miums on the first day of trading.

After the middle of the

banks showed a net contraction of $2,234,000,000 to
$3,570,000,000 as banks, most particularly in New York City,

month, prices of Government securities fluctuated only slightly

met increased needs for reserves through net sales of Treasury
bills to the Federal Reserve Banks. Total Treasury bill holdings

close of the month, yields on long term tax-exempt and inter­
mediate taxable bonds were a little higher than at the begin­
ning while other bonds were virtually unchanged. Yields on
certificates of indebtedness tended to decline, especially the
yields on the shorter maturities which had become out of line
with the general structure of short term rates on Government
securities during September.

of the Federal Reserve Banks increased from $2,460,000,000

and showed little net change through the month end.

At the

As in the two preceding months, stock trading on the New
York Stock Exchange during October was slow and prices
moved irregularly.

After October 1, stock prices declined

for several days, but the major portion of this loss was recov­
ered during the remainder of the month.

At the end of

October, Standard and Poor’s index of 90 combined stocks
was about 1 per cent lower than a month earlier.
Activity in the corporate bond market increased during
October and bond prices in general advanced, with medium
and lower grade railroad bond prices registering the greatest
gains.

Moody’s index of yields on Aaa corporate bonds de­

clined from 2.71 to 2.69 per cent, and the index of yields on
Baa bonds from 3.83 to 3.81 per cent.

Standard’s index of

municipal bond yields declined from 1.92 per cent on Sep­
J

A S

O N

‘ 1942

D

J

F

M

A

M

J

J

A

S

O

N

1943

Outstanding Treasury Bills, Classified as to Ownership




D

tember 29 to 1.86 per cent on October 20, a record low for
the index, and remained at that level on October 27.

FEDERAL RESERVE BANK OF NEW YORK

RESULTS

OF

T H E

T H IR D

W A R

LO A N

85

D R IV E

On October 18, the Treasury announced in a final report
that sales in the Third War Loan drive totaled $18,313,000,000
(excluding $630,000,000 to Federal agencies and trust ac­
counts, which were not included in the $15,000,000,000

of corporations and other investors (including State and local
governments) reached $7,915,000,000 in the recent drive as
compared with $5,648,000,000 in April and $2,793,000,000
in December. The bulk of these purchases, as previously,

quota).

The amount realized was substantially in excess of

went into certificates and Series C Savings notes, in the

sales to nonbanking investors, other than Federal agencies, in

amounts of $3,177,000,000 and $2,288,000,000, respectively;

either the Second or the First War Loan drive, when receipts

in addition, purchases amounting to $1,483,000,000 were made

from such investors were $13,085,000,000 and $7,591,000,000,

of the 2 per cent bonds.

respectively.
Individuals and nonfinancial corporations accounted for

drive, allowance should be made for shifts in ownership of

most of the increase over the previous drive. Particular em­
phasis had been placed on selling the greatest possible amount

outstanding securities from nonbanking investors to the com­
mercial banks shortly before and during each drive. In the

to individuals in order to absorb funds which might other­

November-December period, commercial banks and the Fed­

wise be spent for goods and services, and, as the accompanying

eral Reserve Banks acquired in the market about $1,500,000,000
of Government securities previously held by other investors;

table indicates, the increase in sales to individuals was pro­
portionately greater than the increases in sales to most other
classes of investors and investing institutions. A goal of

In order to obtain a complete picture of the results of the

and in March-April such purchases amounted to somewhat
under $2,000,000,000. During the Third drive commercial

$5,000,000,000 had been set for sales to individuals*, including

banks and the Federal Reserve Banks apparently absorbed

$3,000,000,000 of Series E bonds.

roughly $3,500,000,000 of securities sold by nonbanking in­

The over-all goal was

exceeded as individuals subscribed a total of $5,377,000,000

vestors.

as compared with $3,290,000,000 and $1,593,000,000 in the
Second and First drives; but sales of Series E bonds fell short

that the absorption of Government securities by nonbanking
investors was considerably greater in this drive than in either

of the established goal, although the total amount sold

of the previous ones.

Even allowing for this factor, however, it is clear

($2,472,000,000) was considerably greater than in either of

Each of the three States, all or part of which are within

the two preceding drives ($1,473,000,000 and $726,000,000).
Subscriptions by individuals to the marketable issues of bonds

the Second Federal Reserve District, exceeded their over-all
quotas for the Third drive.

and certificates were higher than the quota established for

State amounted to $5,580,000,000, according to the final re­

such securities, with the greatest increase over the previous

port released by the Treasury, as compared with an original

drive occurring in the 2 per cent bonds.

quota of $4,709,000,000.

to

individuals

amounted

to

Sales of these bonds

$1,220,000,000

as

against

$472,000,000 in the April drive.
Insurance companies and mutual savings banks purchased
a total of $4,127,000,000 of securities as compared with
$3,603,000,000 in April. For these groups only slight in­
creases in subscriptions were to be expected since their supply
of available new investment funds is limited by the compara­
tively steady growth of premium incomes and savings de­
posits. These accumulated funds have been supplemented
in each of the drives by sales of outstanding securities to
commercial banks and others. In the Third drive, as in the
Second, the heaviest purchases of the insurance companies
were the 2Vi per cent bonds.

The mutual savings banks,

particularly those in this District, concentrated more on the
2 per cent bonds as against an approximately equal distribu­
tion between the 2 and 2^2 per cent bonds in April.
Allotments to dealers and brokers in the Third drive
amounted to $894,000,000.

Net sales credited to New York

New Jersey sales amounted to

$710,000,000 in comparison with a quota of $585,000,000;
and Connecticut sales, to $511,000,000 compared with a quota
of $453,000,000. Sales to individuals of $851,000,000 in
New York State were slightly in excess of the quota for
such sales. New Jersey and Connecticut were slightly under
their quotas in this respect, with
$78,000,000, respectively. Series
States were substantially higher
drive; but as in the majority of

sales of $167,000,000 and
E bond sales in the three
than during the previous
the other States they fell

short of the Treasury goal which for most States called for
at least doubling the sales of the April drive. Series E sales
of $246,000,000 in New York and $76,000,000 in New
Jersey were 50 per cent higher than in April, while Connec­
ticut sales of $42,000,000 were double the previous total.
The accompanying table shows a comparison for the Second
Federal Reserve District of sales by type of investor in each
of the three drives.

Total sales to nonbanking investors,

Comparable figures for the April

credited to this District, amounted to $6,343,000,000 in the

drive are not available, since at that time dealer purchases of

Third War Loan drive as compared with $5,302,000,000 in

securities earmarked for distribution to nonbanking investors

the Second and $3,815,000,000 in the First.

were allocated to the appropriate group of investors instead

three drives, purchases by insurance companies, savings banks,

of being included under dealers and brokers.

and other corporations have bulked particularly large in the

Subscriptions

* Partnerships and personal trust accounts are included with individuals.




District totals.

In each of the

Third drive purchases by insurance companies

MONTHLY REVIEW, NOVEMBER 1, 1943

86

Comparison of Sales to Nonbanking Investors in
the First, Second, and Third W ar Loan Drives
(In millions of dollars)

T R A N SP O R T A T IO N
Since the outbreak of war in 1939, and particularly since

S econ d F ederal
R e s e r v e D is t r ic t

U n it e d S ta te s
T y p e o f in v e s t o r

portation system of this country has carried an increasingly
D e c .,
1 94 2

A p r i l,
1 94 3

S e p t .,
194 3

D e c .,
1 94 2

A p r il,
1 94 3

S e p t .,
1943

I n d i v i d u a l s , p a r t n e r s h ip s , a n d
p e rso n a l tru s t a c c o u n ts . . . .
I n s u r a n c e c o m p a n i e s ....................
M u t u a l s a v in g s b a n k s .................
D e a le r s a n d b r o k e r s * ..................
S t a te a n d lo c a l g o v e r n m e n t s . .
C o r p o r a t io n s a n d o t h e r
in v e s t o r s ..........................................

1 .5 9 3
1 ,6 9 9
620
886
200

3 ,2 9 0
2 ,4 0 8
1 ,1 9 5
544
5 03

5 ,3 7 7
2 ,6 2 0
1 ,5 0 8
894
795

387
1 ,0 3 8
405
817
29

737
1 ,4 2 6
730
439
71

1,0 2 1
1 ,6 0 0
895
629
116

2 .5 9 3

5 ,1 4 5

7 ,1 2 0

1 ,1 3 8

1 ,8 9 2

2 ,0 7 2

T o t a l n o n b a n k in g (e x c lu d in g
F e d e r a l a g e n c i e s ) ..................
F e d e r a l a g e n c ie s ..............................

7 ,5 9 1
270

1 3 ,0 8 5
391

1 8 ,3 1 3
630

3 ,8 1 4
1

5 ,2 9 5
7

6 ,3 3 4
9

T o t a l ..................................................

7 ,8 6 0

1 3 ,4 7 6

1 8 ,9 4 3

3 ,8 1 5

5 ,3 0 2

6 ,3 4 3

* F o r t h e A p r i l d r iv e , d e a le r s ’ a llo t m e n t s e a r m a r k e d f o r d is t r ib u t io n t o n o n ­
b a n k in g in v e s to r s w e re c r e d it e d t o t h e a p p r o p r ia t e n o n b a n k in g in v e s t o r cla s ses. I n
t h e o t h e r t w o d r iv e s , n o s u c h r e d is t r ib u t io n w a s m a d e .
N ote:

the entry of the United States in 1941, the commercial trans­

F ig u r e s a re r o u n d e d a n d d o n o t n e c e s s a r ily a d d t o t o t a ls .

heavy volume of traffic. From the summer of 1939 to the
middle of this year, total commodity and passenger traffic
(measured by the Department of Commerce’s adjusted index)
more than doubled, with 60 per cent of the rise occurring
after December, 1941.

Distribution of the enlarged output

of industrial products, shipment of supplies to the armed
forces, troop movements, and curtailment of private transpor­
tation facilities have contributed to the increased business
of commercial carriers.
Commodity transportation at mid-1943 was about 100 per
cent above that four years earlier. By far the largest increases
have been shown by the railroads and the airlines, although

and savings banks were nearly $350,000,000 greater than in
about the same amount if allowance is made for the fact that

shipments of commodities by motor trucks, and oil and gas
pipe-line traffic, also have risen substantially. Water-borne
traffic has dropped sharply, reflecting primarily the curtailment

dealer purchases of IVz per cent bonds were allocated to other

of coastwise shipping.

corporations in the Treasury report in the April drive but not

railroads in 1942 is estimated to have constituted 68 per cent

April, and other corporations increased their purchases by

in the September drive.

Individuals increased their participa­

tion by about $300,000,000, largely in Series E bonds and
2 per cent bonds.
F i n a n c i n g Su b s e q u e n t

to

the

The volume of freight carried by the

of total ton-miles of freight moved, compared with 62 per
cent in 1939.
The growth of passenger traffic has been even more striking

D rive

On October 6, after the close of the Third War Loan drive,
commercial banks were offered about $1,500,000,000 each of

Vs per cent certificates of indebtedness due October 1, 1944,
and 2 per cent Treasury bonds of 1951-53. Both issues were
oversubscribed by a wide margin, with subscriptions totaling
$5,386,000,000 for the certificates and $5,531,000,000 for
the bonds. Subscriptions of $50,000 or less, amounting to
$190,000,000 on the certificates and $252,000,000 on the
bonds, were allotted in full. Larger subscriptions were allotted
on a 26 and 25 per cent basis for certificates and bonds, respec­

than the expansion in freight volume.

After increasing rather

gradually from 1939 through the first half of 1941, the volume
of passenger transportation on commercial carriers has risen
sharply in the past two years and is currently two and one-half
times its 1939 volume.

The chief factor in this development

has been the shift of passenger traffic from private automobiles,
which in 1939 are estimated to have carried 85 per cent of
all passenger traffic; but military travel, and increases in
civilian travel, arising from a variety of factors, also have
contributed substantially to the larger volume.
The accompanying chart shows clearly that the burden of

tively. The Second District portions amounted to 35 per cent
of the $1,579,000,000 allotted on the certificates (compared
with 31 per cent of the offering to banks in the April drive),

the added passenger travel, like the enlarged freight volume,
has fallen heavily upon the railroads. Railroad travel other

and to 32 per cent of the $1,626,000,000 allotted on the

than commutation averaged about 50 to 55 million passenger

bonds (compared with 27 per cent in April).

miles per day in 1939 and 1940.

By the spring of 1942 the

Two exchange offerings also were made on October 6.

daily average (after seasonal adjustment) had reached 100

Holders of $1,400,000,000 of 3 V per cent bonds of 1943-45,
a
called for redemption October 15, were given the option of

million passenger miles, and at the middle of this year it was

exchanging for either 2 per cent bonds of 1951-53 or IVz

level of 1939 and about twice that of 1920, the preceding

per cent bonds of 1964-69, except that the latter option was

peak year.

not available to commercial banks.

by a considerably smaller amount than the "long haul” traffic
handled by the commercial transportation system. The greater

A total of $1,128,000,000

was exchanged for the 2 per cent bonds and an additional

approaching 240 million miles— four and a half times the
Commutation travel on the railroads has risen

The other exchange

need for daily transportation has been met not only by the

offering provided holders of $2,035,000,000 certificates matur­

railroads but also by local transit lines. In 1942 the rise in local

ing November 1 with the option of exchanging for the new

bus and railway transportation was extremely sharp. Although

certificates maturing October 1, 1944.

some restrictions were placed on lines in certain cities during

$58,000,000 for the 2Vi per cent bonds.

Adjustment of interest

was made for the overlap of coupons on the two issues.
total exchanged amounted to $1,936,000,000.




The

the first half of the current year because of the need of con­
serving essential materials, local transit transportation did not

FEDERAL RESERVE BANK OF NEW YORK

M LO S O
I IN F
L
P SE GR M E
A S N E —I S
L

87

is estimated to have advanced even further in September.
An increased rate of activity at cotton textile mills resulted
in a fairly sharp rise, above the relatively low levels of July
and August, for daily average consumption of cotton. Among
those industries in which declines occurred, after allowance
for seasonal factors, were chemicals and anthracite mining.
The decrease in chemical production reflected labor shortages.
In anthracite mining, September is a month in which a
moderate rise usually occurs, but this year, output failed to
show the customary seasonal advance.

The number of air­

planes produced in September totaled 7,598 as compared with
7,612 in August, and the number of merchant ships delivered
was 160 as compared with 164 in August.
The September record for merchandise distribution, like
that for industrial production, presents a mixed picture.

Ton-

miles of railway freight are estimated to have fallen below
the August level. Sales of department stores failed to show
the usual seasonal advance, and the adjusted index dropped
sharply.

Adjusted sales of grocery chains, variety chains, and

mail order houses, on the other hand, increased.
Daily Average Number of Passengers Carried One Mile by Railroad,
Air, and Intercity Bus Lines, Adjusted for Seasonal Variation
(Railroad and airline series are those of the Federal Reserve
Bank of New York; bus lines data have been estimated
from Department of Commerce seasonally adjusted
index of intercity motor bus transporta­
tion. Plotted on ratio scale to show
proportionate changes.)

The civilian labor force declined from 54,900,000 persons in
August to 53,300,000 persons in September, according to re­
ports of the Bureau of the Census; and total civilian employ­
ment is estimated to have decreased from 53,900,000 workers
to 52,500,000. The declines, which were seasonal and resulted

fall below that in late 1942, and in recent months further

in part from the return of students to schools and colleges, were
considerably smaller than in the corresponding period last year.

increases have occurred.

Many students have undoubtedly been retained in industry

During the past three years passenger travel on intercity

either on a full-time basis or as part-time employees under the

bus lines has risen fairly steadily, despite some curtailment

special work-school program inaugurated this year in various

of facilities due to the shortages of gasoline and rubber since
1941. The rise in airline travel was halted suddenly in May,
1942 when the Government inaugurated a priority system

sections of the country. The estimated number of unemployed
in September (800,000 persons) was the lowest on record.

covering airline traffic, reduced the number of flights, and
diverted planes to other uses. While a sharp contraction in
airline passenger travel then occurred, some recovery has taken
place in the past year but the upward movement has been very

PR ODU CTION, T R A D E , A N D E M P LO YM E N T
September was a month of markedly diverse movements
among important manufacturing, mining, and* distribution
While some industries producing materials of war

showed even further gains above the high levels attained
earlier this year, other industries evidenced declines.
The seasonally adjusted volume of electric power generated
appears to have risen approximately 1 per cent.

Other im­

portant advances were shown by the steel, petroleum, and
cotton textile industries.

In the steel industry, several new

furnaces were placed in operation, and daily average output
reached a new high rate of 249,600 net tons. Crude petroleum
production, which in August had been the largest on record,




Sept.

1943
July

Aug.

Sept.

Indexes of Production and Trade*

(100

= estimated long term trend)
Index of Production and Trade.................

120

126

126p

125p

Production.................................................

irregular.

fields.

1942

129

132

133p

133 p

Producers’ goods— total......................
Producers’ durable goods...............
Producers’ nondurable goods.........

163
195
126

165
194
132

166p
195p
133p

166 p
19 bp
134p

Consumers’ goods— total....................
Consumers’ durable goods.............
Consumers’ nondurable goods. . . .

87
36
103

27
108

26 p
109p

108p

Durable goods— total..........................
Nondurable goods— total...................

148
113

145
118

145p
119p

llSp

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

134
89
134

163
85
175

161 p
84p
176 p

174p

118

124

123

124p

143

153

154p

69
85

6
8

8
8

8p
8

87 p

25p

U5p
158p

8
2p

Cost of Living, Bureau of Labor Statistics
(100 = 1935-39 average).............................

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

Velocity of Demand Deposits*
(100 = 1935-39 average)
New York City.............................................
Outside New York City..............................
p Preliminary.

76

* Adjusted for seasonal variation.

6
8
77

8
8
94

MONTHLY REVIEW, NOVEMBER 1, 1943

88

P RC N
E ET

D E P A R T M E N T STORE T R AD E
Sales of reporting department stores in this District increased
between September and October by more than the usual sea­
sonal amount and the adjusted index rose to approximately the
August level.

During the first three weeks of October, de­

partment store sales were 10 per cent greater than in the cor­
responding 1942 period; and apparel store sales in New
York City advanced 30 per cent.
Thus far this year, sales of department stores in this Dis­
trict have been running 7 per cent above those in the first ten
months of 1942, and 35 per cent above those in 1939, the
year in which the war began in Europe.

Increases since 1939

have varied widely for the five major cities in the District:
Buffalo, 70 per cent; Syracuse, 60 per cent; Rochester, 41 per
cent; New York, 31 per cent; and Newark, 25 per cent.
Among the various Federal Reserve Districts, sales this
year in the San Francisco, Dallas, and Atlanta Districts have
been approximately twice those in 1939, sales in the Richmond
and Kansas City Districts have risen about 80 per cent, and
those in St. Louis more than 70 per cent.

The increase for

the New York District is the smallest of any of the 12 Districts.

Indexes of Sales of W om en's and M isses' W ear and of House­
furnishings in Department Stores in Second Federal Reserve
District ( 1 9 3 5 -3 9 = 1 0 0 . Figures cover twelve months ending
January, except those for 1943 which are based on the
eight months, February-September. Plotted on
ratio scale to show proportionate changes.)

the 1942 and 1943 increases have been due to the high level
of sales of women’s and misses’ wear.

As indicated on the

Changes in sales over the war period have reflected not only

accompanying chart, housefurnishings sold in department

price advances but also consumer demand and the types of
merchandise available for purchase. During 1940 and 1941
the increase in total sales in this District was accounted

stores in 1941 were 26 per cent above the 1939 level, while
in 1943 (based on data for the first eight months, FebruarySeptember, of the store year) they dropped 7 per cent below

for primarily by the sharp gain in housefurnishings, whereas

the 1941 figure and were only 17 per cent above sales in 1939.

Department and Apparel Store Sales and Stocks, Second Federal
Reserve District, Percentage Change from the Preceding Year

Sales of women’s and misses’ wear, after increasing 11 per

N e t sa le s
L o c a li t y
S e p t ., 1 94 3

S tock s on
J an . th ro u g h
hand
S e p t ., 1 94 3 S e p t . 3 0 ,1 9 4 3

D e p a r tm e n t stores, S e co n d D is t r ic t .. . .

+

N e w Y o r k C i t y ...............................................
N o r t h e r n N e w J e r s e y ..................................
N e w a r k ...........................................................
W e s t c h e s t e r a n d F a ir fie ld C o u n t ie s . .
B r i d g e p o r t ....................................................
L o w e r H u d s o n R i v e r V a l l e y ..................
P o u g h k e e p s ie ...............................................
U p p e r H u d s o n R i v e r V a l l e y ..................
A l b a n y ............................................................
S c h e n e c t a d y .................................................
C e n t r a l N e w Y o r k S t a t e ..........................
M o h a w k R i v e r V a l l e y ...........................
U t i c a ............................................................
S y r a c u s e .........................................................
N o r t h e r n N e w Y o r k S t a t e .......................
S o u t h e r n N e w Y o r k S t a t e .......................
B i n g h a m t o n .................................................
E l m i r a ..............................................................
W e s t e r n N e w Y o r k S t a t e .........................
B u f f a l o .............................................................
N ia g a r a F a l l s ...............................................
R o c h e s t e r .......................................................

+

6
0
— 1
— 2
— 9
+14
+18
+ 1
+ 5
— 1
+ 7
+ 7
+11
+ 7
— 2
+ 9
+18
— 4
+ 8
+12
+16
+ 2

+ 7
— 2
— 1
— 2
— 5
+ 5
+ 7
— 1
— 5
+ 5
+11
+ 13
+ 12
+10
+ 4
+11
+16
— 2
+11
+ 13
+30
+ 7

—
—
—
—
—
—

A p p a r e l s t o r e s (c h ie f ly N e w Y o r k C i t y )

+21

+21

+

5

+

— 20

6

+
—
—
—

23
24
26
14
19
1
—
0
—
4
6
14
—
1
—

+

6
—

— 9
— 5
— 4
— 16
6

cent from 1939 to 1941, have risen further in the past two
years; sales for 1943 are estimated as 45 per cent above 1939
and 30 per cent above 1941. In past years housefurnishings
and women’s and misses’ wear together have accounted for
approximately 60 per cent of all department store sales in the
District. During 1927-41 women’s and misses’ wear repre­
sented about 35 per cent of total sales, and housefurnishings,
25 per cent. In 1943, however, the proportion of women’s
and misses’ wear has ri^n to 40 per cent, whereas the propor­
tion for housefurnishings has fallen to 20 per cent.
Although stocks of reporting department stores in this Dis­
trict have risen month by month since last April, they were
still, at the close of September, 20 per cent below those of
a year earlier.

Stocks of apparel stores, on the other hand,

were 6 per cent higher than on September 30, 1942.

showed a net increase of 58 per cent, and apparel store stocks
67 per cent, at retail values.

Indexes of Department Store Sales and Stocks, Second Federal Reserve
District (19 23 -2 5 average =
)

100

1 94 2

S ep t.

J u ly

A ug.

S ep t.

S a les (a v e r a g e d a i ly ) , u n a d j u s t e d .....................
S a le s (a v e r a g e d a i l y ) , s e a s o n a lly a d j u s t e d . . .

1 20
112

91
128

95
126

127
118

S t o c k s , u n a d j u s t e d ......................................................
S t o c k s , s e a s o n a lly a d j u s t e d ...................................

164r
1 59 r

106
117

123
127

128
123




At the September, 1943 rate

of sales, stocks for both department and apparel stores repre­
sented approximately iVi months’ supply.
Outstanding orders on September 30 for merchandise pur­
chased by department stores in this District but not yet deliv­

1943

Item

r Revised.

As

compared with September 30, 1939 department store stocks

ered to them, although slightly lower than at the close of
August, were still about 2Vi times as large as on September 30,
1942.

Outstanding orders plus stocks on hand increased 13

per cent during the twelve months’ period.

FED ERAL RESERVE BAN K OF N EW Y O R K
MONTHLY REVIEW, NOVEMBER 1, 1943

General Business and Financial Conditions in the United States
(Summarized by the Board of Governors of the Federal Reserve System)
activity showed little change in September and in the first half of October.
Distribution of commodities continued in large volume and prices remained steady.

I NDUSTRIAL

I n d u s t r i a l Pr o d u c t i o n

Indexes o f Value of Department Store Sales and
Stocks, A djusted for Seasonal Variation
(1923-25 average —100 per cent)

Indexes of W holesale Prices Compiled by Bureau
o f Labor Statistics (1926 average= 100 per
cent; latest figures are for October 16)

Physical volume of industrial production as measured by the Board’s seasonally adjusted
index, as recently revised, was 243 per cent of the 1935-39 average in September, compared
with 242 in August and 239 in July.
There were increases in output in the iron and steel and transportation equipment indus­
tries while activity in other durable goods industries showed little change or declined slightly.
Open hearth and Bessemer steel production exceeded its previous peak level, reached in March
of this year, and output of pig iron likewise established a new record. In the machinery
industry as a whole activity was maintained at the level of recent months although there was
some further curtailment of output of machine tools and machine tool accessories.
Total output of nondurable manufactures continued at the August level. Cotton consump­
tion, which had been declining since May, rose 6 per cent from August to September, but was
9 per cent below the high level of a year ago. Shoe production was maintained at the level of
recent months and was slightly larger than a year ago. The output of manufactured food
products rose seasonally.
Petroleum refining continued to rise in September and was at a rate about double the
1935-39 average. The Board’s index of this industry is substantially higher than the old index
because greater weight is given to aviation gasoline and other special war products. Output in
the chemical industry as a whole declined in August, as some further expansion in industrial
chemicals was more than offset in the total by reductions elsewhere, reflecting readjustment of
the war program. Newsprint consumption rose less than is usual at this season, in the face
of increasing supply difficulties, and a further 5 per cent cut in permitted consumption of
newsprint was ordered, beginning October 1.
Crude petroleum production continued to rise in September, reflecting further improve­
ment of transportation facilities for petroleum products. Output of crude petroleum in August
and September exceeded the earlier peak levels reached in December, 1941 and January, 1942.
Coal production continued at a high level.
In September the value of construction contracts awarded in 37 Eastern States was at
about the same low level as in July, according to reports of the F. W. Dodge Corporation, and
was considerably smaller than in August when there was a temporary increase because one
exceptionally large contract was placed in that month.
D is t r ib u t io n

Department store sales increased less than seasonally in September, following an unusually
large volume of sales in July and August, and the Board’s seasonally adjusted index declined
from 142 to 132. During the first half of October sales showed a gain over September although
usually there is some decline at this season.
Railroad freight traffic in September and the first part of October was maintained at the
high level of previous months. Coal shipments exceeded the record movement of last July
and loadings of grain and livestock were 10 per cent higher than a year ago.
C o m m o d i t y P r ic e s

Prices of grains advanced from the middle of September to the middle of October. Live­
stock prices were slightly lower, reflecting partly the establishment of Federal maximum prices
for live hogs and sharply increased marketings of cattle. Wholesale prices of most other com­
modities continued to show little change.
U. S. Government Security Holdings o f W eekly

Reporting Member Banks in 101 Leading
Cities, Excluding Guaranteed Issues
(Latest figures are for October 13)

A g r ic u l t u r e

BINFOA
IL S DLS
L O LR
O

Crop prospects showed little change during September, according to official reports. There
was a further small improvement in prospects for the corn and potato crops, while the previous
forecast for cotton production was lowered slightly. Aggregate crop production is expected to
be 7 per cent below the peak volume of last season but higher than in any other previous year.
B a n k C r e d it

rufn
-

DAJTO S
E(DpPl
MDE) T
NS S
AUD
E
V UT
U.G* SC IIS
.S OTE R E

/

LAS
O
N
-- f :
DOS K
ES
PI
T f
1942

\ N

i

1943

Member Banks in Leading Cities. Demand De­
posits (A djusted) Exclude U. S. Government and
Interbank Deposits and Collection Items. Gov­
ernment Securities Include Direct and Guaran­
teed Issues (Latest figures are for October 13)




During the five weeks ended October 13, Government security holdings at reporting banks
in 101 leadings cities increased by about 2.5 billion dollars reflecting substantial open market
purchases during the Drive, and also, some purchases of bills on subscription from the Treasury.
Loans showed a net increase of 2.2 billion dollars over the same period. Over two thirds of
the total amount represented loans to brokers, dealers, and customers for purchasing or carrying
securities; in the last week of the period there were some declines, however, as repayments
were made on the liquidation of the securities. Commercial loans, which have been increasing
steadily since June, rose further by 540 m illion over the five weeks.
Holdings of Government securities by the Federal Reserve System showed little change
from the end of September to the third statement date of October, but there were some shifts
among the kinds of securities held. Treasury bills held under option declined by 200 million
dollars between September 30 and October 20, while holdings of certificates of indebtedness
and of Treasury bills outside of the option accounts increased by about 200 million. Total
holdings of United States Government securities by the Reserve System on October 20 were
8.9 billion dollars.